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Archive for October, 2012

30
Oct
Fannie Mae’s Evil Plot Exposed
categories: Caldwell & Co
 

My guest blogger today is Mark Karten of the Karten Group in Las Vegas, NV.   http://tkglasvegas.com    This is an excellent post and brings out just one of the problems we are currently facing in the housing market even here in the Charlotte area.   Thank you Mark!

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Just in time for Halloween, I want to tell you something scary that’s no ghost story. Over the last few weeks, I’ve laid the groundwork for today’s topic – Fannie Mae – and their sinister plan to change the world!

OK, maybe that’s a little dramatic and overstated – you tell me.

Two weeks ago, I told you that everything depends on the appraisal and how low appraisals can cause a sale to be cancelled. Low appraisals are also keeping market values lower and stagnant (although we’ve seen a 13.5% increase in value in the last year in Las Vegas.)

Last week, I referenced a report that showed that nationally, we could be back to our record home values (set at the height of the market in 2005) by 2015. The logical question is, “If appraisals are keeping prices lower, how will we reach record values in a little over two years?”

Some folks think that Fannie Mae is taking the bull by the horns and forcibly changing the market. What exactly is Fannie Mae? Click HERE for the detailed answer.

The short answer is Fannie Mae buys (or securitizes) the mortgage you take out from a bank, so the bank has more money to lend to more homebuyers. The loans are underwritten within the guidelines set by Fannie, to ensure the loans are viable. There is another entity called Freddie Mac, which has the same focus and responsibilities.

They are both called GSEs (Government Sponsored Enterprises) and they’re chartered by Congress.

According to Fannie Mae, one of their main functions in today’s market is to help distressed homeowners, through their website, KnowYourOptions.com. The solution that many homeowners choose is a short sale, which is the best way out of a bad situation.

If the homeowner chooses to ignore all means of assistance, they’re going to lose their home to foreclosure (a lousy alternative with harsher consequences.) Does that knock Fannie out of the game? Nope. Now the home becomes part of Fannie’s arm called Homepath.com, which sells Fannie Mae foreclosed homes.

At face value, everything looks great, right? Not according to accounts from Realtors all across the country. Homeowners trying to short sale their Fannie Mae homes are in greater jeopardy of foreclosure now more than ever.

For homeowners trying to short sale their home with a loan owned by Fannie Mae, once they have an offer, Fannie sends an appraiser out to validate the value of the home. What is becoming an increasing trend, is that Fannie is requiring a purchase price for anywhere from 15 to 25% above market value. Why? To increase home values across the country and a bigger profit for Fannie Mae.

While that’s good for values, it’s bad for the short seller. Normally, lenders will lower their requested value if the buyer supplies an appraisal supporting a lower value. This only applies to buyers getting financing for their purchase, not cash buyers.

Yet Fannie has been refusing to lower their requested “net” – even with substantiated lower values. Is this bad for Fannie? Quite the contrary. If the home doesn’t sell as a short sale, they foreclose – and then it becomes a Homepath.com home.

With Homepath, Fannie Mae offers their own financing AND there’s no appraisal for their mortgages. That means no matter what the home is priced at, the buyer will not be protected by a lower-priced appraisal. It’s a win for Fannie and a losing proposition for the home seller (who got foreclosed on) and the buyer (who is overpaying for the home.)

The only winners are Fannie Mae and the neighbors whose home values increase.

In Arizona, this practice is so rampant that the local NBC affiliate did an exposé on exactly what’s happening, click HERE to watch.

How aggressive is Fannie being with their price increases? Here’s a current example: I sold a home in Summerlin as a short sale that closed on 12/30/11 for $94 a square foot. The homes in this subdivision have since sold per square foot for $99, $100, $92, $94, $112 and $131.

Two weeks ago, Fannie Mae listed the home next door as a Homepath.com home for $160/sf. The difference between the two homes – a slightly smaller floor plan and a swimming pool. Now let’s change dollar per square foot to sales price.

My buyer bought their 2,542 square foot home for $240,000, without a pool – click HERE to view. The Homepath home is 2,448 square feet with a pool for $390,500 – click HERE to view. If this home closes at list price, my client next door will have a net increase in value of $166,720 – in just 12 months. That’s a 69% increase in value.

So who lost big time? The former owners who got foreclosed on. They had the home listed as a short sale for $215,000, which was $88/square foot (obviously too low based on the neighborhood comps.)

What’s the moral of the story? If you’re going to short sale your home and Fannie Mae is the investor holding your loan, pick your short sale listing agent carefully. You need someone who is aware of what’s happening and is prepared to fight to get your short sale approved for market value. Let Fannie raise the prices on someone else’s home, not yours.

Have a great week!

25
Oct
Sinking Foundations, Water Damage, Mold & Lawsuits?
categories: Caldwell & Co
 

Guest Blogger ~ Fred Nader of Fredricks Luxury Design & Construction


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The foundation of a home is one of the most overlooked areas in luxury and custom home construction, yet it is probably the most important part. We know this intuitively and use the term “a good foundation” as a metaphor for anything that we want to build well from homes to businesses to relationships. Without the proper soil, footings, grading  for water to run away from your home and a foundation designed specifically for size, structure, weight, soil, and elevations, you end up with a poor foundation and homeownership fraught with costly headaches. So how do you know if the foundation to your home has been or is being done right?

A foundation is not a one size fits all application for all size homes ranging from 1,600 square foot to 12,000 square foot homes. Though the word “custom”has been misused and applied by builders to tract built AND luxury homes: both unfortunately tend to share the same building process.

Before building, choose a lot with proper soil and drainage. (Golf course communities tend to use all of the good soil for the golf course, and the poor soil remains for the lots).  I spent a mere five hundred dollars for a soil engineer to inspect my soil, recommend footings size, foundation and grade for my lot.  Proper inspection and sealed approval from knowledgeable soil engineers, can avoid the problems mentioned above which will compromise the structure of your home.

The plans for my last home were designed and engineered by computer, which considers the proper size for footings and foundation. For the size of this almost 11,000 square foot home, the computer determined the necessary use of 2ft x 2ft footings built with 12-inch wide commercial block, then filled with solid concrete.  (Most luxury/custom builders use 18-inch footers using 8-inch wide block: the same as smaller tract homes.) The foundation was then waterproofed with French drains installed around the exterior wall.

3 year-old home, always dry crawl

Inside the crawl space the soil was graded higher than exterior so water would go away from the foundation, never in. This seems like absolute common sense, but a simple technique that almost is never employed.   We put down 4 inches of crushed stone, spread over crawl floor keeping the surface dry and moisture free.

Automatic foundation vents were installed and exterior soil was graded so that Again, the water runs away from the foundation. Moisture and mildew proof spray foam was later applied to sub floor providing an airtight seal.

No water, no settling, no mold

One only has to look around to see all the companies out there hired to condition crawl spaces, pumping out water that runs under the house because of improper soil grading and waterproofing. These substandard building methods have produced thousands of South Charlotte homeowners holding the bill for installing piers to jack up their houses, repairs to foundations built on poor soil, repairs for water leaks and mold removal: All because no one took the time to do it right.