Thursday, August 21, 2008

The Home Equity Door Slams Shut

I suppose no surprise that lenders are tightening up on HELOC funding as reported here by Kiplinger's. I still advice Buyer's post-closing to open up a line of credit if don't have to use it but it's nice to have it available in an emergency.

Does this Really Happen?

Saw this piece in the Times regarding letters that low ball Buyer/Offerers send to Sellers accompanying their low ball offer. Here's one example from the piece:

Dear Seller:

I’m writing to let you know that I would like to make a bid on your property. I love the area and am committed to buying a house nearby. And your home fits my needs.

But given that my offer is well below your asking price, I also feel I owe you an explanation.

First, consider the big picture. Nationwide, home prices in the first quarter of 2008 fell 14.1 percent compared with the same period a year earlier, according to the Standard & Poor’s/Case-Shiller U.S. National Home Price Index.

That’s the biggest decline in the 20-year history of the data. And just in case you’re wondering, during the housing downturn of the early 1990s, the decline was never worse than 2.8 percent.

Not only that, earlier this month, the National Association of Realtors pointed to the huge number of existing homes on the market. As of the end of April, the total number was 4.55 million. At the rate people are buying right now, that represents an 11.2-month supply.

So buyers have options right now. A lot of them. I’m no different. Your home is great, but it isn’t unique. Few homes are. I know this may be hard to hear, since you’ve spent years creating memories here. But you may be waiting a long time if you hope to find a buyer with the same emotional connection that you have.

My mindset is hardly unique. We’ve all been reading the headlines. The accompanying articles appear prominently in major newspapers and sit on the Web pages where people check their e-mail every day. Everyone sees them, and the psychological impact is real.

Has your real estate agent laid any of this out for you? Maybe so, and you didn’t want to believe it. But it’s also possible that your agent, afraid of offending you and losing the listing, simply doesn’t want to initiate that sort of discussion. It may be worth sitting down for a candid reassessment.

It will be tempting to view my low bid as an insult. Please don’t make that mistake. Your home is genuinely appealing, and I wouldn’t have written this note unless I was serious about buying it. Getting a firm offer in this market is an accomplishment. So congratulations!

Oh, and one more thing. You presumably need someplace to move. My guess is that you’ll find these same points compelling when it’s your turn to buy. You just might succeed in buying for a better price, too.

I look forward to hearing from you soon.

Yours Truly,

The Realist

Should U File a Tax Assessment Appeal?

Oh that's a question I'd answer on a case-by-case basis but here's a decent Tribune overview.

Condo Trouble w/ FHA Loans

Just catching up on my real estate reading and saw this piece from a couple weeks back in the Trib.'s real estate section regarding FHA restrictions related to buying condominiums. Here's the money 'graph:

FHA rules wreaking the most havoc locally are a requirement that a building must have four or more units. That means buyers of a condo in a three-flat need not apply. There's also a rule that a building's condo association cannot have a "right of first refusal" as part of its declarations of covenants and restrictions. Frequently in place but seldom used, right of first refusal enables an association to turn down a prospective buyer and then buy a unit from a seller.

I can't say I've ever dealt with this problem first hand but that's likely because FHA loans weren't used much until the last year. The right of first refusal restriction seems like it potentially has the greatest impact. From my experience more than 50% of condo associations include rights of first refusal. What's the history of those provisions?? I mean I've never heard or seen an association exercise it's right...getting it waived is generally a formality.