Is it crazy to sell a home in this market? Conventional wisdom would suggest waiting to sell until all the competing foreclosures have worked their way through the system and recovery is underway.

Sometimes, though, conventional wisdom can be wrong. There are circumstances when selling a property in order to buy another makes good financial sense.

For example, consider someone who purchased a rental property in the frenzied and expensive market of 2005 or 2006. If that property is located in California it was reassessed to it’s purchase price. If one were to sell that property today and purchase a like property benefits could include:

Avoidance of capital gains taxes. After all, a loss is not a gain.

Increased positive cashflow due to lower property taxes and lower mortgage payments.

As a savvy investor told me many years ago, “I don’t mind selling in a buyers market or buying in a sellers market as long as I’m buying and selling in the same market.”

Another example is suggested by The Wallstreet Journal’s Smart Money website. In an article titled, “The Case for Downsizing Your Home,” writer Glenn Ruffenach opens with the intriguing suggestion, “Do you love your home? I hope so. That said, chances are good you need to consider leaving it.”

Ruffenach explains that two critical failings in many retirement plans – inadequate nest eggs and premature job loss – might make a downsizing strategy attractive for some.

Real estate on the cheap: How to craft a lowball offer is the latest installment in the popular msn.com real estate series.

Staff writer Leah L. Culler included advice from SLO HomeStore Broker Michael Byrd in her article which explains that “a buyers market isn’t necessarily a free-for-all.”

The article featured “tips on how you can score a great bargain in your next home purchase.”

Besides Byrd, Culler interviewed Dorcas Helfant-Browning, a real-estate agent at Coldwell Banker in Virginia Beach, Va, and Janice Caputo of Pittsburgh.

Ask Roxanne,the popular column written by local mortgage banker Roxanne Carr addresses a question that sound like the stuff of which good soap operas are made.

Q: “I’ve gathered a lot of information from your posted FAQs-my question deals with much the same background. My ex-husband and I were final in May, and as part of that agreement, he had to refinance or sell the property in 60 days. Well, the property consists of two lots, one with the house on it and one that wasn’t buildable until the sewer line was put through last year (it wouldn’t perk) as the backyard. I was required to Quit Claim the property to him so he could refinance, which I did.”

“He didn’t refinance and has listed the house but not the adjoining lot. He Quit Claimed the adjoining lot that is in the mortgage to his girlfriend. Can he separate the parcels out if they are covered under one mortgage? He has filed a form with the mortgage company that specifically excludes me from speaking to them at all even though I am on the mortgage as the co-borrower. Is this a permissible action or does the liability have to be satisfied before the properties can be separated for disposal?”

A., Talbott, TN

A: It sounds like you need to talk firmly with your divorce attorney.  No, you cannot split off one of two properties covered by one mortgage without the lender’s approval.  The lender will generally ask for an appraisal and a paydown of the loan amount for the value of what is to be split off.  It is called a Partial Reconveyance.

You should be able to talk to the lender if you are still a borrower of record; possibly you are not.  Check title with your local County Recorder.  There is no form I know of that would preclude you from speaking with them if you are truly a borrower, and it is to their advantage to help you in any way possible.  Ask for a supervisor.  Good luck.

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Copyright © 2011 Roxanne Carr

Roxanne Carr is division president of The Mortgage House, Inc.  She has over 30 years’ experience in the mortgage banking industry.  Your e-mailed questions are welcomed through her website at: www.themortgagehouse.com or call her at 1-800-644-4030.  This article is a forum to explore real estate principles.  It is not intended to provide tax, legal, insurance or investment advice and should not be relied upon for any of these purposes.

home buyers mortgage interest rates at the close of the week remained pretty much unchanged from the previous week.

This week’s snapshot of the most common loan programs shared by a local lender continues to show the rate for a 30 year fixed rate FHA, VA or USDA mortgage at 3.75%. When we first displayed that rate significantly under 4% it raised some eyebrows and elicited a couple of comments, so an explanation is in order.

When comparing mortgage interest rates it is critical to compare the Annual Percentage Rate (APR) and not just the note rate which is the base rate most people look at. The APR includes not only the note rate, but other costs such as lender fees, discount points and closing costs. Federal law requires that the APR be posted anytime a note rate is displayed.

So take a look at the FHA rate in question. Though the note rate is, indeed, 3.75%, the APR is 4.868% which is more than one point higher. That is a substantial difference. When you compare the note rate to the APR for the other programs in this week’s report you’ll note that the difference is less than 1/4 point. Get the point?

This week’s snapshot:

Conforming Primary Residence & 2nd Home, up to $417,000
30 year fixed: 3.875% (APR 4.002)
15 year fixed: 3.250% (APR 3.473)
5 year fixed: 2.750% (APR 2.869)

Super Conforming Primary & 2nd Home, up to $561,200
30 year fixed: 4.125% (APR 4.240)
5 year fixed: 2.875% (APR 2.982)

JUMBO RATES 80% Primary Residence up to $1,500,000
30 year fixed: 4.50% (APR 4.614)
5 year fixed: 3.00% (APR 3.104)

FHA, VA & USDA rates up to $417,000
30 year fixed: 3.75% (APR 4.868%)

Conforming Non Owner up to $417,000
30 year fixed: 4.25% (APR 4.380)

Propping up home prices seems to be the goal of Freddie Mac, reports American Banker writer Kate Berry.

“The government-sponsored enterprise told investors this month that it is currently selling 90% of its real estate-owned properties at asking prices and is not considering ‘significant discount pricing,’” Berry writes in today’s article.

She quotes Freddie spokesperson Brad German and saying, “‘We absolutely don’t want to tank the housing market.’”

In our experience here on the central coast, Freddie generally does a good job pricing and managing sales of its foreclosed inventory. Exceptions are sometimes noted for homes requiring major renovation or repair when list prices tend not to fully take into account the true condition of the property or the cost of liabilities being assumed by buyers.

Here is the full text of Berry’s informative article:

Freddie Mac: No Fire Sales of Foreclosed Homes

By Kate Berry

September 9, 2011

Freddie Mac said it will not dramatically discount its backlog of foreclosed homes, arguing that such steep price cuts could destroy the housing market.

The government-sponsored enterprise told investors this month that it is currently selling 90% of its real estate-owned properties at asking prices and is not considering “significant discount pricing,” according to a letter obtained by American Banker.

Such discounts could help Freddie rid itself of its backlog of foreclosed homes. But dumping so many properties at once could also drive down housing prices broadly and harm the greater economy, a Freddie spokesman told American Banker.

“We absolutely don’t want to tank the housing market,” spokesman Brad German said.

Freddie sent the letter and a questionnaire this month to investors who are interested in acquiring properties in bulk through its REO sales unit HomeSteps. Freddie said it wanted to share its marketing and pricing strategy and reiterated that its primary focus is on “selling affordable housing to owner-occupants at market value.”

“Currently we are selling above 90% of market value in most of our volume markets,” Freddie said in the letter. “We are extremely mindful of the impact in our approaches to pricing and how it affects the values of neighborhoods should a discounted sale occur.”

Most investors are low-balling the government, trying to buy REO properties at 40% to 60% below the current listing price, Freddie said in the letter. It added: “We are not considering any such significant discount pricing.”

Freddie properties spend an average of 110 days on the market before being sold, and their pricing is based on two broker price opinions: one from a listing agent and another from an independent broker.

Some investors have criticized both Freddie and Fannie Mae for refusing to make major discounts on REO properties, for a lack of supervision of the broker price opinions process, and for listing properties that need major renovations at what investors consider to be above-market values.

“They list properties for a price that we would normally list them for after a remodeling,” said John Helmick, chief executive of Eugene, Ore.,-based Gorilla Capital, a large purchaser of homes at foreclosure auctions.

Freddie spokesman German said most properties sell “as is” because the agency is operating under conservatorship and is trying to “minimize losses and be good stewards of taxpayer dollars.”

Federal regulators last month issued a request for information on options for unloading foreclosed properties owned by the GSEs and the Federal Housing Administration. The regulators asked for submissions by Sept. 15.

At the end of June, Freddie had 60,569 REO properties and Fannie had 135,719. But many of the REO properties are not listed for sale because they may still be occupied or need repairs.

home buyers benefit from the current market so leave it alone. As a broker who represents home buyers exclusively, we’ve long flown in the face of conventional wisdom by remaining bullish on current market conditions. When prices are significantly lower that is good news for home buyers. Simple.

But most everything we read and hear tells us that the market is terrible; that it has to be “fixed” so prices begin rising once again. But our clients benefit from lower prices so we don’t necessarily see the need to “fix” anything. The longer lower prices and low interest rates remain, the more folks who will be able to enter the ranks of home ownership. Again, pretty simple.

And now it may be that we have company in our view that the housing market should just be left alone to do what it is going to do. A real estate professional in Ohio is gaining some degree of attention by publicly taking a similar stance. Her comments are worth pondering so we share them here with you.

Why NAR and the government should stop trying to fix housing

Kathleen Cosner | September 5, 2011

Oh, boy.  We know there’s trouble when NAR not only requested, but is now planning to host a Housing Summit in DC, scheduled for October. Business, economist, and policy making type people should be in attendance. The point? To find a solution to the housing industry disaster.

Attempt one: tax credits

The things that have been tried (some with a modicum of success, others, not so much), haven’t exactly done a whole lot to fix the housing mess. We had the First Time buyer Credit, which also could apply to move-up buyers. While it increased the amount of sales for a time, it didn’t exactly affect values. Most people just bought sooner than they would have, and there was a slight increase in sales prices, due to well, eight grand being tagged onto asking prices.

Attempt two: loan mods

There have been both Government and individual bank programs for loan mods, in which interest rates, principle, and missed payments could all be reduced. Also included with the loan mods are programs for the unemployed and underemployed, initiatives to streamline short sales, and billions of dollars for states that are “hardest hit.”

While millions and millions of owners have not been helped as promised when bank and government sponsored programs rolled out, a fair amount of people are at least getting modifications. However, they are also redefaulting at an alarming rate. Interest rates themselves are, wait for it… at historic lows (I hate this term more than lima beans, and I really hate lima beans). Even if they weren’t super low, this isn’t the early ‘80’s after all. Anything under ten percent is awesome.

Attempt three: government programs

Fannie, Freddie, and other banks even had foreclosure moratoriums. True, some were due to the robo-signing fiasco, but there was a good period a couple of years ago where many were self-imposed. Of course there was TARP, which, well, what was the point of that? So that banks wouldn’t fold, and they’d have capital to lend? How’d that work out again?

We also have new departments in the government like the Consumer Financial Protection Bureau and a boatload of new rules thanks to the Dodd-Frank Bill. Since most of these have either just gone into effect or have yet to begin, it’s too soon to say what will come of them. A lot of different policies and programs have been attempted.  Overall, the success rate has been dismal.

Fresh, new ideas

Some of the new, and fresh ideas (sarcasm much?) bouncing around, are Fannie/Freddie REOs being turned into rentals, mass refinancing for loans backed by Fannie/Freddie, extending jumbo loan-limits, flood insurance, and let’s not forget the ever popular, but rarely done, principle write-downs for those filing bankruptcy, or for those who are underwater.

Are there any other innovative ideas that (1) will come out of a NAR Housing Summit, and (2) not suck? My vote is no. As many of us at AGBeat has long noted, this isn’t a housing problem, it’s a jobs problem. If a borrower or homeowner has little income or is on unemployment, if their credit scores are in the tank, they have zero dollars for a down payment, and their prospects for the future are bleak, who in their right mind would lend them money to buy or re-fi a house?

The real answer:

Listen, I’m no economist, hell, I almost failed the same math class with the same teacher- twice. Obviously, I’m not involved in huge, mega business decisions that affect thousands of people, or schmoozing with the Feds to implement or change policy, either, but I have spent my entire life around real estate. Developing some new, crazy, housing policies is not the way to go. Please, Powers That Be, let the freaking dust fall where it may, and stay out of it. Stop trying to fix housing with the theory that stabilizing it will result in a magic pill for the economy at large.

Please, PTB, instead of a Housing Summit, try a Job Summit. Actually, just call it a meeting, a gathering, a pow-wow- anything but a Summit. And try inviting real, everyday people, too, not just dudes in suits- who knows, ideas like this may come up? We could try throwing bucks at those who can, and want to go to school to improve their current credentials, or train for new careers. Instead of wasting cash on repaving roads that don’t need it (yeah this happened right down the street from us), money could be invested in the tech and medical fields to create and open up more opportunities. Grants could be given to cities that would allow them to re-hire teachers, safety forces, and admin people. And while I’m not huge on tax breaks for all, we need to make the working environment just a tad friendlier in states that have outrageous rates for both employees, and business owners.

A Housing Summit is so not needed. It’s a waste of time and resources. Fix the job problem, and the whole housing thing will fix itself.

home buyers can avoid credit dings when shopping for a mortgage if they understand what will or will not impact their credit score.

The article, “Avoid credit dings when mortgage shopping; How to steer clear of ‘borrower in distress’ label” by Jack Guttentag is one of the informative articles in this month’s “For Home Buyers Only” newsletter provided by SLO HomeStore.

Below is this important article in its entirety. Interested buyers can have this informative monthly newsletter sent to them directly by simply asking.

Avoid credit dings when mortgage shopping
How to steer clear of ‘borrower in distress’ label
By Jack Guttentag

Borrowers in distress often contact many lenders hoping to find one who will approve them. For this reason, multiple inquiries can have a negative impact on a consumer’s credit score.

But multiple inquiries can also result from loan applicants shopping for the best deal. The challenge to the scoring system is to distinguish borrowers in shopping mode from borrowers in distress mode.

Hard inquiries vs. soft inquiries Consumers need not be concerned about inquiries they make, such as ordering a credit report. Self-inquiries don’t affect the credit score. Neither do inquiries from your existing creditors, potential employers, or businesses considering whether or not to solicit you. These are sometimes called “soft inquiries.”

The inquiries that may affect your credit score are those by new credit grantors to whom you have given your Social Security number along with explicit authorization to check your credit. These are “hard inquiries.”

Distinguishing borrowers in shopping mode from those in distress: The ignore rule Two credit-scoring rules developed by Fair Isaac Corp., which pioneered the development of credit-scoring models, are designed to protect the scores of borrowers who shop multiple lenders for the best deal.

The “ignore rule” is that “the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring.”

The 30 days includes the day of the score, which is not evident from the wording. It is a good rule, but borrowers are not warned about other types of credit that are not ignored. A very important one is credit cards.

For example, if a mortgage lender makes a credit inquiry to obtain your score, then you shopped two credit card issuers, and had the lender inquire again, the credit score could drop. That’s because all credit card inquiries are treated as indicators of distress.

Mortgage borrowers today face the hazard that the 30-day period can expire while their loan is still being processed. If the lender decides to recheck the borrower’s credit, which some do as a standard practice, the mortgage inquiries that had previously been ignored will then hit the score. Distinguishing borrowers in shopping mode from those in distress: The “consolidation rule.”

The “consolidation rule” is that “the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score.”

The consolidation rule is expressed in such a way that most readers interpret it to mean that mortgage, auto, and student loans are consolidated together. In fact, what it means is that all mortgage loans are consolidated, all auto loans are consolidated, and all student loans are consolidated. If you shop for one of each type, they constitute three inquiries.

The shopping period during which inquiries are consolidated is 15 days in one version of the scoring model and 45 days in another. Because borrowers don’t know which model is being used by their credit grantor, they should assume the period is 15 days.

But the most serious concern about the consolidation rule is whether the scorers can accurately associate inquiries with the correct loan type, especially in the case of mortgages.

Does consolidation always work?

One of the motivations for this article was a claim made to me by Jack Pritchard, a long-term mortgage veteran, that mortgage inquiries were not always consolidated because the reporting system did not always identify them accurately.

According to Fair Isaac Corp. “the credit reporting system is a voluntary one and … lenders report what they choose to report to the bureaus, and each bureau represents that information a little differently on its credit reports.”

While this reply confirmed that proper identification could be an issue, Fair Isaac claims that their systems work around this problem by giving the borrower the benefit of any doubt. If the system is not sure, it consolidates.

But this leaves open the possibility that the system has no doubt but is wrong. Pritchard pointed to mortgage inquiries from credit unions and finance companies as particularly prone to misclassification because other types of loans are originated out of the same offices. To address this, Fair Isaac was asked what would happen if a mortgage shopper generated an inquiry from a credit union and a finance company?

The reply was that “the credit inquiries would in all likelihood be de-duplicated by the FICO scoring algorithm. Inquiries from both credit unions and finance companies are eligible for de-duplication.”

Bottom line for now

A case can be made that loan inquiries should be added to the list of borrower characteristics, such as sex, race, and ethnicity, that, as a matter of public policy, can’t be used in developing credit scores. The information could continue to be compiled and provided to lenders, but could not be used by the credit-scoring algorithm.

Meanwhile, borrowers shopping for credit should minimize the number of hard inquiries by ordering their own score, which does not count as an inquiry, providing that score to all the vendors they shop. You tell them that they can check your credit when you are ready to authorize it. This will reduce the number of hard inquiries to one, from the vendor you finally select. And do not seek new credit cards during the period you are shopping for a loan.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

home buyers interest rates weekly snapshot from a local lender constitute another big yawn. Not much has changed: rates are still around 4% for a conforming 30-year fixed rate mortgage. The same FHA loan, though, can get you a rate of 3.75%.

Did we say big yawn? 3-3/4% for a fixed-rate mortgage is a very big deal for those who qualify.

Conforming Primary Residence & 2nd Home, up to $417,000
30 year fixed: 4.00% (APR 4.128)
15 year fixed: 3.25% (APR 3.473)
5 year fixed: 2.75% (APR 2.869)

Super Conforming Primary & 2nd Home, up to $561,200
30 year fixed: 4.25% (APR 4.366)
5 year fixed: 3.00% (APR 3.108)

JUMBO RATES 80% Primary Residence up to $1,500,000
30 year fixed: 4.625% (APR 4.739)
5 year fixed: 3.000% (APR 3.104)

FHA rates up to $417,000
30 year fixed: 3.75% (APR 4.868%)

Conforming Non Owner up to $417,000
30 year fixed: 4.375% (APR 4.506)

“Forget the market. Buy a house” is the blunt advice in the headline. Some financial advisers are recommending their clients put some of their cash into buying a house.

Jilian Mincer writes on SmartMoney, “With the Dow Jones Industrial Average down more than 400 points today, and many market experts predicting more volatility ahead, some advisers are recommending their clients put some of their cash to another use: To buy that house or summer home at the shore.”

Mincer cites many of the same issues we’ve written about here including home buying interest rates at a 50-year low, not to mention bargain basement prices in most real estate markets.

Mincer advises, as do we, that job security and financial preparedness are important considerations before making any decision to leap into the market.

And, of course, we’d be remiss if we didn’t advise prospective buyers to use the services of an exclusive buyer agent to assure that their needs are placed above all other considerations.

SmartMoney is produced by The Wall Street Journal.

What buyers need to know about neighborhoods is described in a short report released by the Trulia website this morning. There’s nothing new or earth-shaking in the report, but it does serve to reinforce items any good real estate broker or agent would be sharing with clients.

For long-distance buyers SLO HomeStore has developed The Property Ferret search engine that incorporates lifestyle needs into the customizable home search criteria. For example, if you don’t know much about the central coast’s various towns but know you want to be close to the ocean, just pick that option and you will immediately see all homes for sale in all towns as close to the ocean as you want.