10 Steps to Bolster Selling Appeal

Selling your home in today’s depressed market might be as ambitious as drumming up positive PR for Britney Spears.
By: Paul Owers: RISMEDIA
With thousands of properties for sale, buyers know they have leverage, and they’re using it. They search a multitude of homes in a quest for the best combination of amenities and price.

The National Association of Realtors reported last week that sales of existing homes have dropped by 19.3% in the past year.

So sellers need to fight back, preferably with broom and brush in hand.

Homes that do attract interest are priced right and show well. The grass is cut and the shrubs are manicured, rooms are free of clutter and ratty carpeting has been replaced with a neutral-color berber.

We talked to five housing experts-appraiser Joel Greenberg, real estate agent Janice Leis and home stagers Akanake Cadden, Heather Johnson and Margo Aguirre-for ideas on renovations that homeowners can make that will help their properties stand out.

Fair warning: most of these are budget-friendly, but some changes do require a little extra cash.

“When the market was hot, buyers were willing to overlook things,” Greenberg said. “Not anymore.”

1. Curb appeal

This is arguably the most important part of preparing your home for sale because it’s the buyer’s first impression. Your home doesn’t necessarily have to be repainted, but it should look fresh, with no cracked paint. Consider pressure-cleaning sidewalks, resealing the driveway and replacing the mailbox. Get rid of any debris, weeds and toys in the yard. Sprinkle mulch around the trees and trim the hedges so that they’re not hiding windows. Plant colorful flowers no more than 6 inches high.

“Red, purple, orange,” Cadden said. “Those colors create excitement in a buyer.”

2. Kitchens and bathrooms

Kitchens are the No. 1 seller of homes, with bathrooms a close second. Consider replacing the kitchen counter tops if they’re old and bland. Everybody loves granite, but laminate, black Formica or four-inch tiles with grout aren’t bad alternatives and cost less. Granite 12-by-12 tiles with thin grout is another possibility, but you may have to do a lot of cutting, depending on the depth of the counter top.

Here’s a good rule of thumb: If the house is listed at $500,000 or above, you probably need to spring for granite. To spruce up the bathrooms, replace the fixtures and the sliding shower door. Hang some fluffy white towels. Above all, the bathrooms must be spotless.

3. Doors

The front door, if possible, should have glass side panels to allow light to shine through. Replacing the hardware with, say, antique bronze is a cost-effective way to make the door look new. Don’t forget to make sure the doorbell works. Doors inside the house should be painted and the hardware should be the same on each one. Fix any annoying squeaks. Older homes have sliding-glass doors, but there’s not much you can do with those except replace them. French doors will add value, but they’re expensive.

4. Flooring

Wood is good, but make sure it’s sanded and restained. Laminate flooring also is fine, but it should be a neutral color. Shampoo the carpet so it’s free of stains and pet smells. You don’t need to buy new carpeting because the homebuyer will want to select it. But if the rug is really bad, get berber from one of the home improvement stores and install it yourself.

5. Lighting

Upgrading the lighting is an inexpensive way to improve the look and mood of a house. Replace the fixtures, install dimmers and use soft-wattage light bulbs. Buy a chandelier, but nothing too ornate. Also, keep the outside lights on at night because prospective home buyers often drive through neighborhoods after dark.

6. Living room and closets

A cluttered house quickly turns off buyers, so lose the knick-knacks. Make the house appear open and inviting. Pack up one-third of a closet’s contents and store the junk somewhere off site. A crowded closet tells buyers the house doesn’t have adequate storage.

7. Garage

Garage organization is big business these days and the before/after photos offer dramatic contrasts. Local companies will come in and get rid of the junk, using bins, cabinets, lockers, hooks and hangers to more neatly store what’s left. The cost of organizing your garage can range from a few hundred dollars to more than $15,000. You could do much of the work yourself. For instance, if the garage floor is stained, paint it gray.

8. Patio

Again, less is more. Make sure the junk is gone and that the furniture looks new. Set up the grill. Create a scene that allows potential buyers to see themselves relaxing outside and enjoying the backyard.

9. Ceilings

Adding crown molding and removing popcorn ceilings are nice touches but not necessary. If you do try it, hire a professional. In most cases, however, your money would probably be better spent elsewhere.

10. Pool/spa/sprinkler system

The pool and spa should have enough water. If there are leaks, or if the equipment is broken, get busy. Don’t forget about the sprinkler system. Granted, sellers don’t want to invest hundreds or thousands of dollars in fixing these items, but it will greatly improve their chances with buyers.
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A garden oasis in the Hollywood Hills

Hollywood Dell residents savor their area of winding roads and shady paths.
By: Leslie Anne Wiggins: LosAngelesTimes:com
Geré Fennelly, a composer and former keyboardist for the rock band Redd Kross, was in bed for the night, nearly asleep, when she heard Pink Floyd's "The Dark Side of the Moon." Every note was perfect, like the record she listened to as a teenager. A dream? No. That's life in Hollywood Dell.

Beginnings

The night of the Hollywood Bowl's first concert, July 11, 1922, the Los Angeles Phil- harmonic Orchestra opened its still-running Symphonies Under the Stars summer concert series. Hollywood Dell's early residents, by all accounts creative types similar to the ones who reside there today, may have heard a faint melody from across Cahuenga Boulevard and taken it as a sign that they had chosen a special place to settle.

What it's about

Hollywood Dell inhabitants have found a haven in the middle of a crazy town -- a garden oasis. The Dell, part of the original Hollywood Hills, is a sunken mini-valley just east of the Hollywood Freeway and south of the Hollywood Reservoir. It is filled with winding roads and shady paths where people enjoy afternoons walking with dogs or with babies in stroll- ers.

The community has an active neighborhood association called the Hollywood Dell Civic Assn. Annual fees are $30 per household. Members attend meetings of the Hollywood Beautification Team and keep Dell residents updated on the happenings of their neighborhood and surroundings.

Insider's view

Twenty-year Hollywood Dell resident Tom Meredith, who works in entertainment research, said he has "a hard time imagining living anywhere else." And, if it's not already obvious from her bedtime concert experience, seven-year resident Fennelly calls the Dell "the best place I've ever lived," previously having resided in other parts of Hollywood, as well as in San Francisco and Japan.

Sixteen-year Dell resident Patti Negri, who serves as the homeowners association president and owns a theatrical production company, enjoys sitting on her back deck and watching the Bowl's fireworks displays.

Good news, bad news

Although the crime rate is not as high as in other parts of Hollywood, according to LAPD maps, the Dell does occasionally experience some of the same types of crimes that occur with more frequency nearby. During March there were five reports of theft, none of which was a violent crime.

On concert nights at the Hollywood Bowl, street parking in the Dell can get overcrowded, something that most Angelenos are used to dealing with -- carefully checking signage for tricky restrictions, then wedging SUVs into tight parallel spaces.

Housing stock

Homes within the Dell vary in size and style dramatically; there's a blend of old Spanish Colonial Revival-style and new modern geometric designs, with Craftsman-style and California ranch houses thrown into the mix. There are single-family homes as well as condominiums and semi-attached town houses.

Among the homes currently on the market are a 1991 Frederick Fisher-designed, modern two-bedroom, three-bathroom, 2,016-square-foot home with hillside views for $1,190,000.

The neighborhood also has a new development of 16 Craftsman-style town houses, which range in price from the high $800,000s to the high $900,000s and have either two or three bedrooms.

Report card

Hollywood Dell is part of the Los Angeles Unified School District. Children living in the Dell may attend Cheremoya Avenue Elementary, which scored 761 out of a possible 1,000 on the 2007 Academic Performance Index Growth Report. Joseph Le Conte Middle School scored 662; Hollywood Senior High School, 617.
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First-Time Home Buyers' Few Options

Homeownership is a bit of a nightmare for many first-time buyers. There are still programs that help people purchase their first home, but qualifying standards are strict. The programs also carry first-timer restrictions, so it's wise to shop around.
By: JEFF D. OPDYKE: WSJ.com
Homeownership, the bedrock of the American Dream, is a bit of a nightmare these days for many first-time home buyers.

Lenders are demanding higher credit scores, mandating private-mortgage insurance on many more loans, and requiring larger down payments. Fewer first-timers qualify for the house they want, or they're paying a larger monthly amount to own it.

There are still some programs for first-time buyers that offer slightly more lenient underwriting standards that make it easier to get into a home, or discounted interest rates that make homeownership more affordable. But even these are tougher to qualify for.

Freddie Mac requires a solid credit score of at least 700 for a low- or no-down-payment mortgage through its Home Possible first-time buyer program. Previously, it imposed no minimum. Freddie saw "an influx of business" amid the subprime bust, says Patricia McClune, a vice president, because it's the only way to obtain 100% financing. Loan volumes are still up, but the tightened standards mean fewer first-timers qualify.

Volumes at the Federal Housing Administration are up, too. The agency hasn't changed its underwriting standards, but does impose income-verification and debt thresholds. Moreover, FHA loans require that a mortgage-insurance premium of 1.5% of the loan value be financed into the mortgage; and borrowers must pay an additional 0.5% mortgage-insurance premium every year. Together, that adds $75 a month on a $150,000 loan.

"Every borrower faces a steeper hill" now, particularly first-timers, says Pete Ogilvie, president of the California Association of Mortgage Brokers.

Many programs for first-timers carry restrictions, so shop around. Connecticut's Homebuyer Mortgage Program offers a 5.625% interest rate fixed for 30 years, half percentage point below the area average. That can save $60 a month on that $150,000 mortgage. The problem: Reduced funding means the agency is doing only 2,750 mortgages this year, down from roughly 4,000 previously.

The catch: The loan is subject to a federal recapture tax. If you sell within nine years, you could be required to give up as much as 50% of the profits, depending on various factors.

"That's the problem" you need to be aware of with some first-time buyer programs, says Michael Menatian, president of Sanborn Mortgage, a mortgage bank in West Hartford, Conn. "You get the lower rate, but you're potentially robbed of a big part of the equity to buy your second house. But in this market, it's better than nothing."
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9 Affordable Ways to Enhance Your Home's Curb Appeal

It's natural to feel proud of our homes, but not every house is a Frank Lloyd Wright masterpiece in the eyes of others. Some quick, affordable cosmetic surgery can change that...
By: Josh Garskof: CNNMoney.com
Cosmetic fixes that can put a prettier face on a plain-Jane home will pay for themselves - and then some.

Just as every mother believes her son is a handsome devil, we homeowners tend to see the best in our houses - or at least we become comfortably familiar with the way they look.

But let's face it, to the objective eye, not every man is George Clooney and not every house is a Frank Lloyd Wright masterpiece. There are a lot of drab, even downright gloomy facades out there - especially among homes built after World War II, when many builders abandoned traditional architectural styling to streamline costs and mass-produce housing.

Thankfully, the cosmetic surgery required to put a beautiful face on your home won't hurt a bit. It doesn't even require a big-ticket construction job. "Creating curb appeal isn't about trying to transform the house from, say, a plain-Jane ranch into a grand Victorian," says Charlotte, Vt. architect Ted Montgomery. "Just changing one or two little details is all it takes."

You can find your inspiration by looking at similar houses in the neighborhood - or by hiring an architect to offer suggestions ($300 to $500) and maybe sketch a plan (add $300 to $500). You'll boost your home pride, endear yourself to the neighbors and generate a lot more interest from buyers someday when your house goes on the market.

Subtract Flaws

Assuming the house and yard are already well maintained, job one is to get rid of unsightly blemishes left by a penny-pinching builder or the misguided remodeling efforts of previous owners.

Replace the garage doors. The most prominent facial feature of many homes is a pair of big garage doors - which all too often are flat, lackluster slabs of steel or vinyl. Trade them for more visually appealing doors with moldings, windows or an old-fashioned carriage-house look ($2,000 to $5,000 a door, including labor). See designerdoors.com and clopaydoor.com for examples.

Remove siding. Sometimes ugliness is only skin-deep. "Peek under dreary aluminum, vinyl or asbestos siding and you may find well-preserved wood clapboards hiding underneath," says Asheville, N.C. architect Jane Mathews. If so, remove the siding, repair the old wood and give the house an attractive paint job ($10,000 to $20,000). If not, you could paint the siding or replace it with fiber cement siding (see image), a no-maintenance product that looks like real wood ($15,000 to $25,000).

Lose the funky railings. Swap out bad porch or stoop railings - such as black iron bars and chunky pressure-treated decking components - for visually interesting banisters and spindles that are worthy of their prominent placement at the front of the house ($1,000 to $3,000).

Add Character

Like a dimple or a cleft chin, the addition of an interesting architectural element can give your house some distinctiveness.

Install a salvaged door. The typical postwar front door is decidedly dull, but the entry should be the focal point of your house, says Corvallis, Ore. architect Lori Stephens. For interesting replacements, troll an architectural salvage yard (the directory at buildingreuse.org can help you locate one). Consider a recycled mission-style oak door, a six-panel colonial with blown-glass windows, or arch-top French doors ($200 to $800; more if you're converting to an arch top).

Add moldings. Many newer homes lack exterior trim; the siding just butts up against the windows and doors. A contractor can give the house a more sophisticated, traditional look by cutting back that siding and slipping in wide, flat moldings around the openings and possibly at the corners of the house and between its stories ($3,000 to $4,000). Consider using a synthetic product like cellular PVC for your moldings, which looks like wood but will never rot.

Enhance the roof. A straight, un-adorned roofline makes a house look about as interesting as a shipping container. So consider adding one or more windowed dormers (gabled peaks) or extending the eaves (the roof overhang) a few feet beyond the front of the house with detailed moldings on the under-side ($2,500 to $6,000 per dormer or eave extension). This is major surgery though; do not attempt it without first getting an architect's input.

Multiply the Effect

Invasive procedures aren't always necessary. Just adding the right accents can transform your home's outer look - not unlike a pair of stylish new specs or a good haircut.

Replace light fixtures and hardware. Lose generic shiny brass or black house numbers, mailbox and porch lights (especially bare-bulb fixtures) and substitute something unique and substantial, perhaps made of antiqued copper, bronze or brushed nickel ($20 to $75 each). For ideas, see rejuvenation.com and restorationhardware.com.

Plan for a nonstop flower show. Most of the flowers in your yard probably bloom in the late spring, which makes for a beautiful May - or whenever the big show happens in your climate - but leaves you with a bland yard for the other 10 or 11 months of the year. A local nursery can help you choose and plant additional bulbs, shrubs and trees with different bloom times (as well as plants with colorful autumn foliage and winter berries), so there'll always be something performing in the yard ($50 to $250 a shrub, $500 to $1,500 a tree).

Add color. A paint job ($2,000 to $10,000) in pleasing hues can make any structure appealing. "But don't choose a bright, high-contrast color scheme - that only exaggerates a house's flaws," Montgomery warns.

For subtler suggestions, check out the book "House Colors" by Susan Hershman ($23 at Amazon.com) or go for the colors of nature - muted greens, deep reds or pale yellows - and keep the body and trim close in color. That will give your home a friendly, peaceful look rather than making it say, "Hey, look at me." Sort of like an average-looking guy choosing a simple charcoal suit instead of a flashy powder blue one that only a Hollywood star could pull off.
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The Brighter Side of Housing

The housing bust is helping some people buy homes that they couldn't afford a couple of years ago. The Journal's quarterly survey of housing-market conditions in 28 major metro areas points to continued downward pressure on prices in much of the country.
By: JAMES R. HAGERTY: WSJ.com
Amid Downturn, 'Unaffordable' Is Within Reach.

And now for the heartwarming side of the housing bust: It's helping some people buy homes that they couldn't afford a couple of years ago.

Michelle Dudley for years commuted 50 miles each way to her job as a civil servant in Anaheim, Calif., because she and her husband, Don, didn't feel they could afford a home near her office. This week, though, the Dudleys moved into a three-bedroom house in Anaheim that they recently bought for $390,000, down from the original listing price of $445,000 in November. Similar homes in the area were selling for as much as about $600,000 two years ago, says Erin Eckert, an agent for Redfin, an online real-estate brokerage that represented the Dudleys.

Still, many potential buyers are holding out for better deals. The Wall Street Journal's quarterly survey of housing-market conditions in 28 major metro areas points to continued downward pressure on prices in much of the country.

As usual, there is huge variation from town to town. In most of the country, inventories of unsold homes are no longer growing quickly, as they did in 2006 and 2007, but remain huge. The supply has shrunk modestly in Boston and Denver over the past year. But the number of for-sale signs continues to rise swiftly in the Portland, Ore.; Seattle; Raleigh-Durham, N.C.; San Francisco; and Washington areas.

The biggest gluts are in Florida. In the Miami-Fort Lauderdale area, the supply of single-family homes and condominiums is enough to last 34 months at the average sales rate of the past year. That months-supply figure is about 21 in Orlando, 18 in Tampa and Las Vegas, 17 in Detroit and 14 in Phoenix. A six-month inventory is generally considered a rough balance between supply and demand.

For condos alone in Miami-Dade County, the supply would last 45 months at the current sales rate.

Prices are coming down fast. Real-estate data company Zillow.com estimates that the median value for all homes in the 12 months ended March 31 fell 25% in the Las Vegas metro area, 19% in Miami and Orlando, and 16% in Phoenix. The typical value is still rising modestly in a few places, including the metro areas of Raleigh and Charlotte, N.C., Dallas and Houston. One hitch for house hunters, though, is that mortgage lenders have become much more restrictive with loans. And even buyers who can get financing still face a tricky question: Should I wait for a lower price? Buying now, with home prices generally falling, is "a gamble," says Ms. Dudley, who just moved into her new Anaheim home. But, she says, home prices will rise again at some point. Meanwhile, she was tired of her long, expensive commute.

Kevin McCleary, a computer-security consultant, remained a renter through the housing boom even though he could afford to buy, because he believed prices were reaching unsustainable levels. In October, though, he and his fiancée finally decided to buy a foreclosed home in Herndon, Va., and negotiated a price of about $443,000. The same home sold in 2005 for $645,000. "I don't believe we hit it at the perfect time," Mr. McCleary says. On the other hand, he says, "we were just tired of putting our lives on hold."

During the boom, home prices rose far faster than incomes. Home prices as measured by the S&P/Case-Shiller national index shot up 74% in the six years through 2006, while median household income rose 15%. (Neither figure is adjusted for inflation.) Now prices in many areas are adjusting back toward more affordable levels, a process that could take several years.

In an analysis of 330 metro areas in last year's fourth quarter, National City Corp., a banking concern, and Global Insight, an economic research firm, found that home prices were sharply overvalued in relation to household income and other factors in 21 metro areas, down from a peak of 58 metro areas in the second quarter of 2006.

Economists at the two firms look at home prices in relation to household income and other variables, including population density (an indication of how much land is available) and past differences in prices caused by factors like climate and schools. They then classify as "overvalued" metro areas where home prices are more than 33% above a level that could be explained by fundamental drivers of housing costs. Among areas where this analysis finds that home prices are still too high are Bend, Ore., Atlantic City, N.J., Miami, Honolulu and Portland, Ore.

In most of the country, "we're getting a return to normalcy" in the relation between home prices and incomes, says Richard DeKaser, chief economist at National City. But, he adds, prices may overshoot on the down side.

Economists at Goldman Sachs say home prices are likely to level off by late 2009. They also point to improving affordability. Goldman's chief U.S. economist, Jan Hatzius, says the share of a typical family's income needed to pay mortgage payments on a median-priced home averaged about 17.5% from 1993 to 2003, before jumping to 26% in 2006. The figure now has fallen to 20% and is likely to keep declining as home prices fall.

Mr. Hatzius estimates that average U.S. home prices have fallen 15% since the second quarter of 2006 and projects they will fall an additional 10% before stabilizing late next year. But he also sees a risk that home prices will fall further, particularly if the foreclosure problem proves worse than already expected.

Goldman estimates that foreclosures will add 1 million to 1.5 million homes to the for-sale market this year, compared with less than half a million a year before 2007.

During the first quarter, homes acquired by lenders through foreclosure accounted for 33% of all sales of previously occupied homes in California, up from just 3.2% a year earlier, according to DataQuick Information Systems, a research firm in La Jolla, Calif.

Homeowners hoping to avoid a foreclosure are adding to downward pressure on the market, says Daniel R. Odio, owner of DROdio Real Estate Inc. in Alexandria, Va. Such people often seek to unload their homes through a "short sale," in which the price is less than the amount owed on the mortgage and the lender agrees to forgive the difference. Homeowners hoping to do a short sale sometimes advertise very low asking prices to lure buyers, even if there is little chance the lender would accept bids at that level, Mr. Odio says. The "fictional" asking price, in turn, misleads potential buyers about the value of nearby homes.

The supply of lower-priced homes has surged in some areas. Steven Thomas, president of Re/Max Real Estate Services in Aliso Viejo, Calif., says there are about 1,260 condos available for under $250,000 in Orange County, Calif., or about triple the year-earlier total.
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Better Loans for Green Homes?

Under a proposed bill, people who buy new energy-efficient homes or retrofit existing homes could qualify for lower interest rates.
By: Anne C. Mulkern: REALTOR®Magazine
U.S. Rep. Ed Perlmutter (D-Colo.) has rolled out legislation that could result in lower-interest loans for people who purchase energy-efficient homes or retrofit existing residences with green features.

Under the bill, Fannie Mae and Freddie Mac would gain as much as a 25-percent credit toward their federal goal of serving low- and moderate-income buyers by repurchasing mortgages on environmentally friendly buildings.

This would create an incentive for lenders to pursue green lending because they would know they can easily resell the loans, said Perlmutter, adding that they could also pass the savings on to borrowers.

It's a promising idea, but it's not a sure thing yet. Home builders have expressed concern about the proposal because the additional requirements could increase construction costs; and Fannie Mae is worried about a requirement that would force it to have different percentages of "green mortgages" by various benchmark dates.
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Why Lenders Are Leery Of Short Sales

This Foreclosure Alternative Helps Strapped Homeowners, But It's Not Easy to Pull Off
By: RUTH SIMON and JAMES R. HAGERTY: WSJ.com
As more people fall behind on their mortgages, lenders have been slow to take advantage of a longstanding alternative to foreclosure - a so-called short sale.

At first glance, a short sale might seem like a win-win for everyone involved. In such an arrangement, the borrower sells the home for less than the amount owed, with the lender forgiving the difference. The sale releases borrowers from their obligations. For mortgage holders, it can be less costly than foreclosing - and could provide protection against future price drops. For buyers, it can be a chance to buy a home at an attractive price.

SELLING SHORT
Short sales - in which a homeowner sells a property for less than its loan value - are tricky to pull off:
• It can take weeks or months to get mortgage companies to respond to an offer.
• Mortgage servicers may balk at the purchase price.
• Homeowners may have more than one loan on the property, slowing the process.

Short sales - which were rare when the housing market was booming - can also be a good way for lenders and investors to minimize losses. They typically result in losses of 19% of the loan amount, compared with an average loss of 40% for homes that are sold after foreclosure, according to a recent analysis by Clayton Holdings Inc., which tracks more than $500 billion in mortgage loans monthly for investors. The costs of foreclosure can include not only legal fees, but also taxes, insurance and the expense of maintaining the home until the property is sold and repairing any property damage.

As the housing market continues to weaken, the number of short sales is edging upward. Short sales currently account for about 18% of home sales, according to the National Association of Realtors. But it can be extremely difficult to get these deals completed. Unlike a traditional real-estate sale, a short sale requires the approval of not only the buyer and the seller, but also the mortgage-servicing company. In many cases, loans have been packaged into securities - which means that the mortgage servicer must consider the interests of the investors who own the loans.

Deals can fall apart because the mortgage company rejects the price that has been agreed upon by the buyer and seller. Long delays in getting an answer from the mortgage servicer are another obstacle.

The process can be so frustrating that some real-estate agents and home buyers have decided that a short sale isn't worth the effort. Shari Adams, a paralegal, bought a foreclosed three-bedroom house in Stuart, Fla., after she tried twice to buy a home being sold in a short sale. One deal fell through when the mortgage servicer turned down her offer after six weeks and didn't make a counteroffer. Another deal collapsed because it wasn't clear that the seller was truly facing a financial hardship.

"I basically started to run away from any home listed as a short sale," Ms. Adams says.

Low Success Rate

The success rate for short-sale offers is low, real-estate agents say. Molly Kay Hamrick, president of Coldwell Banker Premier Realty in Las Vegas, estimates that 20% of short-sale offers in the area lead to completed sales, compared with 85% for more traditional sales. Redfin, an online real-estate brokerage based in Seattle, says it represented buyers on 65 short-sale offers in the first quarter but expects only two or three to result in a completed sale.

Because so many deals fall through, Jean Manner Schwimmer of Coldwell Banker Gay Dales in Salinas, Calif., advises buyers making an offer on a short sale to put a clause in their contract that says the deposit can't be cashed until it is clear that the sale has been approved by the mortgage company and the contract has been signed.

Many borrowers walk away in frustration because it takes so long to get a response from the mortgage company to their offer. Servicers take an average of 4½ weeks to provide an answer on a potential short sale, according to a recent survey of real-estate agents by Campbell Communications, with some taking two months or more to respond. By contrast, it takes an average of less than two weeks to get a response to an offer for a property that has been foreclosed on, the survey found.

"To make the process work, you have to have a buyer who just wants that property and is willing to wait three to four months," says Beth Butler, chief operating officer of EWM Realtors, based in Miami.

Alicia and Greg Green accepted a short-sale offer in December for a home in Los Angeles they had purchased as an investment. But the deal didn't close until late March because of delays in getting an answer from the mortgage servicer, Option One Mortgage Corp. At least two offers at higher prices fell through because of delays, says Bill Etchegaray, the couple's real-estate agent.

"Luckily, we didn't lose the buyer," says Ms. Green. "I thought we would because the process took so long." The couple sold the home for $299,000, well below the $375,000 mortgage balance. They fell behind on their payments when the construction business Mr. Green owned went under. A spokeswoman for Option One pointed to the complexities of arranging short sales and said the company is pleased that the sale was successful.

Coming up with what everyone agrees is a fair price can be tricky in a soft market. "Servicers are finding that people try to low-ball the sales price knowing that the property is distressed," says Vicki Vidal, a senior director with the Mortgage Bankers Association.

Missed Opportunities

But with home prices falling in many markets, a rejected short-sale offer may wind up as a missed opportunity. Donald Schriver, owner of Assist-2-Sell Good Sense Realty in suburban Phoenix, says a homeowner he was helping late last year was offered $190,000 for his house in a short sale but was unable to win approval from his mortgage company. The borrower later decided to abandon the four-bedroom house, which was built in 2005. The house is now in foreclosure, with an auction scheduled for June. Prices in the area have continued to fall, says Mr. Schriver, who believes that the most the home would now fetch is $180,000.

A spokesman for Wells Fargo & Co., which services the loan, said the company "made several unsuccessful attempts to connect with the customer" and didn't turn down an offer for a short sale.

Some mortgage-servicing companies are tightening up on short sales because they worry borrowers are rushing into these arrangements when there are better alternatives. In March, Ocwen Financial Corp., based in West Palm Beach, Fla., told its customers it would consider a short sale only after it had talked directly to the borrowers and determined there are no alternatives for keeping them in the home.

"We are concerned that some of our customers are not given all the facts," says William Rinehart, the company's chief risk officer. "In some cases, it's represented to them that a short sale is the only solution to the problem they are in."

Part of the problem may be that many mortgage servicers were ill-prepared for the spike in bad loans. As delinquencies have climbed, they have had to scramble to add staff. Mortgage companies say they prefer other means to help borrowers, such as a repayment plan or loan modification.

Clearing Hurdles

Gathering all the information needed to evaluate a short-sale offer can take time, says Patrick Carey, an executive vice president with Wells Fargo. The loan servicer must first determine whether the homeowner really can't continue meeting the loan payments, then get an appraisal or broker's opinion of the home's value.

Mortgage servicers also try to ensure that the proposed sale is an "arm's length" transaction between two parties rather than, say, a sale to a relative on sweet terms. They must also determine whether the buyer has sufficient funds or the ability to get a loan. If all those hurdles are cleared, the servicer may still need to get approval from the investor that owns the loan and provide an analysis showing that the investor will be better off with a short sale than with another solution.

There are additional complications if the borrower has a mortgage and a home-equity loan. In that case, both parties must approve the deal - which is a challenge when the sales price may not even be enough to cover the mortgage balance.

To minimize delays, Mr. Carey suggests that homeowners contemplating a short sale immediately call the loan servicer to get the approval process started, rather than wait for an offer.

There are some signs that the process is getting smoother. In recent weeks, some mortgage companies have begun to approve short sales for borrowers who can show financial distress but haven't yet stopped making monthly payments, says Dan Elsea, president of brokerage services for Real Estate One in the Detroit area. Until recently, servicers wouldn't even consider a short sale unless a borrower was at least 60 days late.

Fannie Mae and Freddie Mac, which own or guarantee nearly half of all outstanding U.S. mortgages, both say they are trying to streamline the short-sale process. Fannie Mae says that it plans to introduce a policy in the next few months under which real-estate brokers would be given an advance indication of the approximate minimum price that would be acceptable in a short sale, a move designed to quickly weed out offers that are too low.

Freddie Mac says it has already given its top servicers more flexibility to accept short sales for homes backed by loans it guarantees or owns. Lehman Brothers Holdings Inc., another issuer of mortgage-backed securities, also is offering incentives in some cases for servicers to arrange short sales or loan modifications.
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5 Tips for Buying a Home in a Down Market

The subprime mortgage bust has scared a lot of people away from the housing market.
Bankaholic.com
The nightly news is filled with images and stories of everyday Americans who are losing their homes because they made greedy and uninformed decisions, they were taken advantage of by predatory brokers, or a combination of these situations. However, the news isn’t all bad. This decline in the market has dropped prices and made housing affordable to many fiscally responsible renters who never considered home ownership to be an option.

If you find yourself house-hunting, make sure that you follow these five simple steps to take advantage of this downturn in the market; if you don’t, you could be the next sad story on your local news.

1. Accounting for Extraneous Expenses
As with almost any major purchase, there can be a number of fees associated with buying a home. Costs associated with property taxes, homeowner’s insurance, standard maintenance, and utilities should not be overlooked. In addition, if you buy a home that is part of a complex or attached to a homeowner’s association, you will have to pay annual fees as well. Make sure that you take these additional expenses into account when you are determining how much home you can afford.

2. Acknowledging Special Assessments
Many homes require a number of regularly scheduled special assessments to be performed in order to satisfy local regulations and ordinances. These are fees that are required in addition to standard property taxes. In order to make sure that these costs don’t take you by surprise, obtain copies of prior bills for these services and inquire about any pending and future assessments that need to be done on the property.

3. Finding a Manageable Mortgage
A good question to ask yourself before contacting your local banker to discuss a loan is, ‘how much is too much?’ While you might be tempted to try and get as much money as possible if you can find a good rate, you do not want to make the mistake of taking on a loan so big that your finances will be stretched to the point that you cannot make your payments. Traditional income multipliers are a good place to start. If you have a single income, 3.5 times your annual salary is the maximum that you should consider requesting and if you have dual incomes, the maximum should be about 2.75 times your joint salary. If these amounts will stretch your budget too far, then it is a good idea to consider borrowing less.

4. Determining How Much Home to Buy
Now that you have a handle on all of the costs involved and have determined how much money you can borrow, it is time to figure out just what you can afford to spend on a new home. Whatever you do, don’t bite off more than you can chew; doing so could quickly lead down the road to foreclosure. Take into account your credit history, the closing costs on the loan, the amount of the down payment, and any preexisting debts. Weigh these against your income and savings before making a move.

5. Welcoming Your New Home into Your Basic Budget
Once you have everything in order, set a budget and stick to it. While your new home purchase will undoubtedly become both your biggest asset and your biggest expense, you still have to eat. It is also important to make sure that you start building a rainy day fund in case of emergencies; one of the things that accompany a new home is the potential for substantial unforeseen expenses. Set a reasonable budget that includes an allowance for unexpected costs and you can live happily ever after in your new home.


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Bernanke: Economy could shrink in 1st half 2008

The U.S. economy could contract in the first half of this year but should then pick up as aggressive interest rate cuts stimulate growth and financial and housing market woes recede, Federal Reserve Chairman Ben Bernanke said on Wednesday.
Reuters
"It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," he said in remarks prepared for delivery to the congressional Joint Economic Committee.

"We expect economic activity to strengthen in the second half of the year, in part as the result of stimulative monetary and fiscal policies; and growth is expected to proceed at or a little above its sustainable pace in 2009," he added.

The central bank chief appears before Congress slightly more than two weeks after the Fed provided emergency funding to prevent the failure of troubled investment bank Bear Stearns, which he said could have caused a "chaotic" market reaction that would have been difficult to contain.

Bernanke said financial markets remain under considerable strain but emergency liquidity measures have been helpful in alleviating some of the stresses. Funding pressures on large financial institutions seem to have eased somewhat, and some markets, including the key market for agency mortgage-backed securities, appear to be more liquid.

"Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year," he said. "I remain confident in our economy's long-term prospects."
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