Finding Buyers in this market

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Gone are the days when people would qualify for houses without much problem.

If you are looking to buy houses that you can fix and resell, avoid these:

  • Condos
  • Townhomes
  • Jumbo mortgages (high end)
  • Multi-family.

Money is not easily available for these, unless there is owner financing involved.  When you consider what loans are being funded these days, these types of properties are just not getting the funds.  There may be buyers, but lenders are not giving out money.

The challenge to finding buyers is the supply of money.  There are lots of houses pending which tells me that buyers are out there.

So who is your buyer?

Take these steps:

  • What is the median household income for your buying area?
  • Divide that number by 12 to get a monthly median.
  • Take that number and multiply by .29 to get the max principal and interest payment that would be allowed.
  • use that number to find out what is the max loan is that would be funded.

What you’ll see is the average median house that the average buyer can get.  What you’ll find is that first time buyers are your primary audience.  Trade up homes are not moving because they are not getting funded.

Thus, who is your target buyer?

FHA title seasoning lifted for bank owned homes as of July!

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Date: July 6, 2008

Here is FHA’s Flipping policy

FHA requires that: a) only owners of record may sell properties that will be financed using FHA-insured mortgages; b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; and c) that for resales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property’s value. FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months.

The following sales are exempt from the above mentioned policy

* Sales by HUD of its Real Estate Owned

* Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies.

* Sales of properties by nonprofits approved to purchase HUD-owned single-family properties at a discount with resale restrictions.

* Sales of properties that are acquired by the sellers by inheritance.

* Sales of properties purchased by employers or relocation agencies in connection with relocations of employees.

* Sales of properties by state and federally charted financial institutions and Government Sponsored Enterprises.

* Sales of properties by local and state government agencies.

* Upon FHA’s announcement of eligibility in a notice (i.e., ML), sales of properties located in areas designated by the President as federal disaster areas, will be exempt from the restrictions of the property-flipping rule. The notice will specify how long the exception will be in effect and the specific disaster area affected.

We hope you find this information helpful!

via Real Estate Blog – FHA title seasoning lifted for bank owned homes as of July!.

Fannie Mae changes guidelines — buy more than 4 properties

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Here is good news: the investor limit is changing from 4 houses to 10 but Fannie Mae has set the requirements so high that only the cream of the crop will get funded:

Under the new rules, investors will be able to own a total of five to ten financed properties “if they meet … (Fannie’s) eligibility and underwriting standards,” according to a bulletin the company just sent out to lenders.

Loan- to-value ratios on Fannie Mae-financed investor purchases will now go as high as 75 percent for single unit acquisitions and as high as 70 percent for projects with two to four units, provided the applicant has a minimum FICO credit score of 720.

Borrowers will also have to pass a series of other tests including the following:

First, they cannot have filed for bankruptcy or been foreclosed upon at any time during the past seven years, and they’ve got to have a spotless record on their other mortgages — no late payments of 30 days or more — during the previous 12 months.

Second, they’ve got to fully document rental income for any new acquisition, along with their revenues on all other investment properties, backed with two years worth of federal income tax returns.

Third, applicants owning no more than four units will need to show six months of bank reserves to support the new investment purchase, plus two months of reserves for every other investment property they own. Borrowers who own five to ten properties will need to show that they’ve got six months of reserves on hand for every property.

There’s no question here that Fannie is looking to deal ONLY with the most financially stable multi-unit investors — to skim the cream off the top of the investor market, and reject everybody else who can’t come up with the heavy reserves.

Source: Realty Times

Here is a little more technical information.

February 9

Source: allregs.com

Fannie Mae is updating the policy that pertains to multiple mortgages to the same borrower. Fannie Mae’s current policy limits the number of one- to four-unit financed properties in which the borrower may have an individual or joint ownership interest to four financed properties when the mortgage being delivered to Fannie Mae is secured by an investment property or second home. The limitation on the number of mortgages currently being financed applies to the total number of properties financed, not just the number of mortgages sold to Fannie Mae. Fannie Mae is modifying this policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements as outlined in this Announcement. Unless otherwise stated, these requirements apply to all mortgage loans whether underwritten manually or through Desktop Underwriter® (DU®).

Eligibility Requirements

Eligibility Requirements: Five to Ten Financed Properties
Transaction Type Number of Units Maximum
LTV/CLTV/HCLTV		 Minimum
Credit Score
Second Home or Investment Property
Purchase 1 Unit 75/75/75% 720
Limited Cash-Out Refinance 1 Unit 70/70/70% 720
Investment Property
Purchase and Limited Cash-Out Refinance 2-4 Unit 70/70/70% 720

Reserve Requirements:

Reserve Requirements for Second Homes, Investment Properties, and Multiple Financed Properties

Fannie Mae is implementing new reserve requirements that apply to all second home transactions and to investor and second home borrowers that own or have an interest in multiple financed properties. The amount of required reserves varies depending on whether the subject property is a second home or investment property, and on the number of other financed properties the borrower currently owns. The reserve requirements are as follows:

• When the borrower will own one to four financed properties (including the subject property) the reserve requirements are:

- two months of reserves on the subject property if it is a second home,
- six months of reserves on the subject property if it is an investment property, and
- two months of reserves on each other financed second home or investment property.
• When the borrower will own five to ten financed properties (including the subject property) the reserve requirements are:

- two months of reserves on the subject property if it is a second home,
- six months of reserves on the subject property if it is an investment property, and
- six months of reserves on each other financed second home or investment property.

Underwriting and Delivery Requirements

• The borrower cannot have any history of bankruptcy or foreclosure within the past seven years.
• The borrower cannot have any delinquencies (30-day or greater) within the past 12 months on any mortgage loans.
• Rental income on the subject investment property must be fully documented according to the Selling Guide, Part X, 402.24: Rental Income. Rental income from other properties owned by the borrower must be supported by two years’ federal income tax returns. DU messages permitting reduced rental income documentation must be disregarded and full documentation must be obtained.
• The borrower must complete and sign Form 4506 Request for Copy of Tax Return or 4506-T Request for Transcript of Tax Return granting the lender permission to request copies of federal income tax returns directly from the IRS. The lender must obtain the IRS copies of the returns or the transcript and validate the accuracy of the tax returns provided by the borrower prior to the loan closing.
• The borrower must have reserves for the subject property and for other properties currently owned by the borrower (i.e., other financed second home and investment properties) in accordance with the following section – “Reserve Requirements for Second Homes, Investment Properties, and Multiple Financed Properties.”
• Lenders must use Special Feature Code 150 when delivering mortgage loans secured by second home and investment properties that meet the five to ten financed property requirements.

Richmond-area home sales at 10-year low | Richmond Times-Dispatch

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Published: January 27, 2009

Fewer homes were sold in the Richmond area last year than any year in the past decade, according to a report released yesterday by the Virginia Association of Realtors.

In all, 9,287 houses were sold in this area, lower than the 9,526 for all of 1998.

Sales here tumbled 22.8 percent in 2008 from the previous year, according to the housing report.

The average price fell 14.3 percent in the fourth quarter to $250,181 from the same period a year ago — below where it was in 2005.

The Richmond area is defined as the city, the counties of Hanover, Henrico, Goochland and Powhatan and portions of the counties of Chesterfield, Charles City, King William and New Kent.

The Central Virginia Regional Multiple Listing Service, which covers a larger area of 16 localities, reported that the number of homes sold dropped 23 percent and that the average price for the year was $264,467, down 3 percent.

Virginia

Sales of homes in Virginia fell 13.6 percent last year from 2007 to the lowest total in more than a decade.

The statewide median price, with half the houses selling for more and half for less, was $244,493, down 1.2 percent.

Nationally, sales of previously owned homes fell more than 13 percent in 2008 from a year earlier, the lowest total since 1997, according to a report released yesterday from the National Association of Realtors.

The nationwide median sales price was $175,400, down 15.3 percent from $207,000 a year earlier.

Although unemployment claims nationwide are rising and consumer confidence is bad, Virginia, unlike the nation, continues to add jobs, McClain said.

These factors help keep housing more afloat than in other states, he said.

The state added a net 13,100 jobs in 2008, based on data through November, he said. Also, unemployment in Virginia was nearly 2 percentage points below the national average in November, he said.

Virginia has not escaped the rising wave of foreclosures. But the state fared better than the nation, with 1.5 percent of all homes in Virginia facing foreclosure last year, compared with 1.8 percent nationwide, according to the housing report.

The greatest concentration of foreclosures — 80 percent — was in Northern Virginia, McClain said.

via Richmond-area home sales at 10-year low | Richmond Times-Dispatch.

Fourth quarter home sales fall 21 percent in Richmond area

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Home sales in the Richmond area fell 21 percent in the fourth quarter of 2008 compared with the same period in the prior year.

And the average sale prices dipped 14 percent to $250,181, according to a report released this morning by the Virginia Association of Realtors.

The group defines the Richmond area as the city of Richmond and the counties of Chesterfield, Hanover and Henrico.

For all of 2008, sales for the Richmond area declined 23 percent from 2007 and the average price fell 3 percent to $268,973 from 2007.

In the greater Richmond area, which includes the city and 15 localities, the number of sales fell 33 percent in the fourth quarter compared with the same time in 2007. Sales declined 23 percent in 2008 vs. 2007 and the average price fell 3 percent to $264,467 in 2008.

via Fourth quarter home sales fall 21 percent in Richmond area | Richmond Times-Dispatch.

FHA Seasoning Rules

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Below is what I found written up.

FHA will look at the most current legal owner of record and the date they acquired title to the property to begin the 90 day clock.

As a specific example, if a seller acquires title on June 1st and then transfers title to his/her LLC on July 15th, the 90
day rule applies from July 15th not June 1st.

This is true even if the seller is 100% owner of the LLC and no money exchanged hands.

FHA simply looks at the date title last transferred and that is the date they use. The name of the seller on the contract of sale must be the EXACT name that is currently on title.

There may be variations allowable to these guidelines.

Get Signatures on your Contracts Via Email

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Electronicsignature I have started using a 3rd party service that enables me to get legal electronic signatures on my paperwork.  I have been using their service and my customers find it very convenient.

Over 500,000 other companies around the world use this electronic service. 

How it works for me

When I cannot visit a seller in person, for example — they are out of state — this provides an excellent paperless service. 

I prepare my agreement as a Doc or PDF, upload it to the service and then it is emailed to the seller for signature.

My seller opens the document, signs it by typing their initials, and an electronically initialed copy is sent to both parties.  (If a physical signature is still required, they can print it out, and fax it to the number provided by the service so that it stays secure.)

I have found the following benefits:

  • No faxes.  My fax machine is finicky in that not every transmission is successful.  Sellers don’t have to try 7 times to fax something or find a office supply store to fax it.
  • Original PDF copies — no 7th generation faxes.
  • My sellers find it easy and cost free.
  • I don’t have get copies back to seller — its automatic.  Saves me time

I find that using this service saves me time, and headaches, and facilitates my transaction.

You can even use it to collect signatures from mobile phones and iPhones for those who get their email that way.

Are Electronic Signatures legal?

The Electronic Signatures in Global and National Commerce Act (“E-Signature Act”) became effective in the US on October 1, 2000.  Since then, online electronic signatures on commercial transactions and most other agreements have a legal status equivalent to a written signature.   US state law modeled on the Uniform Electronic Transactions Act (UETA) also provides a legal framework for electronic transactions. It gives signatures and records the same validity and enforceability as manual signatures and paper-based transactions. This UETA was adopted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1999. (from the company’s website).

How do you start?

Try Echosign’s free trial. 

That will give you 5 documents for free.

Simply create an account and get started.  No credit card required.

echosign_logo

Virginia Foreclosures Continue to Rise

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According to the 12/11/2008 Richmond Times Dispatch

Foreclosures in Virginia continue to rise from a year ago, but the rate here is better than it is nationally.

One in every 567 Virginia households, or a total of 5,694, received a foreclosure filing in November, according to a RealtyTrac report released today. By comparison, one in every 488 U.S. households receiving a filing. Filings include notices of default, trustee sales and foreclosure sales, according to the online database.

Filings here rose 121 percent last month from November 2007, while nationally they increased 28 percent, according to the report.

This number shows the market in pre-foreclosures is still very active.  What this report doesn’t reveal is how many of these are upside down, or how many can have a deal made from them. 

Richmond Housing Market Developments

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A new ethanol plant is coming to Hopewell, according to the Richmond Times Dispatch on November 23, 2008.  Along with that will come new jobs and the need for housing the new employees. 

Also according to the RTD on November 25, 2008

The National Association of Realtors reported yesterday that sales of previously owned homes fell 3.1 percent in October from a strong gain in September, and down 1.6 percent from the same month a year ago.

October figures were unavailable for the Richmond area. However, the median price here in the third quarter — with half the houses selling for more and half for less — was $217,900, down 8.8 percent from a year ago, according to a report released last week by the industry group. The report covered the 20 localities in the Richmond area.

On November 22, the RTD Published “Housing Slump Felt in Richmond” which also refers to the “State of the Housing Market” describes

  • House sales 2008 vs. 2006 down 37.22%
  • Entire Region Price per sq. ft runs average $123
  • 8.47 month supply of houses (6907 in inventory)
  • In Richmond’s West End, it takes 5.5 months, compared with nearly 15 months in Goochland County, according to MLS data.
  • A forgotten jewel is the Petersburg-Colonial Heights-Hopewell area, White said. The area will benefit from an expansion at Fort Lee and the pending arrival of a Rolls-Royce jet engine testing and assembly plant in Prince George County.
  • The Richmond area has 15.9 percent of all mortgage loans underwater, he said.

Basically, Real estate is local.  Local, and local.

Status of the Richmond Housing Market

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The Richmond Times Dispatch, Nov 19, 2008 Reports in

Housing Prices decline 8%

House prices in four out of five metropolitan areas in the nation — including the Richmond area — fell in the third quarter from the same period a year ago, according to the National Association of Realtors.

The median price in the Richmond region, with half the houses selling for more and half for less, was $217,900 in the quarter, down 8.8 percent from a year ago, according to a report released yesterday by the industry group. The real estate report covers a broad portion of the 20 localities in the Richmond metropolitan area.. . . .

Foreclosures are having a bearing on the local market, but only in some neighborhoods, said Brian Liggan, principal broker and owner of Virginia Capital Realty in Richmond, which deals exclusively with foreclosures.

Foreclosures in Church Hill and Highland Park, for example, are pushing prices down in those neighborhoods. “But they are having virtually no effect in Henrico County’s West End. Nor are they affecting Glen Allen.”