The Isakson/Lieberman Amendment

News out of our nation’s capital is providing perspective buyers with reason to celebrate and look ahead in the housing market. We have all heard of the “American Recovery and Reinvestment Act” that President Obama wants enacted immediately. An amendment to benefit buyers of primary residences was introduced by Senator Isakson (R-GA) and Senator Lieberman (ID-CT).

Comments from Senator Lieberman, “The rapid decline in housing prices lies at the heart of the economic crisis.”  “Real economic growth will not resume until housing values stabilize and American families once again have faith and confidence that the most valuable asset they own – their home – is safe and secure. This kind of credit could repay dividends many times over by increasing housing values, creating construction jobs, and generating state and federal tax revenue.”

The amendment was met with bipartisan support and was approved. The important provision in the amendment was the establishment of up to a $15,000 tax credit for buyer’s purchasing their primary residence.

How Does It Work?

The calculation for how to determine how much your tax credit would be is performed in this manner. Your will get a tax credit for 10% of the purchase price of the residence up to a maximum of $15,000. One of the nice provisions of the amendment is that the tax payer may choose to take the credit all in the first year or it can be split between two (2) years. One very positive feature, as opposed to the First Time Buyer Tax Credit of last year, is that this tax credit does not have to be repaid.

What Is The Timeframe?

Upon enactment of the legislation a buyer will have one year in which to complete their purchase. This sounds like a long time but in reality now is the time to start looking. The housing inventory is at a peak and your best selection for that home that meets your exact requirements may be right now.

What Are The Drawbacks?

The only drawback or downside to this amendment is that if the residence is sold or is not utilized as the primary residence in the first two years, the tax credit must be repaid. There are of course circumstances where this repayment would not apply.

Last week, while attending a continuing education class, I along with the other attendees saw on a listing the classification for a HERS Index. One student in the class asked, what is a HERS Index? No one was able to answer the question. As is usually, when a question like this arises there will be research done and a blog post to follow that answers the question. This is no exception.

After doing a Google search, the first site that I visited in my quest for information on a HERS Index/Rating was the Energy Star site. What I found was that a HERS rating is a scoring system that involves an analysis of a homes construction plans along with on site inspections and testing. Upon review of the plans the “Energy Rater” uses an energy efficiency software package to analyze the design of the home. The Rater will then make recommendations to the builder that will identify energy efficiency improvements that will ensure that the home will meet Energy Star performance guidelines.

Onsite inspections are made by the “Energy Rater” along with the input from the original plan review are used to generate the HERS Index. The on site inspections typically include a blower door test that tests for leaks in the house and a duct test that test for leaks in the duct work.

So now we know what HERS stands for: Home Energy Rating System.

But What Do The Numbers Mean?

Based on the 2006 International Energy Conservation Code, a home built to these standards will have a Hers Index of 100. The lower the Hers Index the more energy efficient the home is. A 1 point decrease in the HERS Index equals a 1% saving in energy consumption compared to the standard. A home with a HERS Index of 85 would be 15% more efficient than the standard.

Who Does The Testing?

The second site that I went to while searching for information was the Residential Energy Services Network (RESNET) site. From their site we get the RESNET Mission Statement:
•    The Residential Energy Services Network’s (RESNET®) mission is to ensure the success of the building energy performance certification industry, set the standards of quality, and increase the opportunity for ownership of high performance buildings.

Certified Rater’s must complete training by a RESNET Accredited Training provider and pass a test to be certified. After certification, the Raters then begin their work of examining plans and helping builders construct more energy efficient homes.

Statistics for single family detached homes in the Gwinnett County real estate market for the month of December 2008 are in. Gwinnett County is divided into six different areas and we will examine each area and then look at the county as a whole.

Area 61

Area 61 is that section of the county that is North of I-85 and West of Pleasant Hill Road. Area 61 includes Norcross, Berkeley Lake and part of Duluth. In the resale segment of the market there were 15 properties ranging in price from $64,900 to $490,000 that went under contract and 8 properties that closed ranging in price from $82,000 to $341,700. In the new construction segment of the market 1 home priced at $304,900 went under contract and there were no closings in the new construction category.

Area 62

Area 62 is the section of the county that is North of Pleasant Hill Road and North of I-85. Area 62 includes Buford, Sugar Hill, part of Duluth and part of Suwanee. In the resale segment of the market there were 59 properties ranging in price from $39,900 to $1,399,900 that went under contract and 26 properties that closed ranging in price from $60,000 to $1,250,000. In the new construction segment of the market 16 properties went under contract ranging in price from $179,900 to $1,190,000 and 15 properties closed ranging in price from $197,000 to $5,500,000.

Area 63

Area 63 is the section of the county that is South of I-85, Northeast of Hwy. 120 and North of Hwy. 29. Area 63 includes parts of Lawrenceville, Duluth, Suwanee and Dacula. In the resale segment of the market there were 48 properties ranging in price from $74,900 to $469,900 that went under contract and 27 properties that closed ranging in price from $70,000 to $357,505. In the new construction segment of the market 11 properties went under contract ranging in price from $159,900 to $659,900 and 4 properties closed ranging in price from $180,000 to $350,000.

Area 64

Area 64 is the section of the county that is South of I-85, Southwest of Hwy. 120, West of Hwy. 124 and North of Hwy. 78. Area 64 includes Lilburn along with parts of Lawrenceville and Snellville. In the resale segment of the market there were 78 properties ranging in price from $54,500 to $419,900 that went under contract and 18 properties that closed ranging in price from $58,900 to $319,600. In the new construction segment of the market 3 properties went under contract ranging in price from $224,900 to $289,995 and 2 properties closed ranging in price from $225,000 to $671,500.

Area 65

Area 65 is the section of the county that is South and East of Hwy. 78 and Hwy. 124, and South and West of Hwy. 20. Area 65 includes Grayson along with parts of Snellville and Lawrenceville. In the resale segment of the market there were 53 properties ranging in price from $49,900 to $429,900 that went under contract and 12 properties that closed ranging in price from $61,500 to $623,333. In the new construction segment of the market 9 properties went under contract ranging in price from $164,900 to $299,900 and 8 properties closed ranging in price from $132,000 to $249,900.

Area 66

Area 66 is that section of the county that is East of Hwy. 20 and South of Hwy. 29. Area 66 includes parts of Dacula and Lawrenceville. In the resale segment of the market there were 30 properties ranging in price from $85,900 to $274,900 that went under contract and 11 properties that closed ranging in price from $104,500 to $552,000. In the new construction segment of the market 12 properties went under contract ranging in price from $159,900 to $450,000 and 3 properties closed ranging in price from $210,000 to $248,500.

Gwinnett County Summary

For the month of December 2008, real estate sales for single family detached homes in Gwinnett County looked like this:
•    283 Resale Properties Went Under Contract
•    102 Resale Properties Closed
•     52 New Construction Properties Went Under Contract
•     32 New Construction Properties Closed.

Moving toward recovery in the real estate market is not an easy task. Gwinnett County has taken a substantial step toward recovery in December. Closing for both resale and new construction are up for the month compared to last month. With interest rates being  extremely low and home prices having leveled out buyers seem to now be ready to take advantage of the market.

Builder Short Sales

A builder doing a short sale on a new construction property is just plain scary. What you as a buyer are being told, in a not so subtle way, is that the builder is probably not going to be able to cover any warranty work that needs to be performed on your new home. Having that builder backed warranty for the first year is a huge financial advantage. Getting a home warranty can rectify some of your exposure however many of the items that need to be corrected in that first year are cosmetic items that a home warranty does not cover. After all, the appliances are covered under the manufacturer’s warranty. I have yet to see a new construction home that does not have settling cracks and nail pops during that builder warranty period. Now, I don’t want you to think that I’m saying not to buy a Builder Short Sale. I’m just saying that you need to buy it at a price that makes it worthwhile to take on the additional financial risk.

Is It A Tough Market?

Sure the market is tough for the new home builders right now. It’s tough for everyone. Everything involved in our economy is tough. These tough times require that you, as an educated buyer, demand certain things from your agent. Possibly the most important thing that an agent can do for a buyer in today’s market is share the knowledge about builders and construction techniques that has been obtained through years of hard work. Not only the sharing of knowledge, but also the ability to obtain current information about the prospective builder’s financial status and prospects for the future. No one wants to be in a situation where they purchase a home today and the builder is gone tomorrow.

Educated Buyers Work With Business People

In the past the thought was that “If you build it they will come”. To some degree that was accurate. In today’s market educated buyers are working with builders and agents that treat their business as a business. The builders and agents that will survive in this market are businesspeople that operate and act like businesspeople.

Don’t Scare Me

The thought of one of my buyers purchasing a home from a builder via a short sale scares the mess out of me. I take pride in protecting my buyer’s best interest. I just don’t think this type transaction is a good fit for buyers who don’t understand the additional financial risks involved.

So you are tired of paying some one else’s mortgage and you want to buy a home but you have been told your credit just won’t allow you to. Let me see if I can guess the way the conversation went. You filled out a mortgage application and the person electronically accessed your credit report. They then told you that the report showed you with a middle credit score of whatever it is and they are not going to be able to help you. Or you were informed that they would talk to their investor or a senior loan officer to see what can be done to help. That is so typical of the way most transactions like this play out.

So What’s The Problem

Let’s look at what the problem is. It is actually very simple, your credit score is too low for you to qualify for a mortgage. With the current conditions in the real estate and financial markets credit has become more difficult to obtain and is being some what reserved for higher credit score customers who may be less of a risk to the lender. So what do we do to help you. First of all we need to know exactly where we stand in the credit score department. We then need to know what items on your credit report are driving your score down.

Credit Reports Are Not Totally Accurate

Are there some items on your report that do not belong to you? One thing we have learned is that the credit reporting agencies data is not always totally correct. In fact 79% of all credit reports contain mistakes, 54% of all credit reports contain personal information that is outdated or belongs to a stranger, 30% of all credit reports contain accounts that are closed by consumers but continue to be reported as open and 25% of all credit reports contain errors serious enough to result in outright credit denial.

Let’s Come Up With A Plan

Once we have reviewed your situation and credit report we can collectively come up with a financial plan to get you on track and set up a timetable for you to get into your new home. We can actually tie this all together with the “No Down Payment Mortgage” discussed yesterday.

The Fair Credit Reporting Act

Fortunately there are several laws that have been inacted to protect you the consumer. The most signifacant of these is the Fair Credit Reporting Act. This law protects your credit rights. You have the right to contest inaccurate information in the report and if a creditor cannot verify any inaccurate information within 30 days the inaccurate information must be removed from your credit report. The credit reporting agencies actually receive thousands of these disputes from consumers every day.

How Long Will It Take?

I know you have several questions about how this process works, with the main one being how long will it take? It is impossible and would be unethical for any individual or company to to guarantee an outcome or timeframe. However, based on experience and expertise you will be given an estimate.

If you would like more information concerning credit repair in the Greater Atlanta Area please Contact Me and we can set up a confidential conference.

As of July first of this year all builders and remodelers in the state of Georgia are to be licensed by the State Licensing Board for Residential and General Contractors. There are three types of contractors that must obtain a license by July 1, 2008.

*  Residential-Basic Contractor (Contractor work relative to detached one-family and two-family residences and one-family townhouses not over three stories in height).
* Residential-Light Commercial Contractor (Contractor work or activity related to multifamily and multiuse light commercial buildings and structures).
* General Contractor (Contractor work or activity that is unlimited in scope regarding any residential or commercial projects).

A fourth classification of contractor is the specialty contractor who is not required to be licensensed. This classification would include painters and roofers for example and they are not allowed to hire subcontractors.

I would think that the purpose of this law would be to help protect innocent homeowners and home buyers from unscrupulous contractors. We have all heard horror stories about homes and projects that have not worked out as originally planned. One big advantage of this law is the requirement for contractors to meet minimum standards for education, financial stability and workers compensation.

So what will the down side of this law be? Since Atlanta is so close to Florida, some of what happens there makes its way to our news programs. When a major event such as a hurricane hits Florida, it can sometimes take additional time to even get bids on getting work done much less getting the work itself performed.

The real estate market is quite unique at this particular point in time. History tells us that even though we have seen ups and downs, we just have not experienced a market like this. Increases and decreases in property values occur all the time just like the stock market. Generally speaking, over the long haul the value goes up. So what makes this market so unique?

What Happened To the Mortgages?

Up until several months ago there was a mortgage program for just about everyone. Then came the sub-prime market shake up and loan programs were reduced to some of the most basic. On top of that, investors tightened up the qualification parameters for applicants. Many first time buyers utilized 100% financing programs which went away. That breathed new life into the down payment assistance programs, which congress may soon do away with. The number of buyers who can qualify for a mortgage in today’s market has declined which therefore creates a negative impact.

Price Your Home Right

Pricing a home correctly when it first goes on the market is more important now than ever. In the past sellers market, when the market was appreciating and mortgage programs followed freely, it was an accepted practice to price your home slightly above value to allow some negotiating room. In today’s buyer’s market this just is not the case. As a seller you don’t want to put yourself in the position of “Chasing the Market”. So how do you avoid this pitfall? The easiest and most comprehensive way is to have your home appraised by an independent third party who is a licensed appraiser.

Help Buyers Buy Your Home

What other factors influence a buyer’s decision of whether or not to make an offer on your home? The main ones are appearance, appearance and appearance. Make sure that the exterior is inviting, remember you only get one chance to make a good first impression. Removing clutter and having clean carpets along with fresh paint will help tremendously. If your home is not in show ready condition and properly priced it is almost certain that you will be chasing the market instead of having the market chase you!

How would you like to receive a letter from your homeowner’s association that starts out like this? During a recent inspection it was noted that you were in violation of the Covenants and Architectural Guidelines for the following reason:

General Maintenance – Paint Metal Roof: "Each homeowner shall keep and maintain each Lot and Structure owner by him, as well as all landscaping located thereon, in good condition and repair…"

Specifically please paint the metal roof on the front of the house to match the shutters.

We will recheck your property in approximately twenty (20) days from the date of this letter. Please note that violations that are not corrected by that date or continue to be repeat violations will incur a fine of $25 per day. The association has the right of abatement (the right to correct the violation at your expense) and the right to membership suspension. Please refer to the Covenants.

In my subdivision many of the bay windows and Queen Anne returns are covered with copper. Now if the copper roof is to be painted the same color as the shutters, then just on my cul-de-sac of 7 homes there would be grey, taupe, reddish orange, blue and black painted copper. I think it is easy to visualize just how silly that would look. Obviously the individual that wrote this letter was not very well versed about copper roofs and their maintenance. For those who don’t know as it ages, copper naturally goes through several stages. Rather than educating themselves first, it is sad that the homeowner’s association just sent out this letter for no good reason.

After several phone conversations and countless hours of research obtaining documentation about copper roofs along with emailing these documents to the homeowner’s association the violation was dropped. The resident was guilty until proven innocent. Seems a bit backwards from the way we have all been brought up don’t you think? Below you will see a picture of a monument that started out as bright shiny cooper and been going through the aging process for some time. I think we can all agree that it would be a shame to paint this structure.

What is the best verbiage to use when marketing a sale on new construction in Greater Atlanta? I recently received an email marketing a builder that was titled “Your Buyers have 2 more weeks to get a Great Deal”. What do you think this email was actually trying to say? Was it that after this two week period is up the deals on this builders homes will really suck? Was it that in 2 weeks the bank was going to foreclose on all this builders inventory? I don’t think that it was either of these two, but the builder needed to clarify his intentions. I feel fairly certain that the builder was trying to create a sence of urgency and increase traffic to the communities he is building in, but don’t do it to the extent that prospective buyers and the agents representing those buyers get the wrong impression.

What About Pricing

One problem that I see with new homes in the Atlanta market is that some of the builders are asking inflated prices for them and then discounting the list price by huge amounts. What is going to happen when this real estate slow down rebounds? Will the builders want to go back to the inflated pricing? Natural tendency would be to say yes. But guess what, the appraisers will be using the discounted pricing for establishing the value of future sales. Kind of a catch-22 don’t you think? Certainly no one expects the builders to work for free. They are entitled to a return on their investment and should run their business accordingly, just be realistic. When I see prices discounted by $50,000 to $100,000 on individual homes, something tells me that the builder is acknowledging that the home was overpriced to begin with. Why not price the homes competitively and negotiate the transaction in a normal manner.

Several years ago when the real estate market in Greater Atlanta was booming, builders viewed real estate agents as a necessary evil and tolerated our existence. With Buyer Agency being so well advertised and promoted as the best course of action by consumer advocates, builders now realize that collectively the REALTOR community is working with the majority of the buyers.

For more information about buyer agency and an Atlanta Buyers Agent contact Mack.

Update for Down Payment Assistance in Atlanta

The Nehemiah Program

This morning I had the privilege of attending a seminar about down payment assistance and how it can benefit both buyers and sellers in the greater Atlanta market. The seminar was taught by Leslie Kane, Area Manager, of The Nehemiah Program. The Nehemiah Program is charitable organization that has helped over 40,000 families in Georgia achieve their dream of home ownership.

The Nehemiah Program began in Sacramento, California in 1994 and was designed to help a particular community become more stable. The program gets its name, Nehemiah, from a biblical figure that helped rebuild the walls of Jerusalem and since the program was being utilized to help rebuild a community it just seemed to fit.

How Down Payment Assistance Works

If a buyer is qualified to purchase a home using FHA financing then they are automatically qualified to purchase a home using the Nehemiah Program. The home being purchased must be owner occupied and can be single family, duplex, triplex, quadraplex or a FHA approved a condo. With FHA loans the buyer is required to make a minimum down payment of 3% of the loan amount. By utilizing the Nehemiah Program the seller contributes the down payment for the buyer. At the time of entering into a contract with a buyer for the purchase of the home, the seller agrees to contribute the down payment and a small processing fee to the program. This is accomplished using the Participating Home Agreement form from Nehemiah. The program in turn contributes the down payment for the buyer. The buyer completes a Gift Letter form detailing where the gift funds came from and what address they will be used for purchasing. This type program can only be performed by a charitable organization. (Sellers are only committed to pay the contribution and fee if a buyer utilizes The Nehemiah Program to purchase the home.)

Who Benefits From a Down Payment Assistance Program?

The Nehemiah Program is helping both buyers and sellers in the greater Atlanta market. Obviously buyers benefit by being able to purchase homes with little or no money out of pocket. Generally speaking this type program would be for buyers with credit that is good enough for them to be able to purchase a home but they lack having the funds for a down payment. Typically prospective buyers who are currently renting or living at home are good candidates for this type program.

Sellers are also benefiting from this program. With the recent increase in FHA loan limits to $346,250 in the metro Atlanta area and $271,000 in outlying areas, more home sellers find themselves in a position to participate in this type program.

Who Qualifies For Down Payment Assistance?

As was stated earlier, if a buyer is qualified to purchase utilizing a FHA loan then they are automatically qualified to participate in this down payment assistance program. To find out if you qualify for FHA financing and down payment assistance Contact Mack.