My New Blog

During the mortgage bailout the Federal government began purchasing mortgage backed securities in order to stimulate the appetite in the secondary market.  After the near collapse of our banking industry investors wanted nothing to do with the secondary market causing mortgage rates to stay high even though the Fed rate was brought down to 0 - .25%.  So, in a nut shell the Feds purchasing mortgage backed securities stimulated the economy and brought mortgage rates down.

Why is the this important?  Because the Fed will, in the near future, cease to purchase mortgage backed securities.  This will cause mortgage rates to rise, so if you or clients are waiting to pull trigger, don't wait too long as mortgage will more than likely increase when this happens.

Hope this insight helps,

Samuel Morales

This is a very good post taken from CNN online today; based on my real life experiance it is very rare that a loan servicer actually does a trial loan modification if you're not already in danger of foreclosure but if they do here is what to expect. 

Mortgage rescue: Credit score killer

By Tami Luhby, senior writerDecember 28, 2009: 8:37 AM ET

But many don't realize that entering a trial mortgage modification can actually hurt their credit.

CNNMoney recently received a flood of e-mails from readers complaining about the impact of trial modifications on their credit reports.

To be sure, many people who apply for the president's plan are already delinquent in their mortgage payments, which wrecks their credit backgrounds. And obtaining a trial modification should affect borrowers' scores because it shows they cannot meet their original obligation, experts said.

But being in a months-long trial period may only add to the pain.

Jason Axelrod learned that the hard way.

Axelrod, a municipal employee who lives outside Chicago, entered a trial mortgage modification program this spring.

He had not fallen behind in his mortgage, but he was finding it harder to make ends meet after his overtime was cut and his property taxes skyrocketed. Told it would not hurt his coveted 750 score, Axelrod secured a $565 reduction in his monthly payments.

Eight months later, Axelrod is still stuck in the trial modification, trying to satisfy his loan servicer's endless requests for documents.

And to his horror, his credit score has plummeted to 644.

"It's completely destroyed my credit," said Axelrod. "If I had known it would affect my score, I would have never entered the program."

Representatives at JPMorgan Chase (JPM, Fortune 500), which services Axelrod's loan, are instructed to tell applicants that entering a modification could impact their credit histories, a bank spokeswoman said.

Despite his weakened credit score, there is at least some good news for Axelrod: After being contacted by CNNMoney.com, JPMorgan Chase said his permanent modification had been approved.

Under the president's plan, troubled borrowers can have their monthly mortgage payments reduced to 31% of their pre-tax income.

Homeowners are first put in a trial modification for several months to prove they can handle the new commitment and to give the bank time to collect the necessary income and hardship verification documents.

During this period, industry guidelines call for loan servicing companies to report borrowers to the credit bureaus according to their status before they entered the modification - either current or the number of days delinquent.

However, borrowers' accounts are also designated with a code indicating they are in a partial payment plan.

The coding alone can impact credit scores, which measure a consumer's financial health and range from 300 to 850 under the FICO system. The severity depends on how many payments the borrower missed before entering the program. Those who were current in their mortgages could see their scores fall up to 100 points, according to the Treasury Department.

Just what banks are reporting to the credit bureaus remains a matter of some debate. Some servicers have been inconsistent in following the guidelines, according to a Treasury official. Also, they don't always report that their current borrowers have entered modification plans.

Some 24,000 trial modifications were given to those still current with their payments, as of early September. A total of 366,000 trial modifications were in effect at that time. The total number has since risen to just under 700,000, as of the end of November.

JPMorgan Chase, Wells Fargo (WFC, Fortune 500) and Citigroup (C, Fortune 500), which are among the nation's largest servicers, declined to be interviewed for this article. A Bank of America (BAC, Fortune 500) spokeswoman said the bank follows industry guidelines.

According to the Mortgage Bankers Association, an industry group, servicers are required to report all information about their clients, including whether they are in modification plans. For seriously delinquent borrowers, this may improve their status somewhat since they will start making payments again.

"If you are in the trial period, over that three month period, you are going to improve your situation in most cases," said Vicki Vidal, the group's associate vice president for government affairs.

Once borrowers receive a permanent modification, their payment status is listed as current. However, the delinquency remains on their credit reports for up to seven years.

On top of that, the longer homeowners are listed as delinquent, the greater the impact on their credit score. That's one reason why servicers should be quicker to convert borrowers from trial modifications to permanent adjustments, said Jan Jones, a housing counselor in Alaska.

Financial institutions have come under fire in recent weeks for dragging their feet in evaluating borrowers for permanent adjustments.

"What's making people upset is the length of time lenders are taking to consider these workout plans," said Jones, who works for Consumer Credit Counseling Service of Alaska.

Axelrod is already feeling the impact of his lower credit score. He ordered a new car this summer, believing it would come with a lower monthly payment. It arrived in mid-December.

But because of his newly blemished credit background, his two credit unions turned him down for a car loan. His dealership told him the best he could get is a 12% rate, a hefty hike from the 4.7% he was paying before.

"This is the biggest nightmare," he said. "My credit is completely useless." 

For the exasperated job-seeker to whom employment opportunities seem bleaker than ever, salvation may lie in the Lone Star State. Texas, home to dozens of energy heavyweights and nearly as many innovative small companies, has three of the best cities to earn a living: Dallas, Houston and Austin.

When taking into account the cost of living, strength of industry, economists' predictions for the future state of employment and, of course, salary, these are some of the best U.S. cities in which to take home a paycheck.

It's no secret that, in general, jobs are tight: The U.S. Bureau of Labor Statistics reported on Aug. 7 that non-farm payroll employment sank further in July, and unemployment is entrenched at 9.4%. But some job markets manage to remain healthier due to one or more factors, like a concentration of top companies a resulting prospective annual jump in job growth. Such is the case for the Texas towns on our list.

And then there's Minneapolis-St. Paul. Cold weather, yes. Dismal employment landscape, no. The reason is that the area is home to 10 of Forbes' top-ranked companies--and comes out third on this list.

While employees everywhere are anxious about their jobs, they have less to worry about in cities with clusters of businesses in high-paying or growth industries, and there just so happens to be a relatively low cost of living as well. It all adds up to people earning a better living.

Behind the Numbers
To create our list of the best cities to earn a living, Forbes ranked the 40 largest Metropolitan Statistical Areas (MSAs)--geographic entities defined by the U.S. Office of Management and Budget for use in collecting statistics--in four areas: median income, cost of living, job growth and the quality of the business environment.

We looked at the past year's median income, collected by the U.S. Census Bureau in each metro area. Because income goes hand in hand with the cost of living (a paycheck is only worth as much as the amount of groceries, health care and housing costs, and other essentials it can cover), we used numbers from the Council for Community and Economic Research, whose ACCRA Cost of Living Index provides a weighted figure for consumer expenditures in each city.

Next we factored in the job growth forecast from 2008-13 from Moody's Economy.com, which uses data like gross product growth, the number of business that have opened or shuttered, and its venture capital dollars to determine future employment prospects for an area.

As a measure of the vibrancy of local business, we counted how many of Forbes' 400 best big companies and 200 best small companieswere located in each metro area. Cities with the highest proportion of industry giants and solid entrepreneurial endeavors have some of the best prospects for qualified job-hunters. Finally, we created a weighted composite ranking based on individual rankings within each of these categories.

More Good Companies, More Jobs
Our data suggest that among the best reasons to move to Houston or Dallas is the number of top-ranked companies headquartered there (38 and 15, respectively). Atlanta also attracts big businesses across diverse industries, as it's home to Coca-Cola ( KO - news - people ), which brought in $8.3 billion in revenue last year.

But you'd also have a few first-class employers to choose from in St. Louis, home to chemicals giant Monsanto Company ( MON - news - people ) and maker of batteries and other electronic equipment Energizer Holdings Inc. ( ENR - news - people ), along with seven others that Forbes ranked the strongest in the country.

What St. Louis truly has to its advantage is its low cost of living--it is the cheapest of our top 10 cities in which to live. While cities like St. Louis might not have a reputation for top schools, a low crime rate or good weather, they compensate with lower expenses.

"Midwestern cities in general tend to have a relatively low cost of living, as compared to high-amenity cities like Boston, New York, San Francisco and coastal cities in general," says Robert Helsley, a professor at the University of California, Berkeley's Haas School of Business. The location of a city raises its appeal and drives up its cost of living, he believes. "The last time I checked, St. Louis wasn't on the coast."

While it's true that a box of cereal is easier on the wallet in some cities than in others ($2.76 in Houston, but nearly twice as much in New York), the city on our list where you'll have the most take-home to spend on groceries is Washington D.C., home to the federal government and a web of other industries that support it. Laborers in the capital brought home a median $40,377 last year.

The next-best earning city is Seattle, whose $32,836 median income makes it the only West Coast city on a list dominated by Eastern and Southwestern metros. Health care, one of the city's beefiest industries, accounts for 96,000 local jobs and $10 billion a year. Biotechnology and education also drive the economy and spur jobs that help mitigate the city's high cost of living.

If you're worried about the economic situation there--or in other places on our list--changing for the worse in the next few years, don't be. As health care, technology and energy take more employees into their ranks, cities that specialize in these core industries will continue to draw skilled workers and dole out attractive compensation.

Expect this list to look similar next year--but you might not need it if by then you've moved to Texas for a job.

By Matthew Woolsey (Frobes)

It didn't take long after Warren Bland retired as a professor of geography at California State University, Northridge, for him and his wife Sarah to realize that 37 years was enough of suburban life. Too much driving and not enough entertainment were two big factors in their move to downtown Portland.

"You don't need the big suburban house. You don't need two or three cars. And you can pocket some equity," says Bland.

For empty-nesters, moving downtown has the obvious allure of trendy restaurants, ample entertainment, quick commutes and a spare bedroom in a place your kids will actually want to visit. Even so, it's not all upside. Along with their attractions, metropolitan hubs such as Philadelphia, Seattle and Chicago can be costly, lonely and crime-ridden.

In Depth: Best Downtowns For Empty-Nesters

Moving downtown "can be a very emotional decision for a lot of people," cautions Daniel Worthington, head of AXA Advisors' San Francisco branch office. "You really have to map out the increased expenses and the potential savings."

The first step in calculating whether a move downtown makes financial sense for you is to consider how much space you need. A good rule of thumb is to assume that you can halve the size of your previous living quarters and still get by comfortably. If you were in a 3,000 square-foot suburban home, 1,500 square feet in a two- or three-bedroom condo should do you fine in a city center.

Before moving to Portland, Bland evaluated everything from housing and transportation costs to crime rates and health care access. He was so meticulous, in fact, that he turned his evaluation process into a book, titled Retire In Style, that analyzes the offerings for retirees of 60 cities.

A move into some cities is tantamount to an immediate payday. Near San Diego, for example, homes in Rancho Santa Fe and La Jolla go for an average of $520 per square foot; move into the upscale Gaslamp district downtown and space costs just $475 per square foot. At those rates, swapping in a 3,000-square-foot suburban home for a 1,500-square-foot condo will free up $850,000. Make the same sort of switch from Littleton, Colo., into downtown Denver's far costlier Union Station enclave, however, and you'll have to shell out an extra $58,000.

Behind the Numbers
For our list of best downtowns for empty-nesters, we considered the country's 30 largest metro areas (geographic entities defined by the U.S. Office of Management and Budget for use by federal agencies in collecting, tabulating and publishing federal statistics) and calculated the potential savings of moving downtown based on the cost of property in the suburbs vs. the downtown area using data from Trulia.com, the Census Bureau and the Texas Transportation Institute. At the top of our list was Los Angeles, followed by San Diego and then San Francisco, as places where suburban homeowners could cash out scads of equity and enjoy the city life. Next were Seattle, Philadelphia and Minneapolis. If, like Bland, you're planning on moving to a new metro, consult the data here about per-square-foot property rates and work out your own math.

Property taxes can also go a long way in tipping the financial scales--especially if you live in a state like Michigan or California, where long-term homeowners receive outsized property tax breaks.

Before making a move, Californians would do themselves a favor to get a firm grasp on Proposition 90. It is a modification to the state's famous Proposition 13, which keeps a tight lid on property tax hikes for as long as you own a home. A long-time resident of a $5 million home might, for example, pay $8,000 in annual property tax while a new purchaser would immediately get ratcheted up to $50,000, says Spencer Sherman, a financial adviser for Abacus Wealth Partners in Sebastopol, Calif.

Under Prop 13, those 55 years old and over can shift their property tax basis one time to a new home of equal or lesser value, but only within the same county. Proposition 90, passed in 1988, allows new buyers to take their basis with them across county lines, but it only applies if the county itself agrees to accept the modification. That shouldn't be a problem if you're looking to move from the suburbs of Los Angeles or San Diego County to the city center, but it's another story in tax-happy San Francisco, which is a county unto itself and doesn't recognize Prop 90.

That's a real shame for residents of the Bay, given that the going rate per square foot in prime suburbs like Mill Valley is around $606, and there is an only marginally higher per-foot price of $668 in Pacific Heights. In contrast, empty-nesters downsizing from East Coast suburbs like Greenwich, Conn., to New York's downtown TriBeCa neighborhood can expect to shell out $584,000 for their half-sized 1,500-square-foot abodes.

Another complication of moving downtown these days is unloading your suburban family homestead. In June, Treasury Secretary Timothy Geithner opted to rent out his Larchmont, N.Y., home after he didn't get any offers that would break even with what he'd paid for it in 2004. It's the same story in Ross, Calif., north of San Francisco, where 28 homes are on the market and there's been just one sale in the last 90 days for which data is available, according to Trulia. In Medina, Wash., home to Bill Gates, 54 homes are for sale; there were just four closings for the most recently reported three months.

One option is to follow Geithner's lead and rent out your suburban home, a strategy that will land you some nice tax benefits.

You can also take advantage of the federal gift tax exemption. "Rather than trying to sell an existing suburban home, consider gifting it to one of your children," says Bennett Marks, founder of Marks Wealth Management in Minnetonka, Minn. The tax law allows each individual to give away up to $1 million worth of assets during his lifetime with neither the giver nor the recipient liable for any tax. That's especially enticing at a time like this, when real estate values are depressed. For more on making gifts, check out "Giving, The Tax-Free Way." Note that when you use $1 million gift tax exclusion, it reduces the amount your estate can pass on free of federal estate tax to non-spousal heirs. For those dying in 2009, that amount is $3.5 million.

"Properties are discounted, but they won't be discounted forever," says Marks.

The flipside of the renter's dilemma is whether you should rent or buy downtown. In Miami, someone downsizing from a 3,000-square-foot suburban home to a 1,500-square-foot downtown condo could bank $178,000. But they'd also then be the proud owners of a property in a market that's down 40% and may be years from recovery. The chances of buyer's remorse are high.

"It's a totally new phase of your lives," says Sherman. "You don't know what your needs are going to be, how much the kids will visit or if you're going to like the new situation."

Translation: The smart move for many will be to rent, rather than buy, their newly feathered empty nest. For a look at how various cities stack up, see our slide show.

NEW YORK (CNNMoney.com) -- The home price slide accelerated during the first three months of 2009, according to a report issued Tuesday.

The S&P/Case-Shiller National Home Price index, a bellwether of real-estate market direction, plunged a record 19.1% during the quarter compared with the first three months of 2008. That followed an 18.2% drop last quarter.

The Case-Shiller 20-city index dropped 18.7% year-over-year, also a record. It fell 18.5% during the last three months of 2008. This index has plummeted 32.2% from its July 2006 peak and has fallen 32 straight months.

The national index covers almost all homes sold throughout the United States and is reported quarterly, while the 20-city index reports sales in 20 major metro areas and represents a cross section of the national market. The 20-city index comes out every month.

"Declines in residential real estate continued at a steady pace into March," said David Blitzer, chairman of the Index Committee at Standard & Poor's in a prepared statement. "All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines."

The ugly report was somewhat unexpected, according to Mike Larson, a real estate analyst for Weiss Research.

"The market was anticipating better results," he said. "There had been some signs of increased sales in post-bubble markets."

But that sales increase has not translated into higher prices. Bargain hunting - bottom fishing really - for foreclosures and other distressed properties has driven sales volume up while further depressing prices.

The foreclosure sales, which many appraisers used to ignore when they evaluated home prices because they represented outliers rather than typical sales, now have to be accounted for.

"These used to be anomalies," said Larson. "Now, when sales are dominated by foreclosures, where they represent 50% or more of [transactions], they are the market."

The market plague has burst far beyond its Sun Belt epicenter, as the latest month's data reveals. In March, Minneapolis recorded the largest monthly price loss of any metro area in the 20-city index, losing 6.1% compared with February. That is the biggest single-month decline for a city in index history.

Sun-Belt cities still had the largest year-over-year declines in March, with Phoenix prices down 36%, Las Vegas off 31.2% and San Francisco dropping 30.1%.

Two cities have now have fallen more than 50% from their peak prices: Phoenix is down 53% since June 2006 and Las Vegas is off 50.4% from its August 2006 high. Dallas prices suffered the smallest loss from peak, just 11.1% since June 2007.

Economist Mark Zandi, the founder of Moody's Economy.com, is optimistic that the market will stop falling sometime this summer or fall. "We need to focus on the mortgage-modification program," he said. "If that plan doesn't work or only works as well as the other modification programs have, we've got a problem." 

Just in case thinking of buying, or currently own a condo...watch this, it is reality--and u are getting @#$@!$. 

Home prices fall at record pace

Index of 20 U.S. cities shows 18.2% annual drop, to the lowest levels since 2004

NEW YORK (CNNMoney.com) -- An index of home prices in 20 major metropolitan areas fell at a record annual pace in November, to levels not seen since 2004, according to a report released Tuesday.

The S&P Case-Shiller Home Price Index, a sampling of 20 cities from across the nation, fell a record 18.2% over the 12 months ended Nov. 30. That brought the index to its lowest point since February 2004. From its peak in mid-2006, the index has plunged a whopping 25.1%.

Eleven of the 20 cities showed record declines, and the 12-month price drop for 14 of the cities was a double-digit percentage.

"The freefall in residential real estate continued through November 2008," said David M. Blitzer, chairman of the Index Committee at Standard & Poor's, in a prepared statement. He said the 20-city index has fallen for every month since August 2006, a total of 28 consecutive months.

The decline was very broad, with prices down at least 1% in every region of the nation during the October-November period. Eight regions recorded record monthly declines, according to Blitzer.

As has become the norm, Southwest cities were the hardest hit, with Las Vegas prices dropping 3.9%, the nation's worst decline. Phoenix, at 3.4% was second. The Arizona metropolis recorded the worst 12-month decline, at 32.9%, followed by Las Vegas, at 31.6%.

New York and Cleveland prices fell by only 1% for the month, the smallest November drops. The best 12-month performer was Dallas, where prices slipped by 3.3%. Other 12-month, single-digit percentage drops were recorded by Denver, at 4.3%, Cleveland, at 5.2%, and Charlotte N.C., at 5.3%.

The Case-Shiller numbers just underscore how tough the market is for home sellers, according to Mike Larson, a real estate analyst with Weiss Research.

But there was some positive news in Monday's report from the National Association of Realtors, which showed a bump up in the number of existing homes sold during December.

"We're clearly seeing some of the impact of falling prices," said Larson. "But the problem is that many of those sales are made at the cheapest prices [often of bank repossessed properties], making it hard for normal homeowners to sell."

He does not foresee any swift improvement in housing markets - not as long as industries of all kinds keep announcing new layoffs, as several companies did Monday when more than 70,000 Americans learned they would lose their jobs.

"Home prices will likely decline, albeit at a slower pace, for the rest of 2009," said Larson.  

NEW YORK (Reuters) -- Demand for U.S. mortgage applications was unchanged during the Christmas holiday week, holding the highest levels in more than five years with loan rates near record lows, an industry group said on Wednesday.

Borrowing costs have tumbled more than 1-1/2 percentage points from summer peaks and are widely expected to slide further as the government steps in to stabilize the worst housing market since the Great Depression.

The Mortgage Bankers Association's seasonally adjusted index of mortgage application activity was unchanged last week at 1,245.7, matching the highest level since July 2003 set the previous week.

Requests for home purchase applications climbed 1.4% to 320.9 on a seasonally adjusted basis, while refinancing application demand slipped 0.4% to 6,733.8 last week.

The refinancing index had surged by nearly 63% in the prior week, also to the highest level since July 2003.

Fast-falling mortgage rates are driving demand, particularly for refinancing.

Fixed 30-year home loan rates averaged 5.03 percent last week, marginally lower than 5.04 percent a week earlier but well below the 6.59 percent summer peak in July, according to the Mortgage Bankers Association.

Last week's rate was the lowest since June 2003, the trade group said.

The Federal Reserve's plan announced in November to buy up to $500 billion of mortgage-backed securities, and its pledge this month to expand those purchases if needed to lower mortgage rates, has already cut borrowing costs.

On Tuesday, the Fed said it would start buying in January and purchase up to a half trillion dollars of mortgage bonds within six months.

Affordability is improving by other measures as well, with a record annual drop in October bringing home prices down more than 23% from their summer 2006 highs, according to Standard & Poor's/Case-Shiller home price measures reported on Tuesday.

Consumer confidence, meantime, plunged to a record low in December in response to the worst job market in 16 years.

Consumers are reluctant to boost spending when unemployment is spiking and when they could be committing money to a house that could cost much less later, analysts said.

Home owners who want to refinance would be unable to if the value of their home has fallen below the size of their mortgage.

More rigid lending criteria also mean that many mortgage applications may not be approved.

While mortgage bond purchases by the government press home loan rates down, "the one thing the Fed and the Treasury cannot do is improve the credit quality of the borrower," said Kevin Cavin, mortgage strategist at FTN Financial in Chicago.

The government interventions "can drive down primary mortgage rates and make getting loans much more affordable, make a borrower's monthly payments lower -- if they can qualify," he said on Tuesday. 

Treasury Department Considers Plan to Lower Mortgage Rates

Financial industry lobbyists are urging the Treasury Department to take steps to lower rates on 30-year mortgages to 4.5 percent.

AP

Wednesday, December 03, 2008

WASHINGTON -- Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates and help stabilize the battered U.S. housing market.

Under one proposal, Treasury would seek to lower the rate on a 30-year mortgage to 4.5 percent by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac, Scott Talbott, chief lobbyist at the Financial Services Roundtable, said Wednesday.

If enacted, such a plan would be an unprecedented opportunity for anyone with good credit and a solid income who could qualify for a mortgage at the lowest rates on records dating to the early 1960s, said Keith Gumbinger, senior vice president at financial publisher HSH Associates.

"You would have the mother of all re-fi booms," said mortgage industry consultant Howard Glaser.

The goal of the industry's proposal would be to take advantage of the unusually large difference, or spread, between mortgage rates and yields on government debt. On Wednesday, the yield on the 10-year Treasury note yield sank as low as 2.65 percent, while the national average rate on a 30-year fixed rate mortgages was 5.75 percent, according to HSH Associates.

In recent years, there has been about a 1.8 percentage point difference between the yield on a 10-year Treasury note and a 30-year mortgage rate, but that spread currently hovers around 3 percentage points.

Analysts said that the government could use its ability to borrow money at low rates to in essence flood the market for mortgage-backed securities. This increased demand would tend to push down the yield on mortgage securities sold by Fannie and Freddie, which now average about 5.5 percent because of investor concerns about default risks. Once those yields fall, the theory goes, lower mortgage rates should follow.

That would have two benefits for the economy: Immediately adding money to the pocketbooks of homeowners who can refinance their mortgages and reduce their monthly payments, and eventually help arrest the slide in home prices since much lower mortgage rates would allow more potential buyers to qualify for loans.

"The goal is drive mortgage rates so low that home prices not only stop falling but begin to rebound," said Greg McBride, senior financial analyst at Bankrate.com.

If the government does buy up mortgage securities, it would be similar to the effort announced last week by the Federal Reserve to purchase up to $500 billion of mortgage-backed securities from Fannie and Freddie. The two mortgage giants, which were seized by federal regulators in September, own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt.

The Fed, however, did not announce a specific target for mortgage rates, which plunged about a half percentage point after the announcement.

That caused new mortgage applications to more than double last week, according to the Mortgage Bankers Association's weekly survey released Wednesday. Refinance volume more than tripled, and made up for nearly 70 percent of all applications.

Still, the industry plan is not likely to help borrowers whose credit is so damaged that banks don't want to lend to them.

"It doesn't do anything to help all the borrowers facing foreclosures," said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. "It's going to benefit the people who have equity in their home, who have decent credit and can refinance."

Treasury is considering several options, and could announce a decision as early as next week, industry sources said.

Treasury spokeswoman Brookly McLaughlin said she would not comment on speculation about actions the department may take in the future.

The proposal was reported Wednesday afternoon on The Wall Street Journal's Web site.
Treasury could make such a proposal as part of a request for the second $350 billion of the $700 billion financial rescue fund, industry sources said.

Treasury Secretary Henry Paulson has been criticized by members of Congress for using the bailout money to shore up Wall Street banks, while not doing enough to help homeowners facing foreclosure.

In recent weeks, a diverse set of industry groups from real estate agents to carpet makers have called on lawmakers and the incoming administration of President-elect Barack Obama to subsidize lower mortgage rates and beef up tax credits to help stimulate housing demand.

The National Association of Realtors has been pushing a plan under which the federal government would spend $50 billion to lower mortgage rates. It says doing so would yield about 500,000 more home sales.

Meanwhile, the National Association of Home Builders is leading a new "Fix Housing First" coalition to push for aid to the ailing housing sector, including a tax credit of up to $22,000 for anyone who buys a home before the end of 2009.

How can sellers avoid $40K loss, tarnished credit?

November 17, 2008

By Benny Kass
Inman News

DEAR BENNY: My son and his wife own a house. Just before the housing market downturn, they moved 1,000 miles away to pursue a much more lucrative-paying career for him. Since then they haven't been able to rent the house, and if they sold it they would lose $30,000 to $40,000. Even though he makes great pay, they are barely squeaking by having to make that house payment and an apartment payment. Because they have kept up with the payment their credit rating is still excellent. Is there anything they can do to unload the house without taking a big hit on their credit rating or losing a lot of money? --Janice

DEAR JANICE: What is the loan to value (LTV) of your son's house? Is there any equity left or is it "upside down"? That means that the mortgage is higher than the current value of the house.

If there is some equity remaining, I would arrange a sale at any cost, just enough to pay off the mortgage and a real estate commission. In fact, your son and daughter-in-law should try to negotiate a lower commission with any real estate agent that lists their house.

If this is an "upside down" situation, then they should talk with a lender and see if a "short sale" can be accepted by the bank. This means that the house is placed on the market for sale at a price below its appraised value, and everyone (seller, broker and lender) take a hit. But if all goes well, someone will buy at the reduced price.

There comes a time in everyone's life that you have to "bite the bullet." Your son has been paying the PITI (principal, interest, taxes and insurance) for several years. Had they significantly reduced the price two years ago, they would have taken a loss on the sale, but would not have to carry that house as well as their present location.

My suggestion: There is no guarantee when this "meltdown" will end. Do whatever it takes to get rid of the house as soon as possible.

Home prices see another record plunge

10 major markets have seen home values fall 17.7% over the past 12 months, and experts expect the declines to continue.

NEW YORK (CNNMoney.com) -- Home prices fell in August for the 25th consecutive month and prices in 10 major markets plunged a record 17.7% year over year, according to a key index of real estate values released Tuesday.

The S&P Case-Shiller Home Price 10-city index dropped 1.1% for the month.

The 20-city index recorded a record year-over-year decline of 16.6% with a 1% fall in August.

"It's Economics 101," said Jared Bernstein, senior economist with the Economic Policy Institute. "You have a huge speculative bubble leading to a severe inventory overhang. And now home prices will have to decline accordingly."

That inventory overhang includes many vacant homes. The U.S. Census Bureau reported on Tuesday that the number of vacant homes on the market held steady in the third quarter, at about 2.8% of all housing. That's 65% higher than the long-term historic rate of 1.7%, and represents an excess inventory of nearly a million homes.

This number is critical to home price trends since owners of vacant properties - especially banks - will slash their prices to get deals done. That pushes prices down even more.

The Case-Shiller indexes compare the sale prices of the same homes each year to determine price trends and are considered one of the most accurate home price gauges.

The hardest hit of all 20 cities on a year-over-year basis was Phoenix, where prices plummeted 30.7% during the past 12 months. Las Vegas prices plunged 30.6% and Miami sank 28.1%.

The cities that held up the best were Dallas, which saw a decline of just -2.7%, Charlotte NC (down -2.8%) and Boston (off -4.7%). No city showed a price gain during the last 12 months.

In August, San Francisco saw the biggest price declines, down 3.5%. Phoenix (-2.9) and Las Vegas (-2.4) also reported sizable losses for the month. Two cities showed gains in August; Cleveland prices rose 1.1% and Boston prices inched up 0.1%.

Of course, the August indexes don't reflect the financial market meltdown that hit in September and severely restricted access to credit, according to Richard DeKaser, chief economist for National City Corp (NCC, Fortune 500). He believes the pace of price declines has picked up since then.

"There are two explanations for these steeper declines," he said, "neither of which are encouraging. One is that the difficulty in obtaining credit has further constricted demand. The second is that home sellers are finally capitulating on prices. They've been holding out for months, refusing to sell except at their prices. Now they're throwing in the towel."

Bernstein agrees. "Buyers and sellers have been staring at each other to see who blinks," he said. "Sellers may be blinking first."

That is reflected in existing home sales volume, which ramped up 5% in September as prices fell. Even new home sales went up slightly in September.

Much of that statistical trend is being driven by data from hard-hit western states like California. The California Association of Realtors reported last week that home sales volume jumped a whopping 97% in September compared with the same period a year ago. But the median price of an existing home has fallen 41%.

If that trend spreads to other states, price weakness could last for many more months, even as sales volume picks up. What happens after that largely depends on the confidence bolstering effect of the government economic stimulus packages, according to DeKaser.

"I'm optimistic," he said. "More credit will be available and housing inventories will be reduced. The deterioration will give way to a more balanced market."

But not everyone agrees that the stimulus packages, which are designed to loosen up tight credit, will prove helpful. Peter Schiff, president of broker-dealer Euro Pacific Capital, believes the impact will be decidedly negative.

"The goal of all these plans is to give consumers more money to spend. However, excess consumer spending is part of the problem, not part of the solution" he said. "After a decade-long spending orgy, market forces are finally trying to restrict consumer spending and dampen credit. But the stimulus looks to provide a new source of funds after savings, income, and credit have been exhausted. Our imbalanced economy is in desperate need of retrenchment, but stimulus plans will effectively hold the firemen at bay while throwing gasoline on the flames."

Schiff explained that the housing boom's exotic mortgages, which let people buy homes with zero money down, have vanished. Now people must save to afford a home. But easy credit means people will buy more consumer goods and save less to put towards housing. As a result, he expects home prices to fall a lot more.

"They'll surrender all the gains they made in the past 10 years," he said, "and be even lower than they were 10 years ago."  

October 31, 2008

By Ilyce Glink
Co-written by Samuel J. Tamkin
Inman News

Q: We sold our home in May and on the seller disclosure form we noted that we had had water in the basement. We always assumed the basement water issue was due to faulty gutters and an excessive amount of rainfall.

The buyer now wants us to pay for waterproofing the basement because she has had water in the basement. Does she have any grounds to sue us after the fact?

A: Most states have a seller disclosure law for residential real estate transactions. These laws require a seller to disclose to a buyer defects or major problems with a home.

To answer your question, you first have to determine whether you had an obligation to disclose the water problem to the buyer. While you believed your water problem was a minor issue, you still elected to disclose the issue to the buyer. You were right to disclose the problem.

If you had failed to disclose the water problem to the buyer, the buyer might have been able to sue you under state seller disclosure laws. You might have become liable to the buyer for the cost to repair the problem and even the buyer's costs to litigate the matter against you.

In your case, you disclosed the water problem to the buyer. If you were truthful in your disclosures to the buyer, the buyer should not be able to then use the seller disclosure laws against you.

Once you disclose a problem like water in the basement, the buyer has the opportunity to inspect, investigate and decide ultimately whether to buy the home. The buyer could also ask you to investigate and fix the problem as a condition of the contract. If the buyer decides to proceed with the purchase, the buyer has purchased the home with the knowledge of the problem.

However, in some states, the real estate contracts often used contain representations regarding the condition of a home. For example, a real estate contract could contain a provision that states that the seller represents to the buyer that the roof is water tight and free of leaks.

If your purchase contract contradicts the terms of your seller disclosure law, the purchaser might attempt to sue you under the contract, rather than under the remedies provided by your state's seller disclosure laws.

And, finally, if the purchaser is simply trying to get you to pay for the repairs because you were mistaken as to the cause of the water damage, that might not be a winnable case. The key to whether you would be liable for the water damage in this instance is whether you knew of the problem and the source of the problem and failed to disclose it.

Water problems in basements can be tricky situations. Some basements can take in water due to cracks in the foundation, a high water-table level, poor drainage around a home, clogged gutters and downspouts, or broken sump pump systems. You can also get water in a basement if the roof leaks, among other possibilities.

There are probably many other reasons why water collects in a basement, but your duty as a seller under most seller disclosure laws doesn't include identifying why a problem occurs. It is simply to let the buyer know there is an issue.

If you were truthful in your seller disclosure statement to the buyer, and your contract does not contain a provision that contradicts the terms of the disclosure about the basement, and you did not make any other representations to the buyer about the source of the problem, you should not be responsible for the fixing what is now the buyer's problem.

As a seller, once you have made a representation under a seller disclosure form to a buyer, you should not try to minimize the repair or try to represent to the buyer a fix for the repair unless you have some knowledge or have been told what needs to be done to fix it. If a seller tells a buyer of a problem with a house, a seller should leave it at that.

A seller should not try guiding the buyer on how to repair the problem. If a seller has a repair estimate or other paperwork from a contractor, the seller could give that paperwork to the buyer, but the seller should always be careful not to minimize the problem or minimize the cost to repair the problem.

What you need to do now is speak with a knowledgeable real estate attorney about the situation and what you've said to the buyer. You want to make sure that you haven't given the buyer any cause to go after you when you said you thought the problem was caused by the gutters and excessive rainfall.

To our readers: Please keep in mind that when we respond to your letter, we may have to make some factual assumptions on issues that may not be clear to us from what you've written. Above all, remember that we're giving you general information, and not legal advice. For specific help on any legal issue, but particularly those that involve state law, please seek the help of a competent attorney in your area.

October 27, 2008

By Dian Hymer
Inman News

Negotiation is back in style. It's not uncommon for buyers and sellers to have many rounds of counteroffering back and forth before they arrive at a contract that is completely agreeable to all involved. When this is accomplished, the contract is ratified.

However, there is another important element involved in ratifying a contract. Until a residential purchase contract is completely signed, and the final signed documents are delivered back to the other party or that party's agent, the listing is not sold.

Let's say you decide to offer the sellers less than their asking price. They don't accept your offer, but issue a counteroffer. Before you respond to the seller's counteroffer, another buyer makes an offer. If you haven't signed the sellers' final counteroffer and delivered it back to them, they can withdraw their counter and sell the house to someone else.

Or they could decide to withdraw the counteroffer to you and issue a new one. This time it could be a multiple counteroffer if the sellers also decide to counter the other buyer's offer. You end up in a multiple-offer competition, which often means paying more or not getting the house at all.

You can't rely on verbal negotiations when you're buying or selling real estate. To be binding on the parties involved, real estate contracts and the addenda to them must be written.

HOUSE HUNTING TIP: Timing is critical. If the seller issues you a counteroffer you can live with and you want the house, sign the document as soon as possible, even if the seller gives you several days to think about it. During that time, another buyer could make an offer and your counteroffer could be withdrawn.

After you sign the counteroffer, make sure that your agent delivers it to the sellers or their agent immediately. Whoever receives the document should sign to acknowledge receipt of the document so that there's no question that the contract is ratified.

Then if another buyer wants to make an offer, you won't have to compete or risk losing the house altogether. Once you have a ratified contract in place, the sellers can negotiate with other buyers, but only for backup position subject to the collapse of your contract.

Don't let yourself be lulled into thinking that because the housing market is generally slow there's no chance you'll end up in competition. The best listings -- ones in good condition and priced right for the market -- can sell quickly, particularly in areas where the inventory is low.

Many buyers have busy work or travel schedules. Often you find the right house to buy at the least opportune time in terms of what else might be going on in your life. Make sure that your home purchase contract states that faxed signatures are binding. This could save you hours of driving in traffic to sign a critical document in time.

Sometimes faxes aren't the answer. If you'll be available only by phone or e-mail, consider giving power of attorney -- one specific to buying a house in a certain area -- to someone that you trust completely. This person should not be your real estate agent. It should be someone who will be available on short notice.

Electronic signatures are becoming more popular. But, they haven't become standard in the home-sale business. If a seller who has had no experience with electronic signatures is considering a couple of offers -- one with electronic signatures and one that was signed in person -- he would probably feel more comfortable accepting the latter.

THE CLOSING: That is, unless the price on the electronically signed offer is a lot higher.

REThink Real Estate

October 02, 2008

By Tara-Nicholle Nelson
Inman News

Q: I bought a house about four years ago, and relocated for work last year. My old house has been on the market for almost a year. I thought about renting it, but I really don't want to deal with tenants from a long distance. The place is almost fully remodeled, and people have been viewing it, but my Realtor says I need to lower the price and try for a short sale. The one thing I haven't tried is putting in stainless steel kitchen appliances -- the appliances currently in there are newer, but they are black. Should I invest my last few thousand dollars in upgrading the appliances to stainless steel, or should I attempt a short sale?

A: Contrary to popular belief, everyone doesn't love stainless steel appliances. In fact, some folks actively dislike them. Buyers generally want updated appliances; if yours are up-to-date, they are not likely the thing that is stopping your home from selling. Based on your Realtor's comments, my guess would be that your home may be overpriced, which is the single most common circumstance that prevents homes from selling. So, no, I would not pour any more money into new appliances. But that doesn't mean a short sale is your only option, either.

Mindset Management

You may be dismissing a better option than a short sale -- renting your home out -- prematurely. Now, don't get me wrong, I am not personally a big fan of being a landlord. It runs counter to my personal life rule of minimizing the number of people who can make me have a bad day. However, if I had to choose between having a tenant and selling my property through a short sale, I would pick a tenant.

Generally speaking, in life, what we fear we create. If you fear that you'll have a tumultuous, drama-filled, excruciating experience of being a landlord, complete with late-paying, car-on-the-lawn-parking, hole-in-the-wall-creating tenants, you very well might get exactly that experience. Being a landlord by definition involves putting your tenant in the position where he or she is able to damage your property and impact your monthly finances.

However, there are a number of things you can do to minimize your chances of ending up with The Worst Tenant In The World (note the capitals). Hire a top-notch property manager who is used to handling properties for distant landlords. Have prospective tenants thoroughly screened and background-checked. Follow the landlord-tenant law of your state to the letter. Obtain a fair, but hefty, security deposit. Put a home warranty in place on your home to minimize your exposure to repair expenses.

On the other hand, there's not a whole lot you can do to minimize the badness of a short sale. It has long-term impacts on your credit and your ability to buy a home in the future. Traditionally, the industry counseled buyers that the "hit" to your credit of a short sale was a reduction of about 150 points, about half as bad as that of a foreclosure, which reduced FICO scores about 200 to 300 points. The algorithm used to attain FICO scores underwent a major change last year, though, and the folks at Fair, Isaac & Co. (hence, FICO) now say that a short sale and a foreclosure are equally bad for your credit, both events reducing your FICO score by 200 to 300 points. The "advantage" of a short sale is that you can get a good mortgage about two years after undergoing a short sale, while it takes about five years following a foreclosure.

Also keep in mind that short sales are tough to pull off -- your lenders must play ball and agree to forgive some or all of your debt to them to make it happen, which they are statistically unlikely to do. Some real estate industry insiders estimate that as few as 20 percent of short-sale listings actually close -- and the ones that close often do so only after months of stressful negotiating with the lenders involved. Many of my buyer clients refuse to look at short-sale listings -- they know that the chances are those properties will end up in foreclosure, and they will circle back to them when they are listed as post-foreclosure, bank-owned properties.

It may seem like you are being forced to choose between a rock and a hard place. Rethink whether being a landlord is necessarily as hard a place as it seems. Also, reassess your current situation. You are really not in a position to make any choices or decisions this moment, as you currently have in hand neither an offer to rent nor an offer to buy your home through short sale in place. Don't agonize and torture yourself over what are truly hypothetical alternatives at this point -- follow my action plan and position yourself to get some actual, concrete options. Only then does it make sense to agonize and torture yourself over the decision whether to rent or to sell short!

Need-to-Knows

As the foreclosure rate has risen, the resale market has gotten worse for sellers, but all those former homeowners who have lost their homes through foreclosure have become tenants. As a result, the demand for rental housing has gone up, and rents have increased in many geographic markets. So, the more dreary the resale forecast for your market, the more easily you'll likely be able to get and keep it rented, and the higher rents you'll be able to command.

This brings us to one of the most critical inputs to your decision whether to rent: cash flow. Whether renting your home is preferable to selling it in a short sale depends largely on how close the rental income will come to covering or exceeding the expenses of owning the property. To assess the feasibility of converting your home into a rental, you need to compare the projected rental income against a realistic estimate of the expenses, including the monthly mortgage payment, property taxes, hazard insurance, HOA dues (if any), any utilities or services you would pay for the tenant (like landscaping), the property manager's fees, and a monthly reserve for maintaining the place. Ideally, you'd also have enough rental income to set aside 5 percent or so of the monthly rent in a savings account to be drawn upon to cover expenses in the event of a vacancy. After conducting this cash-flow analysis, you can decide whether it might be worth it to consider renting your home out, rather than short-selling it, even if you are slightly cash-flow-negative monthly.

Action Plan

1. Talk with a reputable, local property manager. Ask them to help you create realistic estimates for the rental income your property would command on the local market and for the amount you would pay monthly for property management services.

2. Do a projected cash-flow analysis. Very simply, compare the estimated income and expenses -- discuss your analysis with your Realtor and/or property manager to ensure you are not missing any important line items.

3. If you are open to renting it after you have the projected cash flows, put it up for rent and reduce the sale price to a fair market price. You will then be in a race to see which comes to fruition first -- an offer to rent the place or an offer to buy it at a short-sale price. Only once you have an offer in hand will you be in a position to make a concrete decision between these alternatives.

If you do decide to rent your home out, discuss this with your CPA -- there are tax implications for converting a home into a rental property. And stay open to creative solutions, like a lease-option -- you might find someone who is willing to lease, then buy, your home -- the best of both worlds!

When shopping for a home, matching agent to your needs is vital

September 03, 2008

By Ilyce Glink
Inman News

There are great real estate agents and terrible real estate agents. Within each category are agents whose behavior puts them at the top and bottom of the spectrum.

In other words, the best real estate agents are truly stellar. The worst agents? Well, let's just say that if you wind up with a terrible real estate agent you'll probably have war stories to share about your home purchase or sale at the next cocktail party you attend. (Unfortunately, stories about terrible real estate agents are shared more often than stories about great real estate agents.)

When hiring a real estate agent to help you buy your next home, the trick is to find one who really listens to what you have to say; who will go the extra mile to help make your purchase a little less stressful; who will help you be objective when you become emotional about plunking down the single biggest chunk of cash ever; and who can help you understand and work with local market conditions.

I suspect that most buyers spend more time thinking about the curtains they'll hang, the granite countertops they'll install, or the boxes they'll need for their move than the agent they'll hire to help with the purchase of the property itself.

Why is that? Why isn't creating a home-buying team the top priority when beginning the process of buying a home?

Perhaps it is because going through the process isn't perceived as being that much fun.

But that's where hiring a great real estate agent can make all the difference. What qualities should you look for?

The real estate agent you hire should have an intimate knowledge with your neighborhood of choice. The agent should have worked in a neighborhood for awhile, seen a lot of the housing stock, and know the history of the neighborhood, trends associated with it and where the locals hang out. The agent should know about home values and should have the ability to come to you and tell you what other homes have sold for in the neighborhood and what other homes are listed for in the same neighborhood. The agent should also have information to back up why some homes are listed for more than others and be able to represent you when you are ready to make an offer for a home. The agent should know about the school district, shopping, commuting and recreational options. He or she should basically be a wealth of information, and be able to point out the flaws as well as the outstanding features of the community.

The real estate agent you hire should be able to really listen to your wants, needs, dreams and desires, and ask questions that help you delve beneath the surface to figure out what's really driving those wants and needs. Real estate agents sometimes say that "buyers are liars," because buyers tend to change their mind about what they really want to buy during the home-buying process. But if an agent is able to draw out the buyer ahead of time, and help him or her focus on the important issues of the purchase, it will save everyone a lot of time.

It's also important to hire an agent who is willing to tell you what you may not want to hear -- but should. If you're a buyer who is unrealistic about a local neighborhood, you'll want an agent to tell you that what you want to buy can't be found for the price and is unworkable in the current marketplace. No one wants to have their dreams dashed, but you'll come to see that your real estate agent is doing you a favor by not allowing you to run away from reality.

A great real estate agent comes laden with resources, similar to a hotel concierge. (Some real estate companies talk about the "concierge" services they provide.) The agent you hire should be able to provide you with a handful of great home inspectors, mortgage lenders and real estate attorneys for you to interview. (Be wary of the agent who steers you to one specific inspector, mortgage lender or real estate attorney. What you want is a choice of great partners.) If you need help locating service people, a handyman, or even a new pediatrician, a great real estate agent should have those names and numbers at his or her fingertips. Being a walking neighborhood directory for many longtime top agents is part of the service they provide.

A great real estate agent stays in touch. Top real estate agents use technology to help them communicate frequently with their buyers. E-mail, BlackBerrys, iPhones, cell phones, electronic newsletters, Web sites, digital photography and video help agents share properties that they've previewed, provide feedback, and keep buyers updated on the progress that is being made.

Finally, when you hire an agent, it's like a short-term marriage. When the transaction is completed, when you've bought your new home, the intense relationship you've created comes to an end. With a great real estate agent, you'll find you don't want your time together to end. While these are just some of the qualities you should look for in determining whether the agent is a good match for you, you still need to make sure to get referrals and recommendations for the agent from other buyers he or she has represented recently.

What happens next? Dinner -- ostensibly to discuss past and future deals, but really to move your relationship into the long-term-friendship stage.

Before buying, it pays to know property's condition

August 29, 2008

By Paul Bianchina
Inman News

Q: In as much as there are a great number of current issues regarding disclosure to the purchaser of real property, when, if ever, is it going to be the responsibility of the purchaser to investigate particular items of relevance to them? --George D.

A: Great question! In today's day and age of people expecting "someone" to look after them and protect them from anything and everything, and with each succeeding generation seeming to develop more of that attitude than the previous one, it's unlikely that you are going to see the burden of responsibility shifting back onto home buyers anytime soon.

Don't get me wrong. I have always been an advocate of people looking after themselves, especially with a purchase as huge as a home. I am all in favor of disclosure laws, since only the seller knows where the leaks or other problems are (or were), but buyers also need to take the time to inspect and understand the house for themselves. There's a lot more to home than whether or not is has granite countertops!

The current trend is to entrust the responsibility of inspecting a house to a home inspector. That's fine, because a home is a big and complex structure and you can't expect every buyer to have the necessary expertise to do their own inspections. However, I have seen good inspectors that really understand homes and know what does and doesn't constitute a genuine problem that a buyer should be concerned about, and I have also seen bad inspectors that rely on checklists and limited knowledge and handing out a bunch of printed information they downloaded from the Internet, as though an inspection report that's loaded with unimportant paper makes up for one that really delves into the inner workings of the home.

Hiring a home inspector is fine, and I fully encourage it. But remember that if the seller is paying the fee, they're probably going to go for the lowest bidder. So buyers should hire their own inspector as well, and be prepared to put on their coveralls and follow the inspector around -- on the roof, in the attic, under the house -- everywhere their physical abilities will allow them to go. Ask questions. Then when you have the results of both inspections, compare the results closely and ask more questions.

I have noticed that people are more concerned with all the details of the purchase of a $20,000 car than they are with the purchase of a $500,000 home, and then when things go wrong they want to know whom to point the finger at.

So, home buyers everywhere, get involved with your purchase, learn about how it works, understand what's broken and what it's going to take to fix it -- and then sleep a little better at night.

DEAR BARRY: I recently made a purchase offer on a house. The seller's disclosure statement listed no defects, but the offer was contingent on a clean home inspection report. So I hired a home inspector and also ordered an appraisal for a total cost of $700. When I read the inspection report, I couldn't believe the number of major issues that needed attention, from standing water under the building to rotted wood on the roof. Because of this, I've decided not to buy the house. Since the seller's disclosure statement listed no defect, is he liable for the money I spent on the inspection and appraisal? --Dan

DEAR DAN: Unless you can prove that the seller concealed known defects in the disclosure statement, he is not responsible to reimburse your costs. The purchase contract was contingent on your acceptance of the home inspection report. Therefore, your only options are to cancel the transaction or renegotiate the contract.

Reliance on seller disclosure statements is usually disappointing. In most cases, disclosure statements are worth less than the squares of toilet tissue they might have been printed on. A home inspection report, if properly prepared by a qualified professional, will always reveal more than a disclosure statement.

In most cases, sellers are simply unaware of defects in their homes, although there are instances where sellers deliberately conceal known defects. The seller in your case may never have looked under the building and may have been totally unaware of the drainage problem. Likewise, he probably never walked on the roof or crawled through the attic, and therefore had no idea that the wood was rotted.

It is unfortunate that you hired an appraiser before you reviewed the home inspection report. The appraisal should have been done after you considered the physical condition of the property. That would have limited your nonrefundable expenses.

How to buy a foreclosed home

Sure, there are bargains to be had, but there are also plenty of pitfalls awaiting anyone brave enough to wade into real estate's maelstrom. Here's what to consider.

NEW YORK (CNNMoney.com) -- Hoping to score a house on the cheap by buying a foreclosed property? There are good deals out there, but the process is complicated and risky. Here's what you need to know.

There are certainly plenty of foreclosed homes on the market. In California, 40% of existing homes sold in the second quarter were foreclosures, according to DataQuick, a provider of real estate information, compared with 5.4% a year earlier.

Indeed, Fannie Mae CEO Daniel Mudd said Friday that the company is pushing hard to sell more foreclosed properties, to get them off the books. "I don't think this is a time to be holding onto REOs and hoping for a better day," he said.

Steve Dexter, author of "Prospering in the Rising Wave of Foreclosures," has bought dozens of foreclosed homes and thinks now is a good time to dive in. "It's the best way to buy, and it's time to buy again," said

There are three different stages of foreclosure, each of which presents different opportunities for buyers. The first step is to figure out which one makes the most sense for you.

A home goes into pre-foreclosure when a borrower has fallen behind on his payments, but the house has yet to be auctioned off.

Buyers can find pre-foreclosures by poring over the delinquency notices that lenders file with county courthouses when a borrower misses a payment.

Armed with prospects, buyers should go scouting. If they see homes they like, they should contact the owners to see if they want to sell.

"You call them or knock on their doors and say, 'I know you're having a problem and I think I can help you,' " said Alexis McGee, co-founder of Foreclosures.com.

McGee only buys when she figures she can make a profit of 30% or more; marketing and other expenses wipe out about half that by the time she resells. But people buying a house to live in might be happy with a 20% discount from market value.

Cold calling and making low-ball offers on people's homes can be difficult: Some owners are emotional, even angry. Many are trying to hold onto their houses and don't appreciate what they consider scavengers sniffing around.

"But you're not taking advantage of these homeowners," said Duane LeGate, president of HouseBuyerNetwork.com, which puts together buyers and sellers of distressed properties. "All many of them want is financial relief from bad mortgages, and you're offering it."

Indeed, some owners are open to doing what's called a short sale, which is when a buyer pays less for a house than the mortgage that is owed on it. Lenders must agree to a short sale, and will then forgive the rest of the debt.

Often, banks are reluctant to do such deals, since it requires them to take a loss. It can take months and a lot of badgering before a deal goes through, and not every buyer is up for that kind of hassle.

But as the housing market deteriorates, lenders are warming up to short sales, according to Foreclosure.com founder Brad Geisen. "It makes a lot more financial sense for them to liquidate early rather than go through the foreclosure process," he said, which can cost lenders about $50,000.

Gabe Cera recently bought one through an associate of LeGate, Raul Pineyro, owner of Cacophony Group Real Estate Services in Dade County, Fla. Cera purchased a four-bed, three-bath in Miami for about $60,000 less than what the owner's mortgage was worth.

"I'm very satisfied," Cera said. "The transaction was very smooth and quick and I think I saved a lot of money."

In buying any pre-foreclosure, LeGate advises buyers to not be turned off by dirty carpets or ugly paint jobs. That's where the best deals are.

"Anybody can go the Home Depot (HD, Fortune 500) and buy some paint and a new rug," he said.

In the next stage of foreclosure, homes in default are auctioned off on the county courthouse steps. These homes can be real bargains, but the process is a crap shoot.

Bidders can't inspect the property, so there's no telling how much work it needs. And there is also no telling what kind of liens there are against the home, due to unpaid taxes and so forth, which can also jack up the cost of these homes. Finally, Buyers need to come with cash, ready to put 10%-20% down on the spot, and able to pony up the rest in a matter of days.

"If you want to buy on the courthouse steps," said LeGate, "you'd better be a pro."

Even after a purchase, a deal can fall through if the current owner can come up with enough cash to repay the buyer the amount of the winning bid.

LeGate himself has bought several homes at auction, with mixed results.

"The first time, I bought, renovated and sold the house all within 29 days and made a killing," he said. "I thought I was a mini-Donald Trump. The second time, the previous owner poured cement into the pipes before he left and when I turned on the water, it clogged everything. I lost more on the second house than I made on the first."

After a lender takes back a house, the property goes back on the market as what's called an REO (real estate owned) property. These are treated like ordinary sales, listed with a broker. Typically, bargains are not as sharp.

Author Steve Dexter advises house hunters to go to the Web sites of all the major lenders and look for REOs in their communities. Alternatively, "Get a young, hungry real estate agent who's screening REOs all the time and put them to work for you," he said. Foreclosures for sale may also be found on the sites of Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), as well as eBay (EBAY, Fortune 500).

Dexter prefers to buy REOs because the process is so clean; the title is clear and the property is delivered vacant, even if the prices aren't as good. He says one bank manager told him he usually sells REOs for 95% of listing prices, on average.

"You might not think that's too great for buyers," said Dexter, "but the listing prices are lower [than market value]," usually by 10% or more. The total discounts often exceed 15%.

Another way to buy an REO is through an REO auction. As bank portfolios of these properties have swollen, they've started to unload them en masse. Pam McKissick, chief operating officer of Williams & Williams, an auction company based in Tulsa, said her company buys big portfolios of post-foreclosure properties from lenders and then auctions them to individual buyers.

The REOs that Williams & Williams pick up are usually sold within 30 days; successful bids can be quite low. "It's a very rapid process," said McKissick, " You want to put a family back into a home quickly and bring the neighborhood back. This does that." 

Home building at 17-year low

Housing starts and permits both fall sharply in July to levels not seen since 1991 recession.

NEW YORK (CNNMoney.com) -- Home building fell sharply in July to a 17-year low, according to government readings released Tuesday that offered fresh signs that the battered real estate market has yet to hit bottom.

Housing starts plunged 11% to an annual rate of 965,000 from a revised 1.084 million pace in June, according to the Census Bureau report. Economists surveyed by Briefing.com had forecast starts would fall to a rate of 960,000.

Permits - often seen as a sign of builders' confidence in the housing market - tumbled 17% to an annual rate of 937,000 from a revised 1.138 million in June. Economists had forecast that permits would come in at 959,000.

The sharp percentage drop from June was due partly to a jump in multi-family home starts and permits during that month. Single-family home starts and permits slipped only slightly from the June level. But the single-family starts were also at a 17-year low in July, while single-family permits fell to a level not seen since the 1982 recession, reaching a rate of only 584,000 homes in July.

The sharp fall in building activity suggests that home building will continue to be a drag on the economy in the second half of 2008. Earlier this year, many economists hoped that building activity would bottom out this summer and start to show signs of improvement.

In the second quarter, the drop in home building took 0.6 percentage points off gross domestic product, the broad measure of the nation's economic activity. It marked the 10th straight quarter that home building has been a drag on GDP.

But the continued drop in building could be just what the battered real estate market needs. One of the biggest problem for sellers is a glut of unsold homes on the market. Since demand for homes remains weak, the glut will only ease if fewer new homes are built.

In June, builders faced a median wait of 8.4 months to sell a completed home, the longest delay in selling time in 25 years, according to a separate Census Bureau report issued recently.

David Seiders, chief economist for the National Association of Home Builders, says he's hopeful the historically low levels of single-family permits is a sign that the glut of homes on the market could finally start to decline.

Seiders said he's hopeful that the market for new homes will hit bottom in late 2008 or early 2009. But he added that his forecast could prove optimistic given other problems, such as rising job losses and the credit crunch. And the continuing rise in foreclosures adds to the glut of homes available for sale, particularly in markets such as California and Florida.

"We're dealing with a weakening economy in the second half of this year, and early '09 doesn't look that great either," Seiders said. "We don't have any numbers that really show stabilization in the housing market yet."

The government report on housing starts and permits comes the day after a survey of builder confidence by the National Association of Home Builders remained at a record low in August. Only 5% of builders said the current market is good, 8% said they expected a favorable market in the next six months and fewer than 2% said they were seeing strong traffic from potential buyers.

The downturn in housing and building has hammered the results of most of the nation's major builders. Late last month Centex (CTX, Fortune 500), which is the No. 2 builder by revenue, reported a larger-than-expected loss and warned it was seeing no improvement in the home building market.

Most builders have reported larger than expected losses, although Pulte Home (PHM, Fortune 500), the largest builder by revenue, did slightly better than forecasts. Only one major builder, NVR (NVR, Fortune 500), has reported a profit through the current downturn, although its earnings have plunged.

As a group, the revenue of the nation's eight largest home builders has plunged 37% over the last year. Analysts surveyed by Thomson Reuters are forecasting another 36% drop in revenue over the course of the next 12 months.

This is a copy of an email I sent out in regards to Texas and who we are losing out in regards to the New Housing Bill and it's provisions for the mortgage bailout.

My name is Samuel Morales and I’ve been in the mortgage industry for over 5 years so I know what I’m talking about when I say this, “Texans are being looked over and not being accounted for in the New Housing Bill that was just passed” and this infuriates me.

Here’s why:

A vast number of Texans that need help have taken previous home equity loans out on their homesteads. In Texas we call these loans Texas A-6 loans; Back when states were passing home equity laws Texas took an extremely conservative and secure stance in regards to home equity laws there by limiting an individual to only borrowing 80% of the market value of their homestead. In addition to this, once someone takes out a Texas-A6 loan they are forever limited to that 80% ratio even if they refinance at a later time without taking cash out. So now we have the rule “Once an A-6 always an A-6”. Keep in mind that in Texas and Texas only an A-6 loan can not be refinanced as an FHA loan and Texans can not do a cash-out FHA loans like in virtually every other state. (Why is this? No reason, just because; it makes no sense)

Well, you know the new FHA (HUD) $300 Billion bail out meant to help people in need. It’s almost useless in Texas.

Back in the late 90’s and early 00’s many lenders such as Ameriquest and others were doing A-6 loans and inflating appraisals to increase their commissions by allowing borrows to borrow more. The vast majority of these borrows took out Fixed Rate ARMs (That’s when a mortgage is fixed for 1-5 years before it starts to adjust) thinking they could refinance just before the mortgage rate started to increase.

Remember now that A-6 loans are limited to 80% LTV and the initial appraisal was inflated. That means that the borrow is now stuck forever because when they go to refinance they are over 80% of the market value of their homestead, so no matter what their credit looks like they are screwed (excuse my language). (This is because the loan is now considered a Texas A-6 loan, FOREVER )

2 key points (If these 2 key points are met the new law will stand to actually make a difference in this state)

• There is absolutely no valid reason for Texans not to be able to refinance their previous Texas A-6 loan as an FHA loan
• Texas government needs to scrap the 80% rule when someone is applying for HUD assistance via the New Housing Bill.

Why hasn’t anyone caught this? Who knows, but lawmakers

In my opinion the bill is a dead fish anyway but at least some people will be saved. But until these changes are put in Texans are being isolated as the only state that will be virtually excluded from assistance with few exceptions.

I run a website, www.newhousingbill.org and I am already in the process of helping people in need that reside in other states. I’m proud to be a Texan and I have faced foreclosure myself, maybe that’s why I’m so upset about this. I am ashamed that our law makers have overlooked this issue and isolated other Texans that would, if they lived in another state, qualify for this assistance.

I’m sending this to everyone I know because it pisses me off. If you’re going to pass a bill it should do what it’s intended to do. Don’t get me wrong, this is not an issue with our federal government. It’s our local state government that has rendered this law useless for Texans.

Senator John Cornyn Ashamed to say he did not have an email listed online that I could find, and he suppose to be my rep.

Why some agents don't refer best home inspectors

August 12, 2008

By Barry Stone
Inman News

Dear Barry,

As a real estate broker, I read your column regularly and with great interest. But some of your articles trouble me. They suggest that Realtors routinely avoid the most thorough home inspectors and that they even label good inspectors as "deal killers." This charge seems unfair and in poor taste. Good agents, whether they represent buyers or sellers, want an inspector to perform a thorough inspection. Would you be willing to rethink your position on this? --Terry

Dear Terry,

Let's both give some thought to this issue.

The articles you mention were never intended to offend, but to shed light on an entrenched ethics problem that infects not all but many in the real estate profession: namely, the conflict of interest when Realtors refer home inspectors to their clients. Some will flinch at the voicing of this matter, preferring to deny its existence. But there is an elephant in the room, and it cries to be recognized.

The trunk of the problem is this: Agents don't get paid until the sale is completed, and defect disclosure can make buyers change their minds about the sale. Since the best home inspectors disclose more defects, a large number of real estate agents regard the best home inspectors as "deal killers" -- not because those inspectors actually kill deals, but because their thoroughness engenders the fear that they might kill a deal. As a result, some agents do not refer the best inspectors to their clients. Meanwhile, unwary clients assume that they are getting top-notch home inspection referrals from their agents.

Fortunately, there is also a positive side to this portrait. While some agents are avoiding so-called "deal killers," there are other agents who truly represent the interests of their clients and who recognize the value of total and unabridged disclosure. These agents are the shining stars of the profession, the ones who recommend only the most thorough and qualified home inspectors to clients. Agents of this caliber deserve praise and recognition for the exemplary work that they do.

Thus, we have two dissimilar groups of agents -- the compromised and the committed -- separated by an ethical divide that tarnishes the public image of the real estate industry, while jeopardizing the financial interests of trusting home buyers.

A sophisticated response to these charges has developed among the compromised agents, and it goes like this: Because real estate commissions are paid by the sellers, agents must represent the interests of sellers only. Thus, an agent is justified in recommending a mediocre inspector. From a legalistic standpoint, that may be an arguable position. From an ethical perspective, it is inexcusable. As for liability, it is foolish and risky. After all, how does a substandard inspection benefit the sellers or their agents if faulty disclosure produces a lawsuit after the sale? Obviously, it does not.

The more common justification for avoiding thorough inspectors, however, is the ad homonym approach: Just label the best home inspectors as "nit-picky," "too scary for my buyers," or just plain "deal killers." Thus discredited, those inspectors are no longer "worthy" of referrals.

Home inspection may be the only profession where good work discourages referrals. If that were not so, only the best inspectors would be recommended by Realtors. Instead, many referrals go to inspectors who are inexperienced and less than thorough in their findings.

Articles that expose these facts are thought by some to be in poor taste. What is more distasteful, however, is misleading a trusting home buyer in the choice of a home inspector. If such practices were not so common, there would no need for articles such as this one. Hopefully, this will be addressed once and for all by leaders within the real estate profession.

The new math of lending

With banks tightening their credit standards, many have to walk a fine line when it comes to lending to consumers.

NEW YORK (CNNMoney.com) -- Forget oil and gold. Credit might be the commodity that's in the scarcest supply these days.

Saddled by soaring loan losses, banks have been drastically tightening their lending standards, effectively putting credit out of reach for many consumers in search of mortgages, credit cards or car loans.

"Like the tide, credit goes in and out," said Jeff Davis, a bank analyst and managing director at FTN Midwest. "And right now it's headed out."

According to the Federal Reserve's first-quarter survey of senior loan officers at some of the nation's largest financial institutions, banks were turning away an increasing number of consumers because of credit fears.

The Fed is likely to report that this trend continued in the second quarter when it releases its latest senior loan officer survey later this month.

Banks endured rising loan losses in the quarter as the housing market deteriorated further and the economy sputtered.

Hoping to preserve capital and rid themselves of these troubled loans, financial companies have, as a result, held borrowers to a much higher standard.

Auto loan providers, for example, have increasingly favored borrowers with higher income levels and have pushed for shorter lending terms.

Hoping to clear out all the toxic mortgages from their books, banks and other lenders are also raising the bar for potential homebuyers, demanding bigger down payments and additional up-front fees, effectively pricing some shoppers out of the market.

And unlike in years past, fewer consumers are finding they can tap their home for cash via a home equity loan, notes Davis - unless you happen to be a prime borrower with a property where there is no pre-existing lien.

But by raising the bar, some would-be borrowers have fallen by the wayside.

"Once you start raising the standards, there will be that group of people that were on the borderline as far as underwriting criteria that may fall out," said Hugh Queener, chief administrative officer of Pinnacle Financial Partners (PNFP), a Nashville, Tenn.-based bank.

In addition to being tougher to get, credit is also a lot more expensive these days.

While the rates on various loans hinge on a variety of factors, such as the 10-year Treasury note and the prime rate, banks tend to have some leeway when it comes to setting lending rates. And some institutions are certainly taking advantage of this fact.

Some banks, for example, are boosting rates sharply on risky loans in order to avoid attracting any new business.

"They just don't want them," said Adam Schneider, a principal at Deloitte Consulting who deals with clients in the financial services industry. "They are pricing their way out of the problem."

Others are upping rates simply to make a few extra bucks.

"They are finding they are still able to grow their balance sheet and gain market share even with higher pricing," said Jefferson Harralson, an analyst with Keefe Bruyette & Woods.

"But my sense is that they are tiptoeing into it since they so unfamiliar with the lack of price competition," Harralson added.

But banks must also walk a fine line when it comes to credit.

Some beleaguered lenders, for example, may see the value in turning away new loans in order to preserve capital and to live on for another day.

While banks and investors are justifiably concerned about lending, it is also possible that by making credit standards too difficult, institutions are effectively turning away business and ultimately sacrificing earnings growth.

At the same, they run the risk of driving both existing and potential customers into the arms of their competitors - a risky proposition as borrowers can often be a repeat source of business.

Loan pricing can also be tricky.

Sky-high rates can ultimately scare away would-be borrowers to competitors. But even when a bank is able to get a borrower to take a high-interest loan, it has to be careful not to put themselves at risk.

If a banks sets rates too high and a borrower is unable to keep up with payments, the bank only has itself to blame when defaults happen.

"There is no amount of interest you can charge on a bad loan that will make up for it," said Queener.  

Freddie aims to slow foreclosures

Mortgage financier to offer increased payments to loan servicers in effort to increase mortgage workouts.

NEW YORK (AP) -- Freddie Mac is doubling the amount of money it pays loan servicers for each successful mortgage workout among other measures to keep struggling borrowers out of foreclosure, it said Thursday.

The mortgage financier is also giving more time to negotiate workouts in states with fast foreclosure processes and will reimburse servicers for door-to-door outreach.

Freddie will pay $500 for each repayment plan and $800 for each loan modification on Freddie-owned mortgages. Servicers will receive $2,200 for each short sale where Freddie accepts less than the full amount owed on the mortgage.

In some states and Washington, D.C., the government-sponsored entity will give up to 10 months from the due date of the last payment to find sustainable workouts for strapped borrowers. These states allow a lender to foreclose in less than 10 months.

The affected states are Alabama, Alaska, Arizona, Arkansas, California, Georgia, Hawaii, Maryland, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, North Carolina, Rhode Island, Tennessee, Texas, Virginia, West Virginia and Wyoming.

Freddie also will reimburse a servicer up to $15 per mortgage for leaving a door hanger and up to $50 per mortgage for knocking on a door that results in the borrower contacting their servicer.

These new policies go into effect Aug. 1. The outreach reimbursement expires March 31, 2009.

Shares of Freddie (FRE, Fortune 500) fell 25 cents, or 2.9%, to $8.48 in midday training. 

Hiding defects not worth the hassle of a lawsuit

August 04, 2008

By Dian Hymer
Inman News

Forty years ago, seller disclosures weren't part of the home-buying process. The rule of the game was buyer beware.

Now most states have seller disclosure requirements, although they vary from one state to the next. Consult with a Realtor, the Department of Real Estate, or a real estate attorney in the area where you're buying or selling if you have questions about what a seller is required to disclose.

Seller disclosures came into being in order to protect home buyers. However, seller disclosures can also protect sellers. For example, a seller of an older home in the hills of Oakland, Calif., disclosed in writing that the basement flooded during heavy rains.

A few months after the sale closed, the listing agent received a call from the buyer. He was upset that there was water in the basement following an overnight rain storm. He insisted that no one had informed him of this situation before he purchased the property.

The listing agent reviewed the transaction file. The sellers had disclosed in writing that the basement flooded during heavy rains. The buyer had signed to confirm receipt of this information before he removed his inspection contingency from the contract.

What could have been a nasty lawsuit disappeared immediately.

During times when it's difficult to sell, sellers may be tempted to conceal negative information about their homes for fear that it will keep the home from selling. Sellers should resist this temptation. Concealing a material fact can have severe consequences.

Another seller stated in his seller disclosures that he had never had any water problems at the house. He had also remodeled the basement and presented it as a usable family room. Not long after the buyers moved in, bad weather set in. So much water ran into the basement that the cozy family room was uninhabitable. The buyers sued the seller and recovered a hefty sum.

HOUSE HUNTING TIP: Think of disclosure as damage control. Although this may seem counterintuitive, you want any negative information affecting the property to be revealed before, not after, the home sale. If buyers know that the roof is at the end of its life, they can make a determination before buying about how much they can pay for the house, or if they can even afford to buy it without help from the sellers. Problems arise when sellers withhold this sort of information.

A less-than-candid seller was sued successfully by the buyer when the roof leaked soon after closing. The seller's disclosure statement mentioned no problems with the roof. The new owner became friendly with his next-door neighbor who told him that the seller had talked to several roofers and was planning to re-roof the house before the rainy season. What you choose to conceal could be disclosed for you by a neighbor.

The goal in selling your home is to sell for the best price and on the best terms possible. You defeat the purpose if you end up having to pay back part or the entire sale proceeds to settle a lawsuit.

It's not always clear if a fact is material. For example, the sellers of a home in the trendy Rockridge neighborhood in Oakland knew that a cleaning person who worked for the past owner had been raped in the house. The seller, who was an attorney, decided to disclose this fact. This caused a nervous single woman to decide against buying the house. But, it made no difference to the ultimate buyer.

THE CLOSING: And, the disclosure had no negative impact on the selling price.

Before digging, know where utilities are located

July 25, 2008

By Paul Bianchina
Inman News

Summer is a great time to add a new deck to your outdoor living space. And large or small, attached to the house or standing alone, it's a sure bet that before you starting cutting lumber and laying deck boards, you'll need to do some excavating to get the site ready.

Underground locates: No matter how minor the excavation work may seem, the very first thing you need to do before digging is to locate your underground utilities -- and it couldn't be easier. No matter where in the country you are, all you need to do is call 811 and request a locate. Within just a couple of days, someone will be out to clearly mark the location of underground electrical cables, pipes, phone wires and other things lurking under the dirt. The service is free, the peace of mind is priceless -- and if you don't do it, you could be held liable for the cost of fixing anything you cut into!

Lay out your digging: To ensure accurate placement of your framing, and to keep from having to do any more digging than necessary, after the utilities have been located you will next want to get everything laid out according to your plans for the deck. Carefully measure each pier hole or footing trench, and mark its location on the ground with paint, stakes or strings. For a curved deck, you can use a garden hose to help make the layout of the curve easier.

How big is the excavation? Piers and footings need to be of a certain size in order to support the intended load being placed on them. If you have had a lumberyard or professional designer do your deck design, the sizes should be clearly indicated on the plans. If they aren't, you should check with your local building department for information on how to calculate these important sizes, which will vary with load, deck height, soil conditions and other factors.

How deep do you need to go? Another very important consideration is the depth of the hole or trench. For smaller decks with little load on them, it may be sufficient to place precast piers on the ground, while other deck loads may require an excavation that extends below the depth of the frost line in your area. Once again, this should either be indicated on your plans, or is information you can get from the building department.

Weed control: For decks that are low to the ground, you may want to first excavate under the entire deck area in order to lower the grade and also remove vegetation that may later grow up through the deck boards. You may also want to put down a plastic vapor barrier in the deck area to help control both weeds and excess ground moisture.

Hand tools: Finally ready to dig? The tools required will depend on how deep you need to go, how much you need to excavate, what the soil conditions are in your area, and how much energy you have. For a simple deck excavation, basic hand tools may be enough. This typically would include a round-point shovel for digging, a square-point shovel and a rake for moving dirt and backfilling, a pick for tougher soil, and perhaps a post-hole digger for making round holes. Other hand tools that might be helpful would include a sod cutter for cutting out grass, a narrow trenching shovel for digging smaller trenches for wires or pipes, and a wheelbarrow for moving excess soil out of the way.

Power post-hole digger: If you have a lot of holes to dig, especially in hard or rocky soil, you may want to consider renting a power post-hole digger, and there are a couple of different types to choose from. For relatively loose soil, you might want to consider a two-person power auger. This consists of a gas motor mounted on a frame with handles on opposite sides and an auger blade below. One person stands on each side of the frame, while the motor basically drills the auger into the soil. For deeper holes or tougher soil -- or if you just have lot of them to do -- you might consider a tractor-mounted auger instead. And if all that still seems like too much work, there are companies that will come out and drill all the holes for you.

Tractors: You know you've been looking for a chance to rent a tractor, and this new deck may be just what you need. If you have a lot of soil to move, grade changes to make, or a lot of digging to do, there are tractors available in all sizes and styles to help you get the job done. The two basic types are the standard tractor, which is steered by a steering wheel, or the skid-steer tractor, which is steered by two handles that start and stop the wheels or tracks on one side or the other, and may be a better choice in confined areas. Your local rental yard will help you out with the proper choice, operating instructions, and even delivery to the job site.

Remodeling and repair questions? E-mail Paul at paulbianchina@inman.com.