Loan modification instead of foreclosure

The pathways to foreclosure are varied and numerous, especially in today's tougher economy. Increasing mortgage payments or mounting credit card debt, a sudden loss in income or employment, a serious illness, or a divorce or separation are all unexpected changes that can quickly lead to delinquency and even foreclosure.

And whether or not you personally are having trouble with your mortgage, it doesn't matter, because foreclosures affect everyone. After all, a single foreclosure in your neighborhood will often lower the value of every home – including yours – even if you've never missed a single payment.

The good news is that there is hope for you or anyone you know who might be on one of these unfortunate paths.

Lenders Really Don't Want to Foreclose
It's important to understand that lenders are not in the business of owning real estate, and would much rather help a struggling homeowner than to take possession of their home.

The numbers speak for themselves.

The average loss incurred by a mortgage company on a foreclosure is approximately 40%. In comparison, the average loss on a modification of the mortgage is approximately 20%.

With this in mind, let's say a $200,000 mortgage is facing foreclosure. A mortgage lender can expect a loss in the area of $80,000. Compare this to just the $40,000 loss it can expect by working something out with the homeowner. Multiply these numbers by hundreds or even thousands of delinquent loans, and it becomes clear why working with homeowners is in a mortgage lender's best interest – especially in today's challenging market where foreclosures are reaching record levels in some areas.

RealtyTrac®, a company that tracks foreclosure statistics, recently reported that bank–owned inventory hit the three–quarter million mark in July. Bank repossessions have increased 184% since last year at this time as default and auction notices continue to climb.

In the second quarter of this year, 1 in every 171 households nationally reportedly received a foreclosure filing. While the majority of the fallout is limited to states like Nevada, California, and Florida, states from the Midwest and Sun Belt have not been exempt. In fact, add in foreclosures from states like Michigan, Ohio, and Arizona, and the number of homes in foreclosure increases to as many as 1 in every 43 homes.

With staggering numbers like these, it's easy to understand why mortgage lenders are so willing to work with homeowners right now to save their homes through loan modifications. 

Why Should a Homeowner Try to Modify?
Just because someone missed his or her last three mortgage payments, triggering the foreclosure process, doesn't mean that it is necessarily time to start packing up and moving out. As we mentioned earlier, the reasons borrowers may miss a few payments are valid and often understandable. More importantly, not all of the unfortunate scenarios that lead to missed payments are permanent or irreversible. People can and do get back on track very quickly – and lenders know this and, now more than ever, are willing to help these homeowners avoid foreclosure.

According to Hope Now, a non–profit company helping distressed homeowners, mortgage servicing companies have successfully negotiated 522,000 workouts in the second quarter of 2008. In the month of June alone, approximately 76,000 of 105,000 homeowners received loan modifications. With so much on the line, homeowners in financial distress need to be proactive and make every attempt to help themselves.

Remember, with a foreclosure on your record, under most circumstances you will not be able to buy another home with a conforming mortgage for five years. Not to mention the lost opportunities of being a homeowner, which include increased wealth through home price appreciation and decreased income tax liability from deducting mortgage interest and property taxes.

If you or someone you know is facing financial challenges and can't pay the mortgage right now, don't just bury your head in the sand. The first thing you need to do is reach out to your mortgage company right away.

What Should You Do?
For a homeowner to be considered for a loan modification, the lender will want to know exactly where you stand financially and what you can afford.

The first thing to do is to find the courage to pick up the phone and call someone for help. Picking up the phone may not be easy, but if you want to avoid the financial ramifications of a foreclosure, you have to do it.

There are three calls you should make right away. The first call could be to the existing servicing company for the mortgage. The second option could be to a non–profit company like Hope Now. The third would be to contact a company that negotiates loan modifications. Either way, for direction on the best path to take, contacting an experienced mortgage professional is also a good idea.

Once you have made contact, let the company know that you would like to stay in the home. Assure them that you are committed to honoring your mortgage, but that you are in need of a little assistance right now to get back on your feet.

To enter into a modification agreement, the company will need to know, in writing, exactly what caused your sudden financial distress – so be prepared to tell your story in writing. This is also known as a "hardship letter," which will clearly explain the circumstances behind your missed payments and justify why you're in a good position to continue to make your modified payments in the future.

Be advised, investors or property flippers who were simply caught in a falling real estate market are not usually considered hardship cases. These homeowners may not find the same willingness to help that lenders will offer someone whose home in question is his or her primary residence. That means your chances are much better if you live in the home that you're trying to save.

Next, you will need to provide detailed financial information to help prove your case, so be prepared once you make that call to provide this information. Documents may include pay stubs, income tax returns, W–2s, liquid assets (bank and brokerage accounts), and current expenses (food, utilities, insurance, and other common expenses).

With this information, a lender may be willing to offer assistance in the form of a mortgage modification. This could include a reduction of your interest rate, a reduction of your principal, or even an extension of your existing mortgage. A combination of these options could also be in the mix, depending on your situation. Remember, the goal of a loan modification is to keep the homeowner in the home, so be open and up front and willing to help this process along in any way that you can.

Another Option for Struggling Homeowners
New legislation was put in place recently that could also assist homeowners whose mortgage balance is higher than the current value of the home – also known as being "upside down" or "under water." The bill is called the Homeowner Recovery Act of 2008, and it goes into effect October 1, 2008.

This law has provisions that will allow qualified homeowners to refinance their mortgage, with the mortgage company's approval, at 90% of the newly appraised value. There is one catch, though. To take advantage, the homeowner will have to share in future appreciation with the government. While some may be reluctant to do so, this could be an outstanding option for many homeowners who want to avoid foreclosure and keep their homes.

1:08 PM - Oct. 11, 2008 - comments {0} - post comment

HOPE for homeowners

This week, the Bush Administration unveiled additional mortgage assistance for homeowners at risk of foreclosure. The HOPE for Homeowners Program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by HUD’s Federal Housing Administration (FHA).

“For families struggling to keep up with their mortgage payments, this program will be another resource to refinance into a loan they can afford,” said HUD Secretary Steve Preston. “FHA remains a safe and affordable alternative to the high-priced mortgage loans that threaten homeowners’ ability to retain their homes. We strongly encourage borrowers to work with their lenders to determine if HOPE for Homeowners is the right program for them.”

The HOPE for Homeowners program was authorized by the Economic and Housing Recovery Act of 2008. Since the President signed this vital legislation into law on July 30, 2008, the HOPE for Homeowners Board of Directors has worked diligently to develop and implement the program as directed by Congress. The Board was charged with establishing underwriting standards to ensure borrowers, after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage.

The HOPE for Homeowners program ends September 30, 2011. The program is available only to owner occupants and will offer 30-year fixed rate mortgages - so the borrower’s last payment will be the same as the first payment. In many cases, to avoid what would be an even costlier foreclosure, banks will have to write down the existing mortgage to 90% of the new appraised value of the home.

Borrower Eligibility

Borrowers are encouraged to contact their lender to determine eligibility, but may be eligible if, among other factors:

- The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes.
- Their existing mortgage was originated on or before January 1, 2008, and they have made at least six payments.
- They are not able to pay their existing mortgage without help.
- As of March 2008, their total monthly mortgage payments due were more than 31% of their gross monthly income.
- They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).

How the HOPE for Homeowners program works

“HOPE for Homeowners will add to HUD’s existing efforts to make FHA refinancing available to homeowners who need it most,” said FHA Commissioner Brian D. Montgomery. “One year ago, FHA expanded refinancing into its FHASecure program. Since that time, we have helped more than 360,000 families keep their homes by refinancing with FHA, and we will assist a total of 500,000 families by the end of this year.”

The board expects that the primary way homeowners will participate in the program is by working with their current lender. HOPE for Homeowners will serve as another loss mitigation tool available to distressed borrowers.

HOPE for Homeowners also includes the following provisions:

- The loan amount may not exceed a maximum of $550,440.
- The new mortgage will be no more than 90% of the new appraised value including any financed Upfront Mortgage Insurance Premium.
- The Upfront Mortgage Insurance Premium is 3% and the Annual Mortgage Insurance Premium is 1.5%.
- The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
- The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.
- Existing subordinate lenders must release their outstanding mortgage liens.

Standard FHA policy regarding closing costs applies, and they may be:

- Financed into the new loan provided the value of the mortgage (including the Upfront Mortgage Insurance Premium) does not exceed 90% of the new appraised value of the home.
- Paid from the borrowers’ own assets.
- Paid by the servicing lender or third party (e.g., federal, state, or local program).
- Paid by the originating lender through premium pricing.
- The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.
- The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.

The lender will disclose to the homeowner the benefits of the program including home retention, a new affordable mortgage based on the current appraised value, and 10% equity. The lender will also explain the prohibition against new junior liens against the property unless directly related to property maintenance, and a minimum of 50% equity and appreciation sharing with the Federal government.

The costs to the homeowner include the upfront and annual insurance premiums, as well as a share of the equity created by the write-down associated with the HOPE for Homeowners mortgage and any future appreciation in the value of the home. At settlement, subordinate lien holders will receive a certificate that evidences their interest as an obligation backed by HUD, with payment conditional on the value of HUD’s appreciation share.

If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100% FHA share after the first year to a minimum of 50% after five years. The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation. This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.

3:50 PM - Oct. 8, 2008 - comments {0} - post comment

Real Estate Negotiating Tips

This article is by Curtis Seltzer iwho s a land consultant working with both with buyers and investors. He is author of How To Be a DIRT-SMART Buyer of Country Property available at www.curtis-seltzer.com where his columns are posted.

A few individuals love negotiating over property. Others prefer it to back pain but not by much. Most consider it another one of the endless, necessary miseries of adulthood.

I’ve found that negotiating is easier when I can figure out which one of four buyer-seller bargaining relationships I’m in. The four are: 1) both sides are motivated to make a deal; 2) both sides are not highly motivated, but willing; 3) buyer is motivated, seller is not; and 4) seller is motivated, buyer is not.

Price changes motivation. A better offer will move an indifferent seller, just as a lowered price will help a kick-the-tires-type buyer.

I’ve found that non-price factors-terms, seller-financing, upfront financing costs, irremediable negatives, sweeteners and so on-can be as important as price. Lack of physical or legal access, for instance, will stop a land deal, no matter how cheap the price.

A seller stuck on a price can sometimes be jiggled off it by making a point lightly: “I’ll meet your price, if you meet my terms.”

In a buyer’s market where credit is tight and sales are slow, desperate sellers may find themselves in such a bad bind that it’s better for them to accept the pain of continuing to hold out rather than accept a low-ball offer that is predictably ruinous. Low-ball buyers cannot assume that pressured sellers are without options that feel slightly better, even though they’re pretty bad.

I’ve seen back-to-the-wall sellers reject insultingly low offers out of pride.

If you hate to haggle, you’re probably not very good at it. Doing a good job for yourself is partly about the attitude and confidence you bring to the table.

You can build confidence through preparation and research. Buyers need to know as much as possible about the property, their sellers and their own objectives and resources.

Successful bargaining is also about civility. Gloating, belittling and end-zone dancing are what little kids and professional athletes of the same age do. Issues in negotiations are problems to be solved, not platforms to show that you’re smarter than the other side. It’s much easier to concede a point to someone you’re okay with than to someone you loathe.

And then there’s fair play. I know an FSBO seller who rejected three full-price offers from a buyer, each $100,000 higher than its predecessor, because he knew the buyer would go higher. Some think that’s admirable negotiating; I don’t.

Where brokers are orchestrating a sale, a buyer can request face-to-face negotiation with the seller during which the buyer can directly present an offer. Large real-estate deals are often handled this way.

Certain buyers will do better for themselves by allowing the broker to present an offer; others will be disadvantaged. The rule is: it depends on the personalities.

I’ve generally found that it helps both sides to negotiate directly, face to face. It’s the best way to get a sense of the other side.

If you feel uncomfortable negotiating for yourself, negotiation helpers are available to provide counsel.

Whether buyer or seller, you’re looking for a helper who is experienced in negotiating, knowledgeable about the issues that will be raised and, ideally, is not invested in your sale, either emotionally or financially.

Your local lawyer. Good real-estate lawyers help their clients enormously.

Nitwits and the obnoxious don’t. Negotiating is a different skill than advocacy; not all lawyers understand the difference.

If you’re an out-of-town buyer, you may help yourself by letting your local lawyer negotiate with a local seller. Ask whether this is ethically or socially awkward for your lawyer; if so, don’t make the request.

A mediator-consultant. Trained mediators are skilled in getting parties to reach compromise agreements. A mediator-consultant who is hired by one side can be invaluable in finding common ground.

Brokers or agents acting as outside consultants. All brokers and agents who are involved in a deal are financially invested in getting an agreement. While agents are expected to represent the best interests of their clients in negotiations, it’s not unknown for deals to be encouraged because of self-interested commission hunger.

A buyer could consider hiring a broker or an agent as a negotiating consultant, paid by the hour. The broker/agent-consultant is not part of the deal and would not share in the commission split. As an outside and independent consultant, the broker/agent would provide advice unrelated to having his reward be contingent on a purchase.

Brokers and agents. Where buyers and sellers are represented by brokers and agents who always put their clients’ interests above their own, buyers and sellers can place faith in their advice. Where buyers and sellers do not have that feeling about those who represent them, their advice is always a little suspect.

Good brokers and agents have figured out how to keep their own pocketbooks out of negotiations; bad ones don’t even try.

Professional negotiator. If you’re in face-to-face negotiations, you might consider hiring a pro.

Steven Cohen, author of “Negotiating Skills for Managers,” is president of The Negotiation Skills Company near Boston (www.negotiationskills.com). His staff of professional negotiators is available to buyers or sellers for coaching and handholding in person or by phone. “Real estate,” he told me, “is all about negotiation,” which he describes as a “live tool for collaboratively solving problems.”

Another negotiator provider is www.consensusgroup.com. Michael Rosenthal, president, said his negotiators can train clients in strategy and preparation through online materials and role playing. The fee for e-mail and/or phone consultations is $400 to $500 per hour.

Professors. A local college or university may have a knowledgeable faculty member. Avoid the theoreticians and the games-strategists-they’re overkill for real-estate deals. You’re looking for practical help, down in the trenches. Check references.

With the exception of lawyers, negotiator consultants must not negotiate on behalf of their clients as their agents. State laws governing the practice of real estate prohibit non-agents from doing so. A buyer can, of course, purchase whatever advice and information from a consultant that is desired outside of the commission framework.

Spouses. Some couples can take different roles in a negotiation and carry it off without marital meltdowns. Tag-team spousal negotiating is freer of consequences when the couple wins. Losses tend to beget statements like, “How could you be so stupid!”

I’ve seen spousal tag teams adopt different models: accelerator-brake; acceptable price-higher price (seller side); acceptable price-lower price (buyer side); and Mr. Reasonable with Designated Dingbat. Ms. Dingbat’s role was to crazy up the negotiations just enough to unsettle the sellers and have them focus on dealing with her “irrational” demands and Joan Rivers personality. She was brilliant.

The negotiating advice that always applies is to act reasonably and don’t personalize negotiations.

12:50 PM - Oct. 7, 2008 - comments {0} - post comment

New Housing Act affects Seniors

This article by Frank N. Darras, one of the nation’s leading disability and Long-Term Care insurance lawyers explains show the new Housing and Recovery Act can affect seniors.

The Housing and Recovery Act of 2008 is going to affect more than first time home buyers, it will affect seniors too. When the President signed into law a $300 billion housing bill to help homeowners renegotiate their mortgages, reverse mortgage lenders reignited their marketing programs focusing on seniors.

Here is what Seniors need to know:

The increasingly popular reverse mortgage has been shopped by lenders and targeted at homeowners over 62. The intrigue of such mortgages has been that as you age, you can have “your house pay you.” The convincing argument is that reverse mortgages can be used to pay for living expenses, prescription drugs, health care, or to pay off an existing mortgage.

Today’s reverse mortgages are called Home Equity Conversion Mortgages (HECMs) and are insured by the Federal Housing Administration. HECMs allows folks to tap home equity and not have to make monthly payments. The HECM has been limited to the value reflected in a home’s appraisal, the range and loan limits recently were between $200,160 and $362,790, depending on the location of the home.

That is going to change, according to Darras. The new bill is intended to significantly increase the amount a borrower can get and lenders are dangling a golden carrot with phrases like “Seniors may be able to borrow as much as $625K in home equity to use any way they please!” Keep in mind that the amount of your loan will depend on the home’s value, location, interest rates and the age of the youngest borrower on the note.

“Be very careful,” says Darras. “Rising costs on a fixed income can be a dangerous combination. Don’t let fear and the lure of an easy solution drive your decision. The new legislation is promising to make it less expensive to borrow but it can cost you in the long run, if you are not careful.”

At first glance, it sounds pretty terrific, says Darras. But remember, even though the loan will come due only when you die, sell or move away permanently, it will have to be repaid somehow. Are you setting up a financial disaster that could wipe out your life’s savings, your estate and leave heirs with financial obligations they cannot meet?

Darras recommends that you get straight answers from a financial planner you trust. Most importantly, only deal with lenders and companies you recognize and do your due diligence. If you are not sure about taking out that reverse mortgage, wait until the new law comes into affect in October and more protections are in place to protect you.

These days, the rest of your life can be 30-40 years, so make your decisions carefully, regardless of great marketing, fancy brochures and short-term fixes.

6:16 PM - Oct. 1, 2008 - comments {0} - post comment

What happens if my mortgage lender fails?

Last month, the fallout from the mortgage crisis took a rather unusual turn. For the first time in 20 years, several US banks went belly-up, most notably IndyMac Bank, the second largest financial institution to fail in US history, and one of the largest mortgage lenders in the country. Suddenly, IndyMac's bank account and mortgage holders found themselves in uncharted territory – what did this mean to their money and, more importantly, what did it mean to their homes?

Over the next few days and weeks, the Federal Reserve, which seized IndyMac's assets, did its best to assure IndyMac's customers that their bank accounts were protected by the Federal Deposit Insurance Corp (FDIC). This meant that typical checking and savings accounts were protected up to $100,000 per individual and up to $250,000 for retirement accounts, such as an IRA.

Mortgages, however, are not protected by the FDIC. What's more, the bank or entity that just went out of business, in this case IndyMac, may not be the actual "owner" of your mortgage. Many of these investors hire a mortgage servicing company to collect and process each payment of your mortgage, and never actually receive any payments directly from consumers. This is why nearly half of all outstanding mortgage debt in the U.S. today is "purchased" or "owned" by either Fannie Mae or Freddie Mac.

Keep Paying Your Mortgage
Combined with a slowing economy and falling real estate values, additional banks will feel pressure if mortgage delinquencies continue to increase in the coming months. In fact, one banking analyst, Gerard Cassidy, of RBC Capital Markets, predicted last month that as many as 300 banks could fail in the next three years!

If you happen to hold a mortgage with a bank that goes down, the first thing you need to know is that your mortgage does not go away, so keep paying your mortgage payments on time every month. Remember, the entity that funded your mortgage may or may not be servicing it. So, keep detailed records of what you've paid and when, including any billing statements, canceled checks, or bank account statements. According to the FTC, there is a 60-day grace period after the transfer during which you cannot be charged a late fee if you mistakenly send your mortgage payment to the old servicer – but don't count on this!

Unfortunately, mistakes are made, so continue to make your mortgage payments, and keep copies of any and all letters and/or documents for your records. You have the right to dispute errors on your credit report that may result from a transfer of service, but you will not successfully challenge the credit bureaus without accurate documentation, even if you're telling the truth.

It's important to note that the company responsible for servicing your mortgage is required to send you a letter 15 days in advance of any transfer. In addition, the new company responsible for servicing your loan must advise you that your mortgage has been transferred 15 days after the transfer has occurred.

According to the Federal Trade Commission (FTC), the notices must also include:

• The name and address of the new servicer;
• The date the current servicer will stop accepting your mortgage payments;
• The date the new servicer will begin accepting your mortgage payments;
• Toll-free and collect-call telephone numbers (for the current and new mortgage servicer);
• Information about whether you can continue any optional insurance; what action, if any, you must take to maintain coverage; and whether the insurance terms will change; and
• A statement that the transfer will not affect any terms or conditions of your mortgage, except those directly related to the servicing of the loan.

Be aware: there are plenty of scammers out there that try to take advantage of people during this confusing transition. If you receive notification that your mortgage has been sold, make sure all of the above information is given and use it confirm that the transfer is legitimate before you send a payment to the new company. Don't be afraid to pick up the phone and call your existing mortgage company to find out the truth.

In the past, scammers have sent very convincing, professional-looking letters to homeowners stating that their mortgage or mortgage servicing has been sold. Before the fraud can be discovered, the homeowner's credit may have already been damaged and, even worse, they're unable to recover any of their money they lost to the scammers.

Don't let this happen to you or someone you know. If your mortgage company goes out of business, remember that the terms of your mortgage, and your mortgage itself, will not go away. Keep paying, but be on the lookout for any information regarding the servicing of your mortgage and take the time investigate, confirm, and document the transfer of service. Remember, this is your hard-earned money and credit on the line, and it's up to you to protect it.

1:08 PM - Sep. 23, 2008 - comments {2} - post comment

It's time to think about spring bulbs

There is nothing quite as beautiful as seeing your spring flowering bulbs burst into color after the long cold winter. This fall start planning for next spring by adding some color to your drab landscape. Below are some planting tips for a beautiful bulb garden sure to impress in the spring!

www.myidealgarden.com/

1:00 PM - Sep. 21, 2008 - comments {0} - post comment

Maybe it's time to rent out your second home

This article by Christine Karpinski may give you some ideas about what to do with that no-longer-wanted retirement home.

It seemed like a great idea twenty years ago-you’d buy that condo in Florida, vacation there as often as possible, then someday sell your primary residence and spend your Golden Years basking in the sun. Now, “someday” is here and-lo and behold-you’ve changed your mind. You now have grandkids you don’t want to leave, all your friends are nearby, and frankly, the idea of nonstop sunshine with no autumn leaves or snowfalls has lost its luster. You’d hate to sell your vacation getaway, but keeping up two homes has gotten too pricey for comfort. Is there a solution?”Absolutely yes,” says Christine Karpinski, director of Owner Community for HomeAway.com (HomeAway.com) and author of “How to Rent Vacation Properties by Owner, 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment” (Kinney Pollack Press, 2007, ISBN: 0-9748249-9-2, $26.00). “Renting out your vacation home allows you to have your cake and eat it, too. And the good news is, it’s easy to do it yourself-not to mention surprisingly lucrative.”

Many seniors find themselves in this position, she adds. A good percentage of second homeowners fall into the “retirement age” demographic, and quite a few of them have-at one time or another-kicked around the idea of selling their primary residence and moving into that beachfront condo or mountain chalet full-time. Yet, changing lifestyle trends, combined with a rising cost of living, have led many of them to reconsider the fate of their vacation villa.

If you’re a second homeowner, Karpinski offers five reasons why you might consider renting out your vacation home:

1. Circumstances have changed since you made your retirement plans. Maybe grandchildren have arrived on the scene and you can’t bear the thought of moving hundreds of miles away from them. Or your parents are in poor health and need you nearby. Or your spouse has passed away and retiring in the Great Smoky Mountains was his idea, not yours. Regardless of specifics, your life bears no resemblance to what you thought it would look like back when you made your retirement plans.

“Life rarely turns out to look like we thought it was going to look,” notes Karpinski. “That’s okay. Some of the happiest, most successful people I’ve met during my years working in this field never dreamed they would rent out their vacation home, and yet once they tried it they love doing it. It pays to be flexible and keep your options open.”

2. You’ve suddenly realized there’s no place like home. Maybe there are no dramatic life circumstances keeping you from moving to your “dream destination.” Maybe you’ve simply changed your mind. You’ve decided you like being near your friends, you don’t want to leave your church or synagogue, and your Tuesday lunch with “the girls” or Thursday Bridge night with “the guys” is a tradition you just don’t want to give up. Or perhaps you’d like to stay in your hometown most of the year (you kind of like the change of seasons) and spend the bitterest winter months in your beachfront condo. Renting your second home out during the time you are not staying there makes it financially feasible to keep both homes.

“Traditionally, many retirees would sell the home they lived in for forty years, downsize to a smaller house or apartment, and split their time between that home and their vacation place in, say, Florida,” explains Karpinski. “But there are drawbacks to doing that: you lose your neighbors, you’re no longer close to your familiar grocery store, and so forth. And you don’t get to pass the ‘homestead’ down to your kids. Rent out your vacation home and you can have the best of both worlds. You can afford both places. It’s the perfect balanced solution.”

3. You’ve decided to “retire” from retirement. It is not unusual for people to test-drive retirement and find that it’s just not for them. Work can provide many rich rewards-structure, social interaction, mental stimulation, a sense of purpose, and so forth-that people keenly miss when they retire. And when they discover that quitting “the rat race” isn’t quite what they thought it would be, more and more people are opting to return to the workplace. And (let’s be honest), sometimes people simply can’t afford to retire.

“When people decide to postpone retirement, they may also postpone moving to their retirement home,” says Karpinski. “Even if they do retire and then rejoin the workforce either full-time or part-time, they may not want to live in the city they associate with retirement. It’s a psychological thing. And so, in these cases, it’s better to keep the vacation home a vacation home. Renting it out allows them to do that.”

4. Your fixed income hasn’t kept up with your lifestyle. Admit it. Even when you’re happy to give up the daily grind of your job, losing the paycheck that comes with it can be pretty painful. Factor in inflation, rising taxes, and unexpected “new” expenses, and you may find that what seemed like a manageable cost of living five years ago doesn’t seem that way anymore. Your second home, even if it’s paid for, may start looking like a liability due to property taxes, homeowner’s association dues, and maintenance costs. Not if you rent it out, says Karpinski. Then it becomes a (sizeable) source of new income.

“If you have a mortgage on your second home, renting it out only seventeen weeks will cover your mortgage payments for an entire year,” she says. “If it’s paid for free and clear, only five off-week rentals will cover costs like bills for your phone, power, cable, and association dues. All the rest is profit! When you consider that in some markets you can earn as much as $30K-40K in rental revenue per year from your vacation home, you’re looking at a nice ‘raise’ for yourself.”

5. You’re currently renting your vacation home through a property management company, but you’d like to make more money. Ditching the middleman may be the way to go. Property managers simply charge a hefty fee for their services. In fact, as Karpinski’s books point out, you have to rent ten more weeks with a management company to end up with the same amount of money you’d make renting by owner. And with the growing popularity of vacation home rental websites like HomeAway.com, finding renters is surprisingly easy.

“Here’s another good reason for seniors to rent by owner: they typically have time to handle the details,” says Karpinski. “Not that there’s a huge amount of work involved, but it is easier to respond to renter inquiries, do bookkeeping, orchestrate routine maintenance details, and so forth when you aren’t tied down to small children and/or a demanding career. Plus, vacation rental homeowners often meet interesting people and form friendships with them, and retirees tend to have more time to nurture these relationships.”

And here’s a surprise: people who try renting by owner often end up liking it so much that they pour their earnings into another vacation home. In fact, a recent survey by the National Association of Realtors® found that some 55% of vacation home buyers said they were likely to purchase another property within two years.

“Who knows-becoming a vacation rental property owner may become your encore career,” says Karpinski. “Buying and renting out vacation homes is addictive. I’ve done this for years and I can’t imagine ever not doing it. It’s more than a way to make money. It’s a richly rewarding way of life-at any age.”

12:56 PM - Sep. 19, 2008 - comments {0} - post comment

Moving tips

These suggestions from The Move Advocate will help you have a safer, saner move.

Moving may seem like an overwhelming experience for some home buyers, so we’ve compiled a list of “don’ts” to help consumers gear up for a smooth move.

1. Getting a quote over the phone or Internet: A big mistake that consumers make, when planning their moves, is obtaining a quote over the phone or the Internet. Any quote obtained in this manner is a non-binding quote. The only way to obtain a guaranteed or binding quote is to have a visual survey of your household goods by a reputable mover. If you choose to accept a quote over the phone or Internet you are setting yourself up for a nasty scenario when the mover shows up at your new home and demands more money.

2. Waiting too long to line up a mover: Allowing time for a visual survey, receiving a written and binding quote, and reserving a truck for your move takes a lead time of 4-6 weeks. Although moves can be arranged in a shorter period of time, many consumers find that their choices are limited by availability, especially in the busy summer months. In our current real estate market many homes are taking longer to sell, but once sold are closing very quickly. The time to obtain estimates for your move is before your home sells so that you are prepared when it does.

3. Misrepresenting what you are moving: It is very important to show the surveyor or estimator everything you are planning to move. If you forget to show items in a basement, garage, attic, or off-site storage unit and then add those items at time of pick-up, your estimate will no longer be binding. In the same vein, if you commit to packing your own items but don’t have time to finish, the van line will pack your items and charge you for the service. If you are uncertain of whether you will be taking something, or are not sure if you will have time to pack everything, ask the surveyor to put the items or service in the estimate. If you decide not to take something, or do not require the packing, the cost will be adjusted downward.

4. Paying a deposit up front: Reputable movers do not ask for payment up front to reserve trucks or dates. This is a classic red flag in moving. A reputable mover will expect payment upon delivery.

5. Finding a mover based upon price rather than reputation and service: If a mover gives you a price that is significantly lower than other movers it is likely that you are being low-balled. If a surveyor has underestimated your weight in order to give you a lower price you may find, on moving day, that the moving truck does not have enough room for your shipment. This is called an overflow. An overflow means that your items will not all travel together, will not all arrive at the same time, and will generally just cause you a big hassle. Another way to lower cost is to compromise service. Look for a competitive bid from a professional mover who is certified and reputable. Although price is an important factor, don’t base your decision on price alone.

12:40 PM - Sep. 15, 2008 - comments {1} - post comment

Fannie Mae Freddie Mac Takeover

One of our lenders sent the following analysis just now about yesterday's Fannie Mae and Freddie Mac take over.  Based on the reaction of the stock market today, it seems people are relieved.

1:42 PM - Sep. 8, 2008 - comments {0} - post comment

The Sky is NOT falling!

This editorial by Phillip Cantrell, broker with Allison James Estates and Homes expresses our thoughts on the current real estate fiasco exactly!  Since we couldn't put it any better, we're letting him tell you.

So, what do I think? I think there should be more positive news in the papers than we have today. I think the press has focused so heavily on the negatives of the current housing/mortgage/credit recession that we are just beaten down psychologically.

I think I remember the paintings of the buffalo herds on the great plain of the western U.S. in the 1870s. You know, the ones where the dense herd moves as a single, wriggling, gigantic, black mass being driven by yelping hunters on horseback, firing arrows into the herd-the hunters skillfully driving the herd toward the rapidly approaching cliff, over which most fall to instant death. The buffalo follow one right behind the other with never a thought that blindly following the animal ahead might lead to a disastrous outcome. Instead, they run together, surging on and on until finally their simple lives end at the bottom of the cliff, becoming winter’s sustenance for the hunter tribe.

There are distinct similarities between the buffalo herd and the mentality of today’s consumer. I think we are being driven toward the cliff by the hunters and we are mindlessly following the buffalo in front of us, with never a thought of the possible outcome.

Just as the buffalo, we look to the left to see the yelping hunter and we panic. Not because the hunter is a genuine threat, but just because others in the herd are panicking. So we run toward the cliff, even though we have seen the cliff before and intuitively know that running in that direction will surely lead to disastrous results. I think we do so because we have no leadership to warn us that doing so will end our existence and we have no spine to realize the view can be so much more than the hind quarters of the animal in front. I think buffalo butt is not where I want to focus my attention.

I think I am sick and tired of hearing the endless armchair-quarterback analysis of the talking heads on TV. I think I want to scream at them to shut up and go back to work. I think those that can, do, and those that can’t go on TV and try to teach the rest of us what to think about the situation. Yet we refuse to remember where the cliff is located and persist in running blindly toward it.

I think the facts are that of the 120 million homes in the U.S., over 33% of them are completely paid for and have no mortgage. I think that 40 million of the remaining 80 million homes in the U.S. were bought before the year 2000, meaning that even in a “fire sale” the equity in those homes is at least 30%.
I think I know that 94% of all the mortgages in existence today are not behind at all. Of the 120 million homes in the entire U.S. today, only 4 million are “at risk” with less than 2% of all homes actually in foreclosure. I think Congress is about to spend $300 billion (yes, that’s billion, with a capital “B”) of your tax dollars to bail out those 2% of home buyers who made bad decisions. Yet the talking heads would have us believe that, like Chicken Little, the sky is falling and we all have to run for cover or risk getting smacked by falling houses.

But we keep looking to the right and looking to the left and looking in front and deciding that…well…everyone else is headed in this direction so it must be the right way to go. And the cliff draws nearer and nearer.

10:29 AM - Sep. 7, 2008 - comments {0} - post comment

National Economic Woes maybe? - Part II

This interview is between Marylyn B. Schwartz, CSP, an expert in real estate and corporate sales training/management and team development and  Robert Pardes’ (Robert@pardesconsultants.com) . She is president of Teamweavers and a trainer for Leader’s Choice.  He is a certified public accountant, attorney, banking management, real estate finance and related capital markets expert.   He is a certified public accountant, attorney, banking management, real estate finance and related capital markets expert. His company, Recourse Recovery Management Services, provides strategic and tactical services relating to impaired mortgage backed securities investments

MBS: “As you know, effective March 6, the FHA increased its loan limits on jumbo mortgages to a maximum of $729,750. As it became more difficult to get a mortgage loan, this revision infused some well-needed capital into the mix. What effect is this having on the mortgage industry to date?”

RP: “It is very important for the real estate professional to make his/herself familiar with FHA lending guidelines. As mentioned, there are many thrifts and banks that are sound and well capitalized. When you combine that with the advantages of FHA funding, the banking industry is well positioned to meet the needs of a broad-base of demand. That is not to say that the loss of what amounts of 10-15% of the sub-prime market is not a big deal. Realtors® need to use a talented mortgage broker who knows all aspects of the market and is able to explore options with the applicant as well as help educate the agent. In these challenging times I would advocate that purchase agreements would benefit from the inclusion of statement of income, FICO score, the entity funding the loan and other pertinent information.”

MBS: “While there are those who still refuse to acknowledge the existence of an actual recession, those of us feeling the crunch say that who cares what you call it, it is causing great pain regardless. Talk about your view of the present market conditions.”

RP: “The government has reported accelerated inflation rates due to energy and food costs. Even those reported rates grossly underestimate the inflation rate experienced by average American families. Despite the decreases in the cost of flat-screen TVs, we’re up against the double-digit increases in milk, gasoline, healthcare, petroleum-based products, education and household necessities. The real household inflation rate is more like 20% and is combined with flat and in some cases declining income levels. The combined effect produces an outcome that is far more damaging than even that of a recession by its definition of two consecutive declining quarters of growth.

There is an old saying, ‘It’s a recession if you’re reading about it. It’s a depression if you’re living under the twin evils of unemployment or reduced income and double digit inflation.’ There is empirical evidence that unemployment rates are increasing. The government reported rates do not include those who have abandoned the job search or are underemployed at reduced income and therefore reduced spending power. We’re not a nation of whiners as has been claimed. We are a nation experiencing real pain. “

MBS: “Do you have some concrete recommendations to improve the housing market?”

RP: “Political stalemates, confused monetary policy and the absence of participation of real estate sales and finance industry professionals with hands-on experience in the process of creating solutions for residential real estate woes has proven to be an impediment in taking action to remediate the problems as quickly as possible.

My prescription for addressing the severe conditions impacting the housing market are three fold:

- Focus on liquidity, not interest rates. Rates are higher now than they were last year, and it has not helped to cure the ills.
- Support the demographics that comprised the core housing demands prior to the bubble.
- Allow the unavoidable pain to run its course. Clean up the foreclosures as quickly as possible so that we can begin to move back to more normal housing demands.

In addition, and as a direct result of this current crisis, lending regulations have swung to the right. It is incumbent upon all real estate professionals to understand that they are under tremendous scrutiny, deserved or otherwise. They are being vilified as part of the cause of this crisis and should think about their exposure. Their professional conduct needs to be above the appearance of any impropriety. Simple vigilance is not enough. We need the highest levels of integrity and caution. One transaction could result in a regulatory investigation that could sink a career or even a company. Everything should be put in writing and all RESPA rules should be known inside and out and followed to the letter of the law. Ignorance is no excuse of the law. It is up to the individual to monitor his/her conduct and be outside of the influence of, or acquaintance with less than, ethical individuals.”

MBS: “These are complicated and challenging times for us all. The real estate industry has suffered a few black eyes over the past couple of years. The mortgage crisis is still shaking itself out, and the trouble is that we are not sure exactly where the bottom lies. However, one thing is certain. The housing market will eventually recover and move back to a new normalcy. Mortgage lending will continue and homes will be bought and sold. The American dream of homeownership, although looking more like a nightmare of late, will continue. Your viewpoints are greatly appreciated, and we look forward to speaking with you again as we will continue to need clarity as we traverse this unfamiliar territory.”

2:20 PM - Sep. 5, 2008 - comments {1} - post comment

National Economic Woes maybe? Part 1

This interview is between Marylyn B. Schwartz, CSP, an expert in real estate and corporate sales training/management and team development and  Robert Pardes’ (Robert@pardesconsultants.com) . She is president of Teamweavers and a trainer for Leader’s Choice.  He is a certified public accountant, attorney, banking management, real estate finance and related capital markets expert.   He is a certified public accountant, attorney, banking management, real estate finance and related capital markets expert. His company, Recourse Recovery Management Services, provides strategic and tactical services relating to impaired mortgage backed securities investments

MBS: Robert, it is an honor to be chatting with you about subjects that have filled thousands of texts and newspapers worldwide. We are attempting to render some hot topics into pure knowledge that may help our readers work more effectively within the real estate and related industries. That begs the questions, what are, and what is going on with Fannie Mae and Freddie Mac?

RP: First, let’s define what they are. Federal Home Mortgage Corporation (Freddie Mac/FM) was created in 1970 by Congress with a mission to provide liquidity, stability and affordability to the nation’s mortgage markets using private, not public, capital. Congress’ creation of Freddie Mac was a sophisticated and creative approach to the longstanding national goal of promoting homeownership, and a recognition that historically the strictly private markets had failed to provide a stable and affordable supply of credit for residential housing.

Federal National Mortgage Association (Fannie Mae/FM) was created in 1938 as part of FDR’s New Deal. The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing.

They do their jobs by buying loans from banks, thrifts (S&Ls) and mortgage bankers and either holding these loans in their portfolios or securitizing them (protecting the loans with guarantees against defaults) and selling them to investors worldwide. These entities eventually became privatized, yet they remained federally chartered, meaning they were no longer under government regulations.

They are known as government sponsored enterprises (GSEs.) By privatizing these entities two distinct and significant advantages were achieved. First, the agencies gained an implicit unlimited access to low cost government funds. Second, they were allowed to conduct activities with substantially greater leverage and lower capital levels. The government was in essence a ‘sugar daddy’ for funds in perpetuity.

MBS: Having private ownership and at the same time being required to undertake a public mission are competing interests that have proven difficult to manage. How, if at all, does that implicit funds guarantee feed into the present public ‘crisis in confidence’ that now these agencies are on the brink of ruin and/or running amuck by virtue of not abiding by sound banking practices?

RP: “There are headlines everywhere that leave the reader with the perception or reinforce the reality that these entities are undercapitalized to absorb losses relating to loans they own or guarantees they issued to other investors. They own or guarantee 5 trillion of mortgage debt, and that comprises half of the total outstanding mortgage debt nationally. They have combined capital of 55 billion.

When you do the math, on the surface, it looks pretty grim. The fear is that they could ‘eat up’ the capital quickly. If 10% of loans were in default and 1% of defaults equal approximately 25 billion in liability, a mere 3% default rate would more than wipe out cash on hand.

The national default rate of loans (that is past due or in foreclosure) as of 6/1 was 8.8%. However, Fannie Mae’s and Freddie Mac’s holdings in the risky-loan market (the so called sub-prime or non-prime loan) are nominal. Where it gets sticky, however, is that all their existing capital bases and revenues remaining are inadequate to absorb losses associated with the rapidly declining residential market conditions. In the event that their capital was to continue to show signs of depletion, international or other investors may have significant reservations about borrowing because the cost of borrowing rises when capital depletes.

Liquidity and demand for FM and FM securities would decline and they would be compromised in their ability to support the housing market’s need for loans. Does the government provide direct investment to the entities (what amounts to a blank-check bailout) or does FM and FM look elsewhere to raise capital?

There is presently a boisterous debate on this issue on Capitol Hill as well as on every talking-head Sunday news show. It is not within our imagination for these entities to fail. However, a bailout is not going to resolve the underlying causes of the problems, and now would be the right time to look at those root causes and make needed and overdue changes even if and when the needed liquidity is provided. The fact is that when the government bailed out Bear Stearns, that act turned that ‘implicit’ guarantee of funds flowing in perpetuity from the government to FM and FM into an ‘explicit’ guarantee. If Bearn Stearns was not going to be allowed to tank, how could anyone expect that FM and FM would?

MBS: Those of us who are the gatekeepers of the real estate profession are watching, with great interest, to see how this unfolds. One has to wonder if we bailout FM and FM without curing the ills that brought about this historic turn of events. What’s next? US car manufacturers come to mind… Turning to a tangential topic, what is the possible impact of banks having to take back previously bundled and sold loans (so called mortgage backed securities) from investors by virtue of those loans having been securitized by fraudulent documentation, and the subsequent investors realizing losses due to many of those loans falling into the failed sub-prime category?

RP: Notwithstanding press concerns regarding capital levels on hand of many banks, the impact on the real estate profession is a non-event. There are still many banks that are willing and ready to provide mortgage loans to qualified borrowers. Rather than to worry about more bank failures, real estate and banking professionals should be focused on creating a menu of products to meet the core housing demand. It is crucial to keep in mind that we have had sub-prime type loans for many years.

However, the balance between prime loans and sub-prime loans was maintained in a responsible way. The number of sub-prime loans granted mirrored the demographic of persons for whom those loans were created: 10-15%. It is only when banks and thrifts began to offer sub-prime loans to a broader demographic and simultaneously lowered the lending criteria for obtaining a loan did the problems begin en masse.

Non-prime lending reached upwards of 40% of all loans. There are no doubt going to be lending institutions who will continue to realize loses as a result of poorly securitized MBSs. 2 trillion total is not an unlikely figure. The impact to the marketplace is likely to be that banks will have to dedicate ‘the gift’ bestowed by the Federal Reserve of lower borrowing costs. The banks will have to make investor loans at reduced profits (lower interest rates) to help pay for the take back of mortgages previously sold to investors. There is little doubt that where there is the possibility for proving any fraudulent lending practices, those possibilities will be fully investigated over time.”

6:45 PM - Aug. 18, 2008 - comments {0} - post comment

It's true - real estate prices ARE rising

Amidst the gloom on Wall Street about housing someone forgot to check the stats. The National Association of Realtors® has now reported four straight months of rising housing prices, but it seems no one is listening.

According to NAR statistics, the median home price has fallen from a high of $230,200 in July 2006 to a low in February 2008 at $195,600, a drop of 15%. Since February, however, it has risen steadily every month. By May the index (which will be revised on July 24) had risen to $208,600, up $13,000 and a full 6.6%. Another indicator, the mean home price (otherwise known as the average home price), has also shown strength and has risen from a low of $242,000 also in February of this year to $253,100, a rise of $11,100 or 4.5%. It, too, has risen every month since February of this year.

“I just don’t know where Wall Street’s brains are today,” said David Michonski, CEO of Coldwell Banker Hunt Kennedy in New York City. “Everyone on the Street is wringing their hands over housing when in fact the average American has been out this spring buying homes and pushing the median price higher. This has got to go down as one of Wall Street and Main Street’s biggest disconnects in history.”

In addition, on an annualized basis the volume of home sales has also risen somewhat from a low of 4,890,000 homes in January to 4,990,000 in May.

“Rising prices on expanding volume should not a crisis make on Wall Street,” says Michonski.

So why the crisis?

“They say that there are bulls and bears on Wall Street but there are also pigs. Pigs try not just to profit from a crisis but create one to profit from. Today there are just so many people who have positioned themselves to profit from a crisis that they refuse to admit the reality of what is happening on Main Street. It might hurt their positions.”

Is this the bottom?

“No one can know for sure, but the hard data is clear. The median price has risen four straight months. The average American is out there taking advantage of bargains in their local real estate market. They are not listening to Wall Street but following their own belief that the best time to buy is when no one else is, and they are out there buying. If this keeps up, February may prove to have been the low in prices.”

“It is possible that it will not be Hank Paulson or Ben Bernanke who will pull this country out of a housing recession, but the good common sense of the average American whose affordability to buy a home is at a five year high and is acting on it.”

12:31 PM - Aug. 10, 2008 - comments {0} - post comment

A Colorado water primer - part 2

As we emerge from the wettest spring in some time with a relatively large snow pack, it's easy for the droughts of past years to become a distant memory, but perhaps it is wise to remember how tenuous is our water supply. And sometimes it is useful to obtain a perspective from other than real estate interests. The following was excerpted from articles by Nathan Fey of Salida on the website of American Whitewater, "a national non-profit organization with a mission "to conserve and restore America's whitewater resources and to enhance opportunities to enjoy them safely." For more go to http://www. americanwhitewater.org
 

In 2005 the Colorado Legislature created the Interbasin Compact Committee (IBCC) and nine roundtables across the state to further evaluate statewide water supply and demand at the basin level. The IBCC organizes to negotiate diverting water between basins. These Basin Roundtables are charged with refining the SWSI 1 report by quantifying consumptive and non-consumptive water needs and identifying water projects scoped to meet projected future demands. In Colorado consumptive water use includes all withdrawals from surface or ground water supplies to be put to beneficial use, including agricultural, municipal, and industrial needs. Non- consumptive uses include recreational and environmental needs, including Instream flow rights, Recreational In-channel Diversions, and needs for threatened or endangered fish and riparian life.

The Basin Roundtables and the IBCC present any proposed water project in the state to the Colorado Water Conservation Board. Each basin roundtable screens for projects or programs that benefit multiple users, and balance competing needs of a shared water source.

The 2003 Big Straw Referendum A would have given the Colorado legislature $2 billion to build dams and divert more water to the Front Range. After it lost handily, the Colorado Water Conservation Board (CWCB) created SWSI. SWSI Phase I determined that Colorado will have 20% less water than the amount needed (the 20% Gap) based on projected population growth.

"SWSI's findings so far have bolstered Western Slope concerns about possible new attempts at water grabs by the Front Range. It is projecting that Colorado's cities and industrial users will need an additional 708,000 acre-feet of water by 2030, as the state population grows from 4.3 million in 2000 to an estimated 7.1 million people." Aspen Times, August 27, 2004

SWSI Phase II created four technical roundtables that now meet regularly:

1) Water Efficiency (Agricultural, Municipal, & Industrial (M&I),
2) Alternative Agricultural Transfers to Permanent Dry-up
3) Prioritize and Quantify Recreation and Environment Needs
4) Addressing the 20% M & I Gap.

In addition to these technical roundtables, the Interbasin Compact Committee (IBCC) was created. The IBCC organizes nine additional roundtables to meet and negotiate diverting water between basins. Critical decisions will be made within these roundtables that will determine whether many rivers and streams in Colorado have sufficient flows for paddling and other river recreation, fish, wildlife, local economic benefits, and municipal needs.

In response to the ever-increasing demand for water in Colorado, water managers are moving forward with projects aimed at developing new water supplies for Denver and the Front Range. Several of the proposed projects involve billion-dollar schemes to move water across the continental divide, from the Upper Colorado River Basin to the S. Platte basin. While these larger proposals are several years from realization, smaller water projects are moving closer to implementation.

One such project, the Northern Integrated Supply Project (NISP), will provide 16 Front Range cities with 40,000 acre-feet of new water to meet increased demand over the next 50 years. NISP, coordinated by Northern Colorado Water Conservancy District, must undergo an environmental review by the US Army Corps of Engineers as required by the National Environmental Policy Act.

After review, the US Army Corps of Engineers identified three potential alternatives to no-action. Of the three, the 16 NISP participants preferred the Glade Reservoir and the South Platte Water Conservation Project. The preferred alternative includes building a new reservoir to store water underutilized in the Poudre River, a larger tributary to the South Platte River basin.

When Instream supplies are legally available, NISP will divert water from the Poudre River near the mouth of Poudre Canyon, into Glade Reservoir inundating the valley one mile north of highways 287 and 14. NISP's conditional water right for Glade Reservoir will be in priority usually in periods of peak spring run off or large rain events, and will divert a maximum of 1000 cubic-feet per second. Water stored in Glade reservoir will be delivered to the 16 participants via new pipelines or water exchanges.

In addition to Glade Reservoir, NISP will create Galeton Reservoir Northeast of the City of Greeley. For NISP to take full advantage of Northern's year-round water rights and meet consumptive needs, both reservoirs are necessary.

Growth in Colorado is clearly challenging our water supply, but fortunately the challenges are being addressed. Twice in recent years, the University of Denver has convened Strategic Issues Panels to address the Colorado water supply. As can be seen at htt p://www.du.edu/issues/reports/index.html the highlights of numerous recommendations include conservation and cooperation between urban and agricultural water consumers. Recreational water uses like rafting and kayaking are fun and consume almost no water, but their danger requires conscientious attention to safety. Similarly, consumptive water use for agricultural, industrial and domestic uses, fundamental to the quality of life in Colorado, requires aggressive management by both the public and private sectors.
 

12:46 PM - Jul. 29, 2008 - comments {0} - post comment

A Colorado water primer - Part 1

As we emerge from the wettest spring in some time with a relatively large snow pack, it's easy for the droughts of past years to become a distant memory, but perhaps it is wise to remember how tenuous is our water supply. And sometimes it is useful to obtain a perspective from other than real estate interests. The following was excerpted from articles by Nathan Fey of Salida on the website of American Whitewater, "a national non-profit organization with a mission "to conserve and restore America's whitewater resources and to enhance opportunities to enjoy them safely." For more go to http://www. americanwhitewater.org

Colorado generates roughly 95 million-acre feet (MAF) of water on average annually from precipitation. While most of this water is absorbed into the states millions of acres of forest and rangelands, some 16 MAF finds its way into Colorado's creeks and rivers.

6 million-acre feet of water is put to use meeting the needs of Colorado's 4.6 million people. On average, 80% of water used in the state is diverted directly out of our rivers. The remaining 20% is pulled from groundwater and aquifers. Of the water Coloradoans use, 86% is used to meet agricultural needs. Less than 7% is used to meet municipal demands, 2% for industrial needs, 2% to recharge groundwater and aquifers, and 3% for environmental and recreational needs.

As a headwaters state, two-thirds of the surface water generated on average in Colorado is legally obligated to downstream users. 8.8 MAF of water flows to states west of the Continental Divide, including Utah, Nevada, California, New Mexico, Arizona, and Mexico. Colorado supplies another 1.4 MAF of water to states on the Atlantic side of the Divide, including Nebraska, Kansas, and Wyoming.

Colorado's water supply is limited by fluctuating precipitation levels. Drought cycles are a common characteristic of our semi-arid climate. In the drought of 2002, Colorado generated roughly 4 MAF of surface water. Municipal water providers across the state were forced to implement restrictions on water use, and there was concern about Colorado's ability to supply downstream states with their water requirements. To meet demand, an additional 6maf of water was withdrawn from reservoirs and storage systems, which have yet to fully recover. Agriculture, recreation, municipalities, and the environment suffered serious hardship during one of the most serious droughts in Colorado's history. Colorado's obligations to provide water to downstream users via interstate compacts, international treaties, and court ordered apportionment, continues regardless of drought conditions or increasing demands in the headwaters.

Colorado expects another 2.8 million people in the state by 2030, placing more demand on water supplies, more demand than can be met today. The Colorado Water Conservation Board reported in the State Water Supply Initiative (SWSI) that Colorado needs an additional 630,000 AF of water supplies to meet these new municipal demands. Conservation will play a critical role in stretching existing supplies, but cannot meet all the requirements alone. To meet the increase in demand, Colorado is planning for new reservoirs and dams, expanding existing storage projects, and proposing inter-basin transfers and agricultural withdrawals.

12:44 PM - Jul. 27, 2008 - comments {0} - post comment

Kitchen makeovers on the cheap

After downsizing to a historic 1920s cottage, a music-loving couple found perfect harmony with a kitchen makeover. They bought a fixer-upper after their daughters left the nest, and wanted to update the kitchen without spending a fortune. The couple chose mainly off-the-shelf products (with the exception of Special Order countertops) and created a space that’s jam-packed with personality.  Lowe's outlines how they did it:

What They Did

The Challenge: The kitchen’s inefficient layout and outdated appliances provided little inspiration for the homeowners. They wanted to infuse the warmth of a European bistro into the room’s new design and achieve a customized look.

The Solution: Open shelving and a harmonious color palette make the room feel larger. Sticking to their budget, the homeowners salvaged the hardwood floors underneath the tile and painted unfinished in-stock oak cabinets. They chose a suite of stainless appliances to bring the kitchen up to date. The new refrigerator was placed across from the sink for a better workflow, and improved lighting provides ample illumination in the work areas.

Here are 5 ways you can also get a custom look for less:

1. Prepare. Developing a game plan from the beginning helps you stay focused and stick to a theme and color palette.

2. Paint. By coating unfinished wooden cabinets with your desired color, you can get a bold look for a fraction of the cost.

3. Personalize. Do-it-yourself shelving or a breakfast bar maximizes space and adds a one-of-a-kind, professional feel.

4. Pick a suite. Choosing appliances from the same brand with the same finish will give the kitchen a more cohesive appearance.

5. Pad with finishing touches. Unique additions, such as a chalkboard wall or framed travel photos, make a kitchen anything but ordinary.

2:48 PM - Jul. 9, 2008 - comments {0} - post comment

Don't be afraid of color

With a desire to create spaces that are just right for them, today’s customer is looking for an experience inside the home. Neutrals are nice, but homeowners are moving “beyond the beige.”

Melissa Birdsong, vice-president of Trends at Lowes, Inc has these idea on adding color to your home.

When buying or selling a home, a neutral color scheme is the safe choice and often used as a way to provide a blank canvas, allowing potential buyers to paint their personal vision of home. But thanks to the world of home makeover shows and an abundance of how-to palette information available online and in stores, consumer color confidence is higher than ever. With permission to go beyond beige, many homeowners are rediscovering the power of color to create personality in their home that can, if executed thoughtfully, establish a unique and memorable impression-while they’re living there as well as when it’s time to sell.

So what is a “thoughtful” way to color scheme a home? Over the years, I’ve compared it with creating a musical composition-one that combines soft melody and slower tempo with louder and faster parts. The rhythm of the piece creates continuity, but the contrast between the parts adds drama to what could otherwise be a monotonous experience.

Translated to a room-to-room color scheme, neutral zones are the quiet parts; those painted with more color, the livelier ones. Transition between areas becomes very natural when you weave in the color and finishes of the furniture, artwork and accessories that playfully create a more interesting composition.

The actual selection of quiet colors vs. more dramatic ones depends on the mood and the feeling that you want a space to have: a peaceful space for contemplation and reading or a more dramatic backdrop for dining? By aligning the mood with the color “volume,” you create an expression that makes a home feel just right. And opting out of the beige box can provide an experience that’s colorful beyond the hue.

2:16 PM - Jul. 3, 2008 - comments {0} - post comment

How to let your home "age" with you

“Even minor aging-in-place remodels make a huge difference in the lives of seniors and people with disabilities,” said NAHB Remodelers Chairman Lonny Rutherford, CGR, CAPS, CGP, a remodeler from Farmington, N. M. “Certified Aging in Place Specialist (CAPS) remodelers are trained and certified to assist homeowners with making the adjustments needed so that they can live in their homes comfortably. “

According to AARP, more than 84% of people age 50 and older want to stay in their homes as they age.

CAPS recognizes those remodelers who demonstrate understanding about working with older adults, knowledge of common barriers and solutions to aging at home, and techniques for building and sustaining a responsible remodeling business. To earn the CAPS designation, a remodeler must complete a series of industry-specific education courses, provide letters of recommendation, proof of licensing and insurance and adhere to a strict Code of Ethics. CAPS stands for professionalism, customer service and a commitment to quality.

“CAPS courses teach great design skills, and all homeowners can benefit from thoughtful and innovative design options, making their home friendly for people of all ages,” said Rutherford.

The most popular CAPS solutions make a vast difference in improving livability without wiping out savings:

- Installing grab bars in bathrooms and showers
- Replacing door and faucet handles with easy-to-grasp levers
- Creating no-step doors and entry ways
- Adding seated work areas in the kitchen
- Improving lighting and creating color contrast

1:35 PM - Jul. 1, 2008 - comments {0} - post comment

Are we getting close to the end of the mess?

In the initial stages of a Recession (yes everywhere people are now referring to the “R” word) sellers remain under an illusion of inflated home values regarding the real value of their property, while around them this false impression of value leads to a drop in sales as buyers respond by pulling out of the market.   Stefan Swanepoel of the Swanepoel Trends Report has some ideas of how to survive

At some point (about now) reality sets in and some owners reduce prices fueled by a growing financial crunch. There is an increase in the number of short sales, foreclosures rise and banks start taking back many unwanted properties, dropping cash flows lead to losses that force property auctions and a downward spiral of home prices is the result.

Prices are driven price down, developers are stuck with new homes and banks are bulging with foreclosed properties. So who are the largest sellers of homes today? Most likely Countrywide, US Bank, Deutsche Bank, Wachovia, Downey Savings and Loan, Wells Fargo and Washington Mutual.

As a matter of fact, the median sales price of a bank-owned property ranges between 15% to 45% lower than the median listed price of homes for sale in the same neighborhood.

So how far and how long will this go?

Well I’m no economist and I don’t have a crystal ball, but what I can share with you is that statistics indicate that a normal recession is around 10 months (but who knows what normal is). It seems that predictions are running everywhere from 10 to as many as 24 months before we turn the corner.

This is largely founded on the fact that we already have a national “house-for-sale” inventory of around 11 months. U.S. foreclosure filings jumped 57% and bank repossessions are up 129% from a year ago. We can expect some 2.5 million foreclosed properties to be on the market this year and in 2009.

In short - too much stock and too few buyers.

Add to that are mortgage rates, the mother’s milk of the housing market, that seem to be on the rise – both internationally and locally. It would seem that “The 2007 Hangover,” which I wrote about toward the end of 2006 in my annual Swanepoel Trends Report, will provide the industry a headache well into 2009 and beyond.

On another note, the Mortgage Reform and Anti-Predatory Lending Act of 2007 bars banks from steering any consumer to a loan for which the consumer lacks a reasonable ability to repay, does not provide a net tangible benefit or has predatory characteristics. A predatory loan has never been defined and will surely mean, to a trial lawyer, any loan that a marginal buyer cannot afford anytime in the future. Analysis performed for the Consumer Mortgage Coalition concluded that because of the subjective standards the House bill "will likely generate significant litigation" and lenders will "rarely, if ever, be able to dispose of even frivolous lawsuits".

So, during these complex and difficult times, this legislation adds a further incentive for banks to stop lending to all but the best qualified individuals. Therefore it would appear that for the foreseeable future, low-income home buyers without stellar credit scores will find it nearly impossible to get any home loan - which compounds the downward pressure on home values.

As if this isn’t already enough “bad news” another growing concern is the rapid build up of household debt in the U.S. According to Business Week, U.S. households now owe almost $14 trillion, nearly equal to the annual output of the U.S. economy. Regrettably these two are interwoven and one financial crisis feeds off the other.

On the optimistic side: The current housing recession, sub prime mess and the foreclosure explosion won’t last forever. The years 2006 – 2009 will unquestionably leave a scar, but the American dream of owning your own home will return in all its glory. We may have to wait another year or more but keep the faith, real estate will once again create wealth and fuel the economy.

Till then, be astute, knowledgeable and remain positive.

7:14 PM - Jun. 27, 2008 - comments {0} - post comment

How to build "green"

Q. What was the motivation behind your becoming interested in green building?
A. I had known about green building for quite some time and got involved in green remodeling in 2001. From the beginning, it struck me as the only way to build. From that point forward, I felt that it was my mission to educate individuals in the building/remodeling industry as well as consumers and agents about the benefits of green building over traditional building and remodeling. In 2004, I became involved with EarthCraft House, a non-profit organization dedicated to green building and living and I headed their green remodeling committee. The pilot projects that I worked on for this committee were the turning point in my career.

Q. What are some of the features that make a home green?
A. There are four main precepts behind the process of building green. These four guidelines include that the home be energy efficient, healthy for the occupant, durable and resource efficient. All of these concepts interrelate, as a lot of things that make a home energy efficient will make it healthy and resource efficient as well. Green building is a fairly well-established building principle that anyone can employ with the proper training, and almost any building can be made green. The key thing to remember is that green building is not about products and materials, it is a process.

Q. What are some of the advantages to having a green home over a traditional home?
A. First and foremost, green homes are very healthy. Many individuals who move into a green home find that their allergies go away all together or severely diminish. The houses are comfortable, quiet and cleaner as well. In addition, green houses don’t get hot and cold spots that are typical in most traditional homes and they use a lot less electricity gas. In the end, fewer materials are used and wasted.

Q. What do you see in the future of green building?
A. There is no doubt in my mind that everything will be green, because it is where we have to go especially in order to protect our environment. Even today, most green energy codes are strong, but most builders don’t enforce and build to them. The movement is still on the trendy side right now, but it will continue to pick up speed and penetrate more of the market. As it becomes more understood, people will realize that they don’t have to spend more and there is no downside to building green.

7:08 PM - Jun. 25, 2008 - comments {0} - post comment

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