Mortgages avoiding credit crunch

You'll probably have to go to homeownership school. You'll have to prove you can really afford a mortgage. You may have to reconsider your location. And you'll have to run a gauntlet of scrutiny. Today's mortgages are a far cry from boom time loans, but they do exist and some lenders have money to burn.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - A new brand of home loan, customized with tighter controls and fewer defects is replacing those old mortgage models that crashed and burned when the economy hit the skids.

Don't expect these new babies to come off the assembly line like those mass-produced subprime rattle traps, but if you stick to the rules of the road, one of these loans could put you in the driver's seat.

Buckle up.

"You have to qualify. You have to prove your income. They have make-sense underwriting," said, Quincy Virgilio, 2009 president of the Santa Clara County Association of Realtors and broker-owner Realty World CA Property Network in San Jose, CA.

FHA-insured mortgages

The new darling of the homebuyer set, Federal Housing Administration-insured mortgage programs have for decades been available especially for low- to moderate-income families who may not meet requirements for conventional loans.

But with new loan limits as high as $625,500 they've become especially attractive in high cost areas. FHA loans are expected to account for 25 percent of the mortgages signed in 2009, according to the National Association of Realtors. Because of previously lower loan limits, FHA loans amounted to less than 4 percent of homes sold from 2003 and 2006.

The new FHA model also comes with low down payments and eased credit requirements.

"They are much more lenient (compared to conforming Fannie Mae and Freddie Mac mortgages) on how they look at credit scores. The score can be in the 600s vs. 700s, said Cheryl O'Connor, a finance expert with O'Connor Consulting in Danville, CA.

FHA features include:

• As little as 3 percent down.
• Financed closing costs.
• A 1 percent (of the mortgage) ceiling on the amount lenders can charge for closing costs.
• No prepayment penalties.
• Relaxed debt-to-income requirements.
• FHA-approved lenders only.
• FHA-approved appraisals only.

Virgilio says buyers who don't have 20 percent or more down will pay an upfront mortgage insurance fee amounting to as much as 1.75 percent (of the loan) and a monthly mortgage insurance premium that effectively tacks on another 0.5 percent to the interest rate.

"But you can structure your loan with participation from the seller paying closing costs. Not down payment assistance, but closing costs, but in this marketplace the seller is going for that," said Virgillio.

The best rates (typically fixed, rather than adjustable) go to those who have financial reserves, savings or investments amounting to at least two months worth of a PITI (principle, interest, taxes and insurance) mortgage payment.

Likewise, the best deals go to buyers with a 30 to 33 percent debt-to-income ratio when the debt includes housing and all other monthly debt payments.

In addition to FHA home-buying loans, the "Housing and Economic Recovery Act of 2008" created "Hope For Homeowners" which allows troubled mortgage holders to avoid foreclosure by refinancing into a more affordable, FHASecure mortgage, provided Uncle Sam gets a piece of the equity-growth action and provided the existing lender approves.

“People used to qualify with stated income. Now there is more documentation. And they aren't just documenting your income, but looking for assets in addition to your income and low debt-to-income ratios and low loan-to-value ratios.”
- Asmaa Egal, mortgage broker, Loan Republic Financial, San Francisco, CA

Membership-required credit unions

Credit unions are also rolling out the red carpet for home buyers.

The typically members-only financial institutions largely survived the credit crunch because, as non-profits, the fundamentals apply. They take in deposits. They make loans based on sound underwriting principles. They charge more on those loans than they pay on deposits.

Without the profit motive, there was no incentive to get involved in the subprime racket, no reason to sell and repackage loans as investments and no need to otherwise venture into untried and untrue investment schemes.

Along with fixed-rate 30-year mortgages at rates often lower than banks they also offer conventional adjustable rate mortgages (ARM) and hybrids all with rates typically lower than conventional lenders (Search "rates," then see "Ratedex").

"Credit unions have a tendency to be more lenient if you have a bank account with a credit union," O'Connor said.

Credit union originations rose a whopping 10.1 percent during the first half of 2008, according to the industry's federal regulator, the National Credit Union Administration (NCUA). Conventional mortgage lender loan originations took a nose dive, falling 17 percent during the same period.

Rural home loans

Don't get your knickers in a knot over the term "rural."

The nation's housing market includes a host of fine country estates -- large and small -- with land and available for a song! What's more, they come with government backed financing.

"Home buyers in the San Jose (and other) area still have one mortgage that is inexpensive and easy to get, but many people don't know about it," says Dan Auld a loan consultant with National Mortgage City.

Loans backed by the United States Department of Agriculture's (USDA) Rural Development Housing and Community Facilities Programs are limited, but you don't have to grow corn or raise chickens.

The loans are for:

• People living in designated rural areas where the population is less than 20,000.
• People with incomes under 115 percent of household median income for the area. In most areas, the upper income limit for borrowers will be $60,000 to $70,000 per year.
• People buying homes, not refinancing or taking out equity loans.

USDA Programs include no-money down loans (imagine that), home improvement and rehabilitation loans and grants, construction loans, loans for minorities and true to the work-ethic of rural life, sweat-equity loans that require buyers to help build their own homes.

Money for rural homeownership is available during the greatest economic downturn since the Great Depression because of sound lending practices and isolation -- both geographical and financial -- from the boom-bust markets.

The result has been more mortgage money to lend, not less. The federal ag agency's loan volume tripled in 2008.

Local, state agencies

O'Connor says don't overlook local -- city, county and state -- housing assistance programs that often cater to first-time and or low- to moderate-income home buyers.

More information is available about state housing efforts from the HUD web site.

Local contacts are available through the National Association of Housing and Redevelopment Officials.


Also see land consultant Curtis Seltzer's "How To Be A Dirt-Smart Buyer Of Country Property" (Infinity Publishing, $34.95).

© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Shop DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Buy now! Beat the spring rush

Record low interest rates, low-low home prices, less competition and other factors have converged. You've got plenty of time to beat the spring rush. Use it wisely.

Get more home buying news that really hits home!

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Down market. Up market. It doesn't matter. Spring showers typically bring spring buyers.

But if you wait for the seasonal thaw you'll join what could be a throng of market savvy buyers who have already scoped the lay of the land and are elbowing for position.

In many communities, an over-supply of homes for sale with reduced prices, foreclosures, auction sales and sellers shopping for short sale buyers, all make it an opportune time not to procrastinate.

"We are seeing a confluence of events that contributes to the increase in the number of closed sales," said Quincy Virgilio, president of the Santa Clara County Association of Realtors in San Jose, CA.

"Interest rates are at a record low and the affordability index nears a 5-year high. For first-time buyers, rents are skyrocketing and that's an added incentive to buy a home now," added Virgilio, also broker-owner of Realty World California Property Network, also in San Jose.

That doesn't mean every home is a Blue Light Special or that you can shop with reckless abandon. It's a better idea to prepare now, become a savvy buyer and beat the spring rush.

To help get you started we've gleaned some key tips from "Buying Your First Home Now" (Nolo.com, $24.99), by Ilona Bray, Alayna Schroeder, Marcia Stewart and a dozen contributing experts knowledgeable in everything from credit, borrowing and buying to escrow, insurance and taxes.

• Check your home-buying pulse. Just because there's a convergence of favorable market conditions doesn't mean it's your time to buy.


Base your decision solely on the state of your housing market and you'll overlook why the current market is littered with the former homes of those who borrowed more than they could afford.

Likewise, if you wait for prices to fall more your could miss out. No one knows when the market will hit bottom until it begins a sustained upward turn and you can look back and actually see bottom.

Buy a home because, for you, it's the right thing to do. Buy because it's more affordable than renting, because you plan on staying put until it pays off, buy because it is a good fit for your lifestyle and your personal goals.

• Learn your local market. While you certainly need to be up on the most recent housing news, get news from your local media outlets, your friendly neighborhood real estate agents and data providers that regularly generate information about your community.

• Get some basic training. Even if you've purchased before, bone up now. Regulations, local practices and market conditions change. Use well-established, frequently-updated information sources on and off line. Attend real estate industry-sponsored seminars, workshops, counseling sessions and post-secondary level realty classes.

• Examine your credit. Pull your credit report and check your credit score before your lender does. You need to make sure both are where they need to be to land you a home loan. AnnualCreditReport.com (also at 877-322-8228) is the one and only official, federally sanctioned program giving you free annual access to your credit report. The nominal fee to obtain your credit score from one of the three credit reporting agencies is worth the cost.

• Shop with money in your pocket. Get a mortgage approved before you begin to shop for a home. You need to know how much you can afford and how much home you can buy so you can negotiate from a position of strength. Shop around for the best mortgage possible.

• Buy like a savvy investor. Buy low now, sell high later. Shop in the least expensive neighborhood in the best community or the least expensive city in the region. Drill down to buy the least expensive home on the best block or the cheapest home in a neighborhood in transition.

• Pack a shotgun. Use your real estate agent as your point person, but spread your shopping efforts to every corner of the housing market -- classifieds, open houses, online listing portals, the distressed market; tell friends, family and co-workers you are in the market.

"For the immediate future, look for distressed properties to continue flooding the low-performing markets, which will keep sales high but hurt property values," says Stefan Walker a broker with the Los Gatos, CA office of Alain Pinel.

"In the more stable markets, the upper end will continue to cool, but record-low interest rates should keep demand relatively strong for well-positioned mid-value properties," Walker added.

• Sell now! Beat the spring rush!
• Remodel now! Beat the spring rush!

Get more home buying news that really hits home!

© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Shop DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Sharing The American Dream

Equity sharing could hit the main stream as an important stepping stone to home ownership if the Federal Housing Finance Regulatory Reform Act of 2008 creates an equity sharing program to help bail out home owners facing foreclosure.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Federal legislative relief for the nation's housing crisis contains a provision that could turn a rarely-used home financing option -- equity sharing -- into a key stepping stone on the path of home ownership.

Along with other provisions, the federal legislation would create a Federal Housing Administration-sponsored equity sharing program to refinance loans at a discount for home owners facing foreclosure. In return, home owners would share future equity gains with the FHA.

"The feds are about to take equity sharing to the next level," says Jeff Langholz, founder and CEO of HomeEquityShare.com, an online network that matches equity sharing partners.

Not only would the government effort save an estimated 400,000 homes from foreclosure, federal backing could raise the profile of the unconventional creative financing tool and push it into the mainstream of housing finance.

"Every transition in life comes with intermediate stages. Before you are married you get engaged, before you get your driver's license you get a learner's permit. Before you get to homeownership what intermediate transition is there?" he asks.

Langholz is banking on the equity sharing provision in the federal relief package. That may be a safe bet.

Both the U.S. House of Representatives (H.R. 3221 by Rep. Nancy Pelosi, D-CA) and the U.S. Senate (the unnumbered bill known as the "Federal Housing Finance Regulatory Reform Act of 2008" by Sen. Chris Dodd, D-CT) this summer passed versions of the same relief package. Both versions contain the equity-sharing provision.

In late July, federal legislators were reconciling differences for final approval, which is expected "certainly before the August break," said Pelosi spokesman Brendan Daly.

Equity sharing basics

Equity sharing is a symbiotic relationship -- as well as a legal agreement -- between two or more parties holding title to one home. Two or more parties share title in order to share the risk, thereby reducing the risk for both parties. Inevitably, however, home price appreciation is the bottom line. The property must grow in value over the term of the deal for it to really pay off.

Parties in the mutually beneficial relationship, and their roles are:

• The seller. The seller can use equity sharing as a way to quickly sell in a slow market. The seller can also become the investor and retain a stake in the property.

• The investor. Typically a non-resident owner, the investor provides the initial financial leverage in the form of a down payment or larger stake. He or she can be a family member of the occupying home owner (see below), a trusted friend of the occupying home owner or some private entity, say a professional investor. The investor gets tax deductions for his or her prorated share of the deal. With time, provided equity grows, the investor enjoys a joint venture-like return on the bulk of the investment.

• The occupying home owner. Often savings-poor, but income-rich, one person, with little or no money down, becomes the occupying home owner. He or she pays the mortgage and other costs associated with owning and occupying a home -- including taxes, insurance, maintenance and the like.

The occupying home owner gets to deduct a prorated share of the mortgage interest and property taxes, along with other tax breaks that come with home ownership. With enough equity growth, the occupant can eventually cash out, buy out the investor, keep the home or use the equity gain to buy another.

• Title to the home can be held in a variety of ways -- joint tenancy with right of survivorship, tenancy in common, partnership or as a living trust.

Variations on equity sharing

Like its creative financing cousins -- seller financing and lease options -- equity sharing often makes the news as an alternative financing tool buyers and sellers turn to in tough, cash- or credit-tight markets. That's because equity sharing lessens the upfront costs buyers face in any market. When buyers can buy, sellers can sell.

"In today's market, equity sharing makes sense for buyers because it allows them to buy a home which they couldn't buy on their own. Because the equity sharing an investor contributes to the down payment, the buyer needs to borrow less lowering his or her payment and risk. In exchange, the buyer gives up a portion of any home appreciation. This is a worthwhile bargain for people who would not otherwise be able to afford to buy," says Andy Sirkin, attorney/partner with Sirkin Paul Associates in San Francisco.

However, a tight market isn't mandatory.

• Equity sharing also can be strictly business -- an investment purely for financial gain, provided the investor and buyer are willing to risk they'll realize enough appreciation to make the deal pay off.

• The federal legislation points to equity sharing as a tool to help stave off foreclosure. Even without federal backing, a defaulting homeowner can privately bring in an equity share investor to buy a lump sum stake in the property or subsidize monthly payments over time, that is, pay some or all of the monthly mortgage for some period. Again, for the effort, the investor gets an equity stake.

• Equity sharing can also be used by a financially secure seller who doesn't need to drop his or her home price, but wants to move. With an investor buying an 80 percent stake, the seller could retain 20 percent ownership, and get another home. Then, say five years down the road, the seller and investor sell the home, each taking an appropriate share of the equity. Again, and always, appreciation must be sufficient for the deal to pay off.

• Some local governments offer equity sharing deals. The City of San Jose, for example, offers an equity-sharing, deferred-payment loan program for qualified, first-time, low- and moderate-income households.

The program provides housing from select, targeted properties in new housing developments.

Qualified buyer-occupants pay zero. They live mortgage-payment free. There's no down payment, no monthly payment and no interest payment, until it's time to sell or the loan is due in 45 years.

However, when the home is sold, the sale price goes to the city, which has been picking up the monthly mortgage tab. The city (in exchange for also paying the interest) and occupant share any equity gain on a prorated basis based on the terms of the mortgage (to say more here about those terms gets really involved. I'd have to give examples). If the gain is sufficient, the occupant can use it to buy his or her own home.

The occupant can also stay put for the 45-year term of the mortgage again, cost free. However, the loan is due at the end of the term, and again, any proceeds go to the city. If the occupant remains until the end of the term, the city relinquishes any and all claims on equity gains.

Either during a sale before the end of the term or at the end of the term, the occupant is not obligated to use the equity to buy a new home, but can choose to use that gain as he or she wishes.

In the past several years, San Jose has housed hundreds of families with variations of its equity sharing program.

The devil's in the details

Equity sharing is not a silver bullet.

They are most often short term contracts of five, seven, ten years or so -- to make sure the period of risk exposure is short. At the end of the term, the net proceeds from the sale are split, doled out according to contract.

Because the deal relies upon appreciation within a short term, equity sharing can be a tough sell in a depreciating market. They are perhaps better suited for a bottom market or market already on the rise.

The current market also makes the deals dicey because, as of yet, there's no federal backing.

Equity sharing is also a two-sided coin when it comes to the lender.
Risk averse lenders have put a squeeze on all credit and may not look favorably on all but the most "plain vanilla" mortgages.

On the other hand, if the investors has cash for his, say, 80 percent stake and the buyer-occupant needs a mortgage of only 20 percent of the value of the home, the lender might bite.

"Obviously if you are only going to borrow, say, a 30 percent loan (because the investor antes up 70 percent) and there are two people, you have a better chance. You are always better off if you have another person, but lenders are really spooked," said David Hofmann, a San Jose real estate attorney with Hoge Fenton Jones & Appel, Inc.

"Even people who recently qualified are having a tough time. Lenders don't want to see anyone on any loan with any credit issues. Most lenders faced with a default will just take the property back, " Hofmann added.

Equity sharing also remains obscure because the deals can be complicated.
The deals must be legal and binding contracts designed to provide an equitable means to an end. It must include provisions for any disputes or disagreements that might arise during the term. The contracts typically don't allow extracting any returns until the term is up, unless there's an escape clause. Escape clauses come with provisions that include stiff cash penalties for early outs and other resolutions.

Finally, even if the equity sharing deal is designed to create a home owner, its' underlying investment approach triggers a different set of underwriting and tax rules, compared to a conventional home buy.

Buyers will almost always need an equity sharing-experienced team -- real estate agent, attorney and tax professional -- to set up the transaction's contract.

"These deals can give some new lenders heartburn, but there is surprising interest from senior lenders who were around when shared appreciation mortgages (SAMs) were around in the 1980s," said Langholz.

Here's a list of equity sharing resources

• The HomeEquityShare.com network for home equity match ups between sellers, buyers and investors, based in Monterey, CA.

• Larkspur, CA-based Marilyn D. Sullivan's "The New Home Buying Strategy," (Venture 2000, $25.95)
equity-sharing manual.

• San Francisco, CA-based Andy Sirkin, Sirkin Paul Associates and "Basic Equity Sharing Structure" manual.

• In San Jose, CA, real estate attorney David Hofmann with the Real Estate Group at Hoge Fenton Jones & Appel, Inc.

• The Don Reedy, Peter Haglund, Howard Schwartz and Richard Borkowski BuyHalfAHouse.com team.

Also see: "Facilitating Shared Appreciation Mortgages to Prevent Housing Crashes and Affordability Crises"


© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.
Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Seller Financing Coming Around Again

Tight mortgage money makes seller-financing, not a silver bullet to shoot down stiff underwriting standards, but an option to consider in a tight mortgage market.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - If you can't find a bank to approve your home loan, ask the seller to consider being your mortgage lender.

Only a fraction of sellers are willing to take on the role of financier, but that fraction is likely larger than it was a few years ago when lenders had plenty money to lend.

That's because today's home buyers are having a tough time finding mortgage money and sellers are having a tough time finding buyers.

Seller financing isn't an option for every transaction, but it can be a win-win situation for those who can strike a deal, says Greg Winfield, who runs the web listing service OwnerWillCarry.com.

Winfield says seller financed mortgages can come in a variety of formats with all terms negotiable between the buyer and seller.

The best seller-financing comes with properties that are mortgage free and clear. The seller simply accepts a note -- a legally binding loan contract -- from a qualifying buyer.

Such a seller, who finds a qualified buyer, likely can move the home faster than waiting for the current hard money market to yield an approved buyer.

If the seller offers relaxed terms and other incentives, he or she can get a fair price for the home, a higher investment return than other investments, tax breaks due to reporting the sale as installment payments, monthly income, and a shorter listing term.

Benefits to buyers typically include less stringent qualifying, down payment requirements and flexible, tailored rates, closing costs and loan terms and rates.

Elizabeth Weintraub, with Lyon Real Estate's downtown Sacramento office, says because buyers and sellers aren't waiting for a lender to process the loan, closing is faster.

Weintraub says the deal gets more complicated when there's an outstanding mortgage, a fixer-upper home, lease option or land contract involved.

Whatever flavor seller-financing you choose, you will also need a real estate attorney or other seller-financing proficient professional to draw up the papers.

Weintraub says the types of owner financing include:

• Land contracts don't pass title to the buyer, but gives the buyer what's called "equitable title," a sort of temporarily shared ownership. The buyer makes payments to the seller for a term and after the final payment or payoff, the buyer gets the deed.

• Promissory Notes and mortgages are carried by the seller for the entire balance. Also called an "all-inclusive mortgage" or "all-inclusive trust deed" (AITD).

• The seller can carry a junior mortgage, the buyer receives the deed, but gives the seller a second mortgage for the balance of the purchase price, less the down payment and first mortgage amount.

• Lease purchase or lease option. The seller gives the buyer equitable title and leases the property to the buyer for a contracted term. When the buyer fulfills the lease purchase agreement, the buyer receives title and typically obtains a loan to pay the seller. Some or all of the rental payments are a credit against the purchase price. Numerous variations exist.

More DeadlineNews.Com seller financing and creative financing stories.

© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.
Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Selling Strategies That Ease The Squeeze

To help get the housing market rolling again, you might have to get on the bus, hold an auction, lease back a model home or consider equity sharing, among the growing number of existing, new or lesser-known marketing strategies.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Looking to buy a bargain or make a hard sell?

Take the bus and make it the "F" Line.

The "F" is for the growing number of foreclosure properties that have become bus stops along motor tour routes designed to put home sales on the fast track.

The Keenan Carter Group in Pismo Beach, CA became the darling of the bus tour set when its version was featured on "Good Morning America" on ABC-TV and a segment with Neal Cavuto on Fox News.

At $20 a seat, the tour bus also becomes a school bus between stops, serving up information packages on each property. Riders get spreadsheets on mortgage payment options, potential rental income properties could yield and refreshments.

The special focus on marketing foreclosures is not surprising, especially in California where the number of foreclosures exceeded the number of sales in January, according to foreclosure figures from ForeclosureRadar.com and sales numbers from DataQuick Information Services.

Other bus tours are driving into Florida, Las Vegas and other hard hit housing markets that have been flooded with foreclosures.

Driving a bargain on a bus isn't new, but using the strategy as a vehicle to move foreclosures is part of a current trend in special marketing, designed to help turn the housing market around.

Auctions are hot too.

• The fastest growing segment of the auction industry's real estate sector, residential real estate auctions, on or off line, experienced a gross revenue growth of 5.3 percent from 2006 to 2007, according to the Overland Park, KS-based National Auctioneers Association. In 2007 the association created NAARealEstateAuctions.com, a real estate auction multiple listing service (MLS) to handle the volume. Many, but not all, auctions are listed there.

Coordinated open house events are big.

• In Silicon Valley, April 13 will become "The Biggest Open House Day Of The Year," as sellers queue up to offer incentives and accommodate -- on the spot -- buyers who make an offer that day.

Second home marketing is getting a renewed spin too.

• Elisabeth Miller-Fox, president of PrivateCommunities.com says little is known about "model sale lease backs," a spin on lease options typically found in master planned communities.

The tight market is giving this tactic a higher profile.

"In second home communities the developer builds a model home which is fully furnished and beautifully appointed. The developer sells the model home to a buyer who is not yet ready to have a second home, but will be in a few years. The developer then leases the model back from the buyer for 'X' amount of time and continues using the model to generate more sales for the community. It's a win-win for both parties," says Miller-Fox.

Bozeman, Montana's Black Bull Golf Community; Quechee, Vermont's Quechee Lakes; and Ocala, Florida's SummerGlen adult community are just a few communities offering model home lease back deals.

"This is a very different segment of the market and not well understood by the media or the average buyer. The National Association of Realtors (NAR) & HGTV have done a great job of helping people understand the general real estate market and how it works, but there has not been a good conduit for information for the second home buyer in a private, master-planned community. This is a very different animal and a different type of purchase," she added.

• Home shoppers should also be on the look out for some financing flash to give savings-poor but income-rich buyers an edge.

Quincy Virgilio, president elect of the Santa Clara County association, says expect to see a return to equity sharing.

The creative financing strategy includes two parties -- one who occupies the home, another, an investor, who foots the bill for the down payment.

The symbiotic relationship has flourished during past periods of buyer-seller separation in the housing market.

Las Vegas-based Creative Real Estate Online publisher, J. P. Vaughan, also a trial lawyer and real estate investor says everyone can benefit from the strategy.

One person becomes a homeowner with little if any money down, the investor, with the down payment, can get a joint venture-like return on his or her money and a seller, in a slow market, could become the investor or otherwise use the technique to quickly seal a deal, says Vaughan.

Read more creative buying, selling and financing stories.

Advertise on DeadlineNews.Com
© 2008 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Ins, Outs Of Equity Sharing

The symbiotic relationship spawned by equity sharing requires a nurturing housing market and a well-orchestrated contract if it is to evolve into an American Dream.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Consider equity sharing a symbiotic relationship -- as well as a legal agreement -- between two or more people holding title to one home.

Las Vegas-based Creative Real Estate Online publisher, J. P. Vaughan, also a trial lawyer and real estate investor says, properly designed, the creative financing strategy can be a triple-win proposition.

An equity sharing deal is typically struck help sell a home, often in a tough market, but a tough market isn't a prerequisite. It also helps enable a home purchase when it might not otherwise be possible. And it is used to provide an investment with a financial return.

• Typically savings-poor, but income-rich, one person becomes the occupying homeowner with no or little money down.

• A second participant, the investor, provides the initial leverage usually in the form of a down payment stake. With time, he or she can enjoy a joint venture-like return on his or her money.

• The seller, in a slow market, can choose to become the investor or otherwise use the creative financing strategy to quickly seal a deal.

Deals vary, but in its simplest form, an equity sharing agreement works something like this:

• The buyer-occupant generally lives in the residence, pays the mortgage and other costs associated with owning and operating a home -- including taxes, insurance, maintenance and the like. He or she gets to deduct a portion of the mortgage interest, property taxes and others.

• The non-resident, often an investor, perhaps a family member, trusted friend or professional investor, provides all or part of the down payment, and in return gets tax deductions for her or his share of the mortgage interest and property taxes.

• Title to the home can be held in a variety of ways -- joint tenancy with right of survivorship, tenancy in common, partnership or as a living trust.

Equity sharing deals should be legal and binding contracts designed to provide an equitable means to an end. It should also include provisions for any disputes or disagreements that might arise during its term.

Contracts generally indicate that the parties cannot extract any returns until the deal is over. Escape clauses can come with stipulations providing for cash penalties for early outs or other resolutions.

At the end of some specified period, five, seven, ten years or so, the net proceeds from the sale are split between the buyer and investor, again, based on contractual provisions.

Generally and theoretically, through appreciation, an equity deal is set so that the occupant eventually earns a share sufficient to allow him or her to buy a home without help and to give the supporting investor a shot at a profit. Other resolutions can be contracted.

The creative financing tool isn't perfect for every market. While tight money markets can make equity sharing a viable financial avenue to homeownership, a market with flat or reverse home prices requires a deftly drawn contract with a term long enough to allow the deal to gel.

As is the case with any major financial transaction, assistance from a professional experienced in equity sharing agreements is paramount. In addition to the transactional contractual considerations, tax implications abound.

Entering an equity sharing deal with a verbal agreement and or non-binding contract is like searching for fools gold without a pickax.

Referrals from trusted resources -- real estate agents, tax professionals, accountants, other finance experts, and the like, are good resources to tap. Most professionals have a network of peers involved in various aspects of real estate.

The Internet's vast reach can also help make it easy to find qualified help. Keep in mind, the Internet is no better than the Yellow Pages if you don't thoroughly check out professionals' credentials, experience and track record for success.

A few resources include:

• Marilyn D. Sullivan's Home Equity Share network.
• J. P. Vaughan's Creative Real Estate Online.
• The Don Reedy, Peter Haglund, Howard Schwartz and Richard Borkowski BuyHalfAHouse.com team.
• The DirtLawyer.com team at Hoge Fenton Jones & Appel, Inc.
• Andy Sirkin's Sirkin Paul Associates.

Advertise on DeadlineNews.Com
© 2008 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Get On The Bus, Take The 'F' Line

To help get the housing market rolling again, some real estate agents want you to get on the bus.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Call it the "F" Line.

The "F" is for the growing number of foreclosure properties that have become bus stops along motor tour routes designed to put home sales on the fast track.

The Keenan Carter Group in Pismo Beach, CA became the darling of the bus tour set when its version was featured on "Good Morning America" on ABC-TV and a segment with Neal Cavuto on Fox News.

At $20 a seat, the tour bus also becomes a school bus between stops, serving up information packages on each property. Riders get spreadsheets on mortgage payment options, potential rental income properties could yield and refreshments.

The special focus on marketing foreclosures is not surprising, especially in California where the number of foreclosures exceeded the number of sales in January, according to foreclosure figures from ForeclosureRadar.com and sales numbers from DataQuick Information Services.

Other bus tours are driving into Florida, Las Vegas and other hard hit housing markets that have been flooded with foreclosures.

Driving a bargain on a bus isn't new, but using the strategy as a vehicle to move foreclosures is part of a current trend in special marketing designed to help turn the housing market around.

In Silicon Valley, April 13 will become "The Biggest Open House Day Of The Year," as sellers queue up to offer incentives and accommodate -- on the spot -- buyers who make an offer that day.

For the big day, the Santa Clara County Association of Realtors is encouraging real estate agents to have affiliates on hand to immediately offer escrow, loan, inspection and other services.

The idea is to motivate buyers to make a financial commitment to buy a home on the specially coordinated open house day.

The strategy to move resale homes is not unlike price-slashing and incentive lures used by new home builders to move inventory in new home developments.

It's a strategy that can hurt some of the previous, most recent home buyers in the same development who could suffer value loss in the short term. New home sellers, however, hope the strategy will get the housing market moving toward price stability and value gain for the long term.

Home shoppers should also be on the look out for some financing flash likewise designed to give buyers an edge in a market they already rule.

Quincy Virgilio, president elect of the Santa Clara County association, says expect to see a return to equity sharing.

The creative financing strategy includes two parties -- one who occupies the home, another, an investor, who foots the bill for the down payment.

The symbiotic relationship has flourished during past periods of buyer-seller separation in the housing market.

Las Vegas-based Creative Real Estate Online publisher, J. P. Vaughan, also a trial lawyer and real estate investor says everyone can benefit from the strategy.

Cash-short but income-rich, one person becomes a homeowner without money down, the investor can get a joint venture-like return on his or her money and a seller, in a slow market, could become the investor or otherwise use the technique to quickly seal a deal, says Vaughan.

Also see: Realty Auction Action.

Advertise on DeadlineNews.Com
© 2008 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!