March 2013 Market Report from our London Office

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With the first quarter of 2013 nearly behind us Nick Churton of Mayfair International Realty
takes a look at what may lie ahead for the real estate market for the rest of this year.
It must be hard for all those long-term home owners, who have benefited so much from the real
estate market's rich bounty over the years, to come to terms with the fact that for some time to
come homes won't be the cash cows they have been in the past.
First time buyers in their twenties and early thirties are perhaps more fortunate. The last time real
estate was surging in value most of this group weren't taking much notice. For many of them what
went on during the hours of darkness was more interesting than what went on in the cold light of
day.
So, not for them an early step onto the real estate ladder - as the generation before them had been
so keen to do. This older group had had the benefit of received wisdom from the previous two
generations. Property was a sure fire winner they were told. Nothing could ever go wrong they
were assured. Except it could and it did. So much so that property ownership for young adults of
the “noughties” became something of a pipe dream.
But now it is this very generation who are leading a small recovery in the real estate market. They
have proved home ownership is possible before they are forty, or even thirty, by price adjustment,
some careful saving, or by calling on benevolent parents and even grandparents - all mixed
together with a little more money being available at very low interest rates
In recent years it has become apparent to all generations that property ownership through
inheritance is not always a given. Inherited property is a notion last fully understood by the
Victorian rich who, as life expectancy was a lot less than it is now, didn’t have to worry about the
cost of elderly care and its eroding effect on legacies.
So let's hear it for the younger property generation. They are making the sorts of moves that will
help to get the market going - but not for the same reasons as their parents. This new generation
are concentrating on space, style, convenience and the latest home techno-gadgets. If the market
begins to improve and they receive growing capital appreciation then that will be a bonus. But for
them now there are more important reasons for property ownership than making money, and those
are the security and enjoyment of living under their own roofs.

Will Mortgage Forgiveness Debt Relief Act Be Extended?

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THE KCM CREW on FEBRUARY 21, 2012

Many of our readers have asked whether or not we believe the Mortgage Forgiveness Debt Relief Act of 2007 will be extended past its current expiration scheduled for the end of the year. As a reminder, the legislation ensures that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven.

The reason this act is important in today’s housing market is that, without the act, debt reduced through mortgage modifications or short sales qualifies as income to the borrower and is taxable. If the legislation is not extended, then it would require homeowners to complete a short sale or modification prior to year’s end in order to avoid a tax consequence.

Last week, DSNews reported:

“Obama’s FY2013 budget proposal includes an extension of the Mortgage Forgiveness Debt Relief Act of 2007…  

In the Treasury’s Green Book, its summary explanation of the administration’s budget proposal, it calls for an extension of the tax break due to “the continued importance of facilitating home mortgage modifications.”

The administration is proposing an extension that would apply to any amounts forgiven before January 1, 2015.”

In today’s political environment, the passage of any budget proposal could be considered doubtful. However, both parties seem to be in agreement that this provision should be extended. We can only hope that it doesn’t fall victim to an election year.

Know Who You Are Working With

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Know Who You Are Working With

by DEAN HARTMAN on FEBRUARY 9, 2012

I have long been a proponent of referrals when choosing whom to do business with. But even with a referral, you owe it to yourself to do some homework. In terms of a mortgage, you have always had the Better Business Bureau and local regulators (like state banking departments) that you could contact. Over the past few years, the internet search engines have become popular ways of finding information beyond a company’s or a loan officer’s website.  Two other places I strongly recommend you visit online (one for the company and one for loan officers) are:

1.) https://entp.hud.gov/sfnw/public

This is the website for HUD’s Neighborhood Watch. Neighborhood Watch is where HUD publishes a lender’s loan performance on FHA loans and how it compares to the national and local averages.

A compare ratio of 100% means “average” performance. Numbers greater than 100% are below average. And a ratio under 100% is above average. Understand that theNeighborhood Watch numbers measure the quality performance of FHA loans only. Further, be aware that HUD recently stated that lenders with compare ratios over 200% were subject to suspension from being able to participate in the FHA Program, and lenders between 150-199% were going to be scrutinized very closely and subject to audit. Be wary of “riskier” lenders.

When you go to the website, click on the “Early Warnings” tab and either research an individual lender or look for a list of lenders in an area, and then just follow the instructions. Remember, many lenders nationally have similar names, so make sure you have the right lender.

2.)  www.nmlsconsumeraccess.org

Here you can search for loan officer and company licensing status. Recognize that loan officers are individually licensed now. Those who have taken the required courses, passed the required tests and been approved by their respective state licensing authority have all that information verified on this website, along with their employment history. Loan officers who work for federally chartered institutions (like banks) have not yet been required to take the classes and pass exams and are listed on the site with their license number and their employment history.

Make sure you are dealing with a loan officer who is licensed! Ask questions if they have a lot of job changes.

There has been a cleansing in the mortgage industry over the past few years, but there are always a few bad apples in any large group. These websites may help you identify mistakes you can avoid when choosing whom you do business with.

Do Appraisers Use Distressed Properties as Comparables?

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by THE KCM CREW on FEBRUARY 7, 2012

Many of our readers ask us if appraisers use distressed properties (short sales and foreclosures) as comparables when doing an appraisal on non-distressed properties. We have posted on this issue on several occasions (examples: here and here). Last month, the Appraisal Instituteissued a paper on the subject. In the paper, the Institute explained that:

“Foreclosures and short sales can provide important information for appraisers, who develop valuations based on market data and market forces.”

On whether an appraiser should use distressed properties as comparables, the Institute was very direct (all items in bold were shown as bold in the original paper):

“An appraiser should not ignore foreclosure sales and short sales if consideration of such sales is necessary to develop a credible value opinion.”


And they explained the possible differences between short sales and foreclosures:

“A short sale … might have involved atypical seller motivations and so might not be an ideal comp…

A sale of a bank-owned property might have involved typical motivations, so the fact that it was a foreclosed property would not render it ineligible as a comp.”

Bottom Line

Some will argue that distressed properties should not be used when appraising non-distressed properties. However, there is no longer any doubt that they will be.

States Where Citizens Carry the Most Mortgage Debt

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