Builders Getting Creative with Incentives

The "incentives" long familiar to new-car buyers — bonuses or rebates thrown in to sweeten a sale — are becoming more common in the new-home market as sales slow and credit continues to dry up.

Some of the best incentives are free upgrades, when the builder offers to include appliances, landscaping, a swimming pool, or features like hardwood floors instead of basic carpeting. These upgrades, which can save you thousands of dollars, often represent genuine value — a true discount, rather than a gimmick being paid for via an inflated home price. But watch out for "the catch." Sometimes these upgrades are only available if you accept (expensive) features you might not want or need, or if you finance through the homebuilder.

Just like car manufacturers, homebuilders have discovered that offering financing to their buyers can smooth the sales process while adding a significant revenue stream to their businesses. And just as with car-buying, sometimes the "factory financing" is a good deal and sometimes it isn't, especially if it's combined with other incentives. A $10,000 "cash back" promotion that requires you to use a builder's lender and pay above-market rates or fees may be no bargain. But as the market continues to soften, more genuine bargains are surfacing as builders with too much inventory turn to "blow-out financing," offering mortgages with below-market rates and reduced costs to buyers who suddenly have a lot more choices.

There are great deals out there, but not all deals are as good as they look.  If you're offered a complex package of incentives that includes a supposedly favorable mortgage, read everything carefully and look for the catch.  If you don't understand what you're reading, paying a real estate attorney to spend an hour or two reviewing the offer could be money well spent.

Lastly, never let a homebuilder tell you that you "have" to use their lender.  That's illegal: Federal law guarantees your right to seek financing and related services from independent providers, and a builder who tries to restrict your options is probably pulling a fast one.

Paying Too Much in Property Taxes?

More than half of homeowners pay too much because their property has been wrongly assessed.

Property-tax increases are based largely on rising home values, not the increase of taxes by local governments.  Different formulas are used to figure property taxes, but it all depends on a home's assessed value.  Some jurisdictions use a home's actual market value, while others use a percentage of a property's worth.

The National Taxpayers Union estimates that as much as 60% of taxable property in the United States is overassessed.  But only half of homeowners protest their assessments.  This means many may be paying more in property taxes than necessary.  Many taxpayers don't fight it because they don't understand the process, or because they can't stomach doing the research and providing evidence to prove the assessment is wrong.

If you really don't have the time or desire, hire a property-tax consultant or attorney to do the work.  Many of these consultants charge on a contingency basis, meaning they'll take a percentage of the tax savings if they succeed in lowering your assessment.

Mistakes happen more often than you think.  Many assessors don't even come onto your property to inspect it.  They simply compare a written description of your home with that of similar properties in your neighborhood.  Appraisers also may use historical information that's wrong.  A home's square footage, for example, might have been incorrectly calculated on original construction documents.

Here are additional tips to help you in the appeals process:

Housing Slump Could Linger

Economists are giving up on the idea that the U.S. housing slump will be quick and relatively painless.

Instead, more are concluding, the downturn that began nearly two years ago will last at least through the end of 2007, remaining a major drag on the U.S. economy. The culprits: a glut of homes for sale and growing caution among lenders who now regret being so free with their mortgages during the boom.

Most forecasters still expect the economy to regain some momentum this year after a slow first quarter. Recent data have shown manufacturing, business investment and trade on track to help offset the negative effects of falling home values on consumer spending. Even so, some economists expect economic growth this year to remain tepid, largely because of the weak housing market.

Some local markets remain strong, but in much of the country, home prices have been flat to moderately lower over the past year.

The outlook is confusing for the average home shopper, too.  Lenders have eliminated most no-money-down "subprime" loans for people with weak credit records. That means many people who hoped to buy homes this year will have to wait until they can clean up their credit records and save for a down payment.

If all the news of the housing slump has you confused about what to do and when to do it, give us a call or leave us a comment below.  We'll be happy to discuss your individual options with you, and help you determine whether now is the best time for you to look at real estate or not.

Tips for Choosing a Mortgage

Whether buying a home or refinancing an existing mortgage, it is important that home buyers and homeowners determine which type of home loan best fits their household's financial situation.  To help simplify the decision-making, Countrywide is sharing 10 tips for choosing a mortgage loan.  These helpful insights are just a few of the many valuable ways consumers may arm themselves with the knowledge needed to help achieve and maintain home ownership.

When it comes to choosing a home loan there are some basic principles everyone should consider. Two of the basics are, first, stay within your financial means, and second, never commit to anything without being 100% sure that it is in your best interests, ," says John P. McMurray, chief risk officer for Countrywide Financial Corporation, a diversified financial services provider and member of the S&P 500. "There are a number of points to consider when making a decision about taking out a mortgage loan."

Here are 10 tips to consider when deciding which type of mortgage loan best fits your household's personal and financial situation.  (more…)

Has the Real Estate Market Hit Bottom Yet?

Numbers suggest that things are likely to get worse before they get better. After a sluggish start to the spring selling season, the National Association of Realtors reported that pending sales dropped 3.2 percent in April, the most recent data available, while mortgage applications fell about 2 percent over the past month, according to the Mortgage Bankers Association.

Since peaking last summer, the median price of an existing house has now fallen by $9,300 to $220,900, about 4 percent, according to the NAR. That's the first year-over-year decline ever recorded. But prices are still a third ahead of where they were when the market began its amazing run back in 2003. Sales, too, have fallen by about 20 percent since their 2005 peak, while the inventory of unsold homes has nearly doubled to an unwieldy 8.4-month supply.

It appears that it's more psychology than actual hardship that's keeping most of the buyers away.  In reality, there hasn't been a better time to buy a home in years!

Some economists say many sellers will have to reduce their prices by at least as much as they have already—another 4 percent or so—before the market finally reaches equilibrium.  Given how slow some have been to do that, it might take until next summer before things finally bottom out.

That having been said, tightening credit standards—not only for subprime borrowers but also for more creditworthy ones—has clearly dampened demand and pushed sellers to do more than just lower prices. In a recent survey by the Federal Reserve, nearly half of all loan officers said they had raised their standards for nontraditional loans, while 15 percent said they had increased requirements on prime borrowers, raising credit score minimums and more closely scrutinizing property appraisals.

Have you been thinking about buying a home but have been scared into a closet by all the negative news?  We'd love to hear your comments about it by clicking the comment link below.