Just a smile to help you thru the rougher times.... take heart. There is light at the end of the tunnel!

See more of Luckovich's 'toons at AJC.

Rural vs urban/suburban Stable values in a depreciating market

As housing boom corrects itself, and property values slowly depreciate to a number where they'd be had the "boom" never happened, I've been watching to see if there was a notable gap between the urban/suburban homes vs country/rural acreage homes in foreclosure rates. As is usual with rural news, and rural residents, we're often left out of the statistic equation. Then again, that "under the radar" life is what we sought by moving.

Obviously gathering data is easy when they are using large city centers for volume and comparison. And such is the case with sites such as RealtyTrac, who only uses foreclosures filed at the county level in urban areas for their reports.

However Lands of America, a website dedicated to farm, ranch and acreage properties and news, did run an article on rural values in our subprime/foreclosure era - "Rural homes foreclosed but not near number of urban suburban home losses". This is from Dec 9th, 2007, but the much of the content is worthy of repeating.

In most cases, homes are a long term investment. And this especially holds true for rural country homes. Certainly the demand for a less stressful lifestyle change - i.e. "getting out of Dodge" and back to the land - has not lessened. In fact, since 911, what used to be a smaller, more select pool of buyers, has been growing steadily.

Add to a stable and growing buyer pool my own thoughts - that land always holds value. Improvements such as homes and outbuildings can be remodeled, or replaced, changing value. But when you buy land - whether pasture, cropland, timber or view property - that value is less apt to be subject to negatives you find in the cities... such as a depreciating neighborhoods or increasing multifamily or commercial development.

Thus, my own gut has always said that you may have housing ups and downs, but having a beautiful piece of the country will always be a solid investment when compared to a city lot. Afterall, any property's resale value hinges first on buyers' demand.

Most of the spokesmen quoted in this article are from back east. However I see similarities for our Oregon rural properties.

Over the years, the dynamics of rural property ownership have changed from full-time farmers to people who want to live rural lifestyles yet work in the cities.

"These are urbanites and suburbanities trying to find a peace of America where they can have the house on the lake and enjoy the beautiful sunsets," Mr. Duffy said. "I call them hobby farmers.

"Since Sept. 11 [terrorist attacks] we've seen an uninterrupted interest in people seeking a nice place in the country. They're looking to secure a more peaceful lifestyle with less stress, low traffic, low crime, affordable homes and land."

In Pennsylvania, rural property appreciated 5.9 percent overall last year, and 6.3 percent annually for the past two years, Mr. Duffy said. "A lot of people are making investments in rural America."

Note that in PA, they kept their nominal, stable annual appreciation thru the urban price madness... both up and down. Take our own Columbia County, for instance. Prior to the "boom", we had anywhere from 3-8% annual appreciation averages. However we did see as high as 15-19% over the past two years... which did give us some of that "bubble" effect ourselves. Prices are, again, coming back down... which should please buyers still looking to "get out of Dodge" to no end.

How about foreclosures? From the article:

Foreclosures, which have roiled housing markets across the state and the nation, have had a smaller impact in Pennsylvania's rural communities, where subprime loans were rare and lenders and borrowers work hard to avoid defaults.

"Because of the nature of the rural buyer, they tend to be more conservative in how much debt they carry," said Dan Duffy, chief executive officer of United Country Real Estate in Kansas City, Mo., one of the largest rural real estate agencies in the United States.

Also, lenders who specialize in serving rural communities keep most of those mortgages on their own books rather than sell them on the secondary market. Thus, they will go to greater lengths to help property owners avoid foreclosure.

For the most part, the lenders tend to be small outfits, often nonprofit organizations with relatively few accounts. A large number of rural home loans are handled directly by the U.S. Department of Agriculture, which can provide 100 percent financing for a home purchase and even subsidize the interest to make those loans more affordable. The agency also provides substantial help for borrowers who fall on hard times.

Federal records show the USDA filed 269 foreclosure cases in Pennsylvania in fiscal year 2007 and 324 foreclosure cases in the state in 2006. This year's foreclosures represent only 2.96 percent of all rural mortgages the USDA funded in Pennsylvania.

Now there's quite a few statements in this article I don't agree with. And believe me, I'm not shy to point them out. But many urban lenders do loans on nominal acreage homes. So I'm not inclined to agree that the specialty acreage lenders hold the majority of loans in our Oregon rural areas.

However I do agree that those who move out to rural areas *do* think more about their investment and their costs of maintenance. I find my rural buyers tend to be more frugal, leaving financial wiggle room for (to name a few...) tractors, outbuildings, and costs for animals. Things wouldn't be considered in the city.

Yet we have our fair share of 100% financing, conventional and FHA/VA loans here in the country as well. So what I have seen has led me to believe the "lifestyle change" buyer includes a more conservative debt overhead attitude when they are seeking to leave urban stress behind.

But foreclosure values on surrounding homes have more of an impact in the city. When a neighborhood has multiple REO homes, it takes the neighborhood valuedown with it. In the country, not only do we have a wider diversity of home styles and values as neighbors, these homes are spread further apart. The likelihood of that multiple homes per surrounding acres goes down considerably. So the values of a country foreclosure end up having less impact on the surrounding area homes.

Which leads me to another one of those noted disagreements in this article:

"In a rural setting, it becomes a property that basically becomes vacant and falls into poor repair," Mr. McCabe said. "It affects the tax base and becomes a burden to the community."

Many rural economies often already are stretched because they are tethered to a single large employer or to one type of business, such as coal mining or farming. If that sector declines, the whole area goes into a tailspin.

People living in rural neighborhoods are more likely to have lower incomes than urban dwellers, less formal education and less experience with the banking system.

For most of the Portland rural outlying areas, this does not hold true. The majority of our rural residents are commuters, or are self-employed and perhaps do business by internet. Indeed, we have few large employers in our outlying areas to affect the county tax base as noted.

And I'd personally like to smack him for the "less education" comment, too! But I digress.

We have a wide diversity of folks in the country. Some may indeed fit Mr. McCabe's less than flattering depiction. However we also have a large contingent of well traveled, experienced professionals that are just trying to escape attitudes... especially those exhibited by this appraiser (no doubt, a city dweller himself).

Rural communities are far more tight knit. And most do not apply a class or education designation to consider being neighborly.

But at the same time, residents of small towns and backwoods communities place a high value on individuality and self-sufficiency.

They are more likely to blame themselves for financial failure and are less inclined to blame the system.

"Usually in small towns people know each other, and you might have help from relatives. Plus you have the stigma of not wanting people to know you've lost your home," said Darla Wise, north central chapter leader for the Pennsylvania Mortgage Broker's Association.

The smaller populations in rural communities naturally lend themselves to closer personal relationships, she said.

While this article isn't definitive for less than accurate statistics, it sure goes a long way to support a a decision to move to the country. Certainly land and rural homes hold more stable value during the rough depreciation periods.

And for the small percentage of foreclosuresthat are out there? It offers a great opportunity to join the other rural acreage homeowners of America... and be less of a negative statistic.

New increased FHA loan limits

With the tighter criteria in the wake of the subprime, they've again opened a window for those with not much cash to put down on a house to purchase.

See the increased FHA loan limits for Oregon counties here.

FHA loans require approx 3% downpayment. However this can be paid via the seller with the written offer.

More questions as to the specifics? Feel free to shoot me an email, or give me a call at 503-810-3927.

Portland Region Price Analysis Nat'l Assoc of Realtors® 2007 report

Click here to view the 2007 NAR report for Portland prices and trends in PDF.

Some points are summarized here. But do read in it's entirety. Lots of charts & pictures to entertain as well... :0)

• The decline in new homes actually helps control and balance the inventory of unsold/listed existing homes
• Despite media reports, the Portland area decline in home prices are neglible.
• If there are FHA reforms, it could lead to a boost in sales using FHA loans (generally under $304K - see current HUD/FHA limits by county here)
• Average 1 year appreciation (2007) in Portland was 5.2%. 3 year appreciation was 46.1%.

The summary, starting on page 11 of the PDF report, indicates that if mortgage rates don't rise to above 7.5%, our local market appears to be poised for steady growth - even if not the over-inflated and unsustainable boon of previous years. The low mortgage rates as of the report (Oct 2007) had not yet resulted in marked consumer confidence. But I believe that is happening even now. It might also have something to do with the coming of spring - traditionally a good time to buy and sell.

All the tools for a continuing strong market and our equity growth are ours for utilizing. Low rates, inventory, motivated sellers. What is causing the wary or cautious lead up to a happier media face on the housing outloook is consumer confidence. Yet our local job growth is still positive, and economic trends appear to be the wind - tho gentle - at our backs.

Also, in the March 2008 issue of Realtor® Magazine, is the news that national sales for 2007 totaled 5.7 million... the fifth best on record. Not bad for a "media doomed" industry.

It's much as I said in my Jan 23rd post - our financial housing outlook lies within ourselves - we the consumers.

Speaking of economic predictions...

Amidst all the hype and fear mongering of recession, foreclosures and home values dropping by Presidential candidates and the media, comes the soothing voice of reason from billionaire investor, Sam Zell.

The US economy will avoid recession as the housing market begins to recover this spring, according to billionaire investor Sam Zell.

Speaking on "Squawk Box" this morning, Zell attributed much of the current economic troubles to fear-mongering and politicking by Democratic presidential contenders Hillary Rodham Clinton and Barack Obama.

"Obviously what we have going on is an attempt to create a self-fulfilling prophecy," said Zell, chairman of Equity Investments Group and owner of the Chicago Cubs, Chicago Tribune, Los Angeles Times and other companies. "We have two Democratic candidates who are vying with each other to describe the economic situation worse.

"The reality is that if you live on Wall Street and you're in the credit markets the world couldn't be worse. If you're a farmer and you're getting $25 for your wheat, you're having a great time. If you're a CEO and you've got a balance sheet that's bullet-proof, you're in a great position. This whole thing is way out of control, way out of hand."

Zell said that although he doesn't try to pick bottoms in markets he believes housing has hit its nadir and will turn around this spring as inventory clears out.

What brought all this on? Bernanke was testifying before a Congressional committee today, saying he believed we still had more sluggish economic times ahead. No doubt. We didn't get into this overnight, and it's a fantasy to think we can come out overnight.

Add to the hype, while driving down the road, a local radio broadcast blares out the news that the "new" home sales are down for the third month in a row. It's enough to make a lesser optimistic girl, who makes her living by believing in the value of real estate (not only as a home, but an investment), slash-your-wrists depressed.

But not me. Instead the first thing that crosses my mind is... "well duh! It's winter!" Contractors aren't as likely to be finishing construction during these months because of the weather factor. Add to that, the traditionally hot buying season is spring thru late summer. So it's right about now that contractors, brave enough to buck the odds by starting construction projects in the middle of the lenders tightening credit criteria, would be furiously building and polishing off the homes for a spring/summer sale target date.

In fact, I wonder about these stats. Do they even check for the amount of building permits pulled to compare to the number of new construction homes sold? They leave that little ditty out, I see. Strikes me as a more logical analysis if they compare how many homes were finished and ready to sell - with final occupancy inspections completed - and weigh that against how many permits pulled, and then factor in the sales. But what the heck do I know, right?

This simple logic by a non-economic major (that would be me) is supported by today's article at the National Association of Home Builders website.

“The falloff in new-home sales in January largely reflected a return to more normal weather conditions, following the weather-related increase in sales late last year,” said National Association of Home Builders (NAHB) Chief Economist David Seiders. “NAHB’s monthly surveys actually have been showing modest improvements in builders’ confidence regarding home buyer demand since last September.”

“The new-home sales statistics continue to show a lot of month-to-month volatility, but the pattern has been fundamentally flat since the middle of last year,” Seiders said. “The market is being supported by solid gains in employment and personal income, as well as by a historically low interest rate structure, and we expect those supports to be well maintained as we move forward. Furthermore, builders continue to use both price and non-price incentives to bolster sales and reduce inventory,” he added.

Like most strategies, daily or monthly events are merely a snapshot in time of a gradually rising or falling trend. And tho the news may sound dire that day when you turn your radio dial, or channel surf news, I for one think that Zell is spot on.

And, ya know, the man has alot of financial proofs that his instincts are right!

Prime "scam" time... sellers beware!

There are many sellers desperate enough to respond to the inviting "we buy houses for cash" signs as a way out of short sales or foreclosure. In this market trend, those running scams of this sort are in their prime.

But beware those that approach, offering too good to be true bail outs of your credit or foreclosure problem. From an old, but more relevant than ever Scripps Howard News Service article back in 2005.

Steve Tripoli, consumer fraud investigator for the National Consumer Law Center in Boston, interviewed numerous state attorneys general and legal aid staffers for the NCLC's June 2005 report, "Dreams Foreclosed: The Rampant Theft of Americans' Home through Equity-Stripping Foreclosure 'Rescue' Scams."

Tripoli found that foreclosure "rescue" scams fall into three main categories:

_ Phantom help: The "rescuer" charges outrageous fees for light-duty phone calls or paperwork that the homeowner could easily do, none of which results in saving the home. This predatory scam gives homeowners a false sense of hope and prevents them from seeking qualified help.

_ The bailout: In this scam the homeowner is deceived into signing over title with the belief that they will be able to remain in the house as a renter and eventually buy it back over time. The terms of these scams are so onerous that the buy-back becomes impossible, the homeowner loses possession and the "rescuer" walks off with most or all of the equity.

_ The bait-and-switch: In this scam, the homeowners think they are signing documents to bring the mortgage current, but instead actually surrender their ownership. They usually don't even know they've been scammed until they're evicted.

"Rescuers" often place ownership of the property into a trust in the owner's name in order to avoid the "due-on-sale" clause in most mortgage contracts. They then transfer ownership through the trust to themselves or to a front operation. In these instances, the mortgage company is unaware that anything is amiss; the homeowner, however, is frequently left on the hook to pay the mortgage on a house he or she no longer owns.

The last "bait and switch" method is the story I've heard the most, and is perhaps the most heart breaking. I can't say enough, if you are approached by someone offering to purchase your home under these circumstances... or if you aren't entirely clear on just what the circumstances are... find your Realtor® and ask for some help deciphering just what is about to transpire when embarking on such a transaction.

There are legitimate "buy houses for cash" investors. But the circumstances need to be right, and the contract language examined closely for repercussions. If you aren't sure - and remember, always in writing, in writing, in writing... believe no verbal promises - then ask for help before signing anything!

Real estate as investment still good but requires "patient money"

As I stated in my Jan 23rd post, "Despite dropping home values, sellers still ahead in equity", I consider this declining values in homes a market correction. Indeed, when you average out the boom appreciation years with the latest national figures in decline from those highs, the average annual appreciation is still hovering around the "norm"... as if the boom never happened.

What is not friendly in today's market is the "flipper" mentality... that being picking up a house for a dime, and doing a fast flip sale. In fact, many investors never realized that FHA has had rules in place for some time now that prohibit the sale of a flipper home with FHA financing before the seller has held title for at least 90 days. That means 90 days from the time the offer is written to purchase.. not twritten to close on the 91st day. Since many homes investors use to flip fall into the FHA buyer category, this could affect the less than savvy investor, not staying abreast of the latest mortgage industry changes.

However there is still a good market for investing in real estate for a portfolio. With the short sales and foreclosures available, picking up distressed homes for remodeling, holding them as rentals for a time - or perhaps selling them on lease/option or land contract sale to troubled buyers - is still viable. *If* one exercises caution and patience, and does not focus on the quick buck turnaround.

One such small investor, Edward Malone out of Jacksonville, FL and his business partner, David McNeil - an area suffering it's fair share of foreclosures and devaluation - has words of wisdom for those interested in taking advantage of the sellers motivation and the low interest rates.

"The guys who really got hurt," said Edward Malone, a small investor who survived the crash, "were the ones who pulled it out to buy cars and clothes." Most of those people lost their shirt -- and perhaps the cars as well -- when the bottom fell out of he market. Those who survived had a stronger cash flow, a better business model and probably a bit of luck. Timing can be crucial Malone, a Navy officer who has been in Jacksonville for six years, fell into the industry when he started buying and selling properties in 2005. After making his first sale, he bought two more houses, one to live in and one to reha , ending up renting the second one.

He was burned once, he said, when he had to drop the asking price of a house that had been sitting for too long -- a property he just now has a buyer about to close on -- but managed to keep the side business ticking along, even during a deployment to I aq. Luck played a bit of a role when the crash came, with Malone having sold or rented out his properties before prices started dropping. He now has five houses in his portfolio, with two on the market, although he's considering trying to rent them out if they don't sell soon. The key to continued success, Malone said, is a good credit score and healthy cash flow.

"It's huge," he said. "For anyone looking at the real estate market, you either have firm credit or money in the bank." Focusing on fixer-uppers Malone helps keep his cash flow healthy by doing much of the remodeling work with business partner David McN il, enabling them to keep the costs low. "You've got to make it look good," McNeil said. "I make it look like somewhere I'd want to live."

Another savvy investor using the trends speedbumps to his advantage is Mark Coon, owner of a HomeVestors franchise.

High-quality rehabs are vital in this real estate economy, agreed Mark Coon, who started buying and selling homes as the housing bubble inflated. "You have to adjust for a changing market," he said. Coon has always focused on fixer-uppers: He began buying often- dilapidated proprieties about six years ago, when he moved to Jacksonville after signing up for a franchise with HomeVestors, the company with the ubiquitous "We Buy Ugly Houses" billboards.

"Adjust for the changing market" are the words to remember. Today, with more listing inventory, buyers can afford to be more picky, are apt to go for the home in the best condition for the money. So utilizing wise business practicies - i.e. remodeling, befitting the home and area, with cost effective labor and materials - still proves to be a slow, steady income. Like any business, it is always a profit and loss plan. And far too many novice investors go overboard in the remodel, and find themselves with the Taj Mahal on the block, unable to recoup their investments.

Because the "ready and able" buyer pool shrank with the tighter lending criteria, Coon has taken to selling his renovated homes to investors who are purchasing them as rentals... a business now booming. It's a simple and predictable format really. Those who cannot buy with today's lending standards still rent. Everyone still needs a roof over their heads.

Coon finds that tho property owners still respond to his "We Buy Ugly Houses" signs and billboards, more and more investors are making the calls today. Coon has found a new niche as the investor's "middle man"... finding and renovating the home, making it rental ready.

Perhaps his most sage advise is to warn those in for the quick buck.

Other investors got burned, he said, because they were so focused on the quick cash, they forgot they were running a business. "There's a lot of people who got into this business without a lot of business acumen," he said. "It's so easy to get into the real estate business, and it sounds great, but like any other business, it's tough."

Tough, yes. Ever changing, yes. But when you stay atop of the trends, most often proves lucrative.

_______________________________________________

Also see my "Sellers Beware" post above! Not all independent investors are honest businessment, and the scam business is operating in prime time right now!

Which improvements really pay off? Remodeling Magazine's 2007 Cost/Value Report

Wondering how to spend your home improvement money wisely? Certainly all improvements can make a difference to your homes value. But some remodeling choices pay off better than others. And unless you have the deep pockets to do it all, reading Remodeling Magazine's 2007 Cost/Value Report for the Portland area may help you decide which projects should take priority.

So what pays for itself (at least statistically...)? Below a fast summary of what you'll read online at the link above. Obviously, anything over 100% covers your costs.

For the mid-priced projects:

Minor kitchen remodels - 103.5% last year. That's actually down from last years figure of 106.4%.

Adding a deck - 108%

Replacement windows - wood gets 102.9%. However vinyl comes a tad shy at 98.5%

In the 96 percentile were the basement and bath remodels, and a major kitchen remodel.

For the upscale projects:

Siding replacment with cement fiberboard and vinyl window replacements were both about 100%.

Replacing the windows with the wood was the highest return at 103.4%.

And on a personal note... My Dad made front page of St. Pete Times!

Heart busting with pride, here. My 92 year old Dad got his first hole in one after decades of playing golf. As if age weren't enough to make it unusual (the only other one I found was a 78 year old in Iowa back in 2005), Dad is legally blind. No vision in one eye, and the other only perphiferal vision.

Now Dad isn't into big "ta doos". Hang, his foursome had to prod him into even telling my Mom about it, playing in a different foursome that day.

The fifth hole at Cove Cay was the group's first hole in the shotgun start.

"Dorothy actually shot before Leo and her ball went into the water," Gehring said. "We were all over by the water trying to find the ball and I looked up and Leo was about to hit. I said, 'Hey, somebody has to watch Leo.' So I went up there and saw him hit and it was a pretty good shot. I could tell it went on the green, so when we got up there I didn't see it. I looked in the hole and there it was."

Gehring said Fiyalko reacted with a simple, "How 'bout that," and continued with his round. When he got to the clubhouse after the round, his friends had to prod him to tell his wife, Pat, about the feat.

"When he got back to the clubhouse we told him to tell Pat what he did," said Sue Rogan, who has run the Twilighters for the last seven years. "He said no, he didn't want to. So Pat says, 'I suppose you made a hole-in-one.' He said, 'Yes, I did.'

"I've been doing this for seven years and it's the first one for the Twilighters I can remember."

Dad's take on it all?

Fiyalko doesn't understand what all the fuss is about.

"It was my first hole-in-one, and I never saw it," Fiyalko said. "I was just trying to put the ball on the green."

That's about all he'll say on the subject.

That's my Dad.

To till or not to till... that is the question

I had an interesting question from a friend INRE putting in a new vegetable garden. He wanted to know, after getting rid of the indigenous blackberries, should he (roto)till or not?

Not being a garden expert myself... and being one upped by my tomato plants more than I'd care to admit... I set to researching the opinions of experts. I actually landed upon several good sites that I'd like to share.

First, about tilling. The most common thread I've seen is that the usual practice of tilling annually is not necessarily beneficial. Per Master Gardener, Cisco Morris, in his article last February, it all depends on the soil status.

In the old days the recommendation was to rototill your vegetable garden every spring to incorporate organic compost to improve the soil. If you're breaking ground for a new garden, it might be a good idea to rototill in amendments, but if your soil is loose, open and fluffy, rototilling could destroy the soil pores that enable water and oxygen to pass through, and could harm millions of microorganisms that help feed the soil and prevent soil-borne diseases.

If your soil is reasonably good, simply mulch with an organic compost or well-composted manure. The soil-building humus and microorganisms will be washed in by rain and worked in by worms. You'll improve soil structure and continue to feed the web of life in your soil without causing a major disturbance.

The College of Agriculture at the University of Arizona says much the same INRE tilling annually. But they also offer an alternative for the home gardener - chisel plowing. They do say rototilling can work, but with some caveats.

From their Reference Manual in regards to soil preparation for vegetable gardens:

While garden plowing is still a common practice, turning the soil completely over has been found to be detrimental in some cases, causing soil compaction, upsetting balances of microorganisms, and often causing layers of coarse organic material to be buried below the influence of insects and microbes which would otherwise cause breakdown of the material. Chisel plowing, which does not have this disruptive effect, is one alternative, but it is limited to sandy or loamy soils and many farmers who work gardens do not have chisel plows.

snip

Rototilling most home gardens is sufficient, as long as plant debris accumulation is not out of hand. Rotary tilling mixes the upper layers of soil rather than completely turning the soil over, and the effect produced are generally desirable. One possible harmful effect of rototilling is the formation of a compaction layer just beyond the reach of the tinesThis also occurs when a moldboard plow is used to the same depth every year, but at a somewhat deeper level. Use of deep-rooted cover crops or double-digging can do much to prevent or alleviate this problem when it exists. Small gardens can be designed using raised beds which may be worked entirely by hand if the area is small enough.

Perhaps the best start for a fresh garden - or even a new rotation site for the garden (recommended every 3 or so years) - is to find out the composition of the soil. EarthCo from St. Louis, MO is one company that offers service for the home gardener. Various test kits run from $20-$50. They give detailed sample collection instructions, you ship the soil to them, and get the results online. Mind you, I've never used their services myself, so please don't construe this as a recommendation. However if anyone out there has tried their service, and can offer feedback, we'd all appreciate it.

FarmNetServices website offers various directories for agriculture needs. You can find a list of soil testing labs around the country on their site as well. This may be overkill for the home gardener... and we are not without our own local soil talent here in Oregon.

OSU out of Corvallis has their own "how to collect samples" brochure in a downloadable PDF for home gardeners. They also have, again in PDF form, a list of laboratories from all over the country - along with contact names, phone numbers and emails addresses. Needless to say, you can also let your fingers do the walking thru your yellow page directory as well.

OSU also offers some excellent visual tips and tricks that help you determine if your soil is short organic matter. They talk of color, drainage, and smells, along with the more obvious "can't dig a hole wet or dry" or cracked, dry summer conditions. And now is the best time to get that soil analyzed so it's properly fertilized for a spring planting. It's well worthy of a read as your first step.

Other good sites I found? 123Garden has a great article for how to plant just about anything... and plant it for life. And if you're like me, who never knows what to do each month for preparing your garden, there's the monthly "to do" lists from The Old Farmers Almanac.

Fed rate slash to help subprime offers opportunity to stable borrowers

Bernanke's latest rate slash was designed to thwart off the spread of economic repercussions from the subprime fallout.

However at least one Portlander has figured out that it's an opportune time to refi with the new low rates.

Jan. 23--It remains to be seen whether the Federal Reserve's interest rate cut Tuesday will avert a recession. But it's good for Don Christensen.

And, to some degree, that was the point of the huge, unexpected cut. The lower rates will allow the 49-year-old Portlander to consolidate his mortgage loan with a home equity line of credit and credit card debt, saving him about $200 a month. "We couldn't do it without the rate cut," Christensen said.

The feds hope that the lower rates will give the faltering mortgage industry a healthy shot in the arm, increasing transaction activity. Which, of course, keeps mortgage bankers and brokers from being among the unemployed.

"In my opinion, this is an obvious indication that the Fed is panicking," said Steve Emory, of Pacific Sunset Mortgage in Beaverton. "They're concerned about the credit market." Portland's home sales and prices have held up much better than most other markets around the country. But even here, the mortgage industry has struggled. Dozens of firms have folded or closed their local offices. About 8,800 active mortgage loan originators were on file with the state as of the end of December, down more than 4,300 from 12 months before. "Our volume and the industry's volume is off 25 to 50 percent," said Todd Williams, a broker with the Evergreen Ohana Group in Portland.

The rate cut, hoping to curb the cascading effects on the global economy, is a controversial move. Some saying it's won't make a whit of difference, others saying it comes too late.

But there are also some positive voices out there on it's effects on the housing market.

"The cumulative impact of all the rate cuts will provide some much-needed relief to homeowners facing resets on adjustable-rate mortgages," said Greg McBride, senior financial analyst at Bankrate.com.

Gregory Miller, chief economist for SunTrust Bank, said he expects mortgage rates will eventually fall and the housing market to be revived.

Banks have tightened their credit standards and discouraged borrowing, in the wake of the subprime crisis. But if banks' own cost of funding declines, Miller says they may change course. If mortgage rates do drop to around 5 percent, "We see potential buyers moving back into the market," he said.

Indeed, the mortgage industry's response to the increase subprime ARM defaults has been to over-tighten lending criteria... an extreme swing from the prior "easy money" days to the "only perfect borrowers" trend now.

On the heels of the rate cut is a rare demonstration of bipartisanship in DC. Majority leaders Pelosi and Reid huddle with WH officials, busy planning a way for a one time "give back" of taxpayers money to some, plus additional gifts to those who did not make enough to pay taxes at all, in a stimulus package.

Yet will a one time gift of our own money back from Congress... totalling anywhere from $300 to $1200... provide any permanent relief? One can't significantly increase a business on such amounts. $300 is unlikely to cover even one mortgage payment for those in the arrears.

Under the plan, individuals would receive rebates of up to $600 and couples could receive $1,200, plus $300 per child, Paulson said. Rebates would be phased out for individuals earning more than $75,000 and couples earning more than $150,000. Individuals must earn at least $3,000 to get a $300 rebate.

snip

Two business incentives were included in the measure. One would allow large businesses to take a 50 percent bonus deduction on new equipment. Small businesses would be allowed to deduct as much as $250,000 in equipment purchases, up from $112,000 now.

I, for one, tend to see a danger in these measures. Granted, they are likely to provide relief, and shift the tide. However it does not tackle the base problem that got us here to begin with... that being a lack of discipline exercised by too many for living within their means. Remember that it was the domino effect of a small percentage of ARM subprime loans that has caused all this bru-ha-ha. Those opting for ARM subprime mortgages purchased homes that they could afford only in the first years of low interest, but not the reset interest rate. In short, they purchased more home than they could realistically afford.

To offer bail out measures does little to re-train a portion of the population into living within their means. And I'm not alone in these thoughts.

Now, Washington is abuzz with talk of a $145 billion economic stimulus package. Yet, some feel the large rate cut and stimulus package send all the wrong signals. What's needed, they say, is a dose of hard discipline, not a return to the days of easy credit and easy money. "If we try to artificially stimulate the economy through lower rates or a national stimulation plan then we could be setting ourselves up for yet another correction." said Eric Wiley, of Pacific Residential Mortgage in Lake Oswego. "It's like they say, no pain, no gain.' "

Perhaps the most interesting observation: prior to the late January rate slash, numbers and trends were beginning to improve. Would they have continued to correct with the prior measures in place? And have we added fuel to the overspending fire with the latest Federal Reserve moves?

Only time will tell. But one thing is for sure.... with the fed's decision, it's one great time to either buy or refinance.

Despite dropping home values sellers still ahead in equity

There's a lot of panic going on in the sellers' world about their housing prices dropping. Far too many broke the cardinal rule, pulling out their equity and not spending the money for home improvements to increase the home's value, and instead spent it elsewhere. To waylay the cash equity elsewhere, and not improve the home, is a dangerous hedging of bets. It requires the market to keep yielding big gains for the home in it's existing condition. Time itself, with aging components of the home, belie the wisdom of this train of thought.

Now we find the media loudly broadcasting a national average of a 6% decline in home values, and possibly going to a 15% drop in the future.

The 5 percent to 25 percent drop in prices in some D.C. suburbs already has spawned record foreclosures and losses. Ultimately, economists say, how far prices fall could be a critical factor determining whether the U.S. economy experiences only a mild downturn this year or a full-blown recession with wrenching dislocations for homeowners and bank failures that the nation hasn't experienced in nearly two decades. "The underlying cause of the problems in the financial sector is a persistent fall in house prices," said John Makin, economist with the American Enterprise Institute for Public Policy Research.

He expects prices to keep declining until next year for a cumulative reduction of 15 percent nationwide. Such a decline could involve much bigger drops in high-priced cities such as Washington. Like many economists, Mr. Makin is concerned about the consequences of such big price drops. While it might make houses more affordable for first-time home-buyers, it is hurting homeowners who made a habit of tapping into their housing gains during the ousing boom to finance an array of purchases from second homes to college educations. The home-fueled spending was an important impetus to economic growth in recent years.

The above illustrates the danger when homeowners anticipate the housing market remains status quo, and that the gang buster increases are here to stay permanently. They felt, as I said above, they could spend the "free equity" on anything other than improvements, yet the house in it's existing (and ever aging) condition would still continue to rise astronomically.

This, at best, is a pipe dream. Were housing to continue to at these rates, few of us would be able to afford homes in the next few years. In order to sustain such inflation, income would have to increase in ratio equally. The fact is, the housing market always fluctuates. Ups and downs are the norm.

Now, despite the doom and gloom news, there's a reality for sellers to consider here. And to illustrate, allow me to play the numbers game for you.

I'm going to use Columbia County historic appreciation as the example here. Let's say that you purchased property a couple of years ago at $300K. Prior to the highly inflated housing boom we experienced the past two years, our normal appreciation rate was generally between 3 and 7%. Yet the past two years had an unsustainable 13-20% increase.

Now the numbers:

If you appreciate the original $300K at an average of 18% for both years, your $300K property would be worth $417,720 on the market. That's a mean appreciation of 39% for the two year duration, or approx 19.5% annually.

Per national statistics, that home has dropped 6%... or now worth $392,656. While sellers may not be jumping up and down, that still translates to a 30.8% appreciation increase for their original investment, or 15.4% annually. Still way ahead of the game compared to the previous norm.

Let's say the housing does drop 15%, as the "expert seer" predicts. The $300K investment you made would now be worth $355,062. Even tho the devaluation predicted sounds ominous, the home appreciation is still 18% for the original investment, or 9% annually.

Looking at the numbers, one could actually peg this devaluation as a market correction, merely reverting back to the average norm. Hardly the stuff that warrants panic and, unless you are one of those who got yourself into an upside-down mortgage position, is instead a completely acceptable scenario.

Appreciation and equity is not a fixed equation. Many sellers make the error of assuming they have "lost money" when the market goes down. Yet you have not lost something that you never had. Unless a buyer walked up and handed you that 39% inflated cost for the home, it was nothing but a "possibility" of what it could sell for. There is a saying we agents have... your house is worth what a qualified buyer is willing to pay. Period.

Certainly had you successfully cashed out, you would have experienced an opportune boom profit. Then again, unless you already owned a second property, you had to be a buyer, and pay in at the same inflated prices. Rather comes out in the wash, don't you think?

There's other points made in this article that hold with my own theories. And this is that buyers are sitting back, waiting to see just how low the prices will go. And as they wait, the panic sets in stronger for sellers, and the effect cascades thru the rest of the associated economic arenas.

Computer models show that home prices remain as much as 50 percent too high in major cities, where even households with twice the U.S. median income of $47,845 often are unable to afford median home prices ranging from $400,000 to more than $600,000. The overvaluation of homes has created a buyers strike as potential buyers sit on the sidelines waiting for prices to fall. How much prices have to drop to bring buyers back into the market has become a critical question for the housing market and the economy. Hanging in the balance is not only the health of the housing and finance industries but also the accumulated wealth and chief asset of the nearly 70 percent of Americans who own their homes.

James Haffly, an Alexandria defense worker, would like to buy a house in the Washington area but thinks that prices are way too high and must come down substantially. "Housing is out of reach for many folks here unless they have a rich relative," he said, noting that having a high-income, dual- earner family doesn't suffice anymore to buy a typical "starter" home for about $400,000. He's hoping that the 1 million to 2 million foreclosures predicted nationwide this year will help to drive down prices to affordable levels. "I mean, here we are at $125,000 a year, and to buy a home on the low end means spending 40 percent of our take-home pay.

Sellers holding out for the big bucks do so for two reasons. Either they are in the property too deep from over refinancing (or paid the big bucks with a recent purchase) - or they are greedy, and unwilling to accept the gold rush days are gone.

For the former, it may be they will be one of those involved in short sales, or little to no profit to liquidate. Yet for every loser, there is a winner. And in this case, it will be the new buyer.

For the latter... well, reality will hit when the appraisal comes in low, causing any over the top deal to fail. We are all at the mercy of an appraiser's value. And remember, the appraiser works for the lender - assessing value for the lender's monetary risk. Agents, buyers and sellers have no control over an appraisal's results.

To summarize the lessons learned?

1: It's *never* a good idea to pull equity, and not dump the majority of it back into your original investment for improvements. Time is just not on your side to see this as a wise move.

2: The boom is gone, but the devaluations are merely a market correction... bringing reality back home to nest. This insures the stability of future homeowners and affordable prices, in ratio with income. And despite the correction, real estate still remains a steady and sure investment for your money.

3: Buyers will be slow to return to the fold. After so many had to purchase during the high price era, they won't be making that mistake again... if not forced to buy during an artificially high price market trend. They will wait, and take advantage of the many who may be caught in the middle, having to sell with properties over-mortgaged for sundry reasons. As in all conditions, some will win, and some will lose.

But the sooner buyers are back in action, the sooner our economy will return to a more stable state. Fact is, our economic stability lies not in the hands of so-called expert fortune tellers or media hype. It is we - the buyers and sellers - who control our fate.

Gas Appliances in rural country

When you bolt the urban and suburban areas for a lifestyle changes, there are a few adjustments to make. And one of these may include your gas appliances. While there are some exceptions, most rural homesteads do not have a natural gas supply line. But just as there are alternatives in high speed Internet, your alternative to electric appliances lies in propane fuel.

If the home you are purchasing is all electric, you have two choices: buy new electric appliances (if they cannot be included in negations), or get propane service and convert your natural gas appliances to accommodate for the very different fuel source. This includes stoves, dryers, water heaters, changing out the existing electric furnace to a gas fuel, or perhaps installing a gas woodstove.

Some existing gas ranges may have a conversion setting contained. One such example is this Peerless-Premier gas range, with instructions for altering the fuel source found on their website.

What's most important is to know that your natural gas appliance can't merely be attached to a propane line feed without consequences. Failure to do so could result in an explosion. Yet almost all gas appliances - if not all - can be converted at minimal costs. If the technology is not built in, as the Peerless-Premier gas range above, then the cure involves an additional conversion kit. For specifics, and difficulty of installation, you should contact the manufacturers of your appliance.

Beware future of government in US lending practices

In the aftermath of the subprime hysteria, the US Congress has threatened intervention more than once. While the Mortgage Forgiveness Debt Relief Act of 2007 is a good move, it is legislation that offers a better solution.... that being an effective tax reduction by not collecting income tax on homeowners' losses in short sales/preforeclosure. Get serious - it's much easier to not give your money to the feds in the first place than to try and get it back. Despite which party controls Congress, they are all serious spenders.

Ben Bernanke's testimony before the House Committee on Financial Services September 20, 2007 gave a good historical overview of when and how the subprime problems bubbled to a head.

Subprime mortgages are loans intended for borrowers who are perceived to have high credit risk. Although these mortgages emerged on the financial landscape more than two decades ago, they did not begin to expand significantly until the mid-1990s. The expansion was fueled by innovations--including the development of credit scoring--that made it easier for lenders to assess and price risks.

In addition, regulatory changes and the ongoing growth of the secondary mortgage market increased the ability of lenders, who once typically held mortgages on their books until the loans were repaid, to sell many mortgages to various intermediaries, or "securitizers." The securitizers in turn pooled large numbers of mortgages and sold the rights to the resulting cash flows to investors, often as components of structured securities.

This "originate-to-distribute" model gave lenders (and, thus, mortgage borrowers) greater access to capital markets, lowered transaction costs, and allowed risk to be shared more widely. The resulting increase in the supply of mortgage credit likely contributed to the rise in the homeownership rate from 64 percent in 1994 to about 68 percent now--with minority households and households from lower-income census tracts recording some of the largest gains in percentage terms.

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During the past two years, serious delinquencies among subprime adjustable-rate mortgages (ARMs) have increased dramatically. (Subprime mortgages with fixed rates, on the other hand, have had a more stable performance The fraction of subprime ARMs past due ninety days or more or in foreclosure reached nearly 15 percent in July, roughly triple the low seen in mid-2005.

For so-called near-prime loans in alt-A securitized pools (those made to borrowers who typically have higher credit scores than subprime borrowers but still pose more risk than prime borrowers), the serious delinquency rate has also risen, to 3 percent from 1 percent only a year ago.

These patterns contrast sharply with those in the prime-mortgage sector, in which less than 1 percent of loans are seriously delinquent.

There are two important points here. First, contrary to hyped media reports, the percentage of defaults is a small percentage of overall loans in the country, and highest among subprime ARMs... or those borrowers who deliberately chose not to look ahead to the payments after the loans reset.

By contrast, the fixed subprimes, Alt-A and other "less than perfect" credit borrower delinquencies are also a very small percentage of the mortgage industry. This brings the culprit down primarily to one large group - those who opted for the subprime ARMs in order to purchase more home than they could realistically afford than with a comparable fixed loan alternative.

The second important point is that subprime loan packages have been around for quite a while prior to this default trend. Yet regulatory changes (in other words, the US Congress) was one of the factors contributing to the perceived decreased risk of subprime loans for the credit challenged.

An example of this is trend to push loans on to this sector of the population was prevalent even back in Oct of 2003, when ACORN was providing studies that suggested there was racial disparity in lending practices and recommending changes to the Fair Credit Reporting Act. In short, Congress itself, along with special interest groups, have lent a hand in contributing to the easy ARM money - targeting mostly the minority, credit challenged population - leading to the mortgage predicament today.

You will notice that no where on the ACORN site about their "campaigns" are they touting their earlier pressure on Congress to increase loan opportunities to the financially challenged - the sad reality of which constitutes a very large percentile of minorities.

Now I told you these historic stories about US government intervention merely to tell you this story.... It appears that Venezuela's Hugo Chavez had imposed controls over a sector of that country's lending practices. And his penalty for banks not following his guidelines? Seizure of the bank.

CARACAS, Venezuela -- President Hugo Chavez threatened on Saturday to take control of banks that fail to meet state-imposed loaning requirements designed to benefit Venezuela's farmers.

Chavez, who says he is leading Venezuela toward "21st century socialism," accused many private banks of neglecting laws requiring them to set aside nearly a third of all loans for agriculture, mortgages and small businesses at favorable rates.

"The law must be applied," Chavez said during a televised meeting with farmers. Any bank that doesn't comply with these lending requirements "should be seized."

One could only hope that the US Congress would not apply such draconian measures in their efforts to "protect the consumer". Indeed, history shows their foray into over-regulation of private enterprise does not yield the desired results most of the time. Consequently any efforts, other than reducing tax liabilities, should be carefully monitored by the American consumer so we don't find ourselves in "Venezuela", so to speak.

As it is, the private lending industry itself has responded with the needed corrections voluntarily, leading to turning the topsy turvy world right again. Just as it should be.

Foreclosure alternatives

If you are facing a potential foreclosure, there is a concise list of alternatives - with brief summaries - from Second Opinion Solutions Group, LLC.

Second Opinion Solutions Group, LLC, is a company devoted to helping people handle legal and financial hardships with free or low-cost debt reduction tools and professional credit consulting services. Kathleen Rieger, President, is a member of the International Association of Privacy Professionals and the Society of Human Resource Managers. Kathleen invites you to enroll in the free Credit Rejuvenation mini-course and newsletter at http://www.extreme-debt-makeover.com/free-ezine.html

Please note, I have no personal dealings with this company, so I am not providing a recommendation. However the text in their Press Release, "Home Owners Find Mortgage Delinquency Help With Foreclosure Options", is noteworthy.

Your alternatives are listed below. Click on the link above to read more about each of the options.

Short Sale
Short Refinance
Special Forbearance
Mortgage Modification
Partial Claim
Pre-Foreclosure Sale
Deed in Lieu of Foreclosure

Demand for rentals increasing

As I mentioned in my "Had a chat with your lender lately" post on Jan 14th, the slower home sales due to the lender standards tightening would result in more needing to rent until they can qualify for a home purchase. No matter what the economy, every one needs a place to call home - even if rented.

Realtor® Magazine Online's Dec article (Commercial Real Estate Remains Strong) about 2007 market trends for commercial confirms just that trend, and with their "crystal ball", expected to increase in 2008.

Multifamily Market

The apartment rental market — multifamily housing — is experiencing increased demand from the slowdown in home sales. With a rising population and a growing number of households, vacancies are tightening and rents are rising.

Multifamily vacancy rates are projected to average 5.4 percent in the current quarter, down from 5.9 percent in the fourth quarter of last year, and then continue to decline to 5.1 percent by the end of 2008. Average rent is likely to rise 3.1 percent for 2007 and 3.8 percent next year, following a 4.1 percent increase in 2006.

Multifamily net absorption is expected to total 234,400 units in 59 tracked metro areas in 2007, below the 229,500 last year, but should rise to 245,800 in 2008.

Other projections for the multifamily market include:

Markets with lowest apartment vacancies include Northern New Jersey, Salt Lake City, San Jose, San Diego, Nashville and Philadelphia, all with vacancy rates of 3.3 percent or less.

Multifamily transactions in the first 10 months of this year totaled $62.3 billion, compared with $87.4 billion for all of 2006. The sale of buildings originally constructed as condos are being sold to multifamily investors in markets like Washington, D.C., and South Florida.

Many markets have seen condo “for sale” signs change to “apartment for lease” signs almost overnight. Some condominium complexes are being converted into office buildings, and others are becoming mixed-use projects.

Needless to say, for the savvy investor with good credit and some down, it's a great time time to expand the real estate portfolio.

So much for "pride of ownership" Dis'GRUNT'led owner trashes home

"I'll huff, and I'll puff, and I'll blow your house down"... so the fairy tale goes. It's an old story... in more ways than one... but still a good one. And who would have thought this long revered childrens' story, "The Three Little (homeowner) Pigs", battling the evil (lender) wolf would manifest itself in a new light with the 2007 real estate trends?

It's nothing new that some homeowners manifest their rath by trashing their home when faced with impending foreclosure. I've always had a hard time understanding that mentality. I guess I'm one of those who'd leave my place spotless as a certain sense of pride.

Not so for Shane Lovett of Eagle Creek, OR. Last May (as I said, old but still a good story...), angry at the foreclosure, Mr. Lovett locked three pigs in the home, sans water and food, in hopes they would trash the home and further devalue the property.

It's disingenuous for Lovett to believe the lender deserved further losses than they were already about to assume. Loans are generally made in good faith that the buyer will honor the terms, and repay the loan (or refi). But lack of knowledge of the industry may just prove Lovett's rath was aimed at the wrong financial institution. For if Lovett obtained the loan thru a broker, it's entirely possible that the foreclosing entity merely purchased the note on the secondary market, and therefore was not the originator of the loan and it's terms. Thus he was deliberately destroying property for a completely uninvolved third party.

But when human emotions run amok, logic is generally the first casualty.

Of course, what riled me the most, was the treatment of the pigs. No water??? Sorry Shane... lost any empathy from me there. The temporary tenants of Lovett's home were, according to Thomas Getten, an animal rescue expert from Estacada, a little dehydrated, but otherwise just fine for the ordeal.

You can view multiple photos of the interior and the pigs. Odd thing is, I've had quite a few REO foreclosures, and the homes looked much the same. Hummm... I'll bet the majority of the visual mayhem was Lovett's doing... meaning the pigs demonstrated more "pride of ownership" than the dis'GRUNT'led owner.

Working hard for the money...Earning the seller's commission?

It's not unusual to hear sellers mutter obscenities under their breath when they think of paying agent commissions in their homes sale. And in a market when trends are not the wild, out of control appreciation we've seen the past couple of years, sellers are paying far more attention to every cost associated with selling. That most certainly includes their largest closing cost expense - the agent commission. Or, as the Oregon Real Estate Agency now has us call it, "compensation".

I may be a Realtor®, but I am - first and foremost - a consumer and homeowner. So I well understand this scrutiny of such a large cost of doing business. I will also tell you that I support any one's right to buy or sell their own property, without the aid of a professional. This is as American as apple pie, and a right I'd never want to see changed by State's mandating all sales are overseen by 3rd parties.

So why so much? Why bother to pay it at all? And why aren't for-sale-by-owner (FSBOs) properties pushing agents out of business? I'll give you three reasons I earn my compensation... all from an Oregon Realtor's® perspective, of course. Laws differ from state to state.

WHY SO MUCH?
COMMISSION/COMPENSATION SPLITS

Generally listing contracts are set up to cooperate a transaction between two agents, and their respective brokerages. An agent is a sub-agent of the brokerage, and all listings are - in fact - the possession of the brokerage. You may deal with me as your representative, but the brokerage is the other principal to your listing contract, with me included as a liable party.

When a co-op transaction happens, the commission/compensation is split four ways. At closing, the title company pays the agreed to split to the two brokerages, who then creams off the top according to their agreed split, and forwards the rest to each of the two agents.

The percentage amount of the commission is an agreement between the sellers and their listing agent. The co-op split is generally determined by the listing agent. And like everything else in a transaction, nothing is carved in stone until that deed arrives at the county to be recorded into the new buyers names. So it's not unusual to find adjustments in the commission structure along the way. Most notably in "dual agency" situations -- meaning the listing agent also represents the buyer in the same transaction.

So why can't the buyers and sellers each pay their respective agents themselves, and lighten the load of the seller? It's not impossible. But you'll cut down the number of potential buyers, plus increase the chance of a failed deal by refusing to pay a buyers agent. Three good reasons:

1: Most RMLS rules require the listing offer a co-op or fee to buyers agents. No MLS exposure and you lose the largest audience of buyers.

2: Latest NAR stats state 80% of people still use agents to purchase homes. They already have a hefty nut to bring to the table - their own escrow costs, and the most expensive - the down payment, the lender origination and prepaids. Add another 1-3% of cash to close atop that (commissions cannot be added to financing) and many will just not be able to purchase with the aid of a professional. Do you really want to tap into just 20% of the buyer market?

3: Most important. You *really* - and I do mean REALLY - want your buyers to use a professional. If they don't use a professional? See my last category... "Chasing the buyers agent and paperwork".

RUNNING THE LEGAL MAZE

While selling your home isn't rocket science, it is a path fraught with a legal maze of fine print contracts, and a particularly high risk of litigation (or even small claims court) if the details of that fine print are not spelled out in advance. Quite simply, Realtors® are "special agents".. or an entity empowered by the principal (either a buyer or seller) to perform a particular act or transaction on their behalf.

As special agents, we are not lawyers. Quite the opposite, in fact, It would be more than foolish to for us to give, or for you to take, legal advice from an agent. We are, however, trained in the specifics of reading, writing and interpreting real estate contracts and offers to purchase - as well as other legalities of the process. In short, we are an affordable (compared to an attorney) guide thru the legal mass of paperwork that constitutes a real estate transaction in these times.

Or, as I describe my job, I'm charged with providing you with all the information, or links/referral sources to info, possible so that you are qualified to make an informed decision that best benefits your own interests. I will not tell you what to do, tho I may make suggestions at times.

For a seller, this means interpreting an offer to purchase from a prospective buyer, looking for the vagaries that pose a risk, then helping to construct counters that insure fair and honest dealings for all parties. While it may be tempting to just look at the offered price, there are considerably more details that can make, or break, the transaction. And the goal is a realistic dive that results in a closed deal - sans lawsuits.

MARKETING YOUR HOME

Notice I said "marketing" your home, not "selling" your home. Here's where I deviate from many a peer. I'll flat out tell you that I don't "sell" your home because selling implies I could get a mother goat to purchase weekly delivery of cow's milk for her kids.

Houses sell themselves. They speak to buyers. If I take buyers thru, and they need help imagining the home with their belongings, a different color, or visualizing a remodel or knocking out walls... yes, this I do. But there isn't an agent on the planet who should be forcing the sale of a house upon an unwilling buyer. Ensuing buyers remorse could include litigation, really blowing the chance for a good day.

Nope... I don't sell houses. What I do is MARKET your home. It's my job to get yours in front of the people who'd most likely be interested in purchasing it. This includes the wisdom to know to whom your home may appeal more than others. After all, short of the base MLS systems and the usual... Google, Yahoo, Truilia, websites etal... universal marketing is neither wise, nor cost effective.

Obvious examples of this would be an acreage home, maturing timber, very little clearing or pasture, and considerable slope. Certainly not a place I'd advertise primarily to equestrians or those hoping to have critters such as cattle, alpaca or llamas. A less obvious would be appropriate zoning for a buildable 2nd or 3rd residence - or perhaps a healthy year round stream offering a private pond potential(with WRD approval, of course). All of which are imaginative assets that contribute to rich "come on" ad copy and headlines.

CHASING THE BUYERS'AGENT,
PAPERWORK and TEAM COMMUNICATION

I have to admit, I favor doing buyer sides over selling sides. Perhaps this is the "control freak" in me. After the marketing and negotiations are navigated, sellers and their agent then sit... and wait... and hope that all is going smoothly on the buyers' side. It's appropriate to insert that infamous mushroom analogy, "in the dark and being fed...." uh huh.

To tell you the truth, I'm not one for last minute surprises and failures. In fact, one of the reasons I work for myself (a subcontractor) is because I want to be the first to know if I'm going to be laid off! So I'm quite the noodge as a sellers' agent when there's a distinct lack of communication going on. This, of course, doesn't happen when I am the buyers representative.

Buyers have their own hoops to hurdle... home inspections and putting the results into perspective (I'll get into that another time), repair negotiations, appraisals, septic or well tests, verifying tax deferral status for forest or ag tax breaks... there's a lot of activity on the buyers side. And most especially in rural properties.

So the paper chase not only includes the buyers agent and their tasks, but keep abreast of their lenders, the processor and underwriters as well. In short, it takes a skilled buyers team with good communication to get a real estate transaction completed ON TIME - or at all for that matter.

This is where I know what *should* be happening, and by what date to facilitate a timely close. I know who to call, and how to inquire (firmly, but diplomatically) to insure the process is on track. Truly this is the state at which most FSBO deals fall apart... Especially when the buyers do not have a professional helping them.

SELLING FOR-SALE-BY-OWNER
or USING FEE FOR SERVICE BROKERAGES

So why aren't there more FSBOs listings? According to the above linked NAR report, FSBOs have been in steady decline.

A downtrend in the number of for-sale-by-owner transactions is clear, currently at a record-low market share of 12 percent; it was 13 percent in 2005. The level of FSBOs has been on a sustained decline since reaching a cyclical peak of 18 percent in 1997. In addition, a higher share of FSBO properties are not placed on the open market - 40 percent of those transactions were "closely held" between parties who knew each other in advance (family or acquaintances), up from 39 percent in 2005 and 32 percent in 2004.

"When you factor out the properties that were not placed on the open market, the actual number of FSBOs is only 7 percent - the rest are simply unrepresented sellers in private transactions," Stevens said. NAR began tracking the FSBO market in 1981; the record high was 20 percent in 1987.

Add to that, most sellers do not have the marketing tools - access to the MLS, signage, real estate websites, ability to create flyers, etc. Getting into MLS is a breeze with the numerous "fee for service" sites that charge you merely to fill in a form and post it to their member MLS. But two caveats. First, you are paying for service up front, out of your pocket, with no guaranteed results. If it doesn't sell by the end of your contract, you may find yourself paying out again. When you list with a professional, we cover these expenses personally. No loss to you if the property doesn't get sold... UNLESS the agent puts a recompensation percentage into your listing contract. NOTE: *Read the fine print!*

Second, many of the fee for service brokerages offer little that can be construed as effective "marketing". In additional to charging you to input your home into the MLS system, they may provide you with a basic (color? sometimes) flyer (i.e. bedrooms, baths, size, etc... but no personalized, rich "come on" ad text), plus a yard sign. Not only is there no attention to marketing quality, they offer no help in interpreting the contract you receive, nor in constructing a fair counter offers to protect your interests. And frankly, where I really start earning my $s when I put a pen to paper. The specifics of the offer are the singlemost important factor in a transaction.

Nor will the fee for service brokerages keep tabs on the buyers' progress in the transaction. If there is the potential for a failed deal, you'll never see it coming. Fee for service or "limited representation"? It may be a good fit for some. But you will get only what you pay for. So choose your ala carte services wisely, if you indulge.

Many sellers have being burned by the lack of a professional's help in negotiations. And since many homeowners also lack the marketing tools and graphics skills to effectively spread the word... or perhaps are just too darn busy to juggle the details of a sale along with their jobs... most homeowners still opt to list with real estate pros for litigation safety and wise time management. Knowing how time consuming it can be, I don't see that changing any time soon.

Had a chat with your lender lately?

The past couple years, highly inflated home values followed by the problems with the smaller percentage of subprime loans gone bad have created some big changes in the mortgage industry and real estate values.

First, what most sellers notice, is home values have declined. The national media quotes a 6% decline in value. And while many consider this devastating (especially if you're in a 100% mortgage), most are still ahead in their equity. When you consider that for two years in a row, most areas - including our Portland rural areas - experienced double digit appreciation, dropping back 6% is not much in the scheme of things. While this boom proved to be a financial windfall for just about every one involved (except the buyer), as a Realtor®, I viewed these fast increases with serious mistrust and a high degree of alarm.

Frankly, I think this is a much needed, and long overdue correction. A few more years of such accelerated appreciation - without income increases keeping pace - and few of us would be able to afford homes in the near future unless interest rates were guaranteed to stay low for the duration of the loan. That is something no one can bank on.

So if you're a seller, and not in the position of having to sell... I'd hang on for awhile and wait out the market trend corrections. You'll not be commanding the high dollar prices of the recent past. Needless to say, I don't consider it a profitable flipper market either... just one girl's opinion.

However it is one great time to purchase with the intent to hold fast for awhile. With prices going down, and foreclosures and short sales cropping up, it's an opportune time to acquire investment homes to start or expand a real estate portfolio. My logic is this - if loans are tougher to get by many with challenged credit or no money down, they still need a place to live. A place to hang your hat is not an "option", and is always in demand. This offers a couple of options to the entrepreneur investor. Either rent it out, or or offer to sell via lease option or land contract sale. Where else can you park your cash and earn the same interest on your cash as banks?

If you are buyers who are cash shy... don't despair. FHA loans, in conjunction with the sundry non-profit down payment gift assistance programs are still available... at least until further notice.

However the future of the non-profit DPA(or Down Payment Assistance organizations) is sketchy. Their demise was certain when, in October 2007, HUD came up with new rules (provided here thru the Ameridream site) banning DPAs. Other examples of these are Nehemiah, HART, and Liberty Gold... just to name a few. Ameridream and Nehemiah managed to escape immediate shutdown due to court injunctions. Subsequently, in Dec 2007, the US District Court for District of Columbia issued a ruling "enjoining" HUD from implementing the ban on the DPA's.

So if you're a buyer, in need of the down payment assist programs out there... don't drag your feet! Their extinction could be imminent.

Another reason to have a new chat with your lender. We were all spoiled by the vast array of loan packages out there. Yes, Virginia... loans are not simply packages as 30 years, fixed or ARMS. There was a plethora of ways to get to 100% financing. There were 80-15-5s or 80-10-10s for first and second loan options with a bit of down payment. There were specialty loans such as interest only and bridge loans. For qualifying, you could opt for low-doc, no doc, stated income or full documented loans. The different packaging and ways to qualify available makes the non-mortgage savvy head swim.

Truths today? Most of these packages are history, kaput, gone with the wind. Today your credit scores (and that's changing too this year... see my Fair Isaac post below) and your income to debt makes all the difference on your loan rate and qualifications. There are still many specialty packages... rehab construction loans, new construction loans, etc. But as lenders tighten their own practices to ward off Congressional interference in the mortgage market, what's here today may be gone tomorrow.

Moral of the story? Nothing stays static in this business. Not lending packages, rates, nor real estate values. So if you haven't qualified yourself for a purchase - or even for a refi - in the past month or so, it's time for a chat with your lender. You may find you need to alter your search parameters, or make sure you're not buying "too much of a fixer" for the loan package you qualify for. And there's nothing worse than the heartache of getting yourself excited about a new place, only to find out the lender no longer offers the package you need to acquire it.

Need some reference for quality, ethical lenders? Give me a call or email me. You'll find my contact info at my website.

I came, I saw, I felled... Chain Saw safety

One "must have" on our country acreages here in Oregon is a chain saw. Whether clearing debris after storms, basic maintenance of underbrush or unwanted trees, or firewood, there's nothing that fits the need like a chain saw. It's almost downright embarrassing... I get this Home Improvement/Tim Allen gleam in my eye when there's some clearing to be done! Fact is, it's a stress reliever as well as a necessary landscaping task.

But if you're getting your first chain saw, there's most definitely some do's and don'ts you should know about choosing the right size for your anticipated tasks, and basics to know before firing it up the first time.

Or, as fifth generation logger, Carl Smith, says:

"A chain saw is the most dangerous hand tool that can be purchased on the open market. It requires no license and no training to own or operate. Approximately 40,000 injuries and deaths were reported last year in the United States...and most could have been prevented."

Believe you me, as a proud owner of a 16" chain saw (and I want a bigger one!), these critters can be humbling, and frustrating. And as I did everything backwards... like reading mini-courses like this *after* the fact, I'm here to tell you that the tips on not only operating the chain saw, but storing the chain saw when not in use, shouldn't be ignored.

So take a wander over to Carl Smith's mini Chains Saw Safety course on About Forestry for some valuable insight. And while there, you'll find some other tips about felling trees, and a begginer Chainsaw 101 e-course as well.