Buyer Beware: Skeletons in the Closet

The National Association of Exclusive Buyer Agents (NAEBA) recently conducted an online survey of their members to rate the items they found most annoying when searching for a new home with buyers.  Since these real estate companies are always looking out for the buyer's best interest they don't pull any punches.  The results of the survey are revealing, surprising, and sometimes downright weird.

Here are the top five things exclusive buyer's agents find most annoying when previewing a home:

1. Broken door locks preventing access to the house.
2. Pet deposits in the back yard or dirty cat boxes.
3. Missing light bulbs in the basement.
4. Sellers that ask you to remove shoes and then have wet carpet or dirty floors.
5. Having loose stairs on a stairway or missing banisters. 

Other reported annoyances include:

6. Low hanging dining room light fixtures in a vacant home.
7. Closet doors that fall off or are not adjusted properly.
8. Going into a vacant home and hearing animals in the walls.
9. Halloween decorations that are left out.
10. Dangerous children's toys left out.
11. Dead cars in the driveway or yard.
12. Homes on large lots without a survey or description of the lot boundaries.
13. Political signs.
14. Graffiti on a home for sale.
15. Dead birds or animals in or around the home.

It seems that many home sellers are not overly-endowed with common sense.  Closet doors falling off?  Dead animals in the front yard?  The pitter-patter of mousy feet in the walls?  Scary Halloween decorations all over the house?  These should all be no-brainers.  Sending buyers away disgusted or frightened out of their wits is probably not the best of business decisions.  Neither is killing or maiming them with dangerous children's toys left as booby traps.

Jon Boyd, President of NAEBA, points out an important lesson for home sellers.  "In all these cases the buyer's attention is diverted from evaluating the home to something mildly disgusting or frustrating.  If sellers have a dead pigeon lying on the deck it will just help buyers negotiate a better price because of less competition.  But try to leave the skeletons and coffins for the Halloween party!"

NAEBA is a nonprofit organization with over 500 members nationwide.  NAEBA offers industry standard certifications, ongoing education, client referral service, technology and information sharing.

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.

Existing Home Sales Down Slightly

According to the National Association of Realtors, the pace of existing home sales in the United States was off slightly in May to a 5.99 million-unit annual rate.

The inventory of homes for sale rose 5.0 percent to 4.43 million units at the end of May which represents 8.9 months' supply at the current sales pace.  That is the highest months' supply since June 1992, although the 1992 figure only includes single-family homes while the current data also includes condos.

May saw the 10th straight month in which prices dropped from year-ago levels, with the national median price down 2.1 percent to $223,700.

Homes sales were mixed across the regions with the Northeast seeing a 5.8 percent increase for the month while the Midwest saw a 0.7 percent rise. The West and South reported a drop-off in sales with 0.8 and 3.4 percent declines respectively.

Credit Cards Before the Mortgage?

In another symptom of the subprime mortgage meltdown, stressed-out borrowers may be taking care of their credit card bills before making their mortgage payments.

According to a report from consumer credit reporting agency Experian, borrowers with credit scores of 620 or below are 30 days late more often with mortgage payments than with payments on bank-card debt.

The survey noted that historically, consumers have prioritized mortgage debt over credit card debt as they "traditionally view their home as their most valuable asset which should be protected at all costs."

But the current housing slump, in a very fundamental way, has changed the math that governs the way subprime borrowers deal with debt. 

Consumers who have dealt with phone calls, letters and wage garnishees from credit card collectors in the past may want to avoid repeating the experience.  Since home loans usually have a much lower interest rate than credit cards, most credit counselors will tell borrowers who are in over their heads to pay down their credit card debt first above all else.

Mortgage Reform Unlikely in 2007

Homeowners unable to pay monthly mortgage bills and facing foreclosure shouldn't count on help from Washington this year.  Regulators and lawmakers seem to be taking a wait-and-see approach as they confront the fallout from several years of lenders making too many home loans to people with inadequate credit.

The foreclosure rate nationwide is rising at an annual rate double that of two years ago.  Nearly 2 million adjustable-rate mortgages are forecast to reset at higher rates over the next two years, suggesting the foreclosure rate has not peaked.

Federal lawmakers and regulators say they are balancing how to make sure high-risk borrowers can still get loans against efforts to rein in abusive lending practices.

We'll keep you posted here on anything new that might help if you're struggling with, or facing, possible foreclosure.