Wednesday, April 9, 2014
The concept of what adds ‘value’ to a home is subjective, at best - See more at: http://www.inman.com/2014/03/31/the-concept-of-what-adds-value-to-a-home-is-subjective-at-best/#sthash.bfW9Pbi4.dpuf
By Hank Miller Contributor Inman News
The concept of what adds “value” to a home is, at best, subjective.
One buyer may place a high value on a pool while another may see that as a reason to eliminate the home from consideration. Price and cost does not always equal value, and there can be any number of reasons why that’s the case.
The most common reasons reinforce a basic truth found in all real estate: This is not an exact science, and a number of variables — especially the motivations and desires of buyers and sellers — can be very difficult to account for. While data analysis provides a benchmark for value trends in an area, that data must be blended with the variables present in each situation.
“Value in use” has a number of real estate-specific definitions. It also has a much simpler real-world residential application — does the home suit a specific requirement of the present owner or buyer?
There are a myriad of simple examples: a master on the main, an in-law suite, a single-story home or a handicapped-accessible floor plan. Occasionally, a setting or locational appeal can be the impetus — views, lot appeal, schools or proximity to mass transit. Quality of construction and design, craftsmanship and similar upgrades can also increase appeal.
There’s no shortage of people willing to “pay more” to live in a desirable school district, or for a home with certain design features. The question of what a home is “worth” really has two answers — what the data indicates, and what role it serves for the person who lives in it, whether it’s the present owner or the buyer.
The challenge comes when trying to reconcile the hard data that appraisers rely on with those intangible or specific appealing features a buyer values. This is often the basis for appraisal issues, especially in a lending environment with hyper-underwriting processes.
There are homes with full-sized indoor batting cages, racquetball and basketball courts, bowling alleys and even shooting ranges."
Challenging an appraisal in a situation like this can be difficult; underwriters don’t typically like to think outside of the box. In some cases, this can also undermine the confidence of the buyer if potential appraisal problems are not detailed to a buyer or seller.
While a home may contain highly desirable features, the problem of functional obsolescence due to overimprovement may be a genuine concern. There can be instances of properties with features so unique that their cost is not close to supported by the local data.
While some buyers or occupants may still find a home like this appealing, they might be considered “white elephants” because they are so uniquely equipped. That could become a headache for both sides when it’s time to sell.
Most place a high value on garages. A two-car garage is nice. For some, space for three or four cars is better still. But what about six?
What about a garage equipped with a lift system that allows for cars to be stacked in a garage? Or a garage with a “pit” that allows access to work on vehicles from below? Is a cavernous garage that’s tall enough to accommodate an RV or fishing boat worth the expense?
For select buyers, these might be “must-haves.” For others, they may be features that cannot be justified with a higher price.
Outdoor improvements like pools and barbecues routinely enhance appeal, especially in warmer markets. How much will the market recognize pool features like gunite and pebbletech instead of vinyl? What about hot tubs, waterfalls and vanishing edge designs? What’s more desireable: salt water or chlorine?
Will the market pay more for a fully equipped outdoor kitchen with high-end appliances, media and audio systems, and fire pits or fireplaces featuring real stone or brick?
What about uniquely designed and constructed walks, walls and landscaping? Does something like this, especially if a community has a pool and recreational facilities, return the cost of installation and maintenance when offered for sale?
Another example seen more and more is the trend toward athletic equipment in homes, in some cases rivaling what’s found at professional gyms and training facilities. There are homes with full-sized indoor batting cages, complete with pitching machines and netting, homes with racquetball and basketball courts, bowling alleys and even shooting ranges.
Indoor pools are not nearly as unique as they once were, nor are full-sized gyms with professional-grade equipment. While many buyers might enjoy a gym or target shooting, how many want them in their home, and are willing to pay extra for them?
Some homes serve a general purpose for a limited time. Others serve a specific role that may last for many years.
Real estate is a highly personal business and there are an infinite number of variables at play. But answering the question of “Does this home work for me?” is the most important one to control.
That answer — the “value in use” to the occupant — may not be supported by the market data. Which is why an understanding of these terms is so important when making sound real estate decisions.
- See more at: http://www.inman.com/2014/03/31/the-concept-of-what-adds-value-to-a-home-is-subjective-at-best/#sthash.bfW9Pbi4.dpuf
The concept of what adds ‘value’ to a home is subjective, at best - See more at: http://www.inman.com/2014/03/31/the-concept-of-what-adds-value-to-a-home-is-subjective-at-best/#sthash.bfW9Pbi4.dpuf
By Hank Miller Contributor Inman News
The concept of what adds “value” to a home is, at best, subjective.
One buyer may place a high value on a pool while another may see that as a reason to eliminate the home from consideration. Price and cost does not always equal value, and there can be any number of reasons why that’s the case.
The most common reasons reinforce a basic truth found in all real estate: This is not an exact science, and a number of variables — especially the motivations and desires of buyers and sellers — can be very difficult to account for. While data analysis provides a benchmark for value trends in an area, that data must be blended with the variables present in each situation.
“Value in use” has a number of real estate-specific definitions. It also has a much simpler real-world residential application — does the home suit a specific requirement of the present owner or buyer?
There are a myriad of simple examples: a master on the main, an in-law suite, a single-story home or a handicapped-accessible floor plan. Occasionally, a setting or locational appeal can be the impetus — views, lot appeal, schools or proximity to mass transit. Quality of construction and design, craftsmanship and similar upgrades can also increase appeal.
There’s no shortage of people willing to “pay more” to live in a desirable school district, or for a home with certain design features. The question of what a home is “worth” really has two answers — what the data indicates, and what role it serves for the person who lives in it, whether it’s the present owner or the buyer.
The challenge comes when trying to reconcile the hard data that appraisers rely on with those intangible or specific appealing features a buyer values. This is often the basis for appraisal issues, especially in a lending environment with hyper-underwriting processes.
There are homes with full-sized indoor batting cages, racquetball and basketball courts, bowling alleys and even shooting ranges."
Challenging an appraisal in a situation like this can be difficult; underwriters don’t typically like to think outside of the box. In some cases, this can also undermine the confidence of the buyer if potential appraisal problems are not detailed to a buyer or seller.
While a home may contain highly desirable features, the problem of functional obsolescence due to overimprovement may be a genuine concern. There can be instances of properties with features so unique that their cost is not close to supported by the local data.
While some buyers or occupants may still find a home like this appealing, they might be considered “white elephants” because they are so uniquely equipped. That could become a headache for both sides when it’s time to sell.
Most place a high value on garages. A two-car garage is nice. For some, space for three or four cars is better still. But what about six?
What about a garage equipped with a lift system that allows for cars to be stacked in a garage? Or a garage with a “pit” that allows access to work on vehicles from below? Is a cavernous garage that’s tall enough to accommodate an RV or fishing boat worth the expense?
For select buyers, these might be “must-haves.” For others, they may be features that cannot be justified with a higher price.
Outdoor improvements like pools and barbecues routinely enhance appeal, especially in warmer markets. How much will the market recognize pool features like gunite and pebbletech instead of vinyl? What about hot tubs, waterfalls and vanishing edge designs? What’s more desireable: salt water or chlorine?
Will the market pay more for a fully equipped outdoor kitchen with high-end appliances, media and audio systems, and fire pits or fireplaces featuring real stone or brick?
What about uniquely designed and constructed walks, walls and landscaping? Does something like this, especially if a community has a pool and recreational facilities, return the cost of installation and maintenance when offered for sale?
Another example seen more and more is the trend toward athletic equipment in homes, in some cases rivaling what’s found at professional gyms and training facilities. There are homes with full-sized indoor batting cages, complete with pitching machines and netting, homes with racquetball and basketball courts, bowling alleys and even shooting ranges.
Indoor pools are not nearly as unique as they once were, nor are full-sized gyms with professional-grade equipment. While many buyers might enjoy a gym or target shooting, how many want them in their home, and are willing to pay extra for them?
Some homes serve a general purpose for a limited time. Others serve a specific role that may last for many years.
Real estate is a highly personal business and there are an infinite number of variables at play. But answering the question of “Does this home work for me?” is the most important one to control.
That answer — the “value in use” to the occupant — may not be supported by the market data. Which is why an understanding of these terms is so important when making sound real estate decisions.
- See more at: http://www.inman.com/2014/03/31/the-concept-of-what-adds-value-to-a-home-is-subjective-at-best/#sthash.bfW9Pbi4.dpuf
Tuesday, April 8, 2014
Clintonville-Beechwold Freecyclers
I admit it I forget things. Thinks like "do I have a can of Linseed Oil or do I need one ?" I use it to oil handles of garden tools and other wood things that should not get left out in the weather but some times do.
I recently discovered three cans on the shelf in our paint room. What to do with the extra cans ? If you live in Clintonville and you are member of the Clintonville-Beechwold Freecyclers you post a message to the (members only) Facebook Group.
Some one will respond "Hey I need some of that !" You exchange emails off line with address etc., put the material on your front porch and it's picked up.
Now i'm off to pick up my new window screen installation tool that some generous soul has put out on their porch.
Call it redistribution - call it neighborliness. It works !
Clintonville-Beechwold Freecyclers
I admit it I forget things. Thinks like "do I have a can of Linseed Oil or do I need one ?" I use it to oil handles of garden tools and other wood things that should not get left out in the weather but some times do.
I recently discovered three cans on the shelf in our paint room. What to do with the extra cans ? If you live in Clintonville and you are member of the Clintonville-Beechwold Freecyclers you post a message to the (members only) Facebook Group.
Some one will respond "Hey I need some of that !" You exchange emails off line with address etc., put the material on your front porch and it's picked up.
Now i'm off to pick up my new window screen installation tool that some generous soul has put out on their porch.
Call it redistribution - call it neighborliness. It works !
Monday, April 7, 2014
Pitfalls of Reverse Mortgages May Pass to Borrower’s Heirs
By JESSICA SILVER-GREENBERG
The only solace for Isabel Santos as she spends her evenings huddled over stacks of yellowed foreclosure notices is that her parents are not alive to watch their ranch-style house in Pleasant Hill, Calif., slipping away.
Ms. Santos, 61, along with a growing number of baby boomers, is confronting a bitter inheritance: The same loans that were supposed to help their elderly parents stay in their houses are now pushing their children out. “My dad had nothing when he came here from Cuba and worked so hard to buy this house,” Ms. Santos said, her voice quivering.
Similar scenes are being played out throughout an aging America, where the children of elderly borrowers are learning that their parents’ reverse mortgages are now threatening their own inheritances. Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes that need not be paid back until they move out or die, have long posed pitfalls for older borrowers.
Now many like Ms. Santos are discovering that reverse mortgages can also come up with a harsh sting for their heirs.
Under federal rules, survivors are supposed to be offered the option to settle the loan for a percentage of the full amount. Instead, reverse mortgage companies are increasingly threatening to foreclose unless heirs pay the mortgages in full, according to interviews with more than four dozen housing counselors, state regulators and 25 families whose elderly parents took out reverse mortgages.
Some lenders are moving to foreclose just weeks after the borrower dies, many families say. The complaints are echoed by borrowers across the country, according to a review of federal and state court lawsuits against reverse mortgage lenders.
Others say that they don’t get that far. Soon after their parents die, the heirs say they are plunged into a bureaucratic maze as they try to get lenders to provide them with details about how to keep their family homes.
Ms. Santos’s mother, Yolanda, began borrowing money against the equity in her home in 2009, when she was in her 80s. Ms. Santos thought the arrangement would defray her mother’s living and medical expenses by providing cash up front.
It was only after her mother died two years later with an outstanding reverse mortgage balance of about $308,000, that Ms. Santos learned the loan had in fact jeopardized her parents’ nest egg. The financial company that extended the loan, Reverse Mortgage Solutions, moved to foreclose unless she paid the full balance of the mortgage.
What Ms. Santos did not know at first was that surviving family members were supposed to be offered the choice to settle the reverse mortgage for a percentage of the full amount. In her case, that lesser amount offered to heirs is 95 percent of the home’s current value, or about $237,000, according to one estimate. Any shortfall if the home sells for less than the debt is covered by a federal insurance fund, which all reverse mortgage borrowers are required to pay into each month.
After being contacted by The New York Times, the lender offered Ms. Santos the option to buy the home for 95 percent of the current value. The only problem is that the home is now worth more than it was three years ago when Ms. Santos’s mother died.
Lora Bitting, 61, said she was crippled by sadness after her father, Jesse, who took out a reverse mortgage on his Muskogee, Okla., home, died in December. Still, Ms. Bitting contacted the lender a month later to begin the process of paying off the $194,254.34 debt, according to a copy of the letter reviewed by The Times.
But because of delays in uploading her letter and a missing trust document, the lender ultimately sped up foreclosure proceedings on her father’s home last month.
There is no data on how many heirs are facing foreclosure because of reverse mortgages. But interviews with elder care advocates, the housing counselors and heirs, suggest that it is a growing problem already affecting an estimated tens of thousands of people. And it is one that threatens to ensnare future generations, as older Americans increasingly turn to their homes for cash. Already, the combined debt of Americans from the ages of 65 to 74 is rising faster than that of any other age group, according to the Federal Reserve. And approximately 13 percent of the reverse mortgages outstanding are underwater, according to an estimate from New View Advisors, a New York consulting firm.
“It’s truly one of the thorniest issues I hear about from a growing number of attorneys,” said Diane E. Thompson, a lawyer at the National Consumer Law Center.
Reverse mortgage lenders say that they abide by federal rules, noting that their goal is to avert foreclosures, which can be costly and time-consuming. And used correctly, reverse mortgages can help older homeowners get cash to pay for retirement. Peter H. Bell, president and chief executive of the National Reverse Mortgage Lenders Association, a trade group, notes that the loans are tightly regulated.
The reverse mortgage market has been in decline since the financial crisis. The number of such loans fell to 51,000 in 2012 from a peak of about 115,000 in 2007. At the same time, the rate of default on reverse mortgages rose to approximately 9.4 percent of loans in 2012, up from 2 percent a decade earlier, according to theConsumer Financial Protection Bureau. As the market foundered, large banks left, replaced by a fleet of smaller lenders and brokers.
For heirs, the problem with reverse mortgages often centers on the little-known set of federal regulations administered by theDepartment of Housing and Urban Development. A spokesman for the agency said it vets participating reverse mortgage firms to spot any possible violations, but did not provide a tally of the participating firms found in violation or of the participating firms that have been penalized. The regulations apply to reverse mortgages that are insured by the Federal Housing Administration, virtually all of the market.
Lenders must offer heirs up to 30 days from when the loan becomes due to determine what they want to do with the property, and up to six months to arrange financing. Most important, housing counselors say, is a rule that allows heirs to pay 95 percent of the current fair market value of the property — a price that is determined by an appraiser hired by the lenders. Mr. Bell of the National Reverse Mortgage Lenders Association said that lenders are strictly abiding by the 95 percent rule.
The difference offered by the 95 percent rule can be critical. After the financial crisis, when housing prices tumbled, the disparity between the current value of the home and the total balance on the mortgage often means the difference between keeping a home and losing it to foreclosure.
When Robert Campbell’s mother, Lillie, died in 2012, the outstanding loan balance was $123,773 — a sum that was impossible for him to pay. But, he could have cobbled together the $14,000, or 95 percent of the market value of the Chicago home when Ms. Campbell died. The only problem is that the lender never informed him of that option, according to his lawyer, Kathryn Liss. It wasn’t until Mr. Campbell contacted the lawyer that he learned of an alternative. There are others like him.
“There are hundreds of families who want to keep their homes and are simply not aware of their rights,” Jean Constantine-Davis, a senior lawyer for AARP, said.
A version of this article appears in print on 03/27/2014, on page B1 of the NewYork edition with the headline: Inheriting a Mortgage Pain.
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