• The buyer places an offer on the property that’s significantly more than the asking price on the condition that the seller kicks back all or some of the extra money.
• The appraisal is obviously inflated.
• Neither the buyer nor the buyer’s agent has ever seen the property.
• The buyer wants to use a different title company than the one that the seller’s agent has chosen.
• The buyer or buyer’s agent claims that the extra money will be used for home repairs or renovations or paid to a contracting company to handle the repairs or renovations.

If you notice any of these warning signs, put a stop to the transaction, refuse toget involved, and contact the lender to report your suspicions. If the lender won’t listen to you, call Freddie Mac’s mortgage fraud hotline at 1-800-4FRAUD8 (1-800-437-2838) or contact your state attorney general

This summary by: Ralph R. Roberts, GRI, CRS is a real estate and mortgage fraud forensics expert and author of Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership (Kaplan Publishing).

In case you missed this article from The Wall Street Journal

Opinion

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what’s going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That’s the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high ? but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 ? or seven months of supply ? by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won’t stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they’ve been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets’ perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets’ perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.

Home buyers left on hook to repair bad septic system

Click the above link to read the article from Startribune.com, and find out why The Aplikowski Team recommends complete home, well and septic inspections for our clients!

New rules will impact buyers with low downpayments. Another reason to price your home competitively from the start!

The Twin Cities area has been determined to be a declining market by a major mortgage insurance company.  Major lenders are now instituting new guidelines to reduce their exposure in case of loan defaults.

The past real estate boom was fueled in large part by the ability of many buyers to use low or zero down financing to enter the marketplace and increase demand for housing. While this was a good thing, it is hard to argure that these highly leveraged loans, combined with declining values and rate adjustments on option/arm loan products all contributed to the current mortgage mess.

With these new lending guidelines, the ability of buyers to use this type of financing will be severly hampered if the price of the property is not priced slightly (about 5%) below the appraised value.

Keep this in mind when pricing your home!  Not only do we have to sell your home to the buyer, but to the appraiser and the mortgage comany as well!

Read below for details from US Bank Home Mortgage:

——————————————————————————

REVISED USBHM DECLINING MARKETS POLICY

The industry is in considerable turmoil due to declining markets and the impact on Maximum Financing on properties located in those markets. U.S. Bank Home Mortgage Wholesale Division has distributed a memo clarifying their position on the issue. Highlights from the memo:

• If the appraisal indicates the subject property is located in a "Declining Market" or there is an "Oversupply" in the market or the AUS Feedback indicates Declining Values, then the loan will be subject to a 5% reduction if maximum financing is requested.
• Required private mortgage insurance must be provided by one of our three approved primary vendors: MGIC, Radian or RMIC. If required mortgage insurance is unable to be secured at the maximum requested terms, the loan must either be reduced by the required 5% or declined.

Trying to time any market is tough, especially real estate, because of so many variables in neighborhoods, price ranges, etc...

I am sensing some activity in our local market that leads me to believe the market bottom is here, or very near.  I believe that the near historical lows in interest rates, along with price cutting by motivated sellers is combining to finally get buyers off of the sidelines.

I personally bought two properties (one personal residence and one investment property) in the last 60 days because I believe they were real values.

If you have been waiting to time this market, don’t wait too much longer, or the great prices, as well as the low interest rates will pass you by!

There is also some rumblings going on by The Fedral Reserve and Economists that inflation is starting to creep up, and that means interest rates will soon go up as well when they attempt to keep that in check, and avoid a stagnant economy along with inflation (stagflation).

If you have been waiting for the "pefect storm" of low prices and low interest rates, it is here right now!

There has been a lot of media attention focused on the Twin Cities real estate market recently. What does it all mean?

While the market has definitely changed, in my opinion there is no cause for alarm.  The Twin Cities’ economy remains strong, mortgage rates remain affordable, and despite what you may be hearing, homes ARE selling!

The market is being tough on Home Sellers, find out how you can make your home stand out from the heavy competition of excess home inventory.

If you are going to make a move in the current Twin Cities Real Estate Market, not only do you need consultation about the buying & selling process, but you will need time to prepare your home for sale as well.

There is more to marketing & selling your home than putting a sign in your yard.   When you put your home on the market, you need to move away from the notion that you are selling “your home”, and move toward the concept that your home is a “product”, and needs to be prepared and marketed as such.

When you go to the store to shop for a product, you compare a product’s features and price with competing products.  The product you will choose will likely be the one that is priced right and looks the best.  Your home is no different.  Your home will be one of many on the market, and it must look and feel better than the competition to attract an offer from a qualified buyer.

There are several things you can do to help turn your home into a “product” that will stand out from the competition and speed up the sale process, and ultimately put more money in your pocket at closing.

Pre-Sale Inspection:  Having a pre-sale inspection by a qualified home inspector can discover potential hidden problems in time to get them corrected prior to marketing the home.  A pre-inspected home will look that much more attractive to a potential buyer, and may result in a higher sale price and less complicated contract terms.  I believe so strongly in this concept that I offer these inspections FREE to my clients!  Click Here for more info from our preferred Home Inspection Company, Amerispec.

Home Warranties: Offering the buyer a warranty from a Home Warranty Company on the major components of the home is a great way to overcome buyer objections to aging appliances & mechanical systems.  A home with a warranty will stand out from the competition, and may also result in a higher sale price and avoid disputes after the sale. The warranty can even cover you, the seller, during the marketing period of the home at no additional cost.  The best thing is that the premium for this coverage does not have to be paid until the closing of your home sale.  Click here for more info about AHS Home Warranty

Staging:   Getting your home in condition to sell may mean more than a simple spring cleaning.  Neutralizing your decor and re-arranging furniture can make your home feel larger, brighter, and more appealing to buyers.  Some of the highest return on your home-improvement dollars can be realized by removing dated wallpaper, re-painting, and replacing carpet & flooring.  While simply offering buyers a decorating allowance may work in some situations, in a competitive marketplace, actually replacing these items for a buyer can mean the difference between a home selling or not selling.

If you want to know how your home will stack up in the 2007 marketplace, give me a call.   I will help you determine the proper way to showcase and maximize the profit from your home.   If we decide that your home needs some tuning up, I will help you through that process prior to going on the market.  We have many relationships with service providers and contractors who can make your home sparkle!

Buying a Home?  No matter what your Real Estate Needs are, give us a call, we can help!  While this article has primarily focused on home selling, we offer full representation to buyers as well.  Our services to buyers are always free of agent sales commissions, and we offer FREE Home Inspections and the FREE use of our moving truck to all clients!

Avoid fraudulent business practices in your Real Estate Transaction

For most people, Buying or Selling a home will be the largest financial transaction they will make in their lifetime.    When you engage in a real estate transaction, it will require you to have direct or indirect business relationships with practitioners of several different areas of specialization (Realtor, Real Estate Broker, Mortgage Originator, Title/Escrow Company, Home Inspector, Appraiser, etc…)

Throughout time, in all professions, there have always been practitioners who have done things that are unethical or illegal.  Taken as a whole, this has always been a small fraction of practitioners, and the Real Estate Industry is no exception.

That said, a practitioner who wants to bend the rules or engage in unlawful practices can have a devastating effect on your life if you are unfortunate enough to get involved with one of these people.   Even here in Minnesota, in the Twin Cities, there have documented cases of such scams as equity stripping, straw buyers, appraisal fraud, mortgage fraud, escrow funds fraud and the list goes on.  Some of the affected parties in these cases had no idea they were being taken advantage of until it was too late.  See this article from the Star Tribune.

Your real estate transaction all starts with your real estate salesperson.  A good agent who has a history of successful transactions will also have relationships with professional of every other related field you will need to complete your transaction smoothly and safely. While all real estate salespeople have to be licensed by the MN Department of Commerce, not all salespeople are Realtors.  Realtors have to join the Board of Realtors and abide by the Realtors Code of Ethics.

As experienced Realtors, we have relationships with reputable mortgage brokers, title/escrow companies, home inspectors, appraisers, etc…  We have helped hundreds of families complete their real estate transactions smoothly.  We have the track record, testimonials and references to prove it.