San Diego Real Estate Blog

Does it matter whether a real estate agent charges you a flat commission rate — say 6 percent — or quotes you a flat rate but adds hundreds of dollars labeled an “admin” or administrative fee?

Helen R. Kanovsky, general counsel at the Department of Housing and Urban Development, clarified the government’s position on controversial add-on fees in a recent letter to industry lawyers. During the past several years, many brokerage companies began adding fees onto their commissions to generate higher revenue. The fees came with a variety of names — “processing” and “ABC” among others — and were charged to sellers and buyers, payable at closing.

But a U.S. District Court Judge’s decision last year threw the industry into an uproar when he concluded that add-on fees violate federal law when there are no specific services performed to justify the extra cost. This forced the National Association of Realtors and other industry groups to urge brokers and agents to reexamine their approach to pricing.

HUD never issued detailed guidance to the industry following the court decision on what’s legal — and what’s not — until Kanovsky’s letter. Here’s what she said, in essence: Federal law does not govern how much realty brokers can charge their customers. But it does govern how brokers and agents disclose their compensation to consumers. Commissions may be quoted “using a flat fee, a percentage of the sales price, or a combination” of the two. The revised HUD-1 settlement sheet in use nationwide since Jan. 1 has lines where the commission charges and splits can be listed. However, Kanovsky warned that if the total charges “exceed the amount of the commission for listing and selling the home that are reflected in the real estate broker’s or agent’s listing agreement,” then HUD has the legal power to review the extra charge “to determine whether additional services were provided” to justify the add-on.

Buyers should ask about all compensation and fees in any transaction. If you’re asked to pay fees you’ve never heard of, or that come with vague justifications, don’t roll over. Just say no.

Some of the nation’s top economists believe the housing market has turned and better days are on the way for the housing industry.

Increases in jobs, credit, and affordable homes will overcome impediments such as rising interest rates, and the expiration of the Federal stimulus program to push the housing market toward recovery, says Dean Maki, chief U.S. economist for Barclays Capital.

“I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” says Karl Case, co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College.

“The underlying trend is turning positive,” says Bruce Kasman, chief economist at JPMorgan Chase & Co.

It’s nice to see some psoitive things being reported for a change. That sure can’t hurt anything.

The average home in the USA has appreciated +1.7% (in aggregate, not per year) over the last 5 years (i.e., 2005-09). Homes in Wyoming have performed the best, gaining +26.7% on average. Homes in Nevada have fared the worst, losing 40.4% of their value (source: Federal Housing Finance Agency).

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the federally-supported tax credit of up to $8,000 for qualified first-time homebuyers purchasing a principal residence. It also authorizes a tax credit of up to $6,500 for qualified repeat or move-up homebuyers.The new tax credit expires April 30, 2010 (buyers must be under contract by April 30, 2010, and close on or before June 30, 2010). That means homebuyers should act now. With an estimated cost of $10.8 billion over 10 years (estimated by the Joint Committee on Taxation), it is not likely that the credit will be extended beyond the existing deadline of April 30, 2010.

The tax credit, combined with low interest rates and affordablehome prices, makes this a great time to buy.

Higher income limits may allow more homebuyers to qualify. For sales occurring after November 6, 2009, income limits have increased from $75,000 to $125,000 for single taxpayers, and from $150,000 to $225,000 for married taxpayers who file jointly.

The maximum eligible purchase price has increased. The new maximum of $800,000 allows more buyers to qualify. This new maximum purchase price limit applies to both first-time and repeat homebuyers.

The amount of the tax credit is different for first-time and repeat homebuyers.

•First-time homebuyers may qualify for a credit of up to $8,000 (10% of the purchase price of the home or $8,000, whichever is less).

•Repeat/move-up homebuyers may qualify for a credit of up to $6,500 (10% of the purchase price of the home or $6,500, whichever is less).

No repayment is required. The tax credit does not have to be repaid as long as homebuyers use their new home as their principal residence for at least three years after the purchase.

In another sign of the times (crazy as they may be) on April 5, 2010, in an effort to end the foreclosure crisis, the Obama administration will start paying troubled homeowners to “Shortsale” their home. This latest program, which is still being fine tuned, will allow owners to sell for less than they owe and will give them a little cash to speed them on their way. Reports show more than five million households are behind on their mortgages and risk foreclosure. Only a small percentage of homeowners have been helped by the government’s $75 billion mortgage modification plan. The administrations biggest concern (as it should be) is that millions of foreclosures could delay or even reverse the economy’s tentative recovery. I think if you look at history, there is little doubt getting our country back on track will come.

The plan calls for  the servicing bank and second position (if there is one) to get $1,000. And now the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.” through the housing industry. Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure. For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

Whether this plan works or not time will tell. I guess it’s good the administration is going to give the money directly to the people instead of lining the pockets of their cronies at the banks who give huge amounts of monies to both parties election campaigns.

Copy the address below and place in your browser to be taken to NSDCAR’s complete report on housing trends, median prices etc. Very detailed and informative report.

http://www.nsdcar.com/homedex/current_homedex/2009_yearend_homedex_030910.pdf

Economic data was the primary force driving mortgage rates this week. Generally weaker than expected data resulted in modest improvement in rates for most of the week. This was completely offset by an increase in rates on Friday due to stronger than expected Employment data, however, leaving mortgage rates nearly unchanged from last week.

Against a consensus forecast for a decline of -50K jobs, the economy lost -36K jobs in February, and the revisions from prior months showed more jobs than previously reported. The Unemployment Rate remained unchanged from January at 9.7%, which was lower than expected. The payrolls figures and the unemployment rate are calculated from two separate sets of data. The payrolls report focuses on larger companies, while the unemployment survey covers all companies. The more volatile unemployment survey surprisingly showed an increase of 308K jobs in February, indicating that smaller companies were a source of job gains.

This week’s housing data was weaker than expected. January Pending Home Sales fell 7.6%, far below the consensus forecast for a small increase. They were still 12% higher than one year ago, however. The expected surge in sales from the extended homebuyer tax credit has failed to materialize so far. The chief economist of the National Association of Realtors (NAR) suggested that unusually harsh weather “hampered shopping activity” in many regions, so a pickup in sales still may be seen as buyers take advantage of the tax credit before the April 30 deadline.

To learn more about news impacting interest rates and mortgage markets, go to www.mbsquoteline.com

Home buyers hoping to snag a really good deal on a foreclosed home are finding it increasingly difficult because supply is shrinking. The number of foreclosures that are available for sale nationwide fell to 617,000 in December, down from 845,000 in November 2008, reports Barclays Capital.Not only have attractive homes in popular neighborhoods already been snapped up, but also government help for distressed buyers is delaying more foreclosures.

Demand is driving up prices. Investors say typical prices have climbed from 75 percent of appraised value to 85 percent or higher when there are bidding wars.

Source: The Wall Street Journal, James R. Hagerty (02/23/2010