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Innovative Sites Offer Buyers and Sellers New Opportunities

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | September 16th, 2016

Two online platforms that allow investors to sell occupied rented single-family homes without disturbing their tenants -- and buy rented houses with tenants already in place -- are among a plethora of new real-estate-centric sites that promise to improve the buying and selling process.

One, started by the co-founder of Uber, allows would-be buyers to see exactly what they're up against when competing with other potential buyers. Another allows real estate agents to compete for your listing, just like banks sometimes compete online through various portals for home loans.

The investor platforms -- Roofstock and OwnAmerica -- fill a real void.

Typically, when an investor wants to sell a house that he's held for awhile, he has to wait for the current tenants to leave when their lease expires or ask them to leave early. If he tries to put the house on the market while it is still occupied, it not only disturbs the occupants, it also puts them on notice that the house is up for grabs and often scares them into moving out.

Worse, though, is the possibility of lost income if the house lingers on the market for several months once it becomes empty and is listed for sale.

Both Roofstock and OwnAmerica are platforms that address these issues by quietly marketing investor-owned properties to other investors who are searching for properties that already are occupied, saving them the time and cost of finding tenants once the house changes hands.

"You'd never vacate an apartment building to sell it," says Roofstock co-founder Gary Beasley. "Why should rental homes be any different?"

This is hardly a niche market. It's roughly a $2 trillion business with some 15 million single-family rental houses nationwide.

About 13 percent of the U.S. population live in single-family rentals, yet no one really services them, at least not properly, Beasley and OwnAmerica CEO Gregory Rand contend. Existing channels specialize in selling vacant or soon-to-be vacant houses to owner-occupants, they say, but they are not well-equipped to sell with tenants in place.

While the two sites have the same mission, they work somewhat differently. With OwnAmerica, someone wanting to purchase an occupied rental property makes an offer without ever seeing it so the tenants are not agitated. Only when the contract is accepted can they actually visit and inspect the house. And if the property is not what was described online, or if it needs work, the buyer and seller can renegotiate.

At Roofstock, third-party experts inspect and certify houses as part of the listing process. Consequently, buyers have access to fully vetted properties with current cash flow and professional property management in place, and sellers can sell more quickly without losing much, if any, rent.

What's more, prices of houses listed on Roofstock are set in stone, based both on market comparables and property-specific conditions, so there's no back-and-forth haggling.

Another new site, Haus, is described as "an open and fair platform" that gives buyers and their agents access to all offers in front of a seller. So, if four other people make on offer an the house you've also bid on, you'll know exactly what the competition is proposing and, if you like, you can one-up them.

Currently, you may know others have submitted an offer, but the terms of those offers are confidential, so you have no idea what you are up against. Some buyers offer escalation clauses to best their competitors' best offer by, say, $1,000 and perhaps up to a certain amount.

But your rival bidders may also offer other goodies you don't know about -- giving up a home inspection, for example, or allowing the seller to remain in the house for a few extra months -- that could sway the seller.

Haus' goal is complete objectivity. It notifies agents, buyers and sellers when a new offer is submitted, and allows all of them to view the price and terms of all offers on the table at any given point in the transaction. Names are confidential, but everything else is revealed.

That way, both buyers and sellers can monitor listings, and all buyers can have a fair chance of seeing their bid accepted because they can see exactly where their offers stand vis-a-vis any others.

"Haus is creating a platform we believe can revolutionize the way people buy real estate," said Garrent Camp, an Uber co-founder and head of the startup studio that developed the program. "The open and clear communication creates a more efficient and fair process for everyone involved."

A fourth new site, Agenis, promises to save sellers hundreds, if not thousands, of dollars by creating competition for their listings among agents. At no cost, it allows sellers to request bids from agents, who presumably will offer to sell houses at a discounted commission or rebate a portion of their fees at closing.

And finally, yet another startup from the BCRM Group will finance the earnest money buyers attach to their offers, thereby allowing them to sign contracts and proceed to closing without putting up any of their own money. Deposits can be up to 10 percent of the purchase price, but BCRM will charge only 1 percent of the price to advance the deposit on your behalf.

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Love, Marriage, Baby Carriage -- THEN Mortgage

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | September 9th, 2016

Remember the "k-i-s-s-i-n-g" song from when you were a kid? "First comes love, then comes marriage, then comes a baby in a baby carriage."

In the old days, a mortgage usually came after the baby carriage. But fast-forward to modern times, and many couples are buying a house together before getting hitched. Changing the natural order of things could be a big mistake, warns Matt Parker, a Washington real estate agent who hangs his shingle with Keller Williams Puget Sound.

"While the numbers and studies are complex, the reality of a successful, mature partnership is not," says Parker, author of "Real Estate Smart: The New Home Buying Guide." "Make a firm decision on your relationship before you make a firm decision on your home."

Even co-habitating without a legal agreement is not a good idea, Parker writes. The numbers say that living with someone before marriage equates to lower marital satisfaction, more marital conflict, higher rates of infidelity and a higher likelihood of divorce.

"The relationship should come before your housing choice," Parker told me in an interview. "Getting out is far more difficult then getting in."

So fast-forward again, past the courting stage to the point where you're talking marriage. Admittedly, that comes much later these days than it used to -- so much later, in fact, that the prospective bride and groom may have created their own significant assets by that point. Perhaps a prenuptial agreement is in order.

Will that prenup impact your ability to obtain a mortgage?

Usually, the answer is no, says Karen Linehan-Wilson with 1st Advantage Mortgage in Lombard, Illinois. Generally, lenders do not ask about prenups. Barbara Sparks, with Envoy Mortgage in Houston, mostly concurs. Prenups "are acceptable," she told me, "as long as the agreement is court-ordered and complies with state laws."

Divorce is another thing entirely. The statistics aren't great. If there are children involved, buying a house after the split -- even long after the split -- becomes much more complicated.

When a would-be borrower has a divorce in his or her history, lenders want to see the marital settlement agreement, says Matt Weaver of Finance of America Mortgage in Boca Raton, Florida. Specifically, they are looking to see if the applicant pays or receives alimony or child support. As far as the underwriters are concerned, according to Weaver, there is no difference between alimony and support, even though support is usually tied to the age of the child/children.

If you have been receiving either type of payment continuously for three years and will continue to receive it for at least six months, says Weaver, you can count it as income. Of course, it must be verifiable, says Sparks. For child support, she says she confirms the children's ages to be certain the payments will continue for at least 36 more months.

If you pay alimony or child support, on the other hand, it counts against you in your debt-to-income calculation -- "in totality," says Weaver, no matter how much longer you have to pay.

Well, almost. If you have six months or less to go on your support payments, it's possible to make an exception. But otherwise, no.

"It's counted just like a car payment," says Weaver. "It's a liability that's no different than any other type of installment loan."

A copy of the divorce decree or court-ordered support payment is necessary to verify what you are paying or receiving. And if the terms of those documents have been modified, Sparks cautions, "a fully executed court order" is required to confirm the changes.

If your former spouse is paying inconsistently, you're going to run into trouble. If the lender cannot verify that you are receiving alimony or support payments regularly, month in and month out, you won't be given credit for it as income.

Another common problem with these kinds of payments is shared expenses: for example, jointly paying for the kids' braces. If your ex pays the orthodontist instead of you, it upsets the monthly verifiable trail of support payments. Here, Weaver says the important thing is to keep the trail intact: You get the money, and you pay the orthodontist.

One more possible challenge: If you want to buy another property while you are still in the throes of divorce, you should execute a "quit claims deed" to your current house and your soon-to-be former spouse should sign a release of liability.

If the split is less than amiable, good luck getting your ex to sign anything. Weaver calls that "a common cause of frustration" for the once-married borrowers he sees.

That's why he, like Parker, says not to rush into homeownership with your current love. Give it some time.

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Quick Takes: Changing Locks, Shrinking Lots

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | September 2nd, 2016

The first thing you should do after you move into a new place is change the locks.

OK, maybe you could pop a bottle of champagne first and toast your new home. And possibly unpack the kitchen. But after that, change the locks.

Not just the front door lock, either, but also the side door, back door and garage door. If you have electric garage door openers, change the combination on the remotes.

It's not that the folks who owned the house before you were thieves or killers, although you never know. But there's no telling how many keys are out there, given to friends, family and neighbors of the previous residents. You have no idea who these people are, and they have access to what's now your place.

Changing the locks is so important that some agents have taken to giving their clients new lock sets -- or even hiring a locksmith -- as a housewarming gift.

When she orders a home warranty for her buyers, Wanda Kubat-Nerdin of PK Real Estate in St. George, Utah, also includes a complimentary re-keying. And she advises them to "get it done right away."

A visit from a locksmith is also Gwen Fowler's way of saying "thanks for your business." The South Carolina broker says her go-to locksmith "gives me a good price, and goes before the buyers move in. ... (It provides) peace of mind for me and everyone else in the process."

Just when mortgage cops think they've seen it all, a new kind of fraud pops up. The latest scam: reverse occupancy.

Whereas some people say they intend to occupy what's really an investment property in order to obtain a lower finance rate, in a reverse occupancy scheme, the buyer says he intends to rent the house and uses the potential income stream to help qualify for the mortgage.

The maneuver is being used by would-be owner-occupants who don't otherwise have enough income to pass muster, according to Kevin Ludden, fraud industry relations manager at mortgage giant Fannie Mae.

The reverse occupancy liar gets a somewhat higher rate because he supposedly is buying an investment property. Plus, he has to put more money down than an owner-occupant would. So why should anybody care?

Because if there is no income from rent, there is a far greater chance that he won't have enough money coming in to make the monthly payment.

Besides labeling the house an investment property and making a large down payment, two other red flags include the purchaser being a first-time buyer with minimal or no established credit, and having a low income but significant liquid assets as authenticated by bank statements.

In 2014, for the first time in more than 130 years, young adults ages 18 to 34 were more likely to be living with their parents than to be cohabitating with a spouse or partner in their own homes or apartments, according to the Pew Research Center.

The main reason: Fewer people are choosing to settle down romantically before age 35, the tipping point into middle age.

Dating back to 1880, the most common living arrangement among young adults has been living with a romantic partner. But sometime around 1960, that type of household peaked, Pew says. Back then, 62 percent of all 18- to 34-year-olds were living with someone else under one roof, while just one in five were still residing at home.

But in 2014, nearly 32 percent of people in this age group were living at home -- whether "still" or "again" -- vs. 31 percent who lived with another person in a separate household. That's not a record, though. Around 1940, 35 percent lived with Mom and/or Dad.

"What has changed, instead, is the relative share adopting different ways of living in early adulthood, with the decline of romantic coupling pushing living at home to the top of a much less uniform list of living arrangements," Pew Research reported.

If you think lot sizes seem to be shrinking, you're very astute: The median lot size of a new single-family detached house sold last year dropped under 8,600 square feet -- about a fifth of an acre -- for the first time since the Census Bureau started keeping track.

Having trouble visualizing 8,600 square feet? Paul Emrath, an economist with the National Association of Home Builders, says 5.6 median-size lots would fit onto a football field.

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