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Flood Extension Passes Senate – Action Expected in the House Soon
On Tuesday evening, Sept. 21, the Senate passed a bill to extend the National Flood Insurance Program (NFIP) through September 30, 2011. The House is expected to take up the bill on Thursday, September 23, with passage likely. The program was set to expire on September 30, 2010.
This is great news for a couple of reasons: first, because it keeps the program operating for at least a year. For the past year Congress has allowed the program to expire twice. An expired NFIP throws real estate markets into turmoil, especially water-dependent Resort communities. Without an NFIP, no new flood insurance policies or renewals can be written, which places property in a floodplain (such as coastal and lakeshore resorts) at a risk of flooding without insurance. Private flood insurance is expensive and difficult to obtain. Having flood insurance for at least a year eliminates one more obstacle to a resurgent housing market.
Second, having the program operating for a year gives Congress more time to reform the program and place it on a more viable financial and actuarial foundation. House-passed legislation earlier this year would have made some reforms to the program; unfortunately the Senate did not have time to discuss the legislation. NAR will continue to push for reasonable reforms, such as more accurate maps and higher coverage limits, while also making sure affordability is taken into account when premium rates are established.
The Senate held a hearing on reforming the NFIP on Sept. 22, at which NAR was ably represented by Nick D’Ambrosia, a Realtor from Maryland – witnesses discussed a variety of NFIP reform options, and I would encourage everyone to spend a few minutes viewing the attached hearing to hear all of the complexities of NFIP reform.
Russell Riggs
Senior Policy Representative and
Government Affairs Liaison to the Resort and 2nd Home Committee
U.S. Homes Popular with International Buyers
For those that might have missed it, this article by Jim Woodard was published over the weekend. It shows the clear connection between the resort and second-home sector with the inbound international investment into the United States. If you want to add to your toolkit be sure to checkout the great courses offered as a part of the Certified International Property Specialist (CIPS) Designation at realtor.org/global. Two of the newly revised regional courses along with the At Home With Diversity Course will be offered at the REALTORS Annual Conference in New Orleans the first week of November — at a tremendous discount through the NAR initiative Right Tools, Right Now.
A growing segment of todays homebuyers are citizens of foreign countries. The international appeal of U.S. residential properties is driven by the strength ofthe dollar, the increasing value of properties in some regions ofthe country, the emerging economic recovery, and the rising worldwide popularity of owning a home in the United States.
This trend was documented in the recently released National Association of REALTORS’ 2010 Profile of International Home Buying Activity.
More than a quarter of REALTORS (28 percent) reported working with at least one international client in the past year. This is a significant increase from fhe 2009 report, when 23 percent of REALTORS worked with foreign clients. Eighteen percent of all REALTORS were estimated to have completed at least one sale, compared to 12 percent last year.
The NAR study and report showed that most International buyers came from 53 different countries around fhe world. The top four were Canada, Mexico, the United Kingdom and China/Hong Kong. With 23 percent of international buyers coming from Canada, the country has remained the largest buying group in the past three years. Foreign buyers from Mexico have been steadily increasing.
In 2010, Mexico replaced the U.K. as the second largest buying group with 10 percent of buyers. Buyers from fhe U.K. decreased from 10.5 percent in 2009 to 9 percent in 2010. Eight percent of recent buyers came from China/Hong Kong.
Two key factors important to international clients when purchasing U.S. properly are proximity to their home country and the convenience of air transportation. Florida typically attracts European, Canadian and South American buyers while the East Coast draws Europeans. The West Coast brings Asian buyers and the Southwest attracts Mexicans, NAR reported.
6 Reasons to Buy a Vacation Home Now
Here’s a great article from our friends at RISMEDIA. It focuses on Coronado, CA but can apply all over the US. Enjoy.
RISMEDIA, August 11, 2010—As the real estate market continues its bumpy road toward recovery, the vacation home market is heating up, causing homeowners around the country to seriously consider buying the vacation home they’ve been eyeing.
Margaret La Grange and Christine Van Tuyl, an award-winning mother-daughter team with Prudential California Realty in Coronado, CA, offer the top six reasons why now is the best time to buy a vacation home.
“Whether you’re looking for a charming beach bungalow or a high rise condo with spectacular views, a host of market conditions have come together to make buying a vacation home a smart move,” said Christine Van Tuyl. “The drop in home prices, incredibly low interest rates and the increase in demand for vacation rentals make it an optimal time to explore a second home purchase.”
1. Prices down 20-40%. In places like Coronado, CA and greater San Diego, you can pick up a beach cottage or high-rise condo at extremely low prices. That’s only the beginning. Lower prices and less competition are the tip of the iceberg-sized list of factors that make it a good time to consider a vacation home buy.
2. Interest rates. Rates, of course, are at historic lows. Lock in a good rate, buy a vacation home in a desirable location, and watch your asset appreciate over the long-term.
3. A relatively safe investment. Real estate has proven itself to be a safe place to park your money for the long-term. (Long-term is key). Stock market woes have always pushed people to look for alternate investments, and real estate is a consistent stronghold.
4. Make a profit. Or, better yet, make your vacation home pay for itself. Only planning on using your vacation home a few months out of the year? Rent it out short-term to vacationers looking for a great place to stay. Many homeowners make a killing listing their homes on VRBO.com. (Vacation Rental By Owner). When your monthly mortgage payment is less than or equal to one peak week rental, twelve weeks of rental will cover your mortgage payments for the entire year.
5. Vacation rental demand is heating up. Overall, vacation rentals are less expensive than hotel rooms, especially for longer visits and for families. Savvy travelers know this, and are heating up the demand for vacation rentals. In addition, the weaker dollar makes U.S. destinations attractive to travelers from countries with stronger currencies.
6. The pressure of bidding wars is off. Sure, you may not get bargain basement prices on a beachfront cottage—but you might if you’re willing to buy a few blocks away. Houses aren’t exactly flying off the shelves these days, but buyers now have less pressure to make a hasty decision. Buyers looking for deals on vacation homes can really do their homework.
About Christine Van Tuyl and Margaret La Grange
Christine Van Tuyl and Margaret La Grange are award-winning agents with Prudential California Realty in the Coronado Village office. A mother-daughter team with Coronado family roots going back 75 years, Christine and Margaret pride themselves on delivering impeccable service for home buyers and sellers alike.
For more information, visit www.CoronadoIslandHomes.com.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
Sellers should ensure that condo projects are on approved list for FHA mortgages
At the May 2010 REALTORS(R) Midyear Governance and Legislative Meetings, the Western Mountain Resort Alliance reported survey results regarding the lack of liquidity when it comes to condo financing. It was clear that this issue is regretfully hurting the resort and second-home REALTOR(R) — additionally, all REALTORS involved in condo transactions.
Please be aware that your REALTOR staff is “on the case” and sensitive to this issue. Look out for a webinar in September to update you on the latest news involving condo financing and the actions that NAR is taking.
In the meantime, this article by Lew Sichelman offers some helpful hints on the value of the FHA backing and tools to see if a property is eligable for FHA Approval.
Enjoy.
Under a little-noticed edict put in place in December, the FHA is no longer approving mortgages on condominium units on a spot, loan-by-loan basis. Now the entire project must be cleared by the agency before a buyer can purchase a unit in the community with a government-insured mortgage or an owner can trade in his loan for a less expensive one backed by the FHA.
That’s important because FHA financing is being used more frequently today than at practically any other time in the agency’s 76-year history. Three years ago, Uncle Sam insured only 3% of all loans. Now the government backs almost 1 in 3 loans. If your condo project is not on the agency’s approved list, you could be missing a significant part of the market.
FHA approval “opens up your market to a much larger buying pool,” said Jamie Thompson, an agent in the Beverly Hills office of Prudential California Realty.
If yours is a $1-million condo, gaining approval isn’t important. But if it’s valued at no more than $729,750, the congressionally imposed ceiling on FHA financing, “it’s almost critical” to be on the cleared list, Thompson said. “If you’re not, you are going to miss 30% of the market.”
The FHA doesn’t make mortgages — at least not directly. Rather, it insures lenders against the possibility that a borrower may not make his payments as promised. Consequently, lenders love the loans because the government, not the lender, is on the hook should someone default.
With their low down-payment requirements and liberal underwriting rules, FHA loans are highly coveted by borrowers too. That doesn’t mean they’re only for low-income borrowers. On the contrary, they’re open to anyone regardless of what they earn. And would-be borrowers are properly vetted just like those who are seeking conventional financing.
But with down payments of just 3.5% and “extremely liberal” debt-to-income ratios that, according to Jacksonville, Fla., mortgage broker Patrice Yamato, sometimes stretch beyond 50% for borrowers with good credit scores and loads of assets, FHA loans are the hottest game in town.
Late last year, though, the government said entire condo projects must meet certain standards before the FHA will back even a single loan in any particular property. Worse, perhaps, is that as of the end of June just slightly more than 32,000 properties had been approved, said Vicki Bott, deputy assistant secretary for single-family housing at the Department of Housing and Urban Development, where the FHA is housed.
If that doesn’t sound like many, you’re right. Although no one knows for certain exactly how many condominium projects there are, the Community Assns. Institute estimates that roughly 40% of the nation’s 305,400 association-government communities are condos. If the institute is on target, some 122,000 condo properties exist in the U.S., and only about one-quarter of them are on the FHA’s approved list.
To find out if your condo is on the list, go to the FHA website at http://www.fha.gov, look under “Resources” and select “HUD Approved Condominium Projects.”
The government site is a free service, but you’ll have to know the exact legal name of your project. So it might be easier to pay $2.99 to http://www.CheckFHAApproval.com, a site that will launch by the end of this month and requires only an address to determine whether the property is approved and eligible, approved but possibly not eligible, or not approved and ineligible.
The CheckFHA report also notes whether the property is involved in litigation, the percentage of units financed by the FHA, the percentage occupied by owners and the percentage of investor owners. Because of the FHA’s strict condo rules, each bit of this kind of information is important.
“It’s like a Carfax for the FHA,” said Christopher Gardner, founder of a Westlake Village company called FHA Pros and a former loan broker, who said he quickly saw a need for such a service when the FHA stopped approving spot loans. CheckFHA is the outfit’s address-checking platform.
If your project is not listed, you’ll want to move as quickly as possible to gain approval because it could take some time. After all, said Thompson, the Beverly Hills agent, “this market is so soft that you don’t want to miss out on any potential buyer.”
HUD’s Bott says it takes an average of two weeks to process a request, but that can vary widely based on the volume and whether the initial submission is complete or additional documentation is needed. But Thompson says a new and small condo property she is representing in Larchmont has been waiting for six weeks and still no word.
For that reason, buyers who plan to finance their purchases with FHA-insured loans and are interested in a particular condo property will want to be certain the project is on the approved list. Otherwise, you could be spinning your wheels.
Moreover, Thompson said, it’s “a real challenge” to find out if the property is approved. “Getting information from listing agents is nearly impossible because they don’t know who to ask. Even management companies often don’t know.”
There are several ways to go about getting a project approved. Lenders who have delegated underwriting capabilities can clear a property, but it’s doubtful lenders will do that on their own unless someone already has applied for financing — and buyers rarely line up their loans before they go shopping.
A condo association also can initiate the process, as can a property-management company, if there is one. So can a lawyer, but only one who is well versed in condo law. The builder can start the ball rolling too, if it’s a new project.
Yet another alternative is to allow Gardner and his colleagues at FHA Pros to navigate the process for you. The company helps homeowner associations, management companies, realty professionals and individual buyers and sellers obtain FHA approval status. The cost is $1,000 plus up to $1,000 more in separate legal fees.
According to the government, the “vast majority” of requests for FHA approval go through smoothly. But there are numerous requirements, such as no more than half the units in the property can be financed with an FHA loan and owners must occupy at least half the units. A problem with any one of the rules can set the approval process back by weeks.
One of the more frequent issues that can delay the process or stop it is litigation, Bott said. For example, the property cannot be involved in a defect suit against the developer. Other major issues are association dues and budgets. No more than 15% of the total units can be in arrears, and budgets must contain a provision for reserve funds to address future repairs.
lsichelman@aol.com
July 25, 2010|By Lew Sichelman, Distributed by United Feature Syndicate
Expand Your Second Home Market: International Interest in U.S. Homeownership Increases
Consider the international investment that comes to your community. Are you capturing those clients? See latest research on the international sector nationally.
International home buyers are increasingly attracted to property in the U.S., according to NAR’s 2010 Profile of International Home Buying Activity. “While all real estate in the U.S. is local, the same is not true for property owners,” said NAR President Vicki Cox Golder. “The U.S. continues to be a top destination for international buyers from all over the world.”
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