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Retail Is Top Community Amenity

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | July 4th, 2014

Today's homebuyers value services and retail outlets above all other community amenities, according to a new survey from John Burns Real Estate Consulting in Irvine, California.

Even when preferences are broken down by cohort -- Boomers born between 1946 and 1964, Gen Xers born between 1965 and 1979 and Gen Yers born from 1980 to 2000 -- having grocery stores and restaurants nearby are the No. 1 and No. 2 most desired among a list of 25 amenities.

Next on the list for Boomers and Gen Xers is walking trails, then fitness centers -- with the order reversed for Gen Y. A community-wide, high-speed Internet system is also a top choice. If a park is included at a property, prospects would prefer it be a dog park.

Actually, the only major differences among the more than 20,000 new-home shoppers who took part in the study relate to the presence of children in the younger housheholds.

Another finding: Community-wide events and experiences rank above pools, parks and other tangible amenities typically found in new properties. And the good news is that they are usually less expensive for developers.

ADDING SQUARE FOOTAGE

Homebuyers looking for more square footage without increasing the size of the house may want to consider pocket doors, which slide into the wall cavity when open.

According to Johnson Hardware, which makes pocket door hardware and other building materials, traditional swinging doors require 8 to 10 square feet of usable floor space, whereas pocket doors need none. Replacing, say, a dozen swinging doors with pocket doors could yield an extra 120 square feet, or the equivalent of a 10-by-12-foot room.

Pocket doors tend to make rooms appear bigger. And double doors in which one slides one way and the other slides the other way -- converging doors, if you will -- can make for one large room when open or two smaller, more intimate rooms when closed.

Looked at another way, the company says that if a home is initially built with pocket doors, it could be kept to a smaller footprint right from the start. That means less house to build, heat and cool -- which could mean big savings.

RENTAL REVIEWS AND SCORES

Nothing beats an on-site visit, whether you are buying or renting. But prospective renters are placing more and more importance on online reviews, according to a new study.

A second study finds that credit scores improve when on-time rental payments are included. That's good news for renters who want to become owners, whether for the first time or for a second go-round after previous failed attempts at the brass ring.

The analysis by TransUnion found that nearly 8 out of 10 consumers with blemished credit -- the so-called "subprime" gang -- saw an increase in their scores just one month after rent payments were included. More than 4 out of 10 saw an increase of 10 points or more in their scores.

That means these consumers, who are potential borrowers for home loans, may not be as risky as they appear strictly from the standpoint of a traditional credit score, according to Tim Martin, TransUnion's executive vice president.

More proof: On average, renters who became owners in early 2012 experienced a 5 percent boost to their credit scores in 2013 after their rental histories were included.

Meanwhile, the study that found consumers are placing an increased importance on online reviews warned that not just any review will do. Prospects give a thumbs-down to anonymous opinions. Rather, they want authenticated, certified reviews that include real feedback from actual residents who live or have lived in the community.

More than two-thirds of the survey's participants said they can spot a fake review a mile away. Authenticated reviews are those that are vouched for by the apartment developer or management company.

Both studies were released at an apartment industry conference last month.

PUBLICITY HOUNDS

The lengths some outfits will go to, to get their names in the papers or on the news, now border on the ridiculous. We're talking about the proliferation of indices and "best of" lists that seem to come out on an almost daily basis.

We're not questioning the accuracy of the reports, though you have to wonder if their samples are deep enough to label the results meaningful. Rather, you have to suspect whether they are simply veiled attempts at one-upmanship as competing companies look to gain publicity -- and ultimately customers -- for their respective brands.

The latest is RealtyTrac's first Natural Disaster Housing Risk Report, which assigns a natural disaster risk score to more than 3,000 housing markets across the country. In something of an understatement, Daren Blomquist, the data firm's vice president, admitted that the possibility of a natural disaster "may not be the first item" on home buyers' checklists.

Really? We suspect that the potential for disaster is not even on most buyers' lists. Nor should it be. Almost every state in the union is susceptible to one calamity or another, so why even bother?

Besides, as Blomquist says in the report, disaster data is available online from Uncle Sam and other sources. If it is that important to a buyer, he will find a way to dig it up.

But wait: If these lists are simply attempts to gain publicity, then it worked in this instance. 'Cause there it is.

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Time-Sharing Shouldn't Be a 'Life Sentence'

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | June 27th, 2014

As the time-share industry continues to grapple with a business model that offers no easy way out for owners who want to sell their weeks, trade-in programs are emerging -- a great option for those who still enjoy the benefits of time-sharing, but whose current units no longer fit their needs.

With a trade-in, you simply turn over your time in your particular resort to a third party, or perhaps even the property's developer, and you purchase another interval in your current location or a newer one that better suits you.

This isn't an exit strategy for people who can no longer afford to share in the ownership of an apartment or townhouse at a particular resort. Maybe you no longer travel, or perhaps you find you're unable to pay the annual maintenance fee. Or perhaps you're among the minority of owners who decided you really don't like time-sharing after all.

But if you still like the concept, and just find you no longer enjoy the property where you are an owner -- maybe you're getting a little too long in the tooth for downhill skiing, and long for a week or two on the coast were you can chill to the roar of waves crashing instead -- a growing number of trade-in companies will try to find you something new.

These time-share matchmakers will sit down with you to find out why you are dissatisfied with your current resort, figure out what your needs or desires are now, and link you up with a more fitting property. If you find a new one you like, you turn your current time over to the trade-in company and buy time in the new one.

You won't get back what you paid for the original time-share. That won't happen no matter how you try to sell it. But you should receive a decent price, and at least you'll be rid of it. Better yet, because of the trade-in company's affiliation with the new property, you should receive a nice discount on your new shares.

There are a number of vacation ownership companies and travel clubs that have trade-in programs, according to Heather Guffin, president of the Association of Timeshare Recyclers (ATR).

What kind of trade-in price you get, or how much of a discount you receive, depends on any number of variables. Each deal is different, she says, but you alone determine if the compensation is fair.

Another benefit is that once the transfer is completed, you are no longer responsible for the old unit. In other words, you won't have to continue paying those pesky maintenance fees on the old place while it is on the market. After the final transfer, you are only on the hook for the fees on the new property, whether the old has been resold or not.

Trade-in programs are one of only a few exit options for time-share owners Guffin discussed in a recent telephone interview. And therein lies one of the main drawbacks that continue to plague a business that, despite its shortcomings, continues to enjoy surprisingly strong popularity.

That most of the sales recorded over the last few years were to owners who were either upgrading their weeks or purchasing additional ones is proof enough that the concept works. For further evidence, consider recent studies that show that more than four out of five owners are satisfied with their memberships and would recommend time-sharing to friends and relatives.

"Time-share is great when it is being used and enjoyed," says Guffin.

At the same time, it can become a real burden when you find yourself in situations where you are no longer using it, but have to pay for it anyway.

Guffin says her association is committed to finding viable time-share exit strategies that work for the entire industry, but especially for the consumer. "We believe that time-share owners have the right to gracefully exit their time-shares," she says. "The value proposition cannot include it being a life sentence -- that once purchased, a time-share is owned forever."

ATR members are working within the business to solve the resale problem. "Resale is not an enemy of time-share, it is an inevitability," the group's president says. "It is not going to just go away."

One way developers can help is to shine the light on trustworthy resellers. Or perhaps more importantly, help consumers identify the many scam artists who fish in the resale waters.

Toward that end, here are some tips from ATR for identifying resale scammers.

-- First blood. If you did not initiate contact, beware.

-- Rush to judgment. Don't be pushed into making a quick decision.

-- Mystery buyer. No matter what they say, they don't already have a buyer.

-- Upfront fees. A minimal upfront fee of no more than $1,000 may be justified, says Guffin. But anything more is probably a rip-off.

-- Inflated value. Guffin says wise resellers will take 15 minutes to research what their shares are worth. If the reseller says it can get more, hang up.

-- Wire transfers. Wire payments are basically cash payments, and anyone with a bank account can receive a payment by wire. Legit outfits, on the other hand, have merchant accounts with credible banks.

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Loan Modification Redo

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | June 20th, 2014

If you are one of the millions of once-desperate homeowners who have had their loans reworked by a mortgage company to avoid foreclosure, it's time to start facing the possibility of having to do it all over again.

Beginning this year, those whose loan terms were modified so that the interest rate dropped to as low as 2 percent will have to deal with higher rates that could, in some cases, drive the monthly payment as much as $1,724 higher.

Why? Because "permanent" interest rate reductions under the government's Home Affordable Modification Program (HAMP) were anything but. Whether participants realize it or not, rate reductions last for only five years. Consequently, the clock is ticking -- especially for the earliest beneficiaries of the program, which was built to help underwater or financially strapped borrowers save their homes.

Exactly how many borrowers face higher rates and larger payments is unclear.

As of Dec. 1, 2013, 88 percent of the nearly 900,000 people who had their loans modified under HAMP are scheduled for increases by 2021, according to a report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). But a report from the Urban Institute, a research organization, says that as of this past January, more than 1.1 million owners received interest rate abatements under the program.

Moreover, countless others received modifications under lenders' proprietary relief programs that were patterned after HAMP, which was created under the Financial Stability Act of 2009 as a collaboration between lenders, investors, mortgage servicers and Uncle Sam's housing agencies to create standard loan modification guidelines.

The Urban Institute says the number of proprietary mods is "considerably higher" than the number of HAMP mods -- perhaps five times higher, or something above 5 million.

HAMP works like this: Lenders are required to take sequential steps -- called a "waterfall" -- to cut borrowers' monthly payments to 31 percent of their gross monthly incomes. After five years, the rate resets upward by up to 1 percent a year until it reaches its cap, which is the market rate that was in effect when the loan was modified.

All other terms of the modification -- an extended loan term and principal forbearance -- are supposed to remain unchanged.

For 2009 and 2010 modifications, the maximum rate is about 5 percent. So if the market rate was, say, 5 percent five years ago when your mortgage was reset to 2 percent, it will go up to 3 percent this year on the anniversary of the adjustment. It will remain at 3 percent for the following 12 months, then ratchet up to 4 percent for 12 months, and then up to 5 percent.

Market rates declined in 2011 and thereafter, so the total reset won't be as great for loans modified that year and thereafter. But the increase will still be 1 point per year until the market rate from the time of the modification is reached.

Reviews are mixed about the impact of the pending resets. The Urban Institute, for example, says most borrowers should be able to handle the first two jumps, but the third one "may prove problematical." Consequently, it argues that there won't be a big problem until 2016, when the 2009 cohort experiences its third increase in mortgage rates.

The nonprofit, nonpartisan policy research organization also thinks the fears of massive re-defaults are "overblown." Although borrower defaults in the private sector tend to jump by 15 percent when they are faced with large resets, that "should be regarded as an upper bound," it says.

Why? For one thing, HAMP resets will be taking place in a healthier housing market, with rising prices giving borrowers a growing equity stake in their homes. For another, perhaps half of HAMP recipients who are in danger of defaulting again should qualify for an alternative modification.

SIGTARP, the Treasury Department agency, says only 12 percent of the borrowers with active HAMP mods are safe. The rest are in for changes, with some eventually seeing their rates jump to as high as 5.4 percent and their monthly payments rise by $1,724. Half of all owners with active HAMP modifications reside in just four states: California, Florida, New York and Illinois.

And the number crunchers at Black Knight Financial Services point out that more than 40 percent of the 2 million borrowers who benefitted from modified loan rates still owe more than their houses are worth. Moreover, the data and analytics firm says an additional 18 percent have 9 percent equity or less in their homes. (Borrowers with less than a 10-percent stake in their properties usually must bring cash to the table to pay loan fees and closing costs.)

Under HAMP, loan servicers are required to notify borrowers of a pending rate increase no less than four months in advance. And a second notice is required no later than 60 days before the rate reset.

But borrowers shouldn't wait for the notice to act. If you have any inkling at all that a rate increase is coming, be proactive. Start gathering your financial information now.

You'll need, among other things, the two most recent pay stubs for all household members contributing to the mortgage payments, your last two years' tax returns, your most recent profit and loss statement if you are self-employed, your two most recent bank statements, account balances and minimum monthly payments due on all credit cards.

It's also a good idea to get current on your bills if you are not already, and check to make sure the info in your credit record is accurate and up-to-date. Then reach out to your lender to see what options might be available. You might be able to refinance, or you may be in line for another loan modification.

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