home

Quick Takes: Builders' Timeframes, 'Zombie Debt' and More

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | February 12th, 2016

If your builder says he can construct your new home in three months, don't believe it.

According to 2014 data from the U.S. Census Bureau, the average completion time for a single-family house is twice that. And that doesn't count the 23 days it takes to obtain the necessary government approvals.

If you are building the house yourself, it takes even longer: 11.5 months, according to Uncle Sam's count. But if the house is being built by a contractor on your lot, it takes about eight months to be completed.

As noted, these are 2014 figures. It's very likely that it takes even longer to build a house today, because builders continue to have trouble finding the craftsmen needed to do the work. Indeed, the shortage of subcontractors has become acute in many parts of the country, according to the National Association of Home Builders (NAHB).

On average, 22 different subcontractors are used to build a typical house, NAHB says. When asked about 23 different jobs, builders reported "always" subcontracting a sizable chunk of them. Concrete flatwork, masonry, drywall, fireplaces, plumbing, electrical and carpeting, among others, all received "always subcontract" responses in the 90-percent range.

About two-thirds of builders reported that they subcontract 75 percent of the construction cost of an average single-family house. Any way you slice it, that's a lot of work -- and it likely won't be done in three months.

Not long after revered reverse-mortgage spokesman Fred Thompson passed away, Danny Glover has signed on as the latest celebrity to push the products.

The 69-year-old actor can be seen on various marketing materials, as well as the Facebook and LinkedIn pages for USA Reverse, an online lead generator. The company aims to help people understand Home Equity Conversion Mortgages, and also allows would-be borrowers to compare various reverse-mortgage lenders.

Glover, best known for the "Lethal Weapon" films and "The Color Purple," joins a long list of entertainers who have promoted reverse mortgages: Henry Winkler (aka Fonzie of "Happy Days"), James Garner, Pat Boone, Barbara Eden (Jeannie of "I Dream of Jeannie") and Robert Wagner. Glover is the first African-American to represent a reverse-mortgage company.

You've heard of "zombie homes" -- those distressed properties abandoned by financially strapped owners, but not yet foreclosed on by lenders.

But how about "zombie debt"?

That's the term coined by the Federal Trade Commission to cover bills you think are dead, gone and forgotten, but that somehow spring back to life. Zombie debt can wreak havoc with your finances, and especially with your ability to buy a house.

We're talking about debt you settled with a company or debt collector; debts that were discharged in bankruptcy; time-barred debts that are past the statute of limitations; debts that no longer show up on your credit report. Zombie debt can also include debts you never actually owed, such as those resulting from identity theft.

Before paying any of these bills, take a deep breath and look at them carefully. They could be fake, and the bill collector could be a con artist, so make sure you recognize them as your own. If they don't look familiar, obtain a free copy of your credit report -- annualcreditreport.com -- to see if the debt is listed there.

If the "walking dead" debt is a result of identity theft, you'll find tips and sample letters to help you dispute it at identitytheft.gov. But if it is yours, and it's come back to haunt you, federal law still gives you certain rights to protect yourself.

For example, if someone contacts you about a debt you thought was dead, you can ask the collector to send you a written validation notice detailing the amount owed and the creditor's name. By law, the debt collector has to send you this notice within five days of contacting you.

But don't ignore lawsuits. If a debt collector files a suit against you to collect a zombie debt, respond to the lawsuit -- either personally or through your lawyer -- by the date specified in the court papers to preserve your rights.

Don't accidentally reset the debt clock, either. If you make, or promise to make, a debt payment on a time-barred debt -- a debt too old for a collector to make you pay -- the statute of limitations clock may reset. Then, a debt collector can sue you for the full debt amount -- plus interest and fees.

Most real estate agents enter their listings on the multiple listing service on Fridays. But according to a survey by Atlanta realty firm Terrace 24, Thursday seems to be the best day to list a house.

Homes listed on Thursday sell faster and for more money, reports managing broker Mike Minihan. Those listed on Sunday, on the other hand, were on the market the longest.

Of the houses in the Atlanta-area sample that sold without a price reduction, those listed on Thursday were on the market a median of 19 days less than those listed on other days of the week. Also, homes listed on Thursday were more likely to draw offers above the asking price. And eventually, sellers of Thursday-listed houses reaped nearly 98 percent of what they asked.

home

Tips For Avoiding Closing Delays

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | February 5th, 2016

The moving truck is full, the kids are already in the car, and you are waiting not-so-patiently to sign the mound of closing documents for the mortgage on your new home. Then, bam: The settlement agent tells you the lender isn't going to get the papers delivered on time.

The closing has to be delayed.

Now you're stuck paying not only for the moving van, but also for storing your household goods somewhere. Worse, you've already given back your apartment to your landlord, or closed on your old house, so you have to find somewhere to live until you can close on the new place.

Even worse yet, since you won't meet the deadline to close on the house you're buying, the seller may get antsy. So antsy, in fact, that he may declare your deal null and void and sell the place to someone else.

All of these scenarios are possible these days, because closings are taking longer then they used to. The reason: Many lenders are still having trouble coming to grips with new federal "Know Before You Owe" settlement rules that went into effect in October.

Lenders and their vendors had almost two years to figure out how to combine the old requirements from the Truth in Lending Act (TILA) and the Real Estate Settlement and Procedures Act (RESPA) into the new TILA-RESPA Integrated Disclosure, or TRID, forms. But they're still having trouble.

Before TRID, according to the National Association of Realtors, it took roughly 30 days to close. But in November, it took an average of 40.5 days. And according to Ellie Mae's Origination Insight Report, December closings took even longer than that -- up to 50 days.

The key to closing now is the new Closing Disclosure (CD), the statement of final loan terms and costs, which must be given to borrowers at least three days prior to settlement. Lenders cannot change any of those costs once the CD has been issued; otherwise, they are responsible for the differences.

"That's why lenders either wait until the last possible moment to issue the CD, or they have a strict list of items that must be completed in the loan process prior to issuing the CD," says Daniel Jacobs of Michigan Mutual.

So, how do you avoid a TRID-related delay in your closing? Here are a few ideas from the experts:

-- Rate lock. Ask your lender for a longer rate lock, or guarantee of a certain rate pledged on your new loan. That way, if the closing is delayed, you won't lose whatever interest rate you were promised.

Prior to TRID, you could lock in your rate with the lender and close the next day. Now, the rate must be locked in prior to the CD being issued. So lock it in early, advises Jacobs.

Pay extra for a longer rate lock if you have to. Typically, lenders will guarantee their rates for 30 days, but they will lock it in for a longer period -- at a price. It may well be worth paying a few hundred extra dollars for the peace of mind in knowing that however long it takes for the paperwork to be done correctly, you won't lose the house.

-- Act quickly. Schedule all inspections and surveys right away. That way, if there is an issue -- say, the home inspection finds a major problem with the furnace, or the surveyor discovers an unknown right-of-way through the property -- it can be resolved. Moreover, invoices or paid receipts for these services must be accounted for on the CD.

Similarly, invoices or quotes for homeowners' association dues and insurance premiums also must be accounted for on the CD, so take care of these early, too. And if the lender vows to contact the HOA or your insurance agent on your behalf, ask for confirmation.

-- Slow down. Schedule the sale of your current house for at least a week after you are set to close on the new place. Similarly, don't give up your apartment too early. Give yourself plenty of time. It may cost an extra month's house payment or rent, but if there is a delay in closing on your new place, your family won't be out on the street.

"If you are selling one home and moving into another, give yourself more time for issues arising on both ends of the transaction," says Becky Walzak, a longtime mortgage business consultant.

-- Tell all. Don't hold anything back. "Full disclosure, always," advises Brian Koss of the Mortgage Network. Koss says borrowers need to know that getting a mortgage "will be akin to an IRS audit," so they should tell lenders everything. "Because these days, the lender will find it anyway," he says.

If your lender discovers new information toward the end of the transaction, the closing will be postponed. "And until it can be proven otherwise, the new information will be presumed to be an issue," says Koss.

-- Double up. Attach two years' worth of W2s, two months' worth of pay stubs and two months of bank statements to your loan application -- and keep copies for yourself. If you wait until the lender asks for these and other documents, it will slow the underwriting process.

-- Nothing big. Don't make any major transactions -- taking out a car loan, for example, or charging a room full of furniture -- until after closing. Ditto for taking a job at a new company.

"Any movement of money through bank accounts or credit cards, or job changes, can cause your loan to be postponed or denied," says Koss. This holds true even if you've already been approved, because all loans are really only "conditionally approved" until just a few days before closing. The lender can recheck your financial picture at any time.

"You must keep your profile exactly as presented until after closing," explains Koss. "This is one of the biggest delays in lending, and it causes mad scrambles to keep deals on track."

home

Some Buyers Replicate Model Homes

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | January 29th, 2016

When Dave and Judy Daniel decided to move from St. Cloud, Minnesota to retirement community Sun City Festival in Buckeye, Arizona, they knew exactly what they wanted: the model home. But it wasn't for sale, and it wasn't on the golf course like they preferred.

No problem, said salesman Ken Plonski. We'll replicate it wherever you like.

"There were many things we loved in the model," says Dave Daniel. "It was much easier than starting from scratch."

The Daniels are not alone in wanting an exact replica of a builder's sample house. While reproducing model homes is far from a trend, it is happening more than would-be homebuyers might suspect.

"It's not something that happens regularly, but it does happen," says Plonski.

Builders have always sold their model homes, but generally at a project's end when they are no longer needed. Sometime they'll sell their models at a project's outset to an investor, who will lease the homes back to the builder for as long as they're needed.

In other instances, a buyer might be allowed to sign a contract early on to buy the show-house down the road. But he'll have to wait, perhaps two or three years, to take occupancy, and he'll have to pay whatever price is in effect at that time.

Recreating models is another situation entirely. Here, builders are asked to reproduce an upgrade-laden model -- sometimes right down to the furniture and silverware.

There are any number of reasons people want a turnkey, ready-to-go home. Typically, they are well-to-do buyers who don't have the inclination to obsess over layout options, color schemes and the like. In other instances, buyers simply fall in love with what they see.

"We saw the model and it was beautiful," says Dave Daniel. "We were able to do all our planning from Minnesota because we knew what our new house in Arizona would look like."

Builders are probably more likely to be asked to reproduce a model in retirement and resort communities, where people are either pulling up roots and starting over in a new location or want a turnkey property that they don't have to bother furnishing.

But the practice isn't unheard-of in the big city.

"It happens a fair amount, and it's happening more lately," reports Jeff Benach, a co-principal of Lexington Homes, one of the Chicago area's largest builders.

Homebuyer Jon Andes says he could have lived with any of the three models he saw at Lexington Hills in suburban Palatine, Illinois. But he chose the smallest because it could be built on a lot that backed up to a preserve. He asked the builder to build a copy of it, complete with all the extras.

"My wife has a tough time visualizing, so it was much easier for us to go this route," says Andes. "The last home we bought, the builder changed the orientation so the bedrooms where on the other side of the house from the model, and that threw her into a frenzy. It was not what she wanted."

In southwest Florida, it's "very normal" for builders to reproduce their models for buyers -- right down to the decorative fruit on the dining table and wine bottles in the wine cooler, according to James Nulf, a partner in the Seagate Development Group in Fort Myers.

"It's already done," Nulf said, "so they don't have to go through the process."

There's no question that models help bring to life what is, for most people, a hard-to-comprehend floor plan. That's why builders invest heavily in model home parks, with sample houses decorated to the hilt. The homes are appealing, especially to people who can fork over millions to buy one.

At the Quail West community in Naples, Florida, base prices of furnished models start at just over $1 million. Options can add anything from $267,000 to $486,000 to the base. And if the buyer wants the furnishings, she can expect to tack on another $175,00 to $283,000.

To some buyers, it's well worth it. While most buyers want to "put their own mark" on their homes, says Jill Bresnahan, a Quail West sales agent, some "don't want to go through the agony of making selections and then second-guessing themselves, and then not knowing what it's going to look like when it all comes together."

Not all builders will be so accommodating. And others tell buyers to work with their decorator if they want the furniture package.

A few words of warning, if you decide to go that route: The model furniture "looks nice," cautions Chicago builder Benach, "but it may not be of the highest quality." Also, many pieces may be reused from previous projects, so they could be showing their age, even if you can't readily see the wear during your tour.

Next up: More trusted advice from...

  • Too Old
  • Lukewarm Water
  • Happy Place
  • Placebo Effect?
  • Mysterious Felines
  • Chihuahua Chatter
  • How To Handle a Late Tax Payment
  • Are You a 'Great Investor'?
  • No Retirement Plan at Work? Change Is Coming
UExpressLifeParentingHomePetsHealthAstrologyOdditiesA-Z
AboutContactSubmissionsTerms of ServicePrivacy Policy
©2023 Andrews McMeel Universal