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Quick Takes: From Millennial Priorities to Roman Remains

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | September 1st, 2017

Housing choices are going to the dogs. Literally.

That’s the gist of a new Harris Poll, which found that a third of millennial-aged first-time homebuyers made their decision of where to buy based largely on the desire to have a better space for their mutts.

Dogs ranked third among the top motivators for rookie buyers -- cited by more millennials than marriage or the expected birth of a child, according to the poll, conducted on behalf of SunTrust Mortgage.

The desire to have a yard for their pups was named as the prime motivator for 33 percent of first-time buyers ages 18 to 36. Only the desire for more living space, at 66 percent, and the chance to build equity, at 36 percent, were identified as more important.

Wedded bliss was rated as the major decision-maker by 25 percent of the respondents, and just 19 percent said their first kid was the game-changer.

“For (millennials) with dogs, renting can be more expensive and a hassle,” said Dorinda Smith, president and CEO of SunTrust Mortgage. “Homeownership takes some of the stress off by providing a better living situation.”

The bond between millennials and their four-legged friends is strong, even among young adults who have never purchased a home. The survey found that 42 percent of renters say that their dog -- or the desire to have one -- is a key factor in their wanting to buy a home in the future.

Fueled by a substantial increase in sales-dollar volume from Canadian buyers, foreign investment in U.S. residential real estate skyrocketed to a new high this year, according to the National Association of Realtors (NAR). Nearly half of all foreign sales were in just three states: Florida, California and Texas.

NAR found that between April 2016 and March 2017, foreign buyers and recent immigrants purchased $153 billion of residential property, which is a 49 percent jump from 2016 ($102.6 billion) and surpasses 2015 ($103.9 billion) as the new survey high. Overall, 284,455 U.S. properties were purchased by foreign buyers (up 32 percent from 2016), and these purchases accounted for 10 percent of the dollar volume of existing-home sales.

Although China maintained its top position in sales-dollar volume for the fourth straight year, the significant rise in foreign investment in the survey came from a massive hike in activity from Canadian buyers. After dipping in the 2016 survey to $8.9 billion in sales (down from $11.2 billion in 2015), transactions from Canadians this year totaled $19 billion -- a new high for Canada.

NAR attributes the notable rise in activity to Canadians opting to buy property in U.S. markets that are expensive, but still more affordable than in their native land. While much of the U.S. continues to see fast price growth, home price gains in many cities in Canada have been steeper, especially in Vancouver and Toronto.

Buyers from China exceeded all countries by dollar volume of sales at $31.7 billion, which was up from last year’s $27.3 billion. Chinese buyers also purchased the most housing units for the third consecutive year (40,572, up from 29,195 in 2016).

The credit scores of approved borrowers are dropping. So does that mean it’s getting easier to purchase a home?

The median FICO score for borrowers approved for agency-originated loans (those backed by Fannie Mae, Freddie Mac and Ginnie Mae) has declined from 742 in June 2016 to 725 in April 2017. The present level represents a new low after the 2008 housing crisis; the previous low was 726 in November 2015.

But this drop in FICO scores does not necessarily indicate that credit availability is improving. An analysis of agency FICO scores by loan purpose shows that the decline was driven almost entirely by refinance scores. Refinance credit scores fell 27 points from October 2016 (752) to April 2017 (725). Purchase FICO scores, in contrast, declined only 4 points (729 to 725).

One explanation for the refinance-driven reduction in FICO scores is that lenders, in the wake of rising rates, are approving more refinance applications from slightly less creditworthy borrowers to maintain volumes amid a shrinking pool of in-the-money refinance borrowers.

In the remodeling version of Murphy’s Law, once you remove a wall or floor, you never know what you’ll find. Ditto for homebuilding, where Murphy has it that once you put a shovel into the ground, you never know what you’ll dig up.

To wit, builders at a South London residential development recently unearthed a rare Roman sarcophagus. Only two other sarcophagi have been unearthed in England in recent years -- one in 2006 and the other 1999.

The excavation revealed a large “robber trench” around the coffin, and the lid had been moved, suggesting that the coffin was discovered and robbed in the past. However, it is possible that only the precious items were removed, and the less valuable artifacts, such as the body itself, still remain within the stone sarcophagus. The find is being taken to the Museum of London for further study.

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Backup Contracts Sometimes Win

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | August 18th, 2017

It’s always best to come in first when it comes to buying a house. But if the seller accepts another buyer’s offer on the house you want, there’s nothing wrong with coming in second.

If you ask the seller to hold your offer as a backup, there’s a fair chance you could move up if the first contract falls through. And make no mistake: Deals fall through all the time.

Perhaps the buyer couldn’t obtain financing, or is unable to sell his current house. Perhaps a home inspection revealed problems the buyer doesn’t want to deal with, or that the seller refuses to repair. Or maybe the buyer didn’t meet the contract’s timelines for financing and inspections.

If the house you want is a short sale, which often takes two to four months to complete, there’s always the possibility the buyer won’t want to play the waiting game.

“Four out of five buyers who make offers on short sales eventually pull their offers because they get tired of waiting or they find another house,” reports agent Rich Cederberg of eXp Realty in Albuquerque, New Mexico.

I bought a house in Florida a few years ago when the buyer who outbid me backed out. She had thought the house was move-in ready, but it wasn’t. So the bank that had foreclosed on the place came to me, because I had requested that my offer be held as a “just in case” backup.

“We are seeing more homes come back on the market” that had contracts that fell through for one reason or another, says Jeannette Karis, an agent with RE/MAX in Spokane, Washington.

Backup contracts are handled differently in different places. So what follows is a basic discussion of the technique. In such situations, you should align yourself with a quality real estate professional, and perhaps even an attorney versed in real estate law.

Sellers often agree to take other contracts as backup offers as insurance -- a safety net, in you will -- should the accepted offer fall through. This keeps them from having to ever again deal with potential buyers traipsing through their homes. Jane Kontoff, an agent with Keller Williams in Concord, Massachusetts, once listed a property for which the buyer backed out one morning; by the afternoon, the house was under contract with someone else, without ever going back on the market.

Indeed, a backup may be a seller’s secret weapon, used as leverage in keeping the buyer from asking too much in the way of repairs or other concessions.

The mere existence of another offer just sitting there, waiting for the first one to crumble, could have a psychological impact on buyers, pushing them to move forward despite issues they’re not comfortable with. After all, a buyer who plays hardball could end up in a stalemate with the seller, who could decide to hold his ground and move on to the next contract.

Asking for your offer to be held as a backup is a smart move: It doesn’t cost anything, first of all. And if the first buyer’s inspection uncovers significant flaws in the property, the seller has to disclose them, and you will know about them without having to pay for your own examination.

But buyers who find themselves in second place must be careful. If you keep looking at other houses (which you should), and find one you like just as well or better, you could find yourself in the precarious position of having contracts on two places. It’s a good idea to put a time limit on the first offer -- say, 30 or 45 days.

At the same time, a time limit puts added pressure on the seller to swim or cut bait with a first buyer who is stumbling around financing or inspection issues. And if your offer happens to be higher, it could put pressure on the first buyer to move forward because he’s getting a good deal.

Backup buyers also should put a “right of first refusal” clause in their offers. That way, you’ll be first in line if the other deal fails, but you won’t be bound to move forward if your situation changes or other unforeseen issues come to light.

In some places, though, sellers have the right to accept backups right up to the day the first buyer closes. And should one of those backups be without any financing or inspection contingencies, the seller has the right to give the first buyer anywhere from 24 to 72 hours to remove the contingencies in his contract. If the buyer doesn’t, that contract becomes null and void and the seller can move on to yours.

Some realty pros advise against backup contracts because when the first contract fails, the value of house tends to decrease, at least technically. As a result, you could be locking yourself into a purchase price that is too high. At the same time, though, in many markets, values are marching higher every day -- so someone whose backup contract moves up to first could be getting a bargain.

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Tales From the Landlord Trenches

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | August 11th, 2017

Every landlord has tales to tell about the trials and tribulations of owning rental property. Here are a few of mine:

-- The flood. The house was between tenants when an upstairs water pipe burst. The water cascaded all the way down into the crawl space. After filling that area, it spilled out into the yard, creating a wading pool outside.

I didn’t find out until the four-figure water bill arrived. Fortunately, once I turned the water off, the accumulated water slowly sunk into the ground, and I made the necessary repairs.

-- Here today, gone tomorrow. When I eventually put that same house on the market, I fixed it up nicely, including the addition of a bunch of new shrubs. The day after the bushes were put into the earth, they were gone, just like that. During the night, someone had dug them up, leaving me nothing but gaping holes in the ground.

-- Tell-tale heart, Part I. My tenant was way behind on her rent. (I used to let people slide far longer than I should have: big mistake.) So I filed for eviction, and it took three months for the court to process it. The night before the sheriff was to knock on her door, she called me, crying, “Please don’t toss me out! I’ll pay you tomorrow.”

Bleeding heart that I am, I called off the eviction. Of course, she didn’t pay. And it took three more months with no rent to finally get her out.

-- Tell-tale heart, Part II. One of my tenants died of a heart attack in his bedroom. But sadly, no one knew anything was wrong until his rent didn’t arrive. It took days to locate his next of kin. After the police removed his body, a hazardous waste clean-up crew put the bedroom back in order.

-- Guns drawn. The only time I personally evicted someone, the experience scared the living daylights out of me.

I had rented the place to a man, his girlfriend and their children. The guy eventually split with his girlfriend but continued to pay his rent. He was habitually late, but he paid. And then he stopped. It took me several months to track him down, only to discover that he had declared bankruptcy and moved away. I couldn’t touch him for back rent.

But he had allowed his teenage son to remain in the house, so I still had to file for eviction. When I got the court’s permission, I went to the house, along with two deputy sheriffs. As we were about to bang on the front door, the officers pulled their guns, ready for anything.

I wasn’t ready for that, though. When they flashed their weapons, I ran like a scared rabbit around the corner.

Fortunately, the house was empty, but it had been trashed almost beyond reclamation. I had to completely strip it down and start over.

-- The gallon-gift guy. I once rented a room in a boarding house I owned -- five bedrooms, five tenants who shared the kitchen and living space -- to a fellow who was on unemployment at the time. I took a chance on him because he was willing to take the smallest bedroom in the house. He paid his rent faithfully for a couple of years, and then he stopped. Finally, after a few months with no rent, I told him he had to move, which he did.

Nice guy that he was, he left me a present: 50 or 60 1-gallon jugs full of urine. Rather than rising from his mattress to get to the bathroom, it appeared he’d just used jugs. But he never bothered to empty them.

I donned rubber gloves and a mask and proceeded to empty each one down the toilet. Then I carried the empty jugs down the stairs and into my truck and hauled them off to the dump. To remove the stench from the jugs that had spilled during his stay, I had to replace the room’s hardwood floor.

But the worst part occurred on my last trip down the steps with a handful of empty jugs: I missed the last step and broke my ankle.

Of course, there have been a lot of rewarding moments over the years, too. And not just of the monetary kind. The one I remember most fondly happened around Christmas, when a single-father tenant showed up at my front door with a frozen turkey.

Turns out, his church gave out the turkeys to parishioners and told them to distribute them to people in their lives who had done good by them. Since I had allowed him to be late with his rent, he said, he thought of me as one of those people.

I was really touched. But all in all, I’d say landlording isn’t for the faint of heart.

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