The National Association of Home Builders reports a Q2 2011 Home Opportunity Index reading of 72.6. This means that nearly 3 of 4 homes sold last quarter were affordable to households earning the national median income of $64,200.

Q2 2011 marks the 10th straight quarter — dating back to 2009 — in which the index surpassed 70.

Prior to 2009, the index had never crossed 70 even one time.

However, we must remember that the Home Affordability Index is a national survey. From region-to-region, and town-to-town, home affordability varied.

In the Midwest, for example, affordability was highest. 14 of the 15 most affordable markets nationwide were spread throughout Ohio, Michigan, Illinois and Indiana. Only Syracuse (#9) cracked the list from other regions.

The top 5 most affordable cities in Q2 2011 were:

1. Kokomo, IN (95.8%)
2. Wheeling, WV (94.7%)
3. Lansing, MI; East Lansing, MI (94.4%)
4. Bay City, MI (94.3%)
5. Youngstown, OH; Warren, OH; Boardman, OH (93.7%)

By contrast, the Northeast Region and Southern California ranked as the least affordable markets. Led by the New York-White Plains, NY-Wayne, NJ area, 7 of the 10 least affordable areas were in New York, New Jersey, and California. For the 13th consecutive quarter the New York metro area was ranked “Least Affordable”.

Just 25.2 percent of homes were affordable to households earning the area median income there.

The rankings for all 225 metro areas are available for download on the NAHB website.

Standard & Poors released its May 2011 Case-Shiller Index this week. The index measures change in home prices from month-to-month, and year-to-year, in select U.S. cities.

May’s Case-Shiller Index showed a 1 percent increase from April 2011. Home values rose in 16 of the Case-Shiller Index’s 20 tracked markets. Only Detroit, Las Vegas and Tampa fell. Phoenix was flat.

Don’t look too far into the findings, though. Like the FHFA’s Home Price Index, the Case-Shiller Index is rife with flaws.

The first flaw of the Case-Shiller Index is its limited geography. Despite being positioned as a national housing index, Case-Schiller Index is sourced from just 20 cities nationwide. There are more than 3,100 municipalities nationwide.

The Case Shiller Index’s second flaw is that it ignores all home types excepts for single-family, detached homes in its findings. Condominiums, multi-family homes, and new construction are not included in the Case-Shiller Index.

In some markets, these excluded home types outnumber the included ones.

Furthermore, the Case-Shiller Index is flawed in that it takes 60 days to release.

The Case-Schiller Index reports on a housing market from 2 months ago — hardly helpful for today’s buyers and sellers in Worcester , trying to make sense of today’s real estate market data. 

When you want real-time housing market data, therefore, look past the Case-Shiller Index and talk to a real estate professional instead. It’s where you’ll get your best, most relevant information.

http://money.cnn.com/2011/06/28/real_estate/short_sale_fraud_rising/

The definition of loan fraud is simple.  According to the F.B.I. loan fraud is any material misstatement, misrepresentation or omission relied upon by a mortgage underwriter or lender to fund a loan.

The definition does not make any exception for white lies, half truths, fibs or creative facts.  It says any material misstatement, misrepresentation or omission.  In most cases if you are involved in a real estate loan transaction, as a borrower, real estate agent, attorney or some other party, and you have to ask yourself or someone else “Is that loan fraud?”  95% of the time the answer is “yes.”

In most cases when I am asked about whether or not something is loan fraud the conversation usually goes something like this:

Client: The upstairs bathroom plumbing does not work right at all.  The seller’s brother-in-law did all of the work himself and never had a permit for the remodeling.  I want the seller to fix it.

Me: Then we should state that in the purchase contract.  I can have that written in as one of the terms.

Client:  Well the seller and the seller’s agent are concerned that if it is in the contract I won’t get the loan.  They suggested that the seller pay me for the repairs after the closing because he doesn’t have the cash right now.  I am fine with that.  I trust them.

Me: So you, and the seller and their agent are afraid that if you tell your mortgage lender the truth that they may not make the loan to you.  Is that right?

Client:  Yes.  I think that if my lender finds out about the condition of the bathroom I won’t get the loan.  And I don’t mind doing the work myself once we move in.

Me:  Ok.  So think about this, if you lie to the lender or omit certain facts then they will give you the loan, but if you tell them the truth they may not give you the loan.  Is that what you are worried about?

Client:  Yes.  That is what the loan officer and my real estate agent told me.

Me:  Does that sound like loan fraud?

Client:  No.  Not really. I am not being fraudulent.  I’m just not going to tell the lender and I will honestly do the work once I move in.

Me:  Well.  That is not only loan fraud on your part, but now it sounds like conspiracy to commit loan fraud by the seller, loan officer and the agents.  In fact that is exactly what it is.  Let’s do the right thing and work this out in a manner that you, the seller and the lender are satisfied with.

Ok, I know sometimes it can’t be worked out.  But that does not make the option of committing loan fraud all right.  If a deal cannot be kept together with the truth and full disclosure, it is likely better to move on to the next deal.

Here are just a few examples of how mortgage loan fraud is commonly committed:

Making false loan applications.
Lying on a mortgage loan application, or falsifying or misstating employment or income.

Kickbacks.
Making or receiving payment in return for a referral which resulted in a transaction or service.

Undisclosed second mortgages.
Taking an undisclosed loan from the seller to assist in the purchase.

Misstating intent to occupancy.
Stating a borrower/owner will occupy a property that they do not intend to occupy.

Receiving false gift funds or equity.
Stating that a borrower will receive a gift of equity or gift of down payment but the funds will actually be paid back.

Inflated purchase price.
Using two purchase contracts and sending the false contract with a higher sales price to the lender in hopes of obtaining a higher appraisal.

Falsifying deposits.
Stating to a lender that a deposit has been paid when it has not.

False adjustments, purchases or credits.
Paying additional funds to, or receiving additional funds from, the seller to adjust the purchase price prior to or after closing.  This includes buying items of personal property from the seller for more than fair market value.

These are only a few examples of loan fraud.  If you are a borrower or real estate professional, remember that loan fraud is a federal, criminal offense.  It can be a crime of conspiracy, that is if you assist in the commitment of loan fraud you can be punished under the law. 

In most of the circumstances I encounter neither the borrower, real estate agent or loan officers are intending to defraud the lender.  They are simply trying to get the deal done, trying to get the seller and the buyer to where they want to be.  Unfortunately, the definition of loan fraud says ANY material misstatement, misrepresentation or omission.  Whether or not a fact is material is up to a judge or jury to decide.  Never let it get that far.

If you have a question about whether or certain facts amount to loan fraud speak with a qualified real estate attorney.

Realtors® have access to resources not available to the average home buyer or seller.  Between personal spheres of influence, professional networking and trade memberships Realtors® have a unique perspective on their local real estate market and on particular properties and trends, above and beyond what can be found on a listing sheet or on the internet.  They are in constant contact with other real estate professionals, buyers and sellers and often have exclusive details on properties and opportunities not found elsewhere.  Their resources cannot be tapped online or in print.  A good Realtor® will leverage their resources to assist their clients to find the right property or the right buyers.

Whether you are buying or selling real estate, obtaining the best price is critical.  An experienced Realtor® is by trade a good negotiator and will provide their clients the tools to identify the proper price point for real estate.  On average sellers workings with a Realtor® tend to get a higher price for their property than sellers trying to sell on their own.  Likewise, buyers tend to get the best overall price when their offer to purchase is presented to the seller by a Realtor®.  If the price isn’t right for a particular property an untrained individual may never know it.  A Realtor® can draw on their valuable experience and resources to assist their clients in making the best offers and counter offers.

A Realtor® will help you realize the best value for your real estate sale or purchase.  Financially sellers think they will save tens of thousands of dollars by not using a Realtor® but it has been my experience that when sellers are not working with a Realtor® they tend to have many complications with their transactions; Complications that would have easily been avoided with the assistance of a Realtor®.  Complications lead to delays and additional costs that may not directly affect the final sale price but can certainly have a financial impact that is often not considered until it is too late.  Getting involved with an unqualified buyer can mean a huge loss to a seller when the buyer has to back out of the transaction just days before closing.  A Realtor® can protect from this sort of loss and other circumstances that are not foreseen by the average seller.

If you have a question about working with a Realtor® or would like the contact information for qualified local Realtor® please contact me.

With all of the recent talk of improper foreclosures having taken place, and the issues with bank owned real estate title problems, the question of the need for title insurance has been a hot topic. I have always stressed the importance of purchasing an owner’s policy of title insurance. Regardless of who is selling the property, how long it has been in the family or how familiar you or the seller may be with the property you just never know when, where or how a defect in the chain of title may occur.

I have spoken with two home owners recently who purchased property t with a foreclosure in the chain of title. One was trying to refinance their home the other trying to sell. The titles to both properties were defective because of an improper foreclosure process. Neither of them had purchased an owner’s title insurance policy at closing. Now they are both in a position of having to hire legal counsel to try to resolve the matter, which will be very costly. If they had owner’s title insurance they would be able to resolve the matter simply with a claim to the insurer.

Many skeptics argue that title insurance is an overpriced farce, implemented only to create huge profit for large insurance companies and their agents. The truth is that relative cost of owner’s title insurance, a one-time premium paid at closing, is low, a fraction of the purchase price. For the value of the protection it may offer, I believe it is priceless. As for huge profits for insurance companies, there is no doubt that it is profitable for them. But with all of the substantial claims that have been paid out recently, profits have declined sharply. Title insurance business, like all insurance business, is the business of risk. Not buying an owner’s title insurance policy when purchasing real estate is a huge risk.

To learn more about the importance of title insurance read what the American Land Title Association (ALTA) says here.

So what is a short sale flip?

A short sale flip is when a property is purchased by a real estate “investor” from a seller who has negotiated with the current mortgage holder(s) to release the mortgage(s) for less than what is owed, the purchaser of the property then flips, or resells, the property for a profit.

Often the flip is done without the new buyer doing any repairs or upgrades to the property before selling it to a subsequent buyer.  Real estate flips are rather common, what is concerning about the short sale flip is that the lender who has accepted a short payoff does not know that the property is valued for more than what was settled for on the flip.

For example a real estate investor finds a homeowner in distress, upside down on their mortgage.  The investor negotiates with the homeowners mortgage holder to accept a short payoff.  Let’s say the homeowner owes $170,000.00 on the mortgage and the investor negotiates a payoff of $120,000.00, a $50,000.00 shortage (or “haircut,” so to say).  The sale takes place the mortgage is paid off and released for $120,000.00 two weeks later the new owner, the investor, sells the property for $145,000.00, pocketing $25,000.00.  Sweet deal right?  Maybe too sweet, if the lender who took the haircut discovers the facts they may be able to make a very strong argument that they were defrauded.

If lender wins the argument they may be able to pursue the seller, investor and subsequent buyers on a claim of loan fraud.  If successful the parties to the transaction have a lot to lose.  Loan fraud is a federal offense and an unwitting homebuyer may be out their new home, or at the least a substantial amount of money in the legal cost of defending against the lender.

Seeing the risk of having a lender that has taken a significant loss on a short pay off file a claim of loan fraud, title insurers are not willing to insure short sale flips.

The Home Affordable Foreclosure Alternatives (HAFA) program is a part of the Home Affordable Modification Program (HAMP), and offers a streamlined process for short sales and deeds-in-lieu of foreclosure. HAFA will allow homeowners to discharge their first mortgage debt without the credit-destroying step of foreclosure. The program also offers a $1,000 incentive to banks to permit short sales and a $1,500 bonus to homeowners for the purpose of relocation.

• The property must be the owner’s principal residence

• The first mortgage must have originated before 2009

• The unpaid principal must be less than $729,750 for a single-family dwelling

• The borrower’s monthly payment must exceed 31% of their gross income

• The mortgage must either be delinquent or a default be reasonably foreseeable.

If borrowers meet the program requirements they will receive pre-approved short sale terms from their lender, which will include a minimum acceptable proceeds figure for the sale. The homeowner will be required to list the property for sale with a Realtor® and close within 120 day, extensions may be permitted up to a total of 12 months.

Based on the short sale agreement with the lender, HAFA requires property owners to be fully released from any future liability on their first mortgage debt, and in some cases, subordinate debts, so that when the home is sold, the borrower is free and clear of their mortgage.

The program ends on December 31, 2012. HAFA does not apply to FHA or VA loans. There is an extensive amount of paperwork to be completed to participate in the program, Homeowners wishing to take advantage of the relief offered are encouraged to work with a experienced Realtor®.

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Law Requires 2 Types of Smoke Detector Technology

The two most common methods of fire/smoke detection technology currently used is either ionization or photoelectric based.

Ionization sensors feature a constant current flowing between two electrodes. When smoke strikes the device, it impedes the current between the electrodes and causes the alarm to set off.  Ionization sensors are usually quicker to go off than photoelectric detectors. The problem with ionization detectors is that they are not able to distinguish between smoke and steam.  This makes them prone to false alarms when steam from a shower or other source interrupts the current. This is particularly true when the ionization detector is located near a kitchen or bathroom.

Photoelectric sensors send a beam of light between two sensors. This beam passes in front of the sensors in a direct line. When smoke cuts across the path of the light beam, some light is dispersed by the smoke particles causing it to activate the alarm. Photoelectric detectors are less sensitive to false alarms from steam or cooking exhaust fumes but may take longer than ionization detectors to operate. Another major concern is that ionization detectors do not offer the best protection in fires that smolder. Fires that smolder are some of the deadliest fires nationally. Photoelectric smoke alarms are more sensitive to smoldering, smoke producing fires. Most of the residential dwellings in the country have ionization detectors which are more sensitive to flames.

Tests of both types of alarms show that in smoke producing fires photoelectric detectors sound first and it takes nearly 17 minutes longer before an ionization alarm sounds.

New Fire Detector Regulations

Since there are strengths and weaknesses between photoelectric and ionization smoke detectors, the Board of Fire Prevention Regulation has passed a new regulation (527 CMR 32.00). According to the new regulation, owners of certain residential buildings will be required to install and maintain both the ionization and photoelectric smoke detectors. While the new regulation does not change the locations where smoke detectors are required, it does call for the installation of both technologies in certain locations.

Under the new regulation, an ionization detector can not be placed within 20 feet of a kitchen or a bathroom containing a shower or a tub. In these locations only a photoelectric detector is allowed.  In order to comply with the law you can either install two separate detectors that have both technologies or by installing one that utilizes both.

What Properties Are Affected By The New Regulation?

In order to determine if a property is affected by this change you may consider checking with the local fire department. According to the new amendment the following types of properties are impacted by the new regulation:

• Residential buildings under 70 feet tall and containing less than six dwelling units.
• Residential buildings not substantially altered since January 1, 1975, and containing less than 6 residential units.
• All residential buildings sold or transferred after April 5, 2010, which are less then 70 feet tall, have less than six units, or have not been substantially altered since January 1, 1975.

For all properties in these categories, compliance is mandated by April 5, 2010. It should be noted that the law does not apply to these larger buildings or those which were substantially altered since January, 1975, as these properties already were required to upgrade their fire safety systems under other existing laws.

One other important note regarding smoke detectors: Many towns require hard wired smoke detectors and NOT battery operated. You should make certain you know what the requirement is for the town where the property is located in.  As a general rule according to the State fire Marshall’s office, the law is as follows:

• Homes built after 1975 are required upon sale or transfer to comply with the State Building Code in effect at the time of construction.
• Homes built before 1975 are required upon sale or transfer to comply with the requirements of MGL c. 148, §26E(A); and
• Homes built between 1975 and 1998 are required to have hard wired interconnected smoke detectors outside the bedrooms and one detector on each floor at the top of the stairs. The smoke detector at the top of the stairs can be the same detector that is required outside the bedroom.
• Homes built after 1998, smoke detectors are required to be interconnected and have a battery backup. Smoke detectors are required in each bedroom, outside the bedroom and at the top of each flight of stairs. A single detector can satisfy multiple location requirements, if sited properly. There must also be one smoke detector on each level and one smoke detector for each 1,200 square feet of living space.
• The requirements for newer construction also apply to additions and/or renovations where a bedroom is either added or substantially altered. If an addition or renovation involves adding or substantially changing a bedroom, the entire house, including existing bedrooms must be brought up to the present standard according to the Massachusetts State Building Code (780 CMR), regardless of when the original home was built.Carbon Monoxide detectors are required in any residence that has fossil-fuel burning equipment including, but not limited to, a furnace, boiler, water heater, fireplace or any other apparatus, appliance or device; or has enclosed parking within its structure.

According to the carbon monoxide regulations, you need to have a detector on each finished level of the home. Further there must be a detector placed within ten feet of all the bedroom doors. The detectors do not need to be hard wired. A plug-in or battery operated detector meets the requirements and usually the most viable choice. Here are all the types are carbon monoxide detectors that are allowed:

• Battery powered with battery monitoring;
• Plug-in (AC powered) units with battery backup;
• Hardwired AC primary power with battery backup;
• Low-voltage or wireless alarms with secondary power; and
• Certain combination smoke detectors and CO alarms

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