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Archive for February, 2014


Subprime loans make it possible for many homeowners to qualify for a mortgage and buy a home. In 2005, subprime loans also triggered a housing bubble that we are still feeling the effects of for nearly the last decade.

Subprime loans are made to borrowers who are highest risk: either they don’t have a good income history, little or no down payment, or their credit scores are bad.

The housing boom and the bursting bubble

In 2005, Wall Street investors were anxious to securitize subprime loans in hopes of a big return on their investment. This encouraged lenders to push high-risk loans. The assumption was that loans would be refinanced and the prices of homes would rise.

What happened was that eventually, home prices dropped, there were massive foreclosures and investors lost billions in the housing market. The bursting bubble was severe enough to help take down investment giants Bears Stearns and Lehman Brothers, just to name a couple.

The current subprime situation

Currently, subprime lending is a fraction of the total market. In the first nine months of 2013, about $3 billion of subprime mortgages were made compared to $625 billion made in 2005.

Tougher federal lending standards in the last couple of years means millions of Americans with poor credit scores have been unable to secure traditional mortgages. Lenders who operate in the new subprime space have an opportunity not only to help renters become buyers, but turn a big profit as well.

Lenders who offer subprime mortgages are much more careful. They require as much as 30% down to safeguard their investment. They have to hold onto their loans for a while or sell them to private equity firms until they establish a strong enough track record to offer mortgage-backed securities to investors.

Burned by the last bubble, investors are taking a pass on subprime for now. For the time being anyway, buyers who pose the biggest risk will have to rely on the Federal Housing Administration for mortgage loans until the new subprime lenders establish themselves as safe investment opportunities for investors.

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When it comes time to sell your home, choosing the right real estate agent can mean the difference between selling your home quickly and seeing it sit on the market for a while; between getting your asking price and selling well under your target; between a stressful and a stress-free experience.

During the time your house is on the market, you’ll probably spend quite a bit of time with your agent. Their style should be compatible with yours. If you’re a type A personality, choose a go-getter. If you prefer a more relaxed approach, you’ll probably be happier with a REALTOR® who’s more laid back. You are going to be spending a lot of time with your agent, so your agent’s style should be compatible with yours.

Are you a member of the National Association of Realtors?

The NAR requires ethics training and strict adherence to their code of ethics.

What percentage of your clients are buyers vs. sellers?

Can you outline how you would represent us?

Listen for information about housing inspections, following through with your mortgage approval process, and being present at your closing.

In which neighborhoods do you primarily work?

If they don’t work in your area much, it might be worthwhile to keep looking.

How do you plan to advertise my house?

You should have realistic expectations. An agent isn’t going to spend half of their commission on marketing for your home.

What is a realistic time frame to sell my house at my list price?

If it sounds too good to be true, it probably is. You don’t want to be lied to here; you want to be presented with realistic expectations.

Will I be working with you directly or handed off to someone else?

In many instances, the REALTOR® gets the commitment, then farms out the work to a sales associate or administrative assistant and you never hear from him again. They’re more interested in getting the next listing and letting someone else sell the property while they collect 3%. That’s not what you should be looking for.

Do you work full-time or part-time as a real estate agent?

A lot of great agents work part-time and are very successful.

How many homes have you closed in the last year?

A small number isn’t necessarily a deal breaker. Be realistic. If it sounds low, ask why.

How many other buyers and sellers are you representing now?

The busiest agents often are the most efficient, but if they have 100 people they’re working with, they’re not committing a lot of time to your business.

Is your license in good standing?

Make sure to check the agent’s certification with the state’s Department of Real Estate. Many states provide this information online.

How many years of experience and education do you have?

Years of experience is a good indicator of their level of commitment and talent. Those agents who make the effort to continue their education are usually better agents.

Do you work on weekends?

Answer to this better be yes.

Can you provide me references?

Insights from past customers can help you learn more about an agent and give you a greater comfort level.

The best strategy when picking a real estate agent is to choose the most qualified person, and the one with whom you think you’ll work well. Ideally, you want to partner with an experienced agent who knows your market, has a strong sense of ethics, answers your questions and, most importantly, listens to you and addresses your concerns throughout the process.

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A lien occurs when a legal claim is put on a property in order to receive payment for debt or for services rendered. The holder of the lien can sell the property in order to recover the money owed.

A lien can be placed on assets almost any time you have an unpaid debt. A creditor files a lien in the county office stating that they have an interest in your property. It basically gives the creditor a financial stake in your home.

A lien will prevent you from being able to sell, mortgage or take a home equity loan on your home until the lien is lifted. Although there are a number of different types of liens that creditors may place on your home, there are three that are most common.

Mechanic’s lien

When a general contractor builds your home, they will very likely file a mechanic’s lien on the property to ensure they get paid for their work. Subcontractors and repairmen – including plumbers, painters and carpenters – may also file a mechanic’s lien if they aren’t paid.

Judgment lien

If you’re involved in a lawsuit and you lose, the winning party of the lawsuite can file a judgment lien against your home until the payment is collected. This type of lien can also be imposed by an attorney if you do not pay for legal services.

Tax lien

If you don’t pay your taxes, the government entity – be it federal, state, or county – can file a tax lien on your home until the tax bill is paid.

What to do if someone files a lien

Simply put, the best way to get a lien removed against your home is to pay the bill, settle the lawsuit or pay the taxes. You can negotiate with the lien holder to have them voluntarily remove the lien. It is in your best interest to have any lien against your home removed as quickly as possible.

If the lien is unjustified, you can ask the court to remove the lien.

To ensure that there is never a lien on your home, make sure you pay your creditors and taxes on time and in full. Don’t avoid the situation if you have mounting debt or can’t pay your bills. Consult an attorney or financial advisor to get some help.

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Just last week, government issued the housing starts report for December and it was pretty good news. If you listen to talk radio or watch any financial news program on cable, one day a month they talk about housing starts and then you don’t hear much about it. The problem is that nobody bothers to tell you exactly what the term means and why it’s important.

The federal government tracks housing starts and issues the information, usually in the third week of the month. These statistics come from the Census Bureau, which is part of the Department of Commerce and from the Department of Housing and Urban Development (HUD).

The government reports the number of scheduled construction projects of new houses or apartment buildings across the country. That’s housing starts, in a nutshell. Like unemployment rates, economic growth, and consumer confidence statistics, it is used as an indicator of how the economy is doing.

The ripple effects on the economy

The housing market is one of the most vital aspects of the U.S. economy. Many analysts believe that there may be no better indication of how the housing market is doing than housing starts.

If a report comes out showing that housing starts are up, it’s a good sign for the economy. There are usually ripple effects in the stock market as consumers invest, which increases the value of stocks and corporate profits. If the report says housing starts are down, investors tend to get tight-fisted.

Housing starts are an indicator of the commitment of builders to new construction. When new construction is up, more people will be employed to build those houses and apartment buildings. It also means that the people who buy those homes or move into a new apartment will be purchasing big ticket items such as furniture and appliances. These are often referred to as durable goods and are yet another economic statistic you may hear reported.

How to look at housing starts

Because construction is seasonal and subject to weather, housing start numbers tend to be volatile. One down month doesn’t mean you should take it as an indication that the economy is tanking. To identify a trend, look at a six-month period of housing starts to get a more accurate indication of what the market is doing. You should also do a year-over-year comparison.

Remember also that we’re dealing with government numbers here. Like every other report it issues, housing start figures are subject to revisions up or down. Those revisions come out within two months of the original report and are very rarely reported in the news. The change can be significant.

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