Why Are Cash Real Estate Deals on the Rise?

This is an ideal real estate market for cash buyers and according to CNN Money, cash sales accounted for 43% of the national real estate market in 2014.  This is nearly half of all transactions. What has caused an increase in paying for a property in cash?  Several factors contribute, including a tough mortgage lending market.  There are only a limited number of qualified buyers who have not suffered a dent in their credit, a foreclosure or short sale of property in the last five years.  Banks and mortgage brokers are still quite strict with lending requirements.   With Baby Boomers’ retirement looming or imminent, many have the means - and find it easier to pay with cash, rather than relying upon a mortgage lender. 

In some markets, there are inventory shortages, and cash buyers want to go to the head of the line. Often they do – because the real estate purchase is simplified and the closing time may be shortened if the buyer is able to pay in cash.  

Who is the Cash Real Estate Buyer?
There are many different personas capable of paying cash for a home purchase, and there are foreign buyers influencing cash purchase figures.  The reality is that cash buying is on the advance in many states, including Virginia, where the brokerage I represent, Coldwell Banker Traditions says that cash buyers account for 33% of all sales in 2014 as of May 2014. 

Retirees Pay Cash for Homes
The retired sector of the economy now has decades of equity in homes and they are once again on the move. As the real estate market perks up in various U.S. markets, retirees are considering moving out of state to lower expenses and downsizing or embracing retirement community living lifestyles.  Living in the Williamsburg, Virginia real estate market has always been popular with retirees, especially those who love golf, history and plenty of outdoor activities.  

Cash Buyers Looking for Deals
John Starke is a Registered Principal at Financial West Group, based in West Lake Village, California. He said, “I purchased a foreclosure in Virginia that was in excellent condition, so I picked it up.  I saved at least 35% by paying cash for the home in the fall of 2013. The property is in Mechanicsville, Virginia. It’s just 10 miles from Richmond and sits on a half acre.  It’s a 3 bedroom 2 bathroom with an enclosed backyard, to keep my dogs happy,” added Starke. 

Jeff Hurd, Loan Originator at Fidelity Bank Mortgage in Newport News says, “As a lender, I don’t see the cash buy of owner occupied homes. I think the number of people has increased, simply because a lot of people are meeting more resistance to getting a mortgage in the first place.  It’s more of a ‘perceived’ hassle to finance a house.” 


Clearly the trend to pay in cash has benefits for the home buyer.  There are lots of reasons why home buyers prefer this to traditional financing. The most popular cash buyers in today’s market are the second home purchaser, the owner occupied home purchaser and foreigners purchasing real estate in the United States. 

Second Home Purchases Often Paid for With Cash
The second home purchase is becoming increasingly popular for cash buyers in Florida.  In fact, in the Cape Coral area of Florida, cash buys account for 74% of all purchases in 2014.  This is a significant portion of the market, accounting for three out of four real estate transactions.  In the Williamsburg, Virginia market, Coldwell Banker Traditions has measured their cash buys at 33% in 2014 – accounting for one in every three home purchases being paid for in cash. 

Owner Occupied Buyers Pay Cash
The National Association of Realtors (NAR) reports that less real estate investor cash buys are occurring, while property buyers looking for a primary residence who are willing to pay in cash are on the rise. This includes retired couples and individuals who sell their homes and purchase a new one with the equity gained over the past several decades.  It’s also reported that 50% of millennial children will ask their parents to help buy them a home.  Speculatively - many millennial children may be paying cash for homes. For all age groups, nothing compares to the security of home ownership. 

Hurd says that many people are searching for 100% mortgage financing. “It is not available to all home buyers,” Hurd cautions.   To qualify, home buyers must be Veterans, first time homebuyers or homebuyers in rural areas.

Down payments commonly range from 5-50% of home value. “I do have buyers put a big chunk of cash down,” observed Hurd. “It varies. I would say that more than 50% of the people I work with put 5% or less down. Many are Veterans who do not need a down payment or they are in transition and do not have cash at the ready,” commented Hurd. 

Heftier down payments are common, too.  Hurd says, “Occasionally I have a client that puts down 20% or 30% or even 50% on a home purchase. Many people I work with could have bought a house with cash only, but because interest rates hover above 4% it is still enticing to have a mortgage and receive a federal tax break each year.”   

Foreign Buyers Invest Cash in Real Estate
The NAR also reports foreign purchases of U.S. real estate often occur in cash. For example, in Miami, Florida, Latino families and individuals are likely to purchase homes for cash.  In California those of Asian ancestry often pay in cash, too.  Each ethnic group wants their stake in the American dream - and they want it without a mortgage. 

In brisk real estate markets where inventories are low - such as urban areas like San Francisco, Boston and Washington D.C. - some buyers believe if they pay in cash, they will go in front of financed buyers. “From my perspective, a cash buyer may be chosen for the contract in front of a financed buy,” says Hurd. “ It is a generally accepted perception that the home purchase will close much faster if it is not reliant upon financing,” says Hurd. Cash buyers are not receiving the deep discounts (such as the example provided by Starke) in real estate as they did in years past.  Still, in some markets where inventories are low, cash deals may be rather enticing to sellers to speed up the sale.    

Cash home purchases are certainly an optimum way to buy if the resources are available.  Many finance experts usually recommend using only a portion of savings to purchase a home. So, in some cases, a 30-50% down payment may suffice, especially with today’s mortgage rates still low enough to be enticing. 

Learn more about homes for sale in Williamsburg, Virginia. Visit http://www.voncannonrealestate.com.   

Riding the Rollercoaster: Is it a Seller’s Market or a Buyer’s Market?

Is it a seller's market or is it a buyer's market in real estate this year? I say both. This question is posed repeatedly, and answers may vary. In my regional market, Williamsburg and Richmond, Virginia, it is an equal market for buyers and sellers heading into peak sales periods in the spring and summer seasons.

National Association of REALTORS (NAR) Home Sales Statistics

The National Association for Realtors (NAR) reported in April 2014 housing sales and price depends upon the geographic area of the property location. For example, inventories are low and housing is in demand in the Boston and San Francisco real estate markets, driving prices higher quicker. But in Florida, housing prices and home sales are just beginning to recover after years of decline during the recession.

Virginia Association of REALTORS (VAR)

The Virginia Association of Realtors (VAR) statistics report there is an increase of over 17% from March to April 2014 in Virginia real estate market sales, a trend in keeping with previous spring seasons followed by snowy, icy winters. Yet overall Virginia home sales are down by almost 3% compared to April 2013.

The good news for sellers in the Virginia market is that the median sales price for a home is up by almost 3% compared to April 2013, an indicator that market prices are stabilizing. According to the VAR research by the Virginia Center for Housing Research at Virginia Tech, “These numbers indicate that housing prices have recovered in Virginia and have reached a fairly stable level. We expect prices to increase at a moderate rate throughout the spring, as long as inventory increases at an adequate rate to meet demand.”

Inventory is a crucial issue that affects pricing in many markets but it impacts Virginians from all areas of the state quite differently. While Northern Virginia homebuyers may be experiencing bidding wars due to low inventories in some areas, people searching for homes in Southeastern Virginia are experiencing a shortage of inventory in median priced homes ($180,000-350,000). Lack of available choices may put a damper on the decision to buy, but there are not currently bidding wars in the Southeastern Virginia real estate market.

Inventory problems in median priced homes reflect the current Williamsburg real estate market's status quo. So many homeowners are still underwater. Whether they purchased homes at high prices or refinanced, they cannot sell. Sellers that do place their homes on the market need to make sure features are updated – or the price tag has to reflect a lack of updating. In some cases, homeowners that have cosmetic issues (not structural or mechanical) may have to cut listing prices by as much as $10,000-30,000 in order to sell in this market. It's no longer a market where you can just put any home up for sale and expect to sell it in 90 days. Ideally, improvements need to be made prior to placing a home on the MLS.

Request a Custom Market Analysis (CMA) from a Licensed REALTOR

Do not rely on a home's assessment value, or the sale of the home right down the street to accurately price a property. The best way to determine an actual fair market price for any home is to ask a REALTOR experienced in your regional market to perform a custom market analysis. The realtor will examine home sales within a 1-2 mile radius that are comparable to your own home and will let you know the real market value.

What Price to List?

In my opinion, sellers need to get in reality about their home's listing price. Many sellers need to either make improvements or lower the listing price, so they don't miss opportunities to sell a home because it is priced inaccurately or is not adequately updated. I have seen too many homes sit on the market for far too long, for just this type of reason.

There are still vacant homes that are foreclosures and bank owned properties on the market. Many homes have been vacant for some time. When a house is not occupied and nobody is there to see the small repairs, leaks and maintenance nuances going on it will inevitably fall into disrepair. Homebuyers will stop looking at these homes as the stale listing becomes 'shopworn.'

Sellers and Buyers Can Meet at the Table

Sellers must face reality AND buyers must also look more closely at today's real estate market in order to obtain the best price on a home. The days of bidding low on a property purchase by $30,000-50,000 or even more are over. 
Some buyers I have worked with think they can find a home with 100% of the amenities they desire in the price range they want to pay. Because of low inventories in some markets, these homes don't exist. Buyers become frustrated- and this is understandable.

Be Open to Making Cosmetic Changes on the Home

Taking a thorough look at the home market in Williamsburg and Richmond, Virginia areas, I can say that finding a home is easier if buyers are willing to purchase a home and tweak it as they go along, performing upgrades slowly. I recommend sellers accept homes that are not 100% everything they want or cosmetically perfect. However, these homes must be structurally and mechanically sound. If home buyers can make some concessions in covering closing costs or take responsibility for making upgrades after home purchase, many more homes for sale in Virginia would have “sold” in the initial three months on the market.

By all indications, the real estate market nationally, and in my region, is stabilizing and prices are on the rise – albeit slowly – while inventory is flagging in some areas. Buyers and sellers who want to complete home sales have to get together on the transaction to make it work. Compromise and concessions are the keywords of this 2014 real estate market.

Visit:  http://voncannonrealestate.com/articles/riding-the-rollercoaster-is-it-a-sellers-market-or-a-buyers-market.php

Will New Home Building Help Inventory Shortages in Real Estate Markets?

By Elaine VonCannon, ABR, SRES, Associate Broker, Notary, Team Leader, Property Manager, Award Winning Agent

What are homebuyers searching for in today’s real estate market? There are many characteristics of a home – and a neighborhood – that appeal to the current buyer. Many people in the professional job market are experiencing a greater flexibility with personal mobility. They are able to work from home or relocate to a desirable place where employment opportunities are numerous.

Many buyers prefer new homes to existing homes when making a purchase, for a variety of reasons. A new home is not likely to need immediate maintenance. It may even come with a one year home warranty – making the first time homebuyer feel secure in the initial year of purchase.

Housing Market Uptick

With personal mobility on the rise, there are also more female homebuyers (20% of the present real estate market) and the potential for household formation is greater than it was during the recession. Housing priorities that are looked at closely by the buyer have shifted slightly with the times. Homebuyers in today’s market want: shopping, restaurants and entertainment nearby, economic growth, public parks and walking/biking paths, walkability and more.

Low Housing Inventory in Some Markets May be Only Temporary

Since the recession, there are low inventories of saleable properties in many different U.S. markets. Check with the National Association of Realtors (NAR) and state real estate organizations to find the current inventories in your area. The NAR reported on May 22, 2014, "Total housing inventory at the end of April jumped 16.8 percent to 2.29 million existing homes available for sale, which represents a 5.9-month supply at the current sales pace, up from 5.1 months in March." This is a sign that inventories are improving overall.

Renovation Loans and Construction to Perm Loans Available Now

Many banks and mortgage companies now offer renovation loans. These loans are designed to encourage homebuyers and real estate investors to purchase bank owned properties and foreclosures, which generally need maintenance and upgrades upon acquisition. To build new homes to specifications, construction to perm loans are now available. All of this bodes well for low housing inventories in various markets.

New Home Builders, Williamsburg and James City County, Virginia

New home builders in the real estate market today are striving to create communities based on chosen lifestyles. For example, in my region, the Williamsburg, Virginia real estate market, excellent community planning has helped James City County grow in leaps and bounds. There are numerous 55+ communities, golf communities, and gated communities with families and children, and a well-respected education system.

In James City County, new homes for sale include townhouses and condominiums situated near shopping areas and recreation. Many moving to the Williamsburg area are impressed with the plentiful green areas for public recreation and the mild, year round climate. Other enticements for growth include low real estate taxes, compared to taxes in Northeastern states, making a home purchase in Virginia appealing for retired homebuyers.

Major Employers in Williamsburg, VA

Economic opportunities in Williamsburg exceed years past thanks to new growth and strong, key players in the local economy. Employers include: Colonial Williamsburg, The College of William and Mary, Riverside Regional Health System, Sentara Hospital, The National Park Service and many more. In nearby West Point, Virginia, the RockTenn Company paper mill employs many in well-paying jobs.

In Williamsburg, Virginia, strategic community planning combined with economic growth has created desirable surroundings for many. The town is occupied by college students, young professionals, families with children and a significant number of retired people as well as Active Boomers. New home builders have risen to the occasion by adapting their vision to the town’s own future – with great success.

Some of the most well-known communities in the Williamsburg area are Fords Colony, Kingsmill and Stonehouse. These are excellent examples of golf communities that provide quiet, scenic surroundings in luxurious settings as well as numerous other amenities.

New Homes for Sale in Williamsburg, Virginia

Many of the builders currently working in Williamsburg are national production build companies such as Ryan Homes, creating a project in Upper York County named Washington Ridge. Lennar is working on Colonial Heritage in James City County, a 55+ community boasting an active lifestyle for residents. On site there are tennis courts, golf course, pool and a spa as well as other amenities. Then there are numerous communities where the home purchaser can have their dream home built on site, from the ground up.

Buyers Agent Needed for New Home Purchase

Many home buyers find this out the hard way, so be forewarned: do not rely on the builder to provide adequate representation when purchasing or building a new home. By law, a real estate buyer is entitled to a representative, so make sure to secure an agreement with a professional real estate agent. Remember, all of the representatives of the builder work for that particular company – not the buyer. The company representative may be trained to upsell home features and add more cost to the home purchase. A buyer’s agent will negotiate the best deal, at the average cost per square foot in that particular real estate market and is well worth the commission.

As the recession passes into memory and the economy continues to improve, more people will find secure employment and begin new endeavors. Many will want to purchase a home. Any individual, couple or family searching for a home wants to have choices. According to present indicators, low housing inventory will not be a challenge to the home buyer for long as new home building and home financing opportunities become available and popular with buyers. Learn more about new homes for sale in Williamsburg, Virginia. Visit http://www.voncannonrealestate.com.

For Sale by Owner: Off MLS Listing is Risky Business

Since 2013, there has been an increase in sellers pre-selling properties and listing them off the Multiple Listing Services(MLS). Core Logic reported that in 2013, 53% of real estate transactions conducted in the U.S. were not listed on the MLS. Most sellers do not hold a real estate license, and are not permitted to use the MLS - the standard listing portal for a licensed real estate agent. Although buyer’s agents are willing to work with For Sale by Owner (FSBO) listings, they are not permitted to give the seller any advice or access to marketing. 

Sellers who want to list a FSBO may be losing out on tens of thousands of dollars in real market value on a property, especially if they list properties without an up-to-date appraisal or current market research. Often a seller will list a FSBO based on the sale price of a neighbor’s home, which may or may not be the best choice for a comparable property. A local real estate agent lists properties continuously in their regional sales area and is best suited to offer a market comparison in the neighborhoods he or she covers. Remember, tax assessments, though readily available, are not the best tool for gauging a property’s true market value at any give point in time.

One nuance about FSBO sales that should give sellers pause is the fact that an experienced buyer’s agent may hold the upper hand in a FSBO real estate transaction. Why? The seller may not be familiar with state laws and fiduciary codes and/or ramifications of contract issues that crop up during negotiations. Even with a lawyer creating a real estate contract on a property, the final outcome of a For Sale By Owner (FSBO) real estate sale may be held up over a variety of issues. Experienced REALTORS know how to circumvent these roadblocks quickly and keep a property transaction on track.

FSBO is Not Equal to a REALTOR’s Advertising Potential
Working with a professional REALTOR is worth the commission under these circumstances. A FSBO has a limited opportunity for marketing, becoming more heavily reliant upon web real estate portal sites such as Zillow.com. With a seasoned agent, advertising penetration for a property is far greater. For example, I list my properties for sale in Williamsburg, Virginia on four MLS websites. This gives my sellers and extensive area of coverage so that other agents can see the listing and buyers on the MLS can also see it. My MLS listings are also republished on Realtor.com, which is owned by the National Association of Realtors and is also a reputable website in the industry. My broker, Coldwell Banker Traditions, also has a listing mechanism on its locally based website, where my client properties receive excellent visibility. Not all REALTORS list properties this widely on the Web, so check with individual real estate agents and ask them for specific information about advertising provided for client listings through MLS and other venues on the Web.

There are other disadvantages to listing properties without an agent. If the owner happens to miss a showing with a potential buyer, he or she may miss the opportunity to sell a property altogether. For real estate sales in my territory, Southeastern Virginia, an owner is not permitted to use legal forms created by the Virginia Association for Realtors (VAR), unless they are licensed.   Real estate forms are formally copyrighted by the VAR and sanctioned for use only by membership. This puts the seller at another distinct disadvantage in the transaction. Having to create legal forms anew is not only time consuming, it may increase costs for an attorney.

            Besides some of the more obvious advantages to listing with a licensed real estate agent, there is also a common misconception that the use of a real estate lawyer will save money versus paying agents’ commissions. The seller still has to pay the buyers agent fees (which is variable by state and type of real estate transaction). All FSBO sales contracts must be created and finalized with a lawyer. The sales process involves having the buyer read the contract and make changes. The lawyer revises the contract appropriately and it is presented at closing. Lawyers in Virginia charge far more to create an original contract (in my experience) than the commission on the seller’s side - in most instances. Sellers who want to go it alone should seriously consider the lawyer’s fees may be more expensive, and are largely unpredictable, depending upon the number of legal forms needed, length of negotiations and additional contract requirements.
          
            Sellers need to forgo the FSBO and get smart in a real estate market that is definitely on the move in many regions of the U.S. Pricing is trending higher in the 2014 market and inventories are low in many markets. So sellers need to have expert advice on pricing real estate at current market value now - more than ever. In addition to potential loss of profits from home sale, the seller may easily run up against legal and contract issues that may not be quickly resolved. Worse yet, these matters may be settled too late to adhere to the time limits on certain loans such as FHA and USDA. If the seller does not know what they’re doing and timeframes are not heeded, this can cause the buyer to forfeit a loan. In turn, the property loses a good buyer and valuable time on the market.

Be wise and don’t engage in risky business – listing a property off the MLS or without a licensed agent. It is best to have the representation of a licensed agent for a variety of reasons. The main reasons are: the seller will have expert advice, will most likely sell the property sooner and the property will command a fair market price. Say no to FSBO. Instead, seek out a capable real estate professional in your region for piece of mind.     

Visit: http://www.voncannonrealestate.com/articles/for-sale-by-owner-off-mls-listing-is-risky-business.php

Single Female Homebuyers Numbers Increase in Today's Real Estate Market

Recent statistics show single women homebuyers outpace male homebuyers. They are currently capturing nearly 20% of the home buying market compared to approximately 10% for single men (National Association of Realtors). Single women make up 20% of this real estate market- a remarkable increase compared to the mid 1980s, when they were only 10% of the buying market.

Why have so many women decided to enter the home market? There has always been a home market for widowed and divorced women. This type of female homeowner has increased by the numbers of professional women who are making strides in careers and are perfectly capable of purchasing a home. Some may want to make an investment that eventually pays off as a resale or rental unit, while others want a comfortable, secure place to live that suits their lifestyle choice.

Yet when women purchase homes, the process they go through is much different from men. Many men are focused on the amount of space a home has, or the extra features. Men are inclined to want something immediately, and begin the process of paying for it. Women tend to conduct more research and deliberate on different choices. For women, making an emotional connection to the real estate agent and the home are important considerations in the whole process. Women and men definitely have differing approaches to home purchases.

Who is the Female Homebuyer?

What are the characteristics of a female homebuyer shopping for a home? There are actually many different groups of female homebuyers. These include: divorced, widowed, single mother, never married and more. For many professional women, an investment in a home purchase is simply a matter of getting tired of renting and wanting to modify their own space and/or to make a solid investment for the future.

There are also more female real estate investors in the current market then in the mid 1980s. They want to purchase homes that need renovations because the investment will pay off after the rehab is complete in a resale (also known as flipping). Or, the property will be renovated, then placed on the open rental market to produce a monthly income.

Single mothers are looking for properties with enough indoor/outdoor space so their children can play - as well as safe playgrounds nearby. Single mothers want secure neighborhoods with other families as neighbors, so their children can socialize and play with their age groups.

Divorced and widowed women and women who have never married without children may be searching for the complete opposite in a home and a neighborhood. Their ideal dwelling may be a quiet, secure place in a neighborhood without many children.

There are, of course, other types of women homebuyers - some who defy categories. All have the same interests at heart: owning a sanctuary for themselves and their loved ones and having a piece of the American dream.

What Do Women Want in a Home?

When it comes to being very specific about a property, the desires of the women homebuyer are paramount. Often women will not settle for anything less than what they want. Some of these particular aspects of homes include: large closet spaces, jetted bathtubs, a secure neighborhood, a separate laundry room, a spacious kitchen and more. Homes that are move in ready, requiring very little renovation, are often preferable to women homebuyers.

What Types of Properties Do Women Tend to Purchase?

Female homebuyers with careers often purchase townhouses and condominiums, because they have limited time outside of work and these types of property investments require low maintenance. Some women will opt for a single-family home in a secure place with a manageable amount of space.

Many single females on the market today are first time homebuyers. So, real estate agents will need to step them through the initial process of home financing and home purchase.

One thing is for certain. As women continue to make achievements in the professional world, the number of homebuyers will increase in numbers, too. And, women's preferences in housing will begin to shape the features of the actual properties that are sold. For now, one in five purchases are made by single women. This should be plenty of impetus for builders and renovation specialists to cater to women's taste.

Renovation loans: FHA 203(k), Fannie's Homestyle Renovation Mortgage & Conventional Rehab Loans

By Elaine VonCannon, ABR, SRES, Associate Broker, Notary, Team Leader, Property Manager, Award Winning Agent

With a plethora of homes still sold as short sales and foreclosures, renovation loans are increasingly popular with homebuyers. Many family dwellings are being redesigned for additional family members these days. As rental housing costs rise, families decide to live together and save money. There are multiple situations that could apply: boomerang children, aging parents, or divorced with grandchildren - the family home is in need of expansion or renovation to ensure everyone fits comfortably.

Rehab loans such as the FHA 203(k) program or the Fannie Mae HomeStyle Renovation Mortgage are the perfect answer for some first time homebuyers, too. If the borrower qualifies for the 203(k) program, the buyer can borrow based on what the house is expected to be worth after the home rehab is completed.

I will summarize some common home renovation loans available to consumers and some of the requirements for each. Interest rates are subject to vary for each loan detailed, so be sure to check with a qualified loan officer first, before embarking on a home purchase or refinance.

Renovation loans are effective for consumers and banks and mortgage companies because they offer the necessary resources to remove foreclosures from the market and redo them. Plus, these loans provide first time homebuyers, (who have historically been 30-40% of a healthy real estate market), the opportunity to renovate before moving in.

FHA 203(k) Rehab Loan

FHA insured home renovation loans are more popular now then ever before, because resources for renovations are greatly needed. A streamline 203(k) loan includes less than $35,000 in renovations. For homebuyers needing over $35,000 in rehab work, a full 203(k) is necessary.

To qualify for the FHA 203(k) loan, the borrower must agree to hire a real estate consultant to assess the construction plan and sign off on each phase. The project must be completed in six months, with five draws (or payments to contractors) allowed. A list of approved property renovations is included with the loan. Many borrowers feel this loan is too complicated – or the list of renovations too restricted for their projects. But the interest rate on FHA loans is low enough to make it worthwhile.

If interested in a FHA 203 (k) loan, find a mortgage broker with experience in this type of rehab loan to complete the transaction. "FHA loans are typically available for owner occupied residences. These loans are government insured and have a more expensive mortgage insurance rate (PMI), with a 1.75% up front payment and a monthly payment of 1.35%, compared to other loan products," says Jeff Hurd, Mortgage Banker with Fidelity Bank Mortgage in Newport News, Virginia. "With conventional rehab loans, the consumer has the option to pay all of the PMI up front, monthly or have the lender pay it (LPMI)," added Hurd.

Fannie Mae's HomeStyle Renovation Mortgage

When comparing the Fannie Mae HomeStyle loan to the 203 (k), Hurd says the HomeStyle loan product offers more flexibility with repairs and renovations and in the types of homes purchased. "The Fannie Mae HomeStyle Loan offers a wider scope of renovation projects, and can be utilized on a second home and an investment property as well as a primary residence," noted Hurd.

Other advantages of the Fannie Mae HomeStyle Renovation Mortgage include less money down then conventional rehab loans (a minimum of 5%) and less cost for the mortgage insurance. "Monthly mortgage insurance payments are reduced with higher down payments and/or a good credit score above 680. The conventional Homestyle will typically present a PMI pricing advantage over FHA," says Jeff Hurd. With Fannie Mae's HomeStyle Renovation Mortgage, home purchases and improvements can be combined into one loan for virtually any property - and it doesn't have to be Fannie Mae owned. The repairs or renovations must be permanently affixed to the structure and add value to the property. Lenders have to be pre-approved to sell this product, so make certain to ask the loan officer if he or she is participating in this home finance program.

Rehab Loans – the Time is Now

Hurd says now is a great time to purchase a home with a rehab loan. "There are so many houses that may be in distress. Whether the house is bank owned, or it's a foreclosure or short sale, or a homeowner is upside down and doesn't want to put the money into a property to fix it up - there are homes to choose from. Right now homebuyers have a good opportunity to buy a house for a great price and renovate it with the financing. These rehab loan products make it easier to buy a house and complete home rehab projects at the same time, before the move in date." Chances are excellent that a consumer can purchase a property, make the necessary renovations and walk out of the transaction with equity in the home. Hurd says, "There is a market of savvy consumers ready to acquire these houses now."

The housing market has changed tremendously over the last five to seven years. Because there are still vacant properties available in this real estate market, rehab loans are a means of obtaining these properties in need of repair. Homebuyers now can expand their choices of homes to live in because they can remodel to suit their needs. Real estate investors can purchase, rehab and rent or resell the property.

Rehab loans are an excellent stimulus for the real estate market and a great way for homebuyers to purchase what they want without having to worry about liquidating cash investments or having tens of thousands of dollars in addition to a mortgage to fund home renovations.

Frank Dodd Act: How it Impacts Procuring a Mortgage

By Elaine VonCannon, ABR, SRES, Associate Broker, Notary, Team Leader, Property Manager, Award Winning Agent

The Dodd Frank Law is going into full effect on January 10, 2014 and it will definitely affect the way homebuyers obtain financing for home purchases. It will have a direct impact the back offices of banks and mortgage brokers, by imposing more compliance protocols. According to Rachel Alexander, columnist for Townhall.com “All loan originators must now be qualified, licensed, registered, and issued a unique identifier.” Alexandar predicts that under these conditions, some mortgage companies will be going out of business.

Though the law is intended to further protect the consumer from banking debacles such as the recent mortgage and real estate meltdown of 2008 – it also has an undesired effect. Some elements of Dodd-Frank Law inhibit many potential homebuyers from obtaining a mortgage for a desired property. As creditors are well aware, there are many professionals and families still in recovery from the recession. This means that borrowers with secure jobs that lost a home in foreclosure or short sale and have not yet attained a high enough credit rating will be left out of the home buying arena. Homebuyers need to check with their lender for credit score requirements that are currently being used to procure a mortgage. Different types of loans have different requirements.

For those who are lucky enough to have secured employment since the recession began, most creditors are looking at stable employment in these positions for a minimum of 2-3 years to qualify for mortgages.

Positive effects of the law for consumers are not to be overlooked. The Dodd-Frank law eliminates the rules of mortgages past - which tied the origination fees to the dollar value of the loan. The Law puts a cap on the amount of money a loan originator can charge for a loan, and eliminates other extraneous bank fees as well. In the beginning, the Dodd-Frank law will take diminish mortgage companies’ bottom line. It is presumed these additional costs for loan origination will be handed down to the consumer, eventually.

Dodd-Frank is creating a real estate market that is top heavy with investors who, since 2009, represent one third of all real estate sales. Cash purchases on properties are not only popular with investors, but with individual homebuyers as well, who want to avoid the mortgage banking qualification process.

Instead of protecting the consumer, many of the restrictions put into place have put a stranglehold on the mortgage lending process for many Americans. Here’s a summary of mortgage lending qualifications that stymie homebuyers:

1. Down payments of 3-20% are required now depending on the loan program. The only 100% financing available is from the USDA and VA loans.
2. Stable income is established. Three years of income tax forms must be submitted, along with current W-2s.
3. The cap on debt to income ratio is 43%.
4. Homebuyers in most cases must also pay for closing costs, another financial hurdle that affects the timeframe of purchasing a home.

Investors Benefit from Dodd-Frank

Real estate investors are heavily represented in the current market. Many have liquid assets at their disposal and want to put them to work in real estate. However, the home vacancy rate is still hovering at 10%, indicating there is an abundance of inventory and not enough homebuyers to offset this. Investors realize there are more families and individuals on the rental market, so the market for the purchase of rental homes, townhouses, condominiums and multi-unit complexes has picked up and in some markets, new construction of rental units is on the rise.

Real estate investors are advised to take advantage of this market and examine real estate portfolios for properties that have reached full depreciation (12 years in most cases). If a property is fully depreciated – it’s time to purchase a new investment property and start the depreciation process anew. Investors should also identify a seasoned property manager to make certain once the home is acquired it is occupied by qualified tenants and maintained.

Learn more about real estate investment properties that are a great deal in your area, call 757-288-4685 or visit:http://www.voncannonrealestate.com.