May 3, 2010 by Mimi Miller.

8 Things You Must Include in a Financial Plan
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RISMEDIA, May 3, 2010—Just like a comprehensive will or family trust, people need to give serious attention to in-depth financial planning. Financial planning addresses everything that has to do with money. With your adviser’s help, you’ll leave no financial stone unturned. Should you refinance your mortgage? Should you buy or lease a car? What should you do with the inheritance from your grandmother? How can you get more tax-sheltered dollars out of your professional corporation? Where do the answers come from? They come from the “subsets” of financial planning – things like cash flow management and tax planning. The new guide from Mutual Benefit outlines eight areas of focus when preparing a financial plan.
Income Tax Planning
Tax planning actually spans all parts of your financial plan, such as investment strategies, retirement planning and estate planning. Specifically, you need to make sure you’re maximizing all available deductions, exemptions and credits to minimize your tax bite.
Retirement Planning
How much should you save for retirement? And how will you do it? Is retirement right for you? Your planner will discuss tax-qualified retirement plans -including IRAs, Keoghs, 401k plans, 403b plans, corporate pension and profit-sharing plans. You’ll also want to look at non-tax-qualified retirement plans, non-qualified deferred compensation plans, selective incentive plans and tax shelters.
Estate Planning
You’ll start with wills, trusts and estate distribution issues, but that’s not all. A good planner will help you construct a plan so you avoid estate taxes. Too few people worry about estate taxes—they’re too far away, too intangible. But the only way to avoid them is to strategically plan for them today.
Legacy Planning
A good planner will understand legacy planning. A good legacy plan comes from knowing, living and then planning from your values. You are building bridges that will take you and those you love to greater levels of abundance, purpose and significance. You’ll talk about those things that are truly important to you, and then determine the best ways in which to pass those values on after you pass.
Asset Protection
It is imperative to develop strategies that maximize protection of your assets from frivolous lawsuits or creditors in this litigious society. You don’t want to spend years saving and growing your assets only to have them taken away by ambulance chasers. Your planner should address ways in which to implement asset protection.
Education Funding
There are three basic sources of education funding: cash flow dollars, dollars from tax savings and compound interest dollars. You won’t want to use cash flow dollars as they’re the most expensive. Income tax savings and compound interest dollars are far less expensive but require advanced strategic planning. That’s what your planner is for.
Investment Portfolio Management
Entire college courses are built around portfolio management. Simply stated, your licensed investment advisor makes sure your portfolio is “balanced.” In other words, you need both long-term and short-term investments; liquid and illiquid investments; tax-advantaged and non-tax advantaged investments. As part of portfolio management, your registered investment advisor will discuss the pros and cons of different kinds of investments – stocks, bonds, money market funds, annuities, mutual funds, real estate, tangibles, limited partnerships and certificates of deposit, among others. You will look at the whole thing in light of how much risk you can tolerate.
Risk Management and Insurance
There are three basic things you can do with risk: You can avoid it, absorb it, or transfer it. Find out what you can do to avoid risk. Your planner might advise using trusts, family partnerships, or family corporations. He should tell you how to protect your assets from frivolous malpractice claims, frivolous creditors and similar problems. Your planner should also be able to give specific direction as to ways you can absorb or transfer risk.
For more information, visit www.mutualbenefitwealthmanagement.com.

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April 9, 2010 by Mimi Miller.

Colorado and New Mexico are AARP’s latest top unique locations for retirees. Baby Boomers are searching for retirement locations that aren’t based on available beach real estate. Tax incentives, health care options, weather and property values are the new beach front property.

Outside of financial or medical needs, baby boomers have separate criteria to search for their perfect retirement home. Based on their lifestyle, new retirees also focus on living simply, living environmentally friendly or living with a skyscraper next door.

Top 4 Places For Baby Boomers to Retire

Portland, Oregon is number 5 on AARP’s America’s Top Places for Boomer’s to Retire list. The bohemian feel of the small city attracts a European charm for lounging and relaxing. The city’s Pearl District brings shopping to diverse and eclectic levels meant for the unique individuals encompassing the city.

Rehoboth Beach, Delaware, a state once dogged by Wayne’s World in the nineties for being incredibly boring is number 3 on the list of top retirement destinations for baby boomers. The location, only 3 hours from Philadelphia and D.C., nestles majestically within America’s vibrant East Coast and is looking to have a 75 percent increase of retirees over the next 25 years.

Las Cruces, New Mexico is the surprising number two pick of AARP’s boomer’s list for top places to retire. The relatively mild climate and breathtaking landscape set in the Organ mountains inspires relaxation and affordable living.

Loveland, Colorado is numero uno on America’s Top Places for Boomer’s to Retire. The “sweetheart city” is 45 minutes from bustling Denver. Vast Colorado skies in view of the colossal Rocky Mountains make this city a winner for retirees looking for a small town feel with big opportunities.

Written by Amy Munday

Submitted by Amy Munday on Fri, 2010-04-09 13:58

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April 7, 2010 by Mimi Miller.

Daily Real Estate News | April 6, 2010 | Share
Credit Issues Slowing Recovery, Execs Say
A survey of 200 real estate executives by Akerman & Co, a national commercial real estate company, reveals they believe credit issues and the volume of distressed properties continue to inhibit the recovery of the real estate market. The report found that:

79 percent of respondents said availability of credit and other financing challenges was the most pressing issue facing the industry.
65 percent believe that large inventories of lender-owned properties are preventing a recovery in the commercial real estate industry.
44 percent said inventories of distressed properties and their effect on pricing was the second most pressing issue.
54 percent believe residential is the real estate sector best positioned for a recovery.
20 percent said the industrial sector is best positioned.

Source: Akerman Senterfitt (04/05/2010)

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March 26, 2010 by Mimi Miller.

Existing-home sales fell 0.6 percent in February to a rate of 5.02 million units from 5.05 million in January, but they were 7.0 percent higher than the 4.69 million sold a year ago, NAR reported this morning.

The national median sale price of existing homes was $165,100 in February, a 1.8 percent decline from a year ago. Housing inventory rose 9.5 percent to 3.59 million homes, which represents an 8.6-month supply at the current sales pace, up from a 7.8-month supply in January.

First-time homebuyers accounted for 42 percent of all home transactions in February, NAR reports. Distressed homes — typically short sales and foreclosures that sell for a discount — accounted for 35 percent of all sales last month, while investors accounted for 19 percent of transactions.

NAR chief economist Lawrence Yun says stormy winter weather in February had a negative impact on the market. “Some closings were simply postponed by winter storms, but buyers couldn’t get out to look at homes in some areas, and that should negatively impact near-term contract activity.”

Yun notes that year-over-year sales have been higher for eight straight months, and prices are more stable than they have been over the past few years. But, he says, “the housing recovery is fragile at the moment.”

Regionally, existing-home sales data was mixed. Sales in the Northeast rose 2.4 percent to an annual pace of 840,000 in February and were 12.0 percent above a year ago. The median price rose 7.5 percent from February 2009.

In the Midwest, sales increased 2.8 percent in February to a level of 1.11 million and were 8.8 percent higher than February 2009. But the median price fell 2.0 percent below a year ago.

In the South, existing-home sales fell 1.1 percent to an annual pace of 1.85 million in February but were 6.9 percent above a year ago. The median price declined 4.2 percent from February 2009.

Existing-home sales in the West fell 4.7 percent to an annual rate of 1.22 million in February but were 3.4 percent higher than February 2009. The median price declined 9.8 percent from a year ago. Tue, Mar 23, 2010

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March 4, 2010 by Mimi Miller.

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Six economic indicators move in a positive annual direction in Metro Denver, up from one last month
Economic indicators for Metro Denver showed promising signs of improvement in March, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for March 2010.

Nine indicators – including the indicator for foreclosures – moved positively for the month, compared to seven indicators in the prior report. Six indicators moved in a positive annual direction, compared to one indicator in the prior month’s report.

Recent residential real estate data suggest housing markets are shifting due to a variety of influences. The extension of the homebuyers’ tax credits in late 2009 removed a sense of urgency for buyers, therefore, existing home sales nationwide and in Metro Denver have slowed.

“Many buyers still hoping to receive the credits are now returning to the market, though, and brokers say the pace of home sales should accelerate in the coming months,” stated Patty Silverstein, chief economist for the Metro Denver EDC and president of Development Research Partners.

Increased sales volume should help home prices, which are stabilizing – and even rising – in some markets. The Denver-Aurora-Broomfield MSA, for example, was one of 24 metro areas to report an increase in median home price between 2008 and 2009.

As home prices continue to stabilize, mortgage delinquency rates should gradually subside. Data from the Mortgage Bankers Association show the nationwide delinquency rate declined in the fourth quarter of 2009, and Colorado’s rate ranked ninth-lowest in the nation. Significant delinquency challenges remain, though, as roughly one in 17 Colorado home loans was at least 90 days past due or in foreclosure in the fourth quarter.

Foreclosures are an even greater concern in California, Nevada, Arizona, Illinois, Michigan, and Texas – all key economic development competitors with Colorado.

“These six states alone represented 60 percent of U.S. properties with foreclosure filings in January,” said Silverstein.

The nationwide median home cost for 2009 ($173,200) was down nearly 12 percent over-the-year, while the median in the Boulder MSA ($346,000) fell by just 3.8 percent. Price trends were stronger in the Denver-Aurora-Broomfield MSA, where the 2009 median price of $219,900 represented a slight, 0.3 percent increase from the 2008 median. The Denver-Aurora MSA was one of 24 metropolitan areas to report an increase in median home price between 2008 and 2009, and the region’s median price ranked 26th-highest in the nation. The Boulder MSA’s 2009 median home price ranked 11th-highest overall.

Data from the Mortgage Bankers Association’s National Delinquency Survey for the fourth quarter of 2009 show Colorado’s rate of mortgage delinquency – 6.91 percent – ranked ninth-lowest in the nation.

Clearly, residential markets are facing a combination of early momentum and continued challenges. High unemployment and policy changes in the months ahead – including an end of the Federal Reserve’s financial support for mortgage-backed securities and the expiration of the homebuyers’ tax credits – will bring additional hurdles. Ideally, residential markets will build momentum in the coming months that can sustain a recovery as the policy environment changes.

The benchmark revision for national-level employment data shows the nation’s total employment loss from the start of the recession through December 2009 was nearly one million jobs higher than the data initially suggested.

The Colorado Department of Labor and Employment is currently conducting its annual benchmark review of the state’s employment and unemployment data. Statistics for the month of January and revised data for prior years will be released on March 10. A supplement to the March Monthly Economic Summary will be issued following the data release.

The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends. Key highlights include:

Consumer Sector
•The Conference Board’s U.S. Consumer Confidence Index fell abruptly between January and February as consumers’ assessment of present conditions – specifically, business conditions and the labor market – fell to the lowest level reported since 1983. Consumer confidence in the Mountain Region was little better, although consumer outlooks have improved from lows reported at the same time last year.

•Metro Denver retail sales followed a typical seasonal trend and declined between October and November. The November sales total, however, represented a significant slowdown in an over-the-year sales decline that had persisted for the past twelve months.

•The January average occupancy rate for Metro Denver hotels (51.1 percent) was slightly above last year’s rate. January’s average room rate was nearly six percent below the average from January 2009.

•December 2009 passenger traffic at Denver International Airport was 1.7 percent lower than the year-ago traffic level. Airport traffic for all 12 months of 2009 declined 2.1 percent over-the-year as businesses and households limited their travel.

•The three major national stock indexes ended February with gains from the prior month, but all three indexes still showed a negative year-to-date return. By contrast, the Bloomberg Colorado Index rose 2.2 percent year-to-date in February. The state’s energy and media companies reported some of the largest market gains.

Residential Real Estate
•A decline in Metro Denver home sales between December and January was roughly consistent with seasonal trends, but total January sales were 4.7 percent lower than the sales total reported one year earlier. Despite the slower sales activity – which was partly expected given the late-year surge in tax credit-driven home purchases – average sale prices showed signs of improvement.

•Metro Denver foreclosure filings in January fell more than five percent from filings reported in January 2009. Filings declined over-the-year in four of the region’s seven counties but increased in Boulder County, Jefferson County, and the City and County of Broomfield.

•The pace of Metro Denver building permit activity changed little between December and January, although January permits for all property types rose 21 percent from the number reported one year earlier. The gain was due to a year-over-year increase in single-family detached home permits, as January permits for the remaining property types fell below year-ago levels.

Commercial Real Estate
•According to CB Richard Ellis’ fourth quarter MarketView report for Metro Denver, large corporations drove what little office market activity occurred in 2009. Brokers expect a similar trend in 2010 because large corporations – as opposed to small or local businesses – are more likely to have access to capital and credit in a still-difficult lending environment. With the overall demand for space still limited, however, brokers say the wide gap between asking rates and signing rates will persist this year. As a result, office market development will remain stalled. Despite these challenges, CB Richard Ellis brokers expect Metro Denver’s dynamic economy and favorable balance of supply and demand for office space will help the region’s market recover ahead of markets elsewhere.

•A fourth quarter report by Grubb & Ellis expects large tenant transactions to dictate Metro Denver’s office market conditions in 2010. Grubb & Ellis brokers say 2010 should mark the bottom of the market, however, and lease rate spreads should begin to normalize by the end of the year. Notably, the Grubb & Ellis report shows negative office market absorption in 2009 represented the smallest recession-related loss reported in Metro Denver over the past two decades.

•A fourth quarter report by Grubb & Ellis shows Metro Denver industrial market vacancy rates – while low compared to rates for other property types – have risen thanks to two recession-driven trends. The collapse of the housing market put pressure on construction-related tenants early in 2009, and a pronounced decline in consumer activity strained retail warehouse tenants later in the year. The report notes, however, that the absence of industrial construction should help the market rebalance comparatively quickly. Grubb & Ellis brokers expect flex space leasing trends will remain weak in 2010, although properties near the National Renewable Energy Laboratory, Lowry, and Fitzsimons could move more quickly.

•A recent report by CB Richard Ellis notes that Metro Denver’s industrial market – while still facing considerable challenges – has less of a debt burden than other property types and industrial markets nationwide. As a result, CB Richard Ellis brokers expect the region’s market may not experience the same increase in distressed transactions that brokers expect to see in other markets this year. Because lease rates are significantly below levels that would promote development, though, brokers expect industrial market construction activity will remain subdued in 2010.

•A fourth quarter report by CB Richard Ellis suggests the downturn in Metro Denver’s retail market slowed as 2009 ended. Vacancy rates remained high and average lease rates continued to decline, but the somewhat slower erosion of market fundamentals that occurred in the fourth quarter suggests the retail market may at least stabilize in the coming months. Brokers note, however, that the retail market tends to lag other property markets and the rest of the economy, so a retail recovery is likely to take time. The report also suggests that retail construction and investment activity will be slow to rebound.

*A full report is available to Metro Denver EDC investors.

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March 3, 2010 by Mimi Miller.

Mortgage Banking Industry Threatened
By John Rebchook, on March 3rd, 2010
A portion of mortgage reform working its way through Congress that has received little publicity in the mainstream press, could have the unintended consequence of driving up the cost of 30-year mortgages, and driving out of business almost a third of the companies that make home loans.

Mortgage bankers and brokers in Colorado are among the most vocal opponents of the “risk-retention” requirement proposed in the Restoring American Financial Stability Act.

The idea is to require lenders to have some “skin in the game,” in an attempt to curtail lenders from making inappropriate, risky loans, a leading cause of the foreclosure crisis that swept the country starting in 2007.

Proposal goes too far

But the proposal goes too far by requiring lenders to retain up to 10 percent of the loan value for every mortgage they make that is sold into the secondary market, for as long as the loan in outstanding, according to a broad-range of critics. That would mean mortgage bankers and brokers – among other lenders – would need to have billions of dollars on hand, something they are not set up to do, opponents contend. (See chart below for an example of the impact to mortgage lenders.)

“To require a 5 percent or 10 percent risk retention, really penalizes independent mortgage bankers,” said Mike Rosser, who started in the Denver mortgage business since 1965.

“Most of the FHA loans that are being done, and have been done, are by the independent mortgage bankers,” added Rosser, now principal of an Aurora-based consulting firm, the Mortgage Investment Co. Inc. “This will be very bad for homeowners who want to get an FHA loan because they will have far fewer choices of where to go.”

HUD already polices lenders

Rosser said many in Congress do not realize that the U.S. Department of Housing and Urban Development, which owns FHA, “already has a very strong auditing program, a mortgagee review board, they do quality audits all of the time, and have a certain amount of capital requirements to get into the FHA business. So this is really redundant.”

Some lenders point out that the so-called toxic-loans of the past – such as options ARMs and other subprime loans- no longer are being made, while the plain vanilla 30-year mortgages have been packaged and sold as securities for decades, without causing the problems of the discontinued loans that were made without strict underwriting guidelines.

Skin in the game

Peter Lansing, head of Universal Lending, one of the largest privately held mortgage banking companies in Denver (and a sponsor of InsideRealEstateNews), said that Congress “wants us to have some financial skin in the game,” which is why it is considering the risk retention requirements.

“It’s if the industry took a loan, threw it over their shoulder, and took no responsibility actions was a good loan for their borrower,” Lansing said.

But despite the recent financial calamity involving so-called toxic loans, the lending industry has done very well when it properly underwrites conservative loans based on a borrower’s assets, appraisal, income, credit scores and work history, and debt to income ratios. In fact, a report completed this week, shows that borrowers of risky loans are more than three times likely to default than traditional loans. (For a separate story on that report, please go to this link.)

Congress may be unaware of consequences

Lansing said he does not see this as a Democratic or Republican issues.

“I honestly think that Congress has not thought this through,” Lansing said. “What Congress is proposing is ‘over-medicating.’ Congress does need to guard against future abuses which happened in the past. I don’t want to carry this too far, but just like building codes are stricter in the U.S., so if we have an earthquake, it doesn’t have the same devastation as we have seen in some other countries, with less stringent building standards. But we don’t need is over-medication, which will actually be devastating to consumers and mortgage lenders.”

Public in the dark

He said that while people in his industry are aware of it, he said most of the public doesn’t have a clue it is being proposed or its impact.

“This would be very bad for the consumer,” Lansing said. “No mortgage lender has the type of capital needed to put in an escrow account or something like that. The only way to raise the money is to charge the consumer. On a $200,000 loan, if they only required another 5%, that would be an extra $10,000. That’s obviously not going to work.”

Peter Mills, which last September helped found the Community Mortgage Banking Project, a Washington, D.C.-based coalition created to represent the interests of independent mortgage companies, agreed with Lansing.

“The problem is it does not distinguish between high-risk loans and well-underwritten loans,” Mills said. “It is a very blunt instrument, which would affect everyone across the board.”

Mills said the Senate version would require a 10 percent risk retention amount and the House version a 5 percent retention. But he said even a 1 percent retention would be too much. For a lender making about $1 billion a year in loans, in three years it would need to put aside more than $50 million in funds at even a 1% risk retention rate, by his group’s calculations.

Lenders protest proposal

The Community Mortgage Banking Project and the Community Mortgage Lenders of America, last November sent a letter signed by 87 mortgage lenders across the country to the Senate Banking Committee. Eight of them were from Colorado. Only Michigan had as many lenders sign the letter.

“We are very active on this issue in Colorado,” Lansing said. In addition to Universal Lending, the letter was signed by executives from America’s Mortgage in Wheat Ridge; Cherry Creek Mortgage in Greenwood Village; Clarion Mortgage Capital in Greenwood Village; First National Bank Mortgage in Fort Collins; Ideal Homes Loan, Englewood; Pinnacle Mortgage Group, Lakewood; and Unifirst Mortgage, Grand Junction.

“Under the risk retention requirement in the draft bill, independent mortgage bankers- which accounted for almost one-third of all home mortgages in 2008 – would be forced out of business,” according to the letter to Christopher J. Dodd and Richard C. Shelby, the chairman and ranking member of the Senate Banking Committee, respectively.

Community banks, credit unions impacted

But it wouldn’t stop there.

Community banks and credit unions also would “face liquidity and balance sheet constraints that would limit their lending capabilities,” according to the letter.

The impact of a “poorly designed” risk retention requirement would consolidate the market into the hands of a few major lenders, according to the mortgage bankers.

“This is an ironic result in a bill that is trying to mitigate systemic risk and too-big-to-fail concerns,” the mortgage lenders contend.

Bank Monopolies Feared

Mortgage bankers are facing off on the issue with traditional banks, which have money on hand from short-term investments such as checking and saving accounts and CDs. In a statement, the American Bankers Association said that lenders with secured deposits already have enough capital on hand and should be excluded from the risk retention requirement, although it oppose some other parts of the proposed legislation.

“The big banks could certainly live with this,” said consultant Rosser.

But Lansing, of Universal Lending, isn’t so sure.

“Yes, large financial institutions could be better able to handle these requirements,” Lansing said. “But last year, something like $2.75 trillion in mortgage loans were made in the U.S. Is any bank in the country big enough to absorb those kind of costs and handle that kind of volume?”

Also, Lansing said that consumers would lose if only a few banks were making home loans.

“What Congress, unintentionally would be doing is creating a situation where maybe only three or four lenders in the country would make all of the home loans,” Lansing said. “What Congress would be doing is creating monopolies. I’m not against regulation. I think our industry needs, good, sound regulations that make sense. For example, I think some kind of risk retention probably is appropriate when making high-risk loans. But I am against monopolies.”

The Mortgage Bankers Association, which represents about 280,000 people nationwide, strongly opposes the measure, saying it would have “dire consequences” for mortgage markets.

The provision would “unnecessarily stem competition, reducing choices and increasing the costs of credit for consumers,” according to the group. “At the same time, smaller community banks and even larger depositories would be constrained from lending – and available funds for home financing would be reduced by countless billions of dollars – to meet reserve requirements,” according to the MBA.

Grassroots group shares concerns

And the American Homeowners Grassroots Alliance, which in the past has butted heads with lenders on many issues, worries that the risk-retention requirement will require more more responsible lending, “it may also somewhat limit the availability of mortgage loans for qualified borrowers and thereby slow the housing market’s economic recovery.”

It urged the banking committee to avoid this unintended consequence.

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February 26, 2010 by Mimi Miller.

appraisal rules cause chaos
The code of conduct was intended to protect lenders and borrowers from faulty appraisals, but has caused delays and higher costs.
By Marcie Geffner of Bankrate.com

The new “code of conduct” that was supposed to protect lenders and borrowers from faulty appraisals has caused higher costs, delays and considerable chaos in home sales and loan refinances.

Mortgage brokers, appraisers and real-estate agents are up in arms over the new rules, which dictate how lenders select an appraiser when they originate certain home loans. Few borrowers care much, if at all, about how appraisers are hired or paid, but those borrowers whose loans have been delayed or derailed due to the new rules may take a very keen interest, indeed.

At the center of the controversy is the Home Valuation Code of Conduct, which outlines appraisal-related practices that lenders must follow with respect to so-called conventional or conforming loans that they want to sell to Fannie Mae or Freddie Mac.

The practices are intended to reduce the incidence of appraisal fraud and prevent inappropriate pressure being placed on appraisers to inflate home valuations. The code, which became effective May 1, does not apply to FHA loans, which are insured by the Federal Housing Administration, or VA loans, which are guaranteed by the U.S. Department of Veterans Affairs. (Fannie Mae and Freddie Mac have both posted FAQs about the code.)

New rules protect borrowers from inflated appraisals
David Feldman, president of First American eAppraiseIT, an appraisal software and management company in Irvine, Calif., says the code is “very good for borrowers” because the new practices will help to ensure that home valuations will be “less inappropriately influenced.”

“(Homebuyers) don’t want to pay too much, and they want to pay the right price,” he says. “For refinances, if you were hoping for a ‘higher value,’ prior to the code, if there was any pressure, you might have gotten it or not. Now that will be lessened, so it protects borrowers from themselves.”

Bing: Read the new appraisal rules
That may prove beneficial, yet the code also has created other, unintended consequences in these areas:

1. Accuracy. The accuracy and credibility of an appraisal should be the borrowers’ chief concern. Appraisal management companies, which now perform more than half of the appraisals nationwide, contract with tens of thousands of appraisers but typically assign jobs only to several thousand, who complete their work “quickly and with good quality and good service,” Feldman says.

John Stafford, a loan officer with Reliant Mortgage in Dallas, takes exception to such claims. He says there are two types of appraisers: the “slapdash” kind, who base their valuations on the first comparable sales they can find, and the more competent kind, who “work very hard to get the absolute best value, but fair value within the regulations as they are.”

Borrowers should be concerned, Stafford says, because “a lackadaisical effort on an appraisal can easily create a value that is 10 percent lower than it should be.” An artificially low value can kill a home purchase transaction if the appraisal doesn’t support the sale price or derail a loan refinance if the appraisal results in a higher loan-to-value ratio and, consequently, a less attractive interest rate.

2. Timeliness. The timeliness of an appraisal is also a prime concern for borrowers because they typically need to meet the time frame of a purchase-contract contingency or interest-rate lock.

Rob Carter, a real-estate agent with ZipRealty in Washington, D.C., says the code has introduced much more uncertainty into the appraisal process.

“We are all used to knowing when the appraisal is going to get done and what the outcome is going to be,” he says. “It’s a little frustrating when you don’t know.”

Feldman disputes the notion that the code has caused delays.

“The turnaround has not been affected even a twitch,” he says.

3. Cost. Borrowers are also naturally concerned about the cost of an appraisal. Stafford says appraisals have become more expensive as a result of the code because lenders had relied more heavily on automated valuation models, or so-called drive-by appraisals, which required only a confirmation that the home hadn’t vanished from the property. Now, he says, lenders are more inclined to require a full appraisal, which is more costly.

Moreover, borrowers may now be required to pay for an appraisal upfront, which means they’ll be paying out-of-pocket for that expense even if the loan doesn’t close. Borrowers also may have to pay for a second appraisal if the first proves problematic or they want to switch their application to a different lender. The code allows appraisals to be transferred, but lenders aren’t required to facilitate that and must make sure an incoming appraisal complies with the code.

A related issue is whether appraisers should be better compensated for their services. Feldman acknowledges they’re paid significantly less for jobs they’re assigned through appraisal management companies, but he believes their pay is a “cultural question” that shouldn’t concern borrowers.

“Should borrowers pay more so appraisers can make more and therefore be happier?” he asks. “Or is this a new model that appraisers make less per order, although they may become more efficient, so at the end, they may be OK?”

Cultural questions aside, there’s no debate that appraisal management companies have gained market share as a result of the new rules. Some of these companies are independent; others are owned in whole or in part by lenders or title insurers. These companies schedule the jobs and keep as much as half of the fee for their services.

4. Disclosure. Borrowers may like a new rule that requires the lender to supply a copy of the appraisal to the borrower three days before the loan closes. That right may be waived, though not at closing.

Lenders are careful to comply with this rule, Feldman says, because an inability to demonstrate that they did so will void their certification of the loan to Fannie Mae or Freddie Mac.

That may give comfort to the two mortgage companies, but the code offers no recourse to the borrower if the appraisal isn’t handed over on time and, thus, causes a delay in closing.

How to cope with new appraisal rules
Borrowers are well-advised to have a frank conversation with a loan officer, mortgage broker or real-estate agent before they apply for a loan, since they no longer can rely on behind-the-scenes “value checks” to find out whether an appraisal is likely to return a high enough value for the proposed transaction.

Feldman advises borrowers to check into sale prices of comparable homes, online home valuations and news reports of home value trends before they apply for a loan, as difficult as that research may be for individuals not schooled in such matters.

“The hard part for homeowners (is) to be as realistic as they can, so they don’t waste their time and just get disappointed,” he says. “A good lender or mortgage broker will guide you.”

Carter advises homebuyers not to waive the appraisal contingency in a purchase contract, because that may be their best protection against an inflated sale price, perhaps as a result of an overly exuberant bidding war.

The code itself calls for an “Independent Valuation Protection Institute” to operate a compliance-and-complaints hot line and promote “best practices for independent valuation.” That may sound like a good idea; however, this institute has yet to be established.

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February 24, 2010 by Mimi Miller.

Case-Shiller: Denver No. 5 in December
By John Rebchook, on February 23rd, 2010
Month 1-Year Change Rank
January -5.1% 2
February -5.7% 2
March -5.5% 1
April -4.9% 1
May -4.6% 4
June -3.6% 3
July -2.9% 3
August -1.2% 2
September -1.2% 1
October -0.1% 1
November 0.5% 3
December 1.25 5

Source: Standard & Poor’s and Fiserv for 2009

The Denver metro’s housing market ended last year with a 1.2 percent year-over-year gain, the best showing in 2009, according to the closely watched S&P/Case-Shiller Home Price Indices released today.

However, the one-year change in December was good for only fifth place of the 20 cities tracked in the index, as other cities also showed even larger one-year gains in December. San Francisco was No. 1 with a 4.8 percent gain. Dallas, San Diego, and Washington, D.C., also showed larger gains than Denver. Las Vegas, by contrast, showed a 20.6 percent one-year drop.

Still, some local real estate officials said the jump is a good sign that the Denver housing market is on the road to recovery. It was only the second time that Denver was in positive territory in 2009 from the same month in 2008. In November, the one-year change was 0.5%.

“Wow, that is huge,” said Mike Rinner, of the Genesis Group, which tracks housing along the Front Range. “I just stood in front of a crowd of 140 this morning and told them according to Case-Shiller we were up 0.5 percent and I expected that we would end the year at about zero. Boy, was I wrong.”

The Case-Shiller analyzes data from the same homes that have been re-sold, so it eliminates a bias of different homes in the sales mix, which can drive the average and median prices of homes up or down. For example, there have been so many distressed homes sold in Denver in recent years, that it drove the overall market down, while in more normal years, bigger homes entered the market, driving prices up.

What the Case-Shiller study reflects the “healing” of prices at the lower-end, Rinner said.

“The greatest volume of home sales are occurring at the lower end,” Rinner said. “The values have been re-set as lower-end foreclosed homes hit the market, and there has been some appreciation from the lowest levels. If you look at the worst foreclosure markets in Adams, Denver and in Arapahoe counties, those markets have healed. Areas along the northeast corridor such as Green Valley Ranch and Montbello used to have the largest supply of unsold homes on the market, but now they have among the lowest,” as investors and owner-occupants have snapped them up at bargain prices.

By contrast, Rinner said not many sales are occurring in the higher price ranges and there is arguably a large over-supply of expensive homes on the market today.

But because of Case-Shiller’s methodology, it does not include the spec home constructed by a builder for $1.2 million, which never sold and is now going through the foreclosure process and likely will eventually be sold for $400,000 or $500,000, Rinner said.

“Also, at the upper end, owners are less inclined to take a hit, so they won’t sell it in today’s market if they don’t have to,” Rinner said. “So they are just sitting there until the market improves.”

Rinner said that Denver’s drop in the ranking is not a concern. Because areas such as San Francisco have had such huge drops in the past, he said it is not a surprise that they may jump as they start emerging from the bottom.

Independent broker Gary Bauer said that the Case-Shiller showing reflects the price gains that have occurred in the Denver area during the past six months.

“It’s been a nice, steady upward movement,” Bauer said. “From my perspective, we were the first coming into it, and we will be the first coming out.”

But Bauer said he is a ”little surprised that we dropped in the ranking. I didn’t realize that San Francisco is starting its recovery.”

Indeed, he is consulting with a person who three years ago bought a house outside of San Francisco for about $650,000. The owner then put another $300,000 into it. Now, he would like to sell it and move to the Dallas area to be closer to family.

But it’s not worth anything close to $1 million.

“Unfortunately, he bought at the wrong time of the real estate cycle,” Bauer said. “It’s worth maybe $650,000, max. I really don’t know what he can do other than just wait.”

Meanwhile, Bauer is working with a first-time buyer who hopes to take advantage of the $8,000 federal tax credit, which requires that the house is placed under contract by April 30.

“It’s a condo in northeast Aurora that the original owner bought for $143,000,” Bauer said. “We have it under contract for $90,000.”

But John P. Cochran, the Dean of the School of Business at Metropolitan State College of Denver, wonders if the tax credit for first-time buyers, which was extended in early November, may have skewed the numbers late last year.

“It’s hard for me, right now, to accurately interpret the numbers of November and December,” Cochran said. “People were uncertain whether the $8,000 tax credit was going to be extended, so there may have been some acceleration going on as we moved closer to that date when it might have expired. I’m guessing that may have caused a one-time bump.”

John Skrabec, the broker-owner of Live Urban Real Estate, said he thinks that the tax credit, which now requires a buyer to place a home under contract by April 30, did help the market late last year. Qualified current owners also have a $6,500 tax credit. The homes must be closed by the end of June to get the credits.

“I think that sales might be front-loaded to the first part of this year, because of the credits,” Skrabec said. “I am a little nervous about what is going to happen after they are gone.”

Still, he said the gain in the Case-Shiller report is an “encouraging sign.”

And he said it doesn’t bother him that some other markets jumped past Denver, although he was surprised that cities such as San Francisco and San Diego saw such big percentage gains.

“I think that is just the pattern that Denver has echoed over time,” Skrabec said. ‘We don’t usually have the biggest drops, but we don’t have the biggest increases, either. Our little chart doesn’t go up and down as some other cities.”

Also, he said that certain neighborhoods have shown much greater appreciation, from the bottom of the market, than the 1.2 percent overall gain reflects.

“Prices have gone up a lot in southwest Denver, in neighborhoods like Ruby Hill and Athmar Park,” Skrabec said. “They were beaten up pretty bad, and there has been a lot of investors fixing and flipping homes there. Prices have been going up. Most of the demand has been from the bottom up, and that’s all right. The market is gong to recover from the bottom up, not from the top down.”

And even higher-priced homes are moving in northwest Denver neighborhoods such as West Highland and Berkeley, he said. Neighborhoods such as City Park and Uptown, also are doing well. “But it’s still pretty tough outside of the city neighborhoods in the suburbs,” he said.

Chris Mygatt, president of Coldwell Banker Real Estate in Colorado, said that while the Case-Shiller report is a positive sign, he thinks the market is poised to recover even faster than its report shows.

“If you look at the MLS (Metrolist) data from January, it marked five consecutive months of average prices increasing in Denver,” Mygatt said. “That is in conjunction with the inventory down to 17,000, plus or minus, low interest rates, and the tax credits, we could be in store for a pretty decent rebound.”

Mygatt said he does not think there is much chance that the tax credits will be extended beyond their current expiration dates. But he thinks that will keep the government buying mortgage-backed securities to keep interest rates low.

Jeff Bernard, a broker with RE/MAX Alliance and principal of Bernard Real Estate Analytics, said his “hunch” is that San Francisco home prices rose so much is because wealthy foreigners took advantage of a weak dollar to buy houses there last year.

He said he thinks that Denver’s overall appreciation is probably caused by homes from $90,000 to $350,000, which have bounced from lower levels, which offset homes at the upper end that have been heavily discounted from their original prices. “I would imagine there would be a fairly large standard deviation if you broke the numbers down by price points,” Bernard said.

Still, Cochran said it is good news that home prices in Denver are moving in the right direction.

“Having a positive number is good, but certainly I have to look at it very, very cautiously as an indicator of where we are heading,” Cochran said.

Overall, the 10-City and 20-City Composites continued to show improvement in their annual rates of return. In fact, all 20 metro areas and the two composites saw improvement in their annual returns compared to November’s data. Only three cities – Detroit, Las Vegas and Tampa – still showed double digit annual rates of decline as of the end of 2009. Miami, Phoenix and Seattle all moved above such rates with December’s report.

But the areas did not fare as well from November to December. Denver lost 0.8 percent, compared to a loss of 0.2 percent for the 20 cities in the index. Only three cities – Chicago, Cleveland and Dallas – showed bigger month-t0-moth declines than Denver.

“As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now. However, the rate of improvement seen during the summer of 2009 has not been sustained,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the most recent months we are seeing fewer and fewer MSAs reporting monthly gains in prices. Only four cities saw month to month improvements in December over November, when you look at the raw data. We are in a seasonally slow period for home prices, however, so it is not surprising to see better statistics in the seasonally-adjusted data, where 14 of the markets and the two monthly composites all rose in December. Similarly, the National Composite fell by 1.1% in the fourth quarter, but rose by 1.6% on a seasonally-adjusted basis.”

Metropolitan Area November-December Change 1-Year Change from December
Atlanta -0.7% -4.0%
Boston -0.1% 0.5%
Charlotte -0.7% -3.8%
Chicago -1.6% -7.2%
Cleveland -0.8% -1.2%
Dallas -0.9% 3.0%
DENVER -0.8% 1.2%
Detroit 0.0% -10.3%
Las Vegas 0.2% -20.6%
Los Angeles 1.0% 0.0%
Miami -0.3% -9.9%
Minneapolis -0.5% -2.3%
New York -0.7% -6.3%
Phoenix 0.5% -9.2%
Portland -0.3% -5.4%
San Diego 0.1% 2.7%
San Francisco -0.2% 4.8%
Seattle -0.7% -7.9%
Tampa -0.6% -11.0%
Washington, D.C. -0.2% 1.9%
Composite-10 -0.2% -2.4%
Composite-20 -0.2% -3.1%

Source: Standard & Poor’s, Fiserv

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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February 23, 2010 by Mimi Miller.

Denver, CORank: 37
Home price forecast: -7.8%
(one year, forecast through March 2010)
City stats
Population:
(2006) 2,408,750
Median family income:
(2008) $71,800
Home prices
Median home price:
(2008) $255,000
Affordability index:
(2008 median home price/family income) 3.6
Prices peaked in: 2006:Q1
Total climb during the boom:
(2000 to peak) 35.2%
Total decline so far:
(Peak through 2008) -9.5%
One-year change:
(Q4 2007 to Q4 2008) -4.3%
Forecast
Price change :
(from peak to bottom) -19.9%
When they’ll hit bottom: 2010:Q3
At bottom, prices will drop to levels last seen in: 2000:Q3
Notes: The 100 largest markets determined using 2006 Census population figures; metro areas are generally labeled by the largest city in that area. Price data are for single-family homes through the third quarter of 2008, the most recent data available. Forecast change from first quarter 2009 to first quarter 2010. Figures for Q42008 are estimated
Sources: Fiserv Lending Solutions, Moody’s Economy.com, Dutchess County Association of Realtors, Illinois Association of Realtors, Real Estate Center at Texas A&M University.

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February 16, 2010 by Mimi Miller.

Avoid Burnout by Declining the Monkey!
by Jennifer Allan
The other day I had a three-way conversation with two agents who are in the middle of career crises. Both are trying to decide whether to stay or go, interestingly, for opposite reasons. AgentFriend1 has too much business and is burning out and AgentFriend2, well, doesn’t. Have too much business, that is. And she’s burning out, too.

We talked about the causes of their “burnout.” Both agents confessed that they become deeply involved in their clients’ personal situations and get sucked into the emotional drama of it all. Which isn’t uncommon in our business; after all, we ARE deeply involved in the whole situation: if our seller doesn’t have enough equity to properly price; if our buyer’s loan changes and they have to come up with an additional 5% down; if our listing doesn’t appraise and the deal crashes … yes, these events DO affect us both financially and emotionally.

But you can draw a line and preserve your sanity. Terry Watson calls it “the Monkey.” In his live shows, he describes how we wrongly let others put their monkeys on our backs, even though we have our own monkeys to deal with, thank you very much! We real estate agents are really good at accepting our clients’ monkeys as our own.

And you know what? Our clients are HAPPY to give us their monkeys and then blame us when things go wrong. Further, we accept that blame, which puts us in a position where we have to apologize for our inability to solve a problem that wasn’t ours to solve.

Here’s an example. The seller owes $415,000 on his home. The market value is no more than $395,000 and that’s pushing it. In order to break even, the seller needs at least $430,000. The seller “doesn’t want to do a short sale,” so he looks to his agent for another solution. What solution does the agent come up with?

•Price at $439,900 and hope for a miracle

•Reduce her commission to nothing and price at $420,000 (and hope for a miracle)
Of course, there are other solutions, but we monkey-acceptors want to please, so these are the ones we propose. (And then we’re miserable because we have an unsellable product, but that’s another story).

Here’s another example. You interview for a tenant-occupied listing. The seller doesn’t want to inconvenience the tenant, so he asks for a 24-hour showing requirement; day-time showings only; that you attend all showings, and a 60-day possession. You want to please the seller, so you agree, knowing what he’s asking will make the properly unmarketable … and you miserable.

Do too many of these deals and I think burnout IS an inevitability.

Of course, it’s tempted to advise “Well, just thank the %$SOB^# very much for the opportunity, and walk away!”

Sure, that’s an option. But there’s a better way, a way to respectfully decline the monkey and move forward without alienating someone who could be a wonderful client and future referral source. Stay tuned for more!

Published: February 15, 2010

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