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Archive for the ‘Boring but important’ Category

Hills, that is.

OK, so I actually didn’t move to Beverly Hills. In fact, I didn’t even load up a truck.

But I did move. Visit me at my fancy schmancy new site: www.JuliaOdom.com

It’s got all the things you’ve come to know and love: Crimes Against Paint, *How to buy a house for 50¢,  local images. You know, the good stuff. But now in a shiny new package!

*Just kidding about that second one!

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{{You’re gonna have to hang in there with me, this one definitely gets filed under ‘boring but important’}}

Today, HUD announced new rules for FHA mortgages that will go into effect in the near future (“summer” whatever that may mean). Those who don’t eat, breathe, and live real estate finance like I do may not know this, but FHA has become the go-to loan for most borrowers, especially first-timers and lower income, but really for everyone who doesn’t have 20% to put down.

Here are the proposed changes:

Anyone with a credit score under 580 is required to put down 10%

Hey HUD, maybe we should call you Captain Obvious! In practice, most banks aren’t lending to anyone with a score of less than 620 these days anyway so this one won’t have much of an impact.

The up front mortgage insurance is being raised from 1.75% to 2.25%

For a $100,000 loan amount, this means that the house would cost you an extra $500 which can be financed into the loan. Again, not great but not a huge deal in the grand scheme of things.

Seller concessions limited to 3%

This is the one that gives me heartburn. What’s a seller concession, you ask? In most cases, it’s your closing costs. With FHA, you can get a loan with as little as 3.5% down. For first time buyers without a lot of savings, that means you can buy a $100,000 house with not much more than $3,500 out of your pocket, assuming the seller pays your closing costs. That last part is the kicker. Currently, the seller is allowed to contribute up to 6%. And 6% is plenty when you are talking about a $100,000 loan. You aren’t usually going to go over $6,000. But you are probably going to go over $3,000, the new limit in this scenario.

And if you are looking at an even smaller amount, say $50,000?  Three thousand dollars would probably cover your closing costs so you could buy a $50k house for as little as $1,750 out of pocket. Now, with the seller only contributing $1,500 toward your closing costs, that almost doubles what you’re going to have to pull out of the old tin can in the back yard. That’s HUGE!  Anyone looking to live in a $50,000 – they’re rare, but they do exist in Chattanooga – probably doesn’t have that extra $1,500.

And that’s why I don’t like this change. Looking at houses in the $200,000+ range? You probably won’t notice a difference. But all of those first time buyers who are near and dear to my heart (yes, it’s far more gratifying to sell someone their first house), to put it bluntly, are getting screwed.

So to all those who need to use FHA financing and who don’t have an extra couple thousand dollars in your mattress, now just became an even better time to buy. Don’t wait until ‘summer’!

Click to search Chattanooga houses for sale.

Disclaimer: all those closing costs number I’m throwing around up there don’t mean that I (or anyone else) is offering a loan with those exact costs, those are big round numbers to illustrate the point.

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Julia Odom enjoys long walks on the beach, debating the restoration vs. renovation question and hanging out with plumbing inspectors

Visit her website to search for homes.

Do you have a Chattanooga area image you’d like to share (credit given),

a community event to promote or maybe even a crime to report?

Don’t want to miss a thing?? Subscribe to Chattanooga Real Estate.

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These stats are pulled from the 37363 ZIP code. Click here to see what was goin’ on last month.

All Ooltewah Residential Real Estate Sales through the Chattanooga MLS

All active listings as of 1/4/10: 330

Pending or contingent listings (under contract) as of 1/4/10: 58

Residential listings closed (sold) during December 2009: 39

Number of months to sell current actives at December’s sales pace: 8.5

Under $200,000

Active, residential listings: 91

Pending or contingent listings: 29

Residential listings closed during December 2009: 16

Number of months to sell current actives at December’s sales pace: 5.7

$200,000-400,000

Active, residential listings: 186

Pending or contingent listings: 24

Residential listings closed during December 2009: 20

Number of months to sell current actives at November’s sales pace: 9.3

Over $400,000

Active, residential listings: 54

Pending or contingent listings: 5

Residential listings closed during December 2009: 3

Number of months to sell current actives at December’s sales pace: 18

What does all of this mean? Not any big changes since last month’s report which is actually pretty good news. I was expecting a drop off given the expiration of the first time buyer credit, not to mention the typical seasonal slow down. Even though the credit ended up being extended, lots of sales were being pushed through for the end of November supposedly leaving the ‘pipeline’ empty for December. Doesn’t seem to have happened.

So I’ll say exactly what I said last month: If you have a home to sell in Ooltewah for under $200k there’s not much reason to wait around for the market to pick up. Even in the $200-400k range, there’s still only an 9 month supply (not completely optimum for definitely within reason). The upper end of the real estate market fares better in Ooltewah than in the rest of Hamilton County with only an 18 month supply compared to 28.5 for Hamilton County as a whole. If you’ve got a lower to mid level home to sell in Ooltewah and want to move up to a bigger house nearby…get your selling shoes on. If you’ve lived in your house for 5 of the last 8 years you might even qualify for the new $6,500 tax credit.

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Julia Odom enjoys long walks on the beach, debating the restoration vs. renovation question and hanging out with plumbing inspectors

Visit her website to search for homes.

Do you have a Chattanooga area image you’d like to share (credit given),

a community event to promote or maybe even a crime to report?

Don’t want to miss a thing?? Subscribe to Chattanooga Real Estate.

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What, what, WHAAAT? There’s yucky stuff in home ownership, Jules?

How could that possible be?

One of the pitfalls into the money pit that CAN be historic homeownership is the sewer line, the mother of all yucky stuff. Anyone who knows me knows that I LURRVE old houses. Along with that love comes a price to pay. I bought my house for a veritable song, so little that I won’t even bother telling you how much (but did you know that it’s a matter of public record?). I knew when I acquired the old gal that lots of work was going to be needed to bring her back to her former glory. What I didn’t know was that, lurking beneath the weed infested lawn, was an insidious force that was going to cost me $5,000 more than I thought.

A broken sewer line.

Was the sewer system/line working when I bought the house? Sure it was. Of course, no one had lived there in a few months so any slow or backed up lines wouldn’t have been apparent anyway.  The sewer line wasn’t actually broken to the point of disconnection, just enough that one part of the break was offset from the other part. Could it still have functioned that way? Absolutely, at least for a while.  But do you really want a monster lurking in your front yard ready to announce itself with sewage in your bathtub? I thought not.

Here’s the thing about a lot of these old houses in Highland Park, St. Elmo & North Chattanooga: many of them got some of the first sewer lines ever installed in Hamilton county. And they are quickly nearing the end of their useful lives. They might even already be broken or cracked and offset like mine was. The only way to tell is to have a camera run through the line. And that’s NOT something that your home inspector is going to do. It’s going to cost you another couple hundred bucks to have it done. If you are planning on a renovation that includes plumbing work, the city inspector is going to want to see that riveting footage before he signs off on the final inspection anyway. So you might as well get it done now when you still got the chance to ask the seller to pay for the repair if necessary.

Take it from someone who knows – you don’t want to add $5,000 to your renovation budget three days after you close. You should save until at least the next week.

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Julia Odom enjoys long walks on the beach, debating the restoration vs. renovation question and hanging out with plumbing inspectors

Visit her website to search for homes.

Do you have a Chattanooga area image you’d like to share (credit given),

community event to promote or maybe even a crime to report?

Don’t want to miss a thing?? Subscribe to Chattanooga Real Estate.

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Stats listed are coming from the 37405 ZIP code. In other words, if you’re a North Chatt snob purist be forewarned that this is going to include Stringer’s Ridge, a little of Red Bank and some of Signal Mtn Blvd too.

All Northshore/North Chattanooga Real Estate Sales through the Chattanooga MLS

All active listings as of 12/7/09: 119
Pending or contingent listings (under contract) as of 12/7/09: 26
Residential listings closed (sold) during November 2009: 13
Number of months to sell current actives at November’s sales pace: 9.2

North Chattanooga Real Estate, Under $200,000

Active, residential listings: 50
Pending or contingent listings: 17
Residential listings closed during November 2009: 4

Number of months to sell current actives at November’s sales pace: 12.5

North Chattanooga Real Estate, $200,000-400,000

Active, residential listings: 39
Pending or contingent listings: 5
Residential listings closed during November 2009: 7

Number of months to sell current actives at November’s sales pace: 5.6

North Chattanooga Real Estate, $400,000-600,000

Active, residential listings: 9
Pending or contingent listings: 2
Residential listings closed during November 2009: 0

Number of months to sell current actives at November’s sales pace: Ummm, infinity? I’m going to call it around 5 based on what’s pending.

North Chattanooga Real Estate, $600,000+

Active, residential listings: 21
Pending or contingent listings: 2
Residential listings closed during November 2009: 2
Number of months to sell current actives at November’s sales pace: 10.5

North Chattanooga is definitely where you are going to see a disproportionate share of upper end homes selling. 10.5 months worth of inventory compared to a couple of years elsewhere in Hamilton County. After all there really aren’t any cheap ones left out there (if you’ve got one let me know and I can probably find you a buyer lickety split). Most of what makes up that under $200,000 market is probably in Red Bank. Not a bad thing, just not walking distance to Coolidge. If you’ve got a decent house – maybe even an indecent one – in North Chatt and you price it even reasonably well, it’s gonna sell.

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Appraiser, inspector. They’re the same thing right? No, absolutely, unequivocally, irrevocably not. Not the same thing at all. You’re going to need both.

I always recommend that buyers have a home inspection done – even if the house is brand spankin’ new.  Appraisers and inspectors are are both people who come out to look at the house and give you an opinion. Sometimes the two get confused in brains that are already spinning with thoughts of underwriting, offers, negotiations, etc (Hey Mr. Buyer, that spinning brain would be yours!).  Here’s a little cheat sheet to tell you who you are talking about and why.

Appraisers

You’re paying for it but the appraiser is really looking out for the lender’s best interest. His/her job is to make sure that the property you are buying is actually worth what you are paying for it. In some cases, they’ll point out needed repairs and require that they be done but it’s really just a cursory look over the home. If there are issues that affect the safety and welfare of the occupants, they’ll require that they be fixed. Especially if you are using FHA financing but increasingly even with conventional loans. Some things that might be pointed out: missing or deteriorated railings, non-functioning HVAC units, obvious mold, or leaky roofs.

The key point to remember with appraisers is that, even though they may point out obvious repairs, their real job is determining a value, a reasonable price for the house.

Inspectors

As I mentioned, there’s no requirement for a home inspection. This guy (sorry, but they almost universally have a mismatched pair of chromosomes) works just for you. He doesn’t have a horse in the pricing race, he’s just there to nitpick. You want an inspector who will point out every flaw, large and small in your new home. Don’t be surprised if he gives you a laundry list a mile long, usually with a guide as to whether each item is a serious issue or just something to think about.

He’s going to test the outlets to make sure they work, check out the roof and look for minor leaks that might not be showing up inside yet. He’ll also make sure there’s adequate insulation and that the plumbing is all working OK. That crack in the basement? He’ll tell you whether it’s normal settling, something to be concerned about or perhaps that you need to talk to someone above his pay grade (that would be a structural expert).

What’s an inspector’s job? To point out everything you didn’t notice that might be wrong with the house. If you find things you can’t live with you can use your inspection contingency (you do have an inspection contingency don’t you?) to back out of the contract without a penalty, i.e. losing your earnest money.

Why do you need two different people to look at a house and give you an opinion? Because they are looking for different things, and effectively working for different people. Don’t fall into the trap of thinking that just because you are getting an appraisal you don’t need an inspection.

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I love working with first time buyer’s – they always ask me questions that prompt blog posts. The most recent one was:

‘Will my taxes and insurance be part of my monthly payment?’

The short answer, which is almost always true is ‘Yes.’ If you have a mortgage, the mortgage holder will usually require an escrow account be set up from which your annual taxes and insurance will be paid.

Dollar signWhat’s an escrow account, Jules?

It’s just a fancy term for any amount of money that is being held by one person but which belongs to another. When you write your earnest money check, it will be deposited into an escrow account to be held until the day of closing.

What do I have to do to get it set up?

Nothing except plunk down some of your hard earned cash. When you get to closing, one of the sections on the settlement statement is ‘pre-paids’. Most of those have to do with your escrow account. You’ll pay for a year of insurance up front and then a few more months to get the escrow account started. You’ll also pay a few months worth of property taxes. Then there will be an adjustment to make sure they aren’t keeping more than necessary in escrow (only those with advanced degrees from MIT have the necessary brain power to understand the formula that determines the adjustment).

So then how do my taxes and insurance get paid?

The bills will be sent to your lender and presto-change-o, they are paid without you lifting a finger. Once a year they’ll do a review to make sure that there isn’t going to be a shortfall or overage in the account. Insurance costs go up & tax assessments change but, as long as you got a fixed rate mortgage (you are getting a fixed rate mortgage, arent’ you??), that’s the only reason your payment will go up. And hey! Sometimes it even goes down a little.

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