An ARM a Month Keeps the Collectors Away
By Landon McGehee

Originally conceived as a means for more affluent homeowners to keep your cash tied up in investments which would produce greater returns than the interest rates they'd be paying, Adjustable-Rate Mortgages have since come into much wider spread use, often as a means for people to live over their heads in homes they couldn't otherwise afford.

Speculative buyers who intended to resell their homes after they had appreciated are now stuck with depreciated homes instead, and feeling the pinch as well. With many of these ARM's reaching their recalculation points now, we're beginning to see the first wave of casualties, and the numbers will only continue to get worse from here.

Highlighting the first point are statistics recently released from the Federal Housing Finance Board. The generally accepted mortgage one can afford is on a house valued at 2 to 2.5 times their annual income. As the housing boom saw a drastic rise in prices this became next to impossible for the average family.

The average house was priced at $283,000, which would require an ideal salary range of $113,520 to $141,900, yet the median household income as of 2003 was just $43,350, meaning the average household can only realistically afford to mortgage a house valued in the $100,000 range. This has been circumvented by using an ARM, providing initially lower interest rates and flexible payment options

Whether home owners of modest means truly understood the implications of what would happen with their rates down the line is unknown. As short-term rates rise and the loan eventually gets recalculated to include the principal, the minimum per month amount owed can jump drastically, often as much as 50% or more, and often eclipse the rates one would owe through a fixed-rate mortgage.

This would seem to be simple math, by paying less than a fixed-rate mortgage for a length of time, it's only natural that one would eventually have fees that surpass it to make up the difference, but many homeowners have been caught off guard by the jump nonetheless.

This isn't to say that ARM's can't be useful and used wisely. When used with their original intent in mind, they can be powerful tools. On a mortgage in the $1 million dollar range, an interest-only mortgage could save the homeowner as much as $1,000 or more per month over a fixed-rate mortgage.

Those savings can then be reinvested with the intention of earning more than the interest rate owing. For people who move around a lot they can also be a great way to pay a minimum monthly amount, allowing them in effect to 'rent' a house for a period of time at a very reasonable rate.

Taking out an ARM or an interest-only loan is a risky proposition for those on the low end of the income bracket barely covering household expenses, and this is being proved in greater numbers as many home owners have been forced to abandon their homes with nothing to show for it due to being overwhelmed with readjusted rates.

As tempting as it can be to live above your means, the smokescreen and mirrors will eventually disappear, leaving you exposed and vulnerable. Be sure to plan ahead and take on a loan that will work for you both now and in the future.

Don't delay - Now is the right time to gain more knowledge on the subject of household expenses. Learn from our years of experience, visit everlife.com.

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MERIDIAN REAL ESTATE PRESENTS:

Buyer's Agent Smoothes Sometimes Bumpy Road to Foreclosure Purchase

By Rick Sharga, Vice President of Marketing for RealtyTrac

Whether it's the first time or the tenth, buying a home can be both an exhilarating and overwhelming experience. As with any major purchase, there's a significant amount of pressure to make the right decisions about such matters as where and what to buy, and ultimately how much to spend. How can you make sure you get the best deal possible on a property that suits your needs, or find exactly the right property to fit your budget and your lifestyle? Increasingly, many homebuyers are doing this by secure the representation of a Buyer's Agent.

Most people hire a real estate agent to sell their home, but overlook the importance of having an agent when buying a property. While in some cases it's possible to negotiate your purchase through the seller's representative, make no mistake: these seller's representatives are charged with making the sale and negotiating the best deal for their clients — the sellers! With that in mind, it's best to secure your own representation as a buyer, in order to minimize potential conflicts, and make sure your interests are represented.

In the more complex foreclosures market, a Buyer's Agent can be even more valuable. The agent can help you negotiate with the owner before a property comes on the market and can also act as a buffer during the negotiating process to make sure you've completed all the necessary steps before closing. Done right, it's like having your own personal tour guide to help you find your way through the foreclosure buying process.

For buyers looking to uncover substantial bargains in real estate, the foreclosures market does offer a treasure trove of opportunities. Foreclosure properties are some of the best opportunities in real estate today with savings of 10-30 percent below market value. Some properties offer savings of up to 50 percent or more! But like any investment offering a high return, there are sometimes higher risks involved in buying a foreclosure than in buying more traditional real estate. One of the ways to maximize the value while minimizing the risk is to work with Buyers Agents who specialize in this market, with specific experience navigating the twists and turns that come with purchasing a foreclosure.

"If you're in the market for a foreclosure property, you should really take some time to look for an agent with actual foreclosure transaction experience," explains James J. Saccacio, chief executive officer at RealtyTrac, the leading online foreclosure marketplace. "The nuances of this market make it a different animal from conventional real estate, so buyers owe it to themselves to secure a seasoned agent who's familiar with the foreclosures process, and has knowledge of local, regional and state laws."

RealtyTrac's National Agent Network connects prospective buyers of foreclosure properties with local agents who specialize in foreclosures. Homebuyers can go to www.realtytrac.com to identify and research potential home purchases, as well as to find all the tools and professional resources they need to help them close the deal.

Of course, it's also important to consider the agent's knowledge of the area where you wish to purchase property, their ability to close a deal, and their access to other professionals such as attorneys, lenders, and title companies. It's often a good idea to interview two or three agents to ask about their credentials and to test out chemistry, just as you would when selecting any valued business partner. Ask for references from previous buyers to see what people who have been in your shoes have to say about the agent's credentials and demeanor. Ultimately, your agent should make you feel confident that they know how to steer you correctly through the foreclosure buying process.

Here are some questions to ask a prospective buyer's agent if you're buying a foreclosure:

• Are you a licensed, full-time an agent?


• Are most of your clientele buyers or sellers?


• How long have you worked with foreclosure real estate?


• How many clients are you working with presently?


• Do you have former clients I can contact as references?


• How will you help me contact owners in default?


• Are you familiar with the foreclosure laws in this area?


• How much commission will I pay as a buyer?

Once you've selected an agent, you'll need to set up some ground rules for how you want to work together, such as times you are available to view homes, expectations regarding the agent previewing properties on your behalf, and courtesies expected by both parties.

Keep in mind that even the most intuitive agents are not mind readers. You need to make your preferences, priorities and spending limits clear up front, so neither party wastes valuable time looking at properties that don't meet your needs.

Finally a word about etiquette: While you don't necessarily have to commit to working exclusively with a single agent (unless you've signed an exclusive agreement with them), it's most proper to ultimately extend your loyalty to an agent who spends a significant amount of effort helping you find a property. Remember, real estate agents work on commission, so the time they spend working on your behalf amounts to nothing if you don't ultimately make a purchase through them. If for some reason, you find that your needs are not being met by a particular agent, it's best to set the record straight early in the process, either to correct the problem or to retain alternate representation.

Working with a Buyers Agent can often result in a net savings on property purchases—whether traditional resale homes or foreclosure properties, and can also help inexperienced home buyers from making costly mistakes in negotiations, contract terms and property research.

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Friday, August 24, 2007

Inman News

The rate of new single-family home sales dropped about 10.2 percent in July and the median sales price rose 0.59 percent compared to the same month last year, the U.S. Census Bureau and Department of Housing and Urban Development announced today.


Sales of new single-family houses in July 2007 reached a seasonally adjusted annual rate of about 870,000, compared with the July 2006 estimate of 969,000. The rate is calculated as a projection of the monthly sales total over a 12-month period, adjusted for seasonal fluctuations in sales activity.

The median sales price of new houses sold in July 2007 was $239,500, compared with a median price of $238,100 in July 2006. Meanwhile, the average price of new homes sold in July 2007 was $300,800, down 3.4 percent compared with the July 2006 average price of $311,300.
What's" Your Home Worth?

The seasonally adjusted estimate of new houses for sale at the end of July was 533,000, which represents a supply of 7.5 months at the current sales rate. A supply greater than six months is generally considered to indicate a buyer's market.

Statistics are estimated from sample surveys and are subject to sampling variability as well as nonsampling error including bias and variance from response, nonreporting and undercoverage, the agencies noted.

Changes in seasonally adjusted statistics can show irregular movement, and it can take five months to establish a trend for new houses sold. Preliminary new-home sales figures are subject to revision. On average, the preliminary seasonally adjusted estimate of total sales is revised about 3 percent, according to the report.

For most folks, finding ways to keep their money growing, and doing so in a safe way, is a mind-boggling process. Investing in real estate is an option most would take a second glance, considering the way property market values are going up today.

However, a lot of think that the path to success in real estate is in buying a handful of rental properties, leasing them out for 20 or so years, and then retire rich with millions in equity and a large, fat cash flow to sustain you till retirement. That notion is however quite true; in 30 years probably, the mortgages on the properties will have been paid off, the said property will have at least doubled or tripled in value, and the rents will be substantially higher than today.

The only one problem with that notion is that you have bills and financial needs today and while achieving a healthy cash flow in 20 years or so is a nice idea, it still doesn't solve today's cash flow concerns. You need to solve today's cash flow problems before worrying about creating long term wealth. If you are like the average American, probably your biggest concern is security.

That is the main reason why so many people today keep working at jobs that they absolutely don't like; because they can't let go of the security that a regular paycheck gives. By investing in good real estate deals, one has the chance of getting good yields in the future, and putting their hard-earned money on good pieces of property could help increase their savings in the long-term.

Investing in real estate has been a usually safe and respectably good investment choice over the last decades. With the housing and property market booming over the last several years, people have seen wonderful rate of returns in their real estate portfolio.

Because of all this, real estate looks to be a safe, secure investment. We constantly hear stories of people making ridiculous returns on their investments; however, what we don't hear is how many people have lost their shirts playing the same game. Real estate investing can be a terribly risky one unless you are well informed of the market's movement and indicators.

Real Estate as a tangible investment

One main reason why many people prefer to invest in real estate over equity markets is that real estate is tangible. You can touch it. If you own shares of a certain company or startup tech firm, the best that you can get is a quote on your screen. It's like being able to drive to a house and say that you own it. It makes you feel more secure. I feel like I have more control when I can reach out and touch something physical.
Less risks, greater returns in real estate investing.

When done properly, one can achieve greater better returns in real estate than on investing in the stock market, without additional risk. In fact, I would argue that you can achieve better returns with less risk. Try getting insurance on your stock portfolio. It will never happen because insurance companies know that real estate is a much safer investment.

Real estate Isn't rocket science

According to investment experts, the greatest advantage of plunking your cash on real estate investments is that you don't have to be a George Soros to make good money in this field. Whenever you try to make money, say for example, in the stock market, you need to understand the technical and fundamental techniques of yields, net asset values and such.

You need to get a firm grasp of stuff like inventory turnover, daily sales ratios, etc. In real estate, it is a much simpler, uncomplicated process. If you have a good real estate broker and you do have basic understanding of a basic financial sheet, then you are all set. A good real estate broker can help you in dealing with all the aspects of land and property investment.

Buying land can be a very confusing ordeal. There are many reasons to buy land. Some people buy for investment, some buy to live on the property. No matter why you buy land, we all want to make money with the property in the long run. Here are a list of tips and tricks to help you in the process. These tips are from Max Mosko. Max Mosko has been buying and selling land for over 40 years.
1. Make sure you have electricity in front of the property, or at a minimum 1/2 mile from the property. Its could cost over $2000/pole to bring power to your site.
2. In most cases, you can only build one home per lot. Dont think that if you buy a 100 acre parcel, you can build a whole community. Check with your local zoning office on land use.
3. Try to avoid buying swamp land. Also try to avoid buying low land.
4. One acre home sites can cost 90k. 100 acre home sites could cost 100k. Your better of buying the larger parcel. One day it may be of great value.
5. If you need to get zoning help, see a local in town lawyer. They have have extra pull in their township.
6. If you live in a cold climate, don't expect to sell you raw land in the harsh winter, when its covered with snow.
7. Don't invest more than 2-3 hours away from where you live. It make every step of the buying/selling process more difficult.
8. Make sure you can build at least one home on your property, otherwise it may not be of any value.
If your looking to purchase land, feel free to contact us. We sell land throughout Canada and the USA.