Real Estate Information

When home owners take on a remodeling project, they’re often far more focused on choosing glistening fixtures for a new bathroom or debating the type of granite to use on a kitchen countertop than, say, navigating the intricacies of the building permit process. That could be a huge mistake, however, and it may not even come to light until the house is put up for sale. Ignoring local approval requirements not only poses safety and legal problems but also can potentially derail an otherwise smooth sale.

Home owners using licensed contractors for remodeling work typically don’t have to get involved with permitting. Most licensed contractors will handle the cumbersome process for them—filling out the paperwork with the municipality, collecting fees, and being present for the required inspections, says Michael Hydeck, president of the National Association of the Remodeling Industry. But when home owners tackle do-it-yourself projects or use unlicensed contractors, they risk problems later.

The permit process varies widely from city to city and state to state). But the purpose of the document is the same everywhere: It offers ­assurance by a municipal building department that the work being done meets all safety codes.

Home owners may be asked about permits in the process of selling a home. At closing, they may have to disclose any remodeling work they did and verify permits. A home inspector evaluating a property for a buyer may want to know whether a permit was obtained. Furthermore, the buyer’s appraiser may want to see permit records to check the legality of any home renovations.

“If no permits are found and it’s obvious the home has been renovated, the bank will likely refuse to make the loan,” according to the American Bar Association’s book Legal Guide to Home Renovation (Random House Reference, 2006). If the permitless work isn’t discovered until after closing, the home’s value could even be subject to a lawsuit, such as in cases when an addition added extra square footage to the home’s value but the construction wasn’t done legally with a permit.

That’s why contractors and legal experts say real estate practitioners are well advised to ask sellers before they take on a listing for a renovated home: “Did you get a permit for that?”

Remodeling contractor John Price in Merced, Calif., has been called in to help home owners after permit problems have been uncovered. He once worked with a home owner who installed siding by himself, but added it too far down along the wall of the house, so it rubbed up against dirt and picked up moisture. Eventually the poor installation led to mold growing in the drywall throughout the inside of the house.

Some home owners, however, are tempted to sidestep the permit process not wanting to pay the fees (municipalities generally charge a minimum issuing fee—such as $25—as well as an additional fee—sometimes 1 percent—of total construction costs), or they might not want to risk delaying a project or a sale by waiting for city inspections (obtaining permits can take anywhere from a day to six weeks or more).

“People have strong incentives to cheat, and some of that lays squarely on the feet of policymakers who have sometimes created a system that is time-consuming and frustrating,” Price says.

But caught without a permit during resale, home owners may face big consequences. They may have to pay fines (possibly up to quadruple the original permit cost) or may have to tear the project down and redo it.

Virtually No Job Is Too Small

Home owners making any changes to the structures of a home will likely need a permit—and you may need more than one, Price says.

While kitchen and bathroom remodels and housing additions are obvious permit candidates, people may not realize they might also need one for such projects as installing a window, adding a new light switch, or replacing a shower. “There are not too many jobs you don’t need a permit for,” Hydeck adds. “It’s better to be safe than sorry.”

http://realtormag.realtor.org/home-and-design/feature/article/2011/09/remodeling-don-t-forget-permit

The Department of Housing and Urban Development has once again extended its deadline for a program that provides up to $50,000 in interest-free loans to unemployed or medically ill home owners who are struggling to make their mortgage payments. 

The new deadline is now Sept. 15. HUD resumed taking applications for the program on Monday.

The $1 billion Emergency Homeowners Loan Program, which launched in June, was originally slated to end on July 22, but HUD first extended the deadline to July 27 to give home owners more time to apply. 

Home owners eligible for the program will be able to qualify for up to $50,000 in interest-free loans for up to two years. Home owners who have had a drop in income of at least 15 percent from involuntary unemployment or underemployment due to economic conditions or a medical emergency are eligible for the program. Home owners must still be able to contribute $150 per month toward their mortgage. (Learn more about eligibility requirements and the participating states at http://findehlp.com.)

Source: “HUD Extends Deadline for Unemployed Mortgage Assistance,” HousingWire (Aug. 29, 2011)

The White House is considering a housing proposal that would allow millions of home owners with government-backed mortgages to refinance into lower interest rates, The New York Times reports. 

“A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere,” an article in The New York Times notes.

Many home owners have been unable to take advantage of today’s low interest rates — which are averaging around 4 percent — because they don’t qualify for refinancing at the best rates since they owe more on their home than it is currently worth or because of poor credit. The refinancing plan is still under discussion of how it would work, The New York Times said. 

“This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing,” Christopher J. Mayer, an economist at the Columbia Business School, told The New York Times. 

The White House is also considering other options to try to stimulate the housing market or save home owners from foreclosure. Such options include more changes to its refinancing programs so more home owners can participate or a home rental program to that would rent out foreclosures instead of putting them for sale so foreclosures would stop weighing down overall home prices.

Source: “U.S. May Back Refinance Plan for Mortgages,” The New York Times (Aug. 24, 2011)

For the third straight month, new-home sales fell in July, the Census Bureau reported on Tuesday. However, sales were 6.8 percent higher compared year-over-year from July 2010. 

The new-home building industry continues to struggle to compete against a backlog of existing-homes and foreclosures on the market that have pushed prices down. 

For July, new homes sold at a seasonally adjusted annualized rate of 298,000, only a 0.7 percent drop from a rate of 300,000 homes sold in June. 

The median home price for new-homes was $222,000 in July, which is 5.5 percent down from June. The median price is 8.8 percent higher from 12 months prior. The median price of a new home is more than 30 percent higher than the median price for an existing home, analysts say.

The drop in sales reflects an increasing concern over the economy, said David Crowe, chief economist for the National Association of Home Builders. Crowe said he expects August figures will also drop because of “the market turmoil and the uncertainty it creates in consumers.” 

Source: “New-home Sales Dip in July,” CNNMoney (Aug. 23, 2011)

A new report argues that if banks wrote down the mortgage principal of underwater borrowers it could pump $71 billion per year into the economy and create more than 1 million jobs annually. The report, “The Win/Win Solution: How Fixing the Housing Crisis Will Create One Million Jobs," comes from The New Bottom Line, a campaign that represents about 1,000 nationwide faith-based and community organizations. 

The campaign argues in the report that by lowering home owners’ mortgage payments by an average of more than $500 per month--or $6,500 per year--that it would free up about $6 billion dollars per month that home owners could then spend on such items as buying groceries, household necessities, school supplies, etc. 

“Home owners across the nation are struggling to pay their boom-era mortgages with their recession-era salaries and the economy is suffering for it,” according to the report. “Writing down the principals and interest rates on all underwater mortgages to market value would serve as the second stimulus that America so desperately needs, only without added costs to taxpayers.”

The group is pressing State Attorneys General, who are currently in settlement talks with the nation’s largest banks over allegations of foreclosure abuses, to stand firm on its request for principal reductions for underwater borrowers. 

Source: “Fixing the Housing Crisis Would Create One Million Jobs Annually,” RISMedia (Aug. 21, 2011)

Which states rank the highest as best places for children to live? The 2011 Kids Count Data Book by The Annie E. Casey Foundation recently ranked 50 U.S. states based on social, health, and economic factors affecting children. Each state was given a score based on such factors as infant mortality rates, child and teen death rate, percentage of children in school, and the number of children below the poverty line and in single-parent families. 

Here are the 10 states that emerged as the best for children: 

1. New Hampshire

2. Minnesota

3. Massachusetts

4. Vermont

5. New Jersey

6. Connecticut

7. Utah

8. Iowa

9. Nebraska

10. North Dakota

See what other states made it on the top — and bottom — of the list. 

Ranking the worst of the 50 states? Mississippi.

Source: “Child Wellness by State,” The Huffington Post (Aug. 18, 2011

Housing affordability continued to be near record highs in the second quarter, hovering near its highest level in the 20-plus years it has been recorded, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. 

About 72 percent of all new and existing-homes sold in the second quarter of the year were affordable to families earning the national median income of $64,200, according to the index. The record high remains 74.6 percent, which was reached last quarter. 

"At a time when home ownership is within reach of more households than it has been for more than two decades and interest rates are at historically low levels, the sluggish economy and the extremely tight credit conditions confronting home buyers and builders remain significant obstacles to many potential home sales," says Bob Nielsen, chairman of the National Association of Home Builders. "That said, however, some housing markets across the country have stabilized and are beginning to show signs of a budding recovery."

Most Affordable Housing Markets

According to the index, Youngstown-Warren-Boardman, Ohio-Pa., was the most affordable major housing market during the second quarter with 93.7 percent of all homes sold found to be affordable to households earning the area's median family income of $54,900. Other cities ranking near the top for affordability is: Syracuse, N.Y.; Indianapolis-Carmel, Ind.; Dayton, Ohio; and Lakeland-Winter Haven, Fla.

Least Affordable Markets

The index found the least affordable market in the country--for the 13th consecutive quarter--is New York-White Plains-Wayne, N.Y.-N.J., in which 25.2 percent of all homes sold during the quarter were affordable to those earning the area's median income of $67,400. The other least affordable major metro areas includes San Francisco-San Mateo-Redwood City, Calif.; Santa Ana-Anaheim-Irvine, Calif.; Los Angeles-Long Beach-Glendale, Calif.; and Honolulu.

By REALTOR® Magazine Daily News

Ongoing economic concerns continued to push mortgage rates to new lows, as 30-year and 15-year mortgage rates took another dip, pushing home affordability even higher, Freddie Mac reports in its weekly mortgage market survey. 

30-year fixed-rate mortgages: averaged 4.15 percent this week, dropping from last week’s 4.32 percent average. The previous record low for 30-year rates was set on Nov. 11, 2010, when rates reached 4.17 percent. For comparison sake, in 2000, 30-year mortgage rates averaged more than 8 percent and just five years ago they averaged 6.5 percent.

15-year fixed-rate mortgages: averaged 3.36 percent, dropping from last week’s 3.50 percent. Last year at this time, the 15-year fixed rate averaged 3.90 percent. 

5-year adjustable-rate mortgages: averaged 3.08 percent, dropping from last week’s 3.13 percent. Last year at this time, the 5-year ARM averaged 3.56 percent. 

1-year ARM: averaged 2.86 percent this week, dropping from last week’s 2.89 percent. A year ago, the 1-year ARM averaged 3.53 percent. 

"Not surprising, many home owners took advantage of this low mortgage rate environment and have already refinanced their loans,” says Frank Nothaft, chief economist of Freddie Mac. “The refinance share of applications averaged nearly 70 percent of all mortgage activity in the first half of this year, according to our survey. In addition, an increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter.”

Source: “Mortgage Rates Lowest in Over 50 Years,” Freddie Mac (Aug. 18, 2011)