HUD Fines Real Estate Manager

The Department of Housing and Urban Development slapped a whopping $170,000 penalty on an apartment complex manager in St. Louis. The money is being split $83,000 to the residents allegedly being discriminated against, $15,000 for a trust fund for possible other claimants, and $72,000 to set up an on-site daycare center.

The violation: Requiring the parents to supervise their minor children if they were outside of the apartment.

No, there is no sense in the ways these laws are sometimes enforced. Perhaps the apartment manager should have taken a different tack and reported the parents to the local child endangerment authorities instead of attempting to impose parenting onto the parents.

Determing Your Downpayment

This article gives you some excellent hints and tips for how to approach how much your down payment should be. Succinctly - Do not go for the "no money down" lending schemes that led to the real estate bubble and avalanche of foreclosures.

Landlords - Screen Your Potential Tenants

Screening tenants is an art, not a science. However, in order to make good decisions, you need to gather information about the prospective tenant in a manner both legal and ethical, and which will maintain the dignity of the person.

One of the biggest mistakes a new landlord makes is not screening potential tenants. Yes, John’s check for the security deposit cleared the bank – but what will happen next month? The screening process has one purpose, and one purpose only – to help you make a prediction of the prospective tenant’s future behavior based on their prior behavior.

It is essential that any prospect fill out a thorough rental application, with information on their employment, income, address history, as well as previous landlords’ names and contact information. You should also obtain an emergency contact on the application for several reasons.

Be sure the application requires a signature, and contains a release so you can legally check the information they have given you. If you start snooping around in someone’s background without that signature and release, you could be in violation of state and federal laws, and face an expensive and time-consuming lawsuit.

The first people to contact, and the information source worth the most weight, are the current and previous landlords. They are your best source for determining what sort of tenant the applicant may be in your case.

Key information to obtain from other landlords includes: a) Were they late with the rent, and if so, how many times?; b) How long were they a tenant?; c) Did they damage the apartment?; d) Was any eviction action started during the tenancy?; e) Did the tenant leave owing a balance?

In many cases, landlords will only respond to written inquiries about previous tenants, with a copy of the release signed by the person. It is good practice to maintain written records of inquiries you have received, and to have on file a record of what information you provided. It is also good practice to have a written record of what was said about the previous tenant, if you deny them a lease.

Do not rely solely on the current landlord’s information. In some cases, that landlord has a ‘problem’ on their hands who they would all-too-happily pass off to you.

It occasionally pays to go to the next step, and subscribe to a credit reporting service. If the rents are high enough, the $150 annual fee most services will charge a small business are more than warranted.

However, do not fall into the trap of making one of the biggest mistakes a rookie landlord makes, by relying too heavily on credit reporting services. The reports do not tell you who will be a good or bad tenant. Analyze the patterns. Look at the dates involved. It is possible that your prospective tenant had a financial setback due to illness, injury, or divorce, and they will be an excellent tenant.

If the credit report comes back shaky, ask the person to meet with you for an explanation. Do not be shy about asking pointed questions. If the person is serious about living in your property, they will be direct and forthcoming about the causes.

Make sure you have an emergency contact, preferably a family member, listed on the application.

There are two primary reasons for requiring this information. 1) If something happens to your tenant, such as major illness, injury, or death, you may be the first person to know. 2) If the tenant disappears, this family member may be able to help you locate them.

Following these general tenant screening tips will help you have a successful career as a landlord, as well as keep you out of hot water with invasion of privacy suits, and discrimination claims.

Remember, you became a landlord for the revenue and wealth-building, and it pays to remain blind to everything else.

Buy, or Rent?

Should you rent or buy a home? That is a question people all over the free world ask themselves every day.

There are numerous factors to consider on whether your temperament is suitable for home ownership, or continuing to rent. Deciding whether to rent or buy a home is as much an emotional decision as a financial one. Let the financial aspect rule the final decision, but do not ignore your heart!

Are you ready to settle down and make roots in a specific location? If so, then plan your financial strategy, factoring in all of the expenses of home ownership, and make the investment. If not, rent at an affordable level, at a price less than the cost of ownership, and sock away the cash for a down payment if/when you are ready to buy.

Home ownership is a long-term investment and creates a sense of permanence. It can also become an anchor in the community that you cannot easily shed. Real estate is an illiquid asset and not easily ‘cashed out,’ and cannot be picked up and moved with you if you take a job that requires relocation. You can’t use it for food or medication, if you have a medical emergency that cuts off your income. If the neighborhood suddenly changes, you cannot pick up and move without consequence.

What type of home should you buy?

You have decided it is time to buy a home, but that does not necessarily mean a house. Condominiums might be the right answer for you, once you have considered the next question. Or perhaps the answer to the next question is an enthusiastic YES, and you should consider buying a duplex or four flat building in which you can live, and receive all of the same favorable financing and tax consequences as a single family home.

Are you ready to tackle all of the small maintenance and repairs yourself? Have you factored in the costs of the tools you will need and those repairs into your financial decision-making process?

With ownership comes certain responsibilities beyond financial ones. Owning a home may require a certain set of maintenance skills, or the finances to hire skilled craftsman and tradesman to handle maintenance issues. Do you have these skills, or, are you willing to acquire them? There is a reason a plumber makes $75 to $100 an hour – their tools and skills have been acquired through training, experience and investment, no less extensive or exhaustive as getting that MBA.

Are the tax benefits of ownership all they are cracked up to be? The answer is “sometimes.”

Sometimes the tax expenses of owning a house will exceed the tax benefits in a very short time. Discuss the income tax benefits of owning a home with a qualified tax professional prior to purchasing, and compare that projected benefit to the projected costs of local property taxes. Once you have projected the property tax increases against the income tax savings, determine if the convergence of the benefits are being exceeded by the expense in the near-term. If this convergence occurs too closely in the future, then consider remaining a renter and investing the cash in a different long-term vehicle such as municipal bonds that also receive highly favorable tax consequences, as well as being a much more liquid asset in the case of an emergency.

Is the timing right?

Real estate values are a localized phenomenon, even though they are somewhat impacted by national factors such as mortgage rates. You need to find out if the values in your location are rising, if they are flat, or have they been declining?

If home values are in the decline, then now is not the right time to buy. Be patient, and wait a few months. Now is the time to watch the neighborhood you want to live in for a crop of FOR SALE signs sitting on lawns month after month. Once those signs start saying SOLD, it is time to buy. Your odds will be significantly improved that the asking prices are more reasonable than they once were, and you should be able to afford to purchase more home than you originally thought.

Foreclosure "Rescue" Scam Hammered

As if the looming avalanche of foreclosures in the United States isn’t bad enough, the Federal Bureau of Investigations (FBI) announced on Wednesday that they have filed charges against an Ohio man, alleging that he was involved in a scheme that defrauded unsuspecting homeowners of hundreds of thousands of dollars with a false promise of saving them from foreclosure.

James A. Warsing of Ashtabula, Ohio, was indicted on eight counts of Mail Fraud. The indictment claims Warsing, operating as WJW Enterprises, bilked $500,000 from people using a promise to use the money to settle their foreclosure cases, but instead converted the money to his personal use. The indictment claims these activities took place between 2001 and 2005.

This is not Warsing’s first brush with the law. In October 2004, Ohio Attorney General Jim Petro charged Warsing with violations of Ohio’s Consumer Protection laws. Warsing was convicted of those charges in June 2006, and was ordered to make restitution to 18 people, as well as to pay fines totally $300,000.

"Homeowners deserve to be protected from unscrupulous business practices," Petro said. "It was unconscionable for Mr. Warsing to take advantage of people already down on their luck, and we're pleased he has been brought to account for it."

Petro said Warsing was running a “Foreclosure Rescue” scam, in which Warsing through his company would offer to settle or stop a foreclosure action, for a fee, but instead pocket the fees that ran from $3,000 to $5,000 and do nothing.

Such “foreclosure rescue” scams have become more commonplace in the past decade according to a report from the National Consumer Law Center, a consumer advocacy agency based in Boston. “This is a uniquely bad collision of the financial stresses on homeowners with a boatload of bad ways for them to be conned into losing their homes or the equity in them,” says NCLC’s Steve Tripoli, principal author of the report.

New Home Furnace and Boiler Standards Released

After a delay of nearly thirty years, a program passed in 1978 during the Carter administration is finally being implemented by the Department of Energy (DOE). The DOE released on Friday guidelines for improving energy efficiency in hot water heaters, furnaces, and boilers, but the new standards will not take effect until 2015 and take 24 years to put in place.

The “fast tracking” of the new standards was started in February 2007, when the Department requested that Congress approve a streamlining process for residential and commercial appliances, shortening what the DOE described at the time as a three year review process into one that would only take 10 months to implement the changes.

The long range goal of the program is to update the standards of a wide variety of household appliances, including everything from dishwashers to heat pumps. Under the plan, the DOE has already amended standards for dishwashers and hot water heaters.

The DOE in a press release claims the new standards will lower carbon dioxide emissions by 7.8 million tons a year, or the equivalent of 2.6 million passenger vehicles.

“As a nation, we must find better and more ways to both conserve energy and use it more efficiently and productively. These amended standards will not only cut down on greenhouse gas emissions, but they also allow consumers to make smarter energy choices that will save energy and money,” DOE Assistant Secretary of Energy for Energy Efficiency and Renewable Energy Andy Karsner said.

The DOE said the new regulations would be online at the Federal Register on November 19, but a search of their database only pulled up the February request to Congress.

The thirty-year logjam in carrying out this process was broken in January 2006, according to the DOE. Since that time the DOE claims that the implementation of rules governing the four appliance groups is at “…a pace unprecedented in DOE’s history.” However, the Manhattan Project, carried out by the predecessor agency to the DOE managed to take from theory to reality the atomic bomb in a mere six years.

More appliance groups are under study for revised standards, and they include everything refrigerators, central air conditioners, furnaces, water heaters, clothes washers and dishwashers; as well as smaller, home equipment including ceiling fans, torchiers, dehumidifiers, and fluorescent and incandescent lights. Also covered, would be plumbing equipment, including showerheads, faucets and toilets.

“Improving appliance standards is a top priority of the Department of Energy,” Karsner said.

What is a Realtor?

You have been shopping for that perfect home, and you noticed that some of the business cards you have been collecting say Realtor while some do not. So, what is a Realtor?

A Realtor is a member of the National Association of Realtors or one of its sub-organizations. The National Association of Realtors is a professional organization made up of people in the various sub-specialties of real estate sales, appraisal, or management, with local chapters all over the globe.

According to the National Association of Realtors Web site, "The core purpose of the NATIONAL ASSOCIATION OF REALTORS is to help its members become more profitable and successful."

A member of the National Association of Realtors is expected to abide by a very stringent code of ethics. The NAR site simplifies their nine page code of ethics into a set of underlying principles which "can be loosely defined as:

1. Loyalty to clients;
2. Fiduciary (legal) duty to clients;
3. Cooperation with competitors;
4. Truthfulness in statements and advertising; and non-interference in exclusive relationships that other REALTORS have with their clients."

Most states have codified two of those principles into their real estate licensing laws, specifically the fiduciary duty to clients and the truthfulness in statements in advertising.

Do not confuse someone with the designation of Realtor with someone with a real estate license. While most Realtors hold a real estate license, not all real estate license holders belong to the National Association of Realtors, or subscribe to its code of ethics.

Photography and Real Estate Sales

One of the most critical elements for preparing any effective real estate marketing effort is pictures. Home buyers want to ‘shop around’ using the pictures they’ve seen, even if they have seen the actual house; and many buyers won’t even consider looking at a house if there are not any ‘pre-view’ pictures available. Attractive pictures will help get a “SOLD” sign on the home quicker, make the client happy, and put a commission in the agent’s pocket.

Here are five quick tips for getting attractive pictures to include in your marketing campaign to get that home sold.

1) Get a decent digital camera. You’re in a profession with high dollar stakes involved, and the images you use should reflect that. You do not need to invest thousands of dollars in a high-end SLR camera; however, your camera phone just doesn’t cut it to take professional-grade photographs. Purchase a decent camera that takes shots with at least 5.1 megapixel capability, with storage cards for easy ‘reloading.’

2) Take a lot of pictures. And I mean a lot. Hundreds if necessary. Try them with and without the flash. Take pictures from a variety of angles, even if it means just moving a few inches over. There’s no additional cost involved if you bought the right camera in choosing which pictures to use, so give yourself plenty to choose from.

3) Only take outside pictures on a sunny day. Outdoor shots should be bright and cheerful, not with the sky dark and gloomy. Wait a few days, the weather will change, and you can do the outside shots at any time of the day – but make sure you do so when the sun will be behind you, and make sure your shadow isn’t showing in the pictures!

4) Use your flash unit sparingly, if possible. The glare that can come off of surfaces you hadn’t even thought of can ruin a shot. Be sure to take shots in rooms with lots of windows and mirrors on angles so the bounce-back from the flash doesn’t show up.

5) Buy a decent image editing program. This software is available at anywhere from $99 to thousands of dollars, but you do not need to have the high end software for your purpose. You can create contact sheets with even the lower end software and involve the client in choosing which pictures you will use.

If you follow these basic pointers on taking photographs instead of snapshots, you will put in your arsenal an important tool for selling homes more effectively. A picture says a thousand words, so the adage goes – and it’s true!

Down Payment Basics for Home Buyers

Your home search has started, but you are uncertain how much of a down payment you will need. The answer to the question of how much your down payment should be lies in your wallet and your emotions, and there is no pat answer to the question of what a basic down payment will be.

Most home buyers today get pre-qualified for a loan, based on how much of a down payment they are willing and able to make, how much they earn, and their credit history. Then the lender will factor this together to come up with an annual percentage rate, and the projected payments.

The traditional rule of thumb is for a buyer to put twenty percent down, because at that level the mortgagee (buyer) will not have to purchase mortgage insurance. This type of mortgage generally matures in either 15 or 30 years, and some lenders have the options of 20 and 25 year amortization periods.

In essence, take whatever amount of cash you have available for the down payment, and multiply by five, that will get you the approximate price of the homes you should be looking to purchase. With a 20% down payment, you should be able to get a traditional, fixed-rate mortgage without the added expense of mortgage insurance, points, or origination fees.

If you are adverse to risk, the traditional mortgage, paid back in as short of a period as you can afford, is the way to go.

However, let us say you are willing to take a bigger risk, and do not mind the cost of the mortgage insurance, or you want more house than your current cash says you can purchase. Then you will be looking at one of the other types of mortgage available, from adjustable rate mortgages, to insured mortgages, to possibly ‘borrowing’ the funds from the seller in a contract for deed. These plans vary from lender to lender, and it pays to shop for the best deal.

In some of the scenarios described above, you will need as little as no down payment up to five percent down. It is likely with these types of mortgage loans that you will have to fund some form of lending costs, such as points or an origination fee, payable to the lender at the time the loan is closed, or by making even higher monthly payments. Those fees can be a flat rate, or a percentage of the amount borrowed.

The non-traditional mortgages all have one thing in common, they are risky both to the lender and the borrower.

The lender adjusts for this added risk by creating higher effective interest rates. Even if the initial rate allows the borrower to qualify for the loan, the formula being used by the lender to adjust the rates over time will end up being higher than that of a traditional mortgage. This adjustment in the rate also makes the loan riskier for the borrower, because unless the increases in their income are keeping up with the increased mortgage payments, they are looking at losing the home in the not-too-distant future.

Overall, it makes the most sense to put down as much up front as you can. The savings over time are high, and will end up being many times more than what you put down.

Tips for Real Estate Agents on Effective Brochures

Many real estate agents come to the industry without any preparation on how to create flyers, pamphlets or brochures. While it is not rocket science, making attractive and effective brochures to help sell a home does take some practice and an investment in a set of tools to create flyers and other marketing materials that the buyer will hang onto, and call back on.

Below are five of the tools that every agent should have to create the best marketing materials they can at the lowest cost.

1) A good digital camera. While your camera phone might be just fine for snapping a quick picture, the quality and pixel density just do not cut it when you put that picture in print or the internet. You can find many good, inexpensive digital cameras in the $250 to $350 price range. Be sure to get one with a resolution of at least 5.1 megapixels, and it should have an auto-zoom feature. Get one with an expandable memory, or separate memory cards, and take a lot of pictures to select from.

2) A good color printer. You don’t need to break the bank to find a good color printer capable of printing on a variety of paper types. You can pick up a good inkjet printer capable of printing high quality pictures and graphics in the $200 to $300 price range, and refill cartridges are typically in the $30 to $40 range.

3) Quality paper. Do not use typical light-weight office paper for printing out flyers and brochures that will hit your customer’s hands. Use the cheaper paper to prepare a mockup for proof-reading, look over the layout and to check edits, but use heavier stock, or even glossy stock, for the finished product. The paper as much as the contents printed on it lend weight to the flyer or brochure that will say “quality.”

4) Photographic editing software. This one will take the most ‘hands on’ learning curve of all of the tools. But learn the basics first, such as improving the color saturation, the brightness, and the contrast of your digital images. You will be amazed at how good even the dingiest picture can be made with a decent software package. And you don’t have to go for the high end on this, you can find professional-grade editing software for digital images in the $129 to $199 range.

5) Document editing software. Whether you are using a Windows or Mac-based computer, your package came with word processing software. What most people don’t realize is that that same word processor has available various templates on the internet for download, some free, others at a minimal cost. Learn how to make the best use of those pre-formatted templates, or create one of your own. Try to come up with one standard template you use every time, or a few different ones for different markets. But keep it simple and make sure to leave plenty of room for pictures!

You’re in a highly competitive industry if you’re selling homes. The successful real estate agent knows that not only must they appear professional, but so should everything they leave behind for the world to see. Professional looking brochures and flyers are as much your ‘calling card’ as your business card, and should be a reflection of the pride you take in yourself and in representing your clients.

Landlords: Use the Internet to Find Tenants

Using the internet as a marketing tool is essential for landlords today in finding tenants for their rental properties, whether they be residential or commercial. By using the internet as an advertising vehicle, you will see great rewards in finding your next tenants. For the purposes of this article, I will focus on residential real estate, rental homes and apartments.

Most residential properties are rented by the 22 to 30 age group. These young adults grew up using the internet as a research tool, and odds are they will turn to the internet when looking for an apartment or house for rent.

There are several means of advertising on the internet – some free, some quite expensive.

One critical mistake many landlords make when using the internet for advertising is leaving out pictures and floorplans, and using too much shorthand to describe their offering. The internet is a visual medium – and the more words the better in most cases.

You absolutely must have a Web site. This does not have to be an expensive proposition, but if you are a landlord of any size (10 or more units) without a Web site, you will have a lower ‘credibility factor’ with your potential tenants, especially if what you are renting is an A-class property. You should also analyze the Web sites of the largest landlords in your area, and try to emulate (not copy!) those with front page search engine rankings.

If you live in a Metropolitan Statistical Area (as defined by the US Census Bureau) of 250,000 or more people, odds are that there is a Craigslist.com site dedicated to your area. Advertising on Craigslist.com is free, and you do not have to resort to clunky abbreviations in order to describe what you have for rent. Including pictures and/or floor plans are also highly recommended options.

Many cities also have smaller, regionalized message boards for finding and renting property. These are also generally free, but may take a bit of digging to locate. Locating them and getting a listing there will probably help raise your Web site’s rank in the search engines, and thus the number of potential tenants.

Most newspapers have Web sites that include the listings from their classified ads on them. Depending on the paper, the cost of being listed is free, or comes at an additional cost. If the newspaper you are advertising in does not have this as an option, and you have a different option available, take it! Some newspapers offer an internet-only option at a lower cost than the print version. Test the success of going this route, you may be surprised at its effectiveness.

There are several listing services on the internet for which a landlord pays either a one-time, annual, or monthly fee for having their name and link included. If you have an advertisement in the Yellow Pages, be sure that your listing is included on their Web site. Be sure a link to your company’s Web site is included.

There are several ‘rate your landlord’ sites springing up. Most are unmoderated, and most contain nothing but gripe sessions from prior tenants about what they perceived as bad landlords. Do not ignore these sites – if you have a current tenant who is happy with you, direct them to one of these sites and ask them to talk up what is good about you. If you have a bad rating on one of these sites, try to have it removed, if the claims are false.

Make use of the internet effectively and creatively, and your job as a landlord for finding new tenants will become a much easier one.

Five Pitfalls for the First Time Homebuyer

You’re reaching for the dream, and have decided to buy that first home. Be sure to avoid the five pitfalls that lie in wait, and could turn that dream into a nightmare. Watch out that you do not make the same mistakes that other first-time home buyers make.

1) Get the house inspected. Ever since the boom in this industry started in the 1980s, many states now require that home inspectors receive specialized training and be licensed. Ask to see the home inspector’s license, and get a list of five of his clients from six months ago for you to call. Most problems with a property will surface in that short time.

2) Get the house appraised by a reputable appraiser of your choosing. Appraisers are usually licensed real estate professionals familiar with the local market. Do not trust that the agent you’re working with will choose one best for you, they are working for the seller, not you! Get a list of potential appraisers from the mortgage lender you’re working with who are acceptable to the lender.

3) Budget accordingly! Many people do not realize the hidden costs of owning a home. You should plan on a minimum of five percent of your gross (pre-tax) income being devoted to the maintenance and upkeep of the home, whether the home is new or existing. Sock that many away every year, or when your furnace goes out, you’ll be left out in the cold.

4) Don’t offer full price. The price of the home has probably been set at a price anywhere from five to 15 percent higher than the seller is willing to accept. This is especially true if there is a real estate agent working with the seller, because they have access to sales records giving a good indicator of what the actual value of the house on the open market will be. Also, the agent has a hidden psychological motivation to pressure the seller into accepting a reasonable price, since they only get paid when the house sells.

5) Shop Shop Shop! Do your homework! The first house you see may seem to be your ‘dream’ home, but take your time. Most homes take roughly ninety days from the time it goes on the market to the time a buyer is found, so you can look around and possibly find one you’ll like even better.

Do your homework on the neighborhood. Ask the police department for crime statistics. If you have children, check closely what the school choices are. Also check for the availability and accessibility of essential services, such as groceries, pharmacies, etc. If it is a rural property, find out the condition of the well and septic system.

The longer a house sits on the market, the more likely it is that the seller will accept a less-than-full-price offer. As a first time home buyer, you don't want to buy more than you can afford, and you don't want to make mistakes that could leave you stranded if you make the wrong decision.