Right now, demand for residential properties for lease, lease to own, and contract sale (seller financing) is improving.  There are several reasons for this, but the primary reason is tougher loan restrictions on credit.  Lack of easy money just a year ago has created a new group of people who want to, but can’t, purchase the conventional way.  Many of these people have stable cash flow incomes, but for one reason or another (ie. job market, medical bills, credit cards, or divorce) have reduced credit scores. 

Traditional Financing and associated challenges:

FHA- A loan limit of $271,000 in Indiana has increased the credit rating cutoff to 620 to mitigate risk.  The FHA (Government Backed) loan is the preferred option right now for properties that are less than $300K.  FHA usually would be slightly more expensive to the strong buyer.  This is not the case now.

Fannie Mae/Freddie Mac- Conventional and insured conventional loans sold to the secondary market with an upper limit of $417,000 in Indiana are much more restrictive.  One year ago, the Fannie Mae loan (estimated at 60% of the current outstanding loans) was the primary option except for a buyer with some serious credit issues or someone who could only put a very small amount of money down.  There is now a rate bump (higher rate) required based upon a FICO credit score less than 740.  A 740 credit score is very, very good.

Jumbo loans- With the major problems with private mortgage insurance providers, there is no capability to borrow above $417,000 without a 20 percent down payment.  In recent past, the optimistic small business owner may have purchased the same property for 5 percent down payment; therefore, the upper end market has lost a pool of buyers.  Additionally, mortgage interest rates for Jumbo Loans are much higher than smaller loans due to the perceived risk and lower demand in the secondary market. 

If their price range sales are sluggish, many motivated home sellers must turn to a new marketing approach to accomplish their goals if the competition and high inventory levels will prevent a profitable short-term sale.  There is a pool of responsible buyers who would love to live in the home and there is another group of sellers with an obvious demand to get cash flow to cover their debt and maintenance requirements.  These sellers likely comprehend the increased probability of selling their property for significantly more money in the future.  There are viable options and you should decide what is best for your situation with professional guidance and expert advice.  Let’s get specific, call Me.

Type:  Traditional

Age:   Built in 2001

Location:   Near 161^st and Springmill Road in Mulberry Farms neighborhood.  This is a quiet community with a large central pond and playground.

Square footage:   2618 including 857 in the unfinished basement

Rooms:   This three-bedroom two-and-a-half bath home has an open floor plan with a kitchen and family room combination, formal dining room and upstairs loft that can be used as an office, playroom, or exercise room. 

Details:  The seller is in the process of rehabbing the home and finishing the basement but the renovation in not yet complete.  This home is at the entrance of the neighborhood and backs up to 156^th Street. The sizable backyard provides a buffer between the home and nearby road.   A home of this size with a basement is a great value at this price point. 

Price:  $175,000

Chances are that something may go wrong with your next home improvement project.  According to Consumer Reports, out of 17,129 readers asked about their experiences with 18 common projects ranging from painting a room to building an addition, 44% had at least one problem. 

For Carmel and Fishers residents, the best way to avoid similar problems is with extra planning and patience. 

Take the time to consider all costs.  Unexpected incidentals, purchasing the incorrect products, and surprises such as delivery costs and trash removal fees can increase your expenses.  More than 25% of people asked said they paid for poor planning by a median of $625.  Even projects perceived as simple like interior painting have cost readers a median of $280 extra due to unforeseen issues.

Make a plan and stick to it.  One in 10 people asked said they changed their minds during remodeling.  37% of those who made changes spent a median of $2,000 extra.  For people doing big additions, that number ballooned to $10,000.

Hire a realistic contractor.  Nearly one in 10 readers went over budget because their contractor underestimated expenses, did poor work, or failed to anticipate code requirements.  In today’s environment in Carmel and Fishers Indiana, lowball bids are more common, especially in competitive markets.  According to Bruce Irving, a home renovation consultant in Cambridge, Mass., “In today’s climate contactors are loath to lose a job by being too gloomy about a project.  If a guy underbids, chances are he’ll look to make up the difference.  Watch out for estimates with several open-ended amounts for products. 

Check references.  Make sure your contractor has insurance, including workers’ comp, and an up-to-date license.  Scrutinize the contract closely.  It should list each product down to the model number.  If this seems too picky, consider that the survey revealed more than 1,600 complaints of unexpected incidentals costing an additional $200, such as hardware and finishes.

Do some investigating.  Unexpected surprises such as rotting joists, rusted pipes, and frayed wiring were experienced by 16% of the respondents and cost a median of $1000 to fix.  A good contractor will check for potential problems.  Wisconsin based contractor, Dean Herriges, says “during the planning stage, we’ll do some exploratory work to see what’s going on behind those walls.  Telltale signs include water-stained walls (leaky roof) and sawdust along the baseboards (termites).  Your contract should include a clause for unforeseen conditions. 

Examine the financial details.  Unexpected closing costs and extended interest payments costing a median of $1,900 were incurred by readers who refinanced a project.  If needed, be sure the work has permits and conforms to local codes.  Greg Johnson, a building inspector in St. Paul, Minnesota, says a contractor who asks customers to get their own permits “is always a red flag” and “there is a good chance he’s ducking a licensing requirement.”

Below are examples of the hidden costs of home improvement.  These show median overall cost overruns based on a survey conducted by Consumer Reports for eight popular projects:

Bathroom remodel:  60% went over budget, overrun:  $600, main causes:  changed plans, needed to upgrade systems and structural problems. 

Kitchen remodel:  56% went over budget, overrun:  $1200, main causes:  changed plans, contractor underbid labor, and needed to upgrade systems (plumbing, wiring, etc.).

Deck addition:  45% went over budget, overrun:  $700, main causes:  changed plans, cost of materials increased and needed special tools.

Room addition:  55% went over budget, overrun:  $2000, main causes:  changed plans, contractor underestimated labor, and cost of materials increased. 

Basement finishing:  56% went over budget, overrun:  $1350, main causes:  changed plans, needed to upgrade systems, and needed special tools.

New windows:  33% went over budget, overrun:  $600, main causes:  changed plans, structural problems, and water damage.

Interior painting:  31% went over budget, overrun:  $280

Major landscaping:  45% went over budget, overrun:  $735, main causes:  changed plans, increase in cost of materials and needed special tools. 

Source:  Consumer Reports May 2009 Issue

Unfortunately, even here in Carmel and Fishers Indiana, statistics show that most people ignore an unfriendly letter or call from the bank after a missed or late payment(s).  Take action now before it’s too late and the bank takes over the property.  One solution to this difficult situation is a real estate Short Sell.  A Short Sell is a case where a bank can avoid an expensive foreclosure by accepting an offer for an amount less than what is owed on the property prior to an expensive foreclosure.  For the owner of the property, a short sale is an attractive alternative to a foreclosure, which can be personally and financially devastating. 

According to The Distressed Property Institute, LLC the ramifications of a foreclosure include:

• Current Fannie Mae Loan rules prohibit another mortgage for 5 years after a primary residence foreclosure and 7 years for an investor property. 
• Interest rates can be increased due to risk for a purchase as it is now noted on the application if there has been a foreclosure in the last 7 years
• Credit scores could be lowered 250 to 300 points for over 3 years and will remain public in credit history information for 10 years or more. 
• A challenge to Security Clearance and a negative fact that may be available to an employer.
• The bank has the right to pursue a deficiency judgment (loss) due to foreclosure.

Alternatively, the benefits of avoiding foreclosure through a short sale:

• Fannie Mae loans potentially can be gained in as little as 2 years.
• Credit scores will indicate only late payments and after sale the property will show paid or negotiated, which may lower credit scores as little as 50 points if all other payments are made and credit score dips can be limited to 18 months.
• A short sale is not reported on credit history like a foreclosure, it will show paid or settled.
• Most Security Clearances will not be challenged.
• In some cases the lender can be convinced to give up the right to pursue a deficiency judgment (bank loss).

Armed with this information, it is easy to see why you would want to sell your property prior to foreclosure by gaining insight from expert REALTOR with the proper Short Sale training.  Be ready to step through a streamlined process that will enable you or your friends to move out from a difficult financial situation.  Take action now!  Call me or another Certified Distressed Property Expert.  Time is critical to avoid a foreclosure!

Type:  Condo

Age:   Built in 2007

Location:   Near 32 and Carey Road. 

Neighborhood:   Lancashire at Oak Manor 

Square footage:  1500 square feet

Rooms:   This three-bedroom home offers an open split floor plan with the master suite on one side of the condo and the additional rooms on the other side for added privacy.  There are two full baths and a kitchen with solid surface counter tops and modern appliances. 

Strengths:   This one-level condo is on the first floor and is conveniently located near a new shopping area and the proposed Midland Trace Walking Trail that will connect to the Monon.  There an attached one-car garage.   

Challenges:  Like all condos, there is a monthly fee, which in this case is $200. This fee covers the cost of water, sewer, snow removal, trash removal, lawn care, fitness center, clubhouse and pool.

WHAT’S IT WORTH?  $135,000

Type:  Traditional

Age:   Built in 1995

Location:   Near US 31 and State Road 32

Neighborhood:   Willow Creek

Square footage:  4058 including 1428 square feet in the unfinished basement

Rooms:   This four-bedroom home has a large kitchen, two-story entry, family room, formal dining room, separate living room, sunroom, and master suite with vaulted ceilings, private bath and an expansive walk-in closet.

Strengths:  This home has a spacious wood paneled sunroom, large fully fenced backyard, back deck, and a desirable cul-de-sac lot.  The basement could be finished for a reasonable price to add 1400 more square feet of living space.

Challenges:  This home is the largest and arguably one of the nicest in the subdivision. The upstairs carpet color in some rooms is not neutral and may not appeal to the average buyer.

WHAT’S IT WORTH?    $235,000

Type:  Ranch

Age:   Built in 2002

Location:   Near State Road 32 and Springmill Road

Neighborhood:   Quail Ridge offers residents well maintained common areas, ponds, and a community playground.

Square footage:  1440 square feet

Rooms:   This three bedroom ranch has two full baths, an open floor plan, large great room, dining area, kitchen with quality oak cabinets, and a master suite with a walk-in closet.

Strengths:  This home has a private backyard that backs up to a wooded area.  There is a brand new sprinkler park within walking distance from this home.  This home is in good condition and has great curb appeal.  

Challenges:  According to the Metropolitan Indianapolis Board of Realtors, the average days on the market for a home in the $100-150K price range in this area is just shy of three months.

WHAT’S IT WORTH?    $130,000

Conventional mortgage money has tightened up recently as a result of the increasing amount of foreclosures. Basically, rates are linked to credit ratings and the bar is set much higher now than in the past.  For example, someone with a 720 credit score, typically considered great buyer, has no issues with interest rates on conventional financing and 5% down-payment.  However, as you move to the mid-600 credit scores (considered reasonable in the past) expect the interest rate to jump up 1.5- 2% higher than the previous norm while the down-payment may be 20%. 

Most lenders are favoring FHA loans (government backed) for these cases where rates are not tied as tightly to credit ratings.

The difference between success and failure in sports may be a fraction of a second.  The difference in business success and failure doesn’t seem to be as close at first glance, but it is.  Making it, and not making it, can be due to the smallest of margins.  The slightest edge can propel you from the back of the pack to the front.  The edge is having written goals.  It is easy to go into the office or the shop and put out fires.  To keep busy doing aimless activities that seem important at the time.  I heard recently from Brian Buffini, professional business coach, ”Many of us aim for nothing and hit it with amazing accuracy!”  Where is your focus without a target?  We rely on the gut feeling to direct our lives.  Wouldn’t you prefer to have the control of making decisions based upon what you really want instead of a knee-jerk reaction when the pressure is on?  Write on your calendar a block of time that is dedicated to breaking down what you want, why you want it, and what steps you will do to get there. 

Business is only one of five interlinked categories that you should evaluate to make your life more effective and fulfilling.  Reflect on your Spiritual Goals, Family Goals, Business Goals, Financial Goals, and Personal Goals.

Spiritual Goals— I wouldn’t leave this blank unless you feel that you may be the first human to live forever.

Family Goals—Visualize the big picture and then weekly activities and block time for them.

Business Goals- These should be specific and measurable.  For example, my real estate business is largely by referral and my goal is to receive 200 referrals for home sellers and buyers this year.  I am committed to these referred clients and ensure that they are the highest priority, treated like royalty, and the person who referred them is acknowledged as the key to my business success.

Financial goals—In addition to revenue from business, consider other sources of investment income, reflect on what motivates you, and take action to get the funds.

Personal goals—Think about what makes you happy.  Do you want to get fit?  Get more educated about a subject?  Have more time off?  Feel the desire to help others in need?  Start with the end in mind and work backward to establish daily tasks.

When written goals in these five areas of your life are your priorities, you can’t help but be more effective and fulfilled.  It is time for you to use “The Edge”.