Looking to Buy or Rent? Be Ready For a Surprise!!!

The metro Atlanta real estate market is now on the rise. The market hit bottom in 2011 and began it's climb in 2012.  A low supply of homes has now started a wave of new construction that has not been seen since 2006.  Banks are now favoring short sales over foreclosing on homeowners. Some previously upside down homeowners are now able to sell their homes and with rates below 3%, they are able to upgrade the house without upping the mortgage. Investors who purchased within the last 3 years with plans of buying and holding are now unloading properties.  So what does all of this mean for someone looking to buy or renting for the next few years before purchasing?

If you are looking to purchase the market is not a friendly one. There are not as many deals as you may have seen over the last 18 months.  The overall number of homes on the market it down and prices across the board are up.  With an influx of larger investors and second-time home buyers, competition is at an all time high.  This will require diligent efforts of your real estate agent to locate properties within your criteria and you making a QUICK and informed decision on how to bid the most aggressively to beat out the competition.  HUD, Fannie Mae, and Freddie Mac properties are the most favorable route since they offer periods that they will only look at offers from owner occupants. This gives everyone a fair shot at getting their offer submitted, reviewed, and hopefully accepted.  Unapproved short sales still are not favorable route for a buyer looking to move in 90 days or less. Buyers using loans will need to work on saving up more money to cover their down payment along with closing costs in order to make a more favorable offer to a seller. There are a lot of cash buyers so if you're using a loan the competition is fierce.

If you are looking to rent, you will notice that there is an abundance of rental properties now available.  You will see a lot of property management companies with numerous properties and stricter application processes. What you will also notice is that rent rates have become very negotiable since there is a glut of rental properties on the market as a result of the 2008-2011 foreclosure purchases.  As a renter, you will see  properties in better condition and with incentives all in an attempt to steer you into renting.  Always evaluate the fair market rent in an area before looking at properties so you are able to negotiate on the spot when you are viewing potential rentals. If you are a strong applicant (good credit, good rental history, solid employment) or are looking for a long-term lease you definitely have the upper hand in negotiating rental rates. Be sure to include provisions in the lease regarding if the landlord sells the property and that the landlord provide monthly proof that the mortgage(s) on the property are current.

That's What Buyers DON'T Like

As spring approaches, the Metro Atlanta real estate market is seeing low inventory and rising property values. This is opening the door for regular resales to enter the market to compete with the short sales and foreclosures.  With multiple offers on foreclosures and lengthy approvals short sales being common place, this has made a 'normal' sale much more attractive; dealing with a person and not a bank, quick closings,and quick response times to offers.  This has set the stage for homeowners to list their properties in order to break even and possibly (dare I say) make a profit! However, some features of your home, that you think are special, may prove to be an obstacle in getting max dollar for your home.

CARPETED BATHROOMS
NO ONE wants this!!! Get rid of it....


VAULTED CEILINGS
Two story foyers and family rooms make a statement. What you don't want them to say is high energy bills. Provide a copy of your utilities for buyers to see in winter and summer months so they won't overestimate what their potential bills will be.


CORNER LOT
Some look at it as a 'premium' lot with great curb appeal. Most look at it as a lot with typically higher property taxes and an unfavorable backyard.  The best way to combat this is to fence in your backyard to eliminate the guesswork of the property line and to define the space. Planting leyland cypress bushes or trees to create a barrier can sell the idea of more privacy and a better view.

MASTER ON MAIN AND SPLIT-FOYER FLOOR PLANS
Master bedrooms on the main floor are appealing to older buyers or those with health issues.  They do not appeal to young families or those planning to have children because the secondary bedrooms are upstairs and not quickly accessible.  The split-foyer plan gives you additional living spaces & bedrooms like a home with a basement but feels more like a part of the the house. Most buyers don't like opening the front door, being confronted with stairs and having to go up or down. Unfortunately for these two floor plans, buyers will  eliminate them all together from their search so for the buyers who will consider them you will need to play to the strengths of each floor plan. For a master on main, make the master bedroom feel large and the other bedrooms functional an office, gym, or media room. On split foyer floor plan, make the lower level more attractive than the main level.

POOL
A pool can be a gift for parties and gatherings and a curse if you have the pleasure of maintaining it yourself.  The best way to overcome the negative aspects of a pool is to spruce it up and make it look new and well-maintained. Make it appear as all you do is turn it on and swim, little to no maintenance.  Be sure to have extra chemicals and all the necessary equipment (in working order) to pass on to the buyer making them confident that they can maintain it with ease.  You also want to use furniture and accessories to sell it as an additional entertaining space even when you're not swimming.

HOMEOWNERS ASSOCIATION
A homeowner association (HOA) should represent a stable, maintained community, with responsible homeowners that want everyone to be accountable for the neighborhoods condition. The reality is that some HOA's are bankrupt, don't do much to improve the community, and are ran by management companies and not the residents. A large perception of HOA's is that they are overly strict and can become a nuisance as they enforce the bylaws. The best way to overcome this apprehension is to offer a copy of the covenants and bylaws to potential buyers and if you are in a community with rather high HOA fees, consider paying a year's worth of fees as a buyer incentive.

2013 Metro Atlanta Housing Market

SHIFT IN THE ATLANTA MARKET

The last quarter of 2012 saw inventory across the board drop and prices begin to increase.  In 2013 that trend will continue.The first segment that will continue to see decline are the foreclosure/REO properties.  Lenders are looking to push bulk sales to investors and increase the number of short sales on their current borrowers.  Some lenders prefer to do a short sale over a loan modification.  In 2012 we saw lenders who actually solicited mortgagees to do a short sale and receive up to $30,000 in relocation assistance. With less foreclosures and more resales, prices across the board will begin to increase.  This will allow stale listings to finally be absorbed making way for new inventory.

HOW THIS AFFECTS YOU AS A HOMEOWNER

If you have a property that you would like to do a short sale on, you may see more favorable terms given by lenders to expedite the process.  If you have a home that is right on the borderline of being underwater, you may see property values in your area increase to whereas you can do a refinance or a traditional sale and either break even or (dare I say) make a profit!  If you are not planning on buying or selling and currently own a home, this is the market you've been waiting for!  Inventory gets low and prices increase. Less foreclosure comps on appraisals allow property values to rise.  In the Metro Atlanta area, I believe you'll see a noticeable increase in the next two years.  Until unemployment rates decrease, we will not see a dramatic change across the board since you will still have mortgagees that are in danger of foreclosure.

HOW THIS AFFECTS YOU AS A RENTER OR LANDLORD

As a potential renter, you will find a lot more rehabbed properties available with slightly less restrictive application processes.  As a landlord, you will see fair market rent go down slightly due to the influx of investment properties that have been rehabbed and put on the market for rent.  You will definitely need to do some cosmetic repairs to get fair market rent and some upgrades if you're looking to get top dollar.

Size Matters: Little Bank beats Big Bank

In the last 9 months or so I've been watching a disturbing trend become a stark reality.  Larger banks are actively pursuing new purchases and do not seem to have the manpower to process them all.  Three of my last five transactions were with smaller lenders who ended up with the loan when the larger bank could not execute. How is this possible? Let's look at some factors.

Loyalty
Giant, monster mega banks (as Clark Howard calls them) originate the bulk of their loan refinances and new purchases from their current account holders.  People automatically feel comfortable dealing with their current financial institution because they figure that since their lender has all of their personal info already, they can trust them.  Also, another VERY common misconception is that since you bank with a financial institution for a number of years, you have a better chance of being approved or it makes the underwriting process simple. Sadly, both of these couldn't be further from the truth.  Large banks show no special treatment nor do they take into account the banking history you have with them when it comes to processing and approving a loan.  I've found this treatment to be exclusive to small, community banks and credit unions where you actually get perks for being a member and not just a customer.

Size Matters
Since the housing market crash and the new banking regulations were passed in 2009, larger banks began to put smaller players out of business and purchased some of the smaller competitors, and hired their loan officers, in the process.  The big banks became more powerful, but when as the housing market roared back, they were unable to provide the processing efficiency needed to accommodate of the influx of loans.  Since larger banks are always more strict, they used to broker out less attractive loans (sub 680 credit scores) to other banks/mortgage brokers to get them done.  Without those smaller banks/brokers being there to field those deals, the banks now have way more than they can handle.  Instead of hiring more employees, they seem to prefer to hold loans hostage for 45-90 days while smaller bank's and mortgage brokers are able to close loans in 8-18 days!!! This is fact, not fiction. I have a list of them that I use daily on my website. Don't let a giant, monster mega bank tell you that you cannot do a loan (FHA/VA included) elsewhere with competitive rates & pricing in under 30 days because it is simply not true.

Times Have Changed---AGAIN!
In the past mortgage brokers were synonymous with mortgage fraud, high yield spreads, higher closing costs, and higher interest rates. There was a time that mortgage brokers couldn't compete with a direct lender's rates/closing costs. But since the banking regulations of 2009 helped weed out all of the bad seeds, the mortgage brokers that survived are now reaping the harvest of stalled and even declined loans from larger banks and closing them in a week or two.  Sadly, I don't see this trend ending anytime soon unless the larger banks hire more processors/underwriters to handle the growing load of purchases, refi's, short sales, and loan modifications that they have on their plates. Larger banks also need to loosen the restrictions a tad to help get loans approved.  Large banks have become overly strict, since these regulations were passed, and seemed to have now lost the little common sense they had left.

RENT--A four-letter word in Real Estate

"I'm looking to rent" are usually not the words the average real estate agent likes to hear. While renting means little commission for an agent, it can be a source of solid leads and annual income if done correctly.  Renting can actually be a good thing for all parties involved and even a community.  Everyone knows the cons and horror stories of renters and renting- the noisy neighbors, the unkempt exteriors, tenants not paying rent, landlords not fixing major repairs, etc. But, let's look at the PROS of renting from all sides.

FROM THE TENANT SIDE
-When relocating, renting is usually the best option in order to get familiar with the surrounding areas, amenities, retail, and commute to work.
-Renting in an overpriced/spiking market is a great idea (refer to 2007-early 2008).
-Less at stake if you move or travel frequently
-Establishing a solid rental history is key when purchasing a home.
-The opportunity to live in more desirable communities that you couldn't normally afford to purchase and live in

FROM THE LANDLORD SIDE
-Great tax write off
-Having mortgage being paid in part (preferably in full!) by someone else
-Home secure from vandalism versus being vacant
- Potential for residual income

FOR REALTORS
-Create a database of potential buyers
-Database of sellers who may potentially sell or buy new investment properties
-Property management opportunities

FOR THE COMMUNITY
-Less eyesores of vacant/neglected homes
-Contributes to a diversity in the local community, which is important in my opinion
-Decreased crime activity from vacant homes being vandalized or occupied illegally
-Less potential foreclosures with landlords having ability to stay current on mortgage

LOCATION, LOCATION, LOCATION

You always hear the cliche' when it comes to real estate it's all about location, location, location.  That's easy to comprehend in California, Florida, or New York, but how does that translate to the Metro Atlanta area? The main thing you have to remember is inside the perimeter of I-285 the rules are different than when you're dealing with properties located outside the perimeter.

Inside the perimeter, you're either trying to get as close to Buckhead, Midtown, or Downtown as possible. You want to be in an area with a nice surrounding area and low(er) crime rates.  Retail then comes into play especially when you're factoring condos. Can you walk to the grocery store, retail shops, or entertainment? These are things you don't usually get outside the perimeter in the suburban areas, however, an in-town area (Buckhead, Virginia Highlands, Brookhaven, etc.) with a suburb feel are highly in demand. School districts don't play as big of a role in property values since private/charter schools are the preference here.  Areas along public transportation lines are not the most desirable as you'd find in other areas of the country.

Outside the perimeter, the closer you are to an expressway is one of the leading property value boosters.  Commute times in Atlanta are some of the worst in the country so this is becoming a more popular requirement. Retail is the next property value indicator. The closer you can be to malls, retail stores, shopping centers, and grocery stores ensures that your area is desirable. I would say high school districts are just as important as retail since this is what drives most people to move into the suburbs or from a neighboring county.  The only exception to these rules are when you're assessing country club communities.  Country Clubs can be very isolated and still command a heftier price tag than a comparable home that fits all the other criteria I used to assess home values outside the perimeter.

When purchasing a home location is important, but only you know what YOU need to be located close to you when you are living in the property.  For investment properties, you want the property to encompass as many of these value indicators as possible in order to cater to as many potential buyers as possible.

Downpayment Assistance Programs

      Down payment assistance programs have sustained during the housing market roller coaster. Some of the more popular programs went away but some very attractive ones are available through various counties. They all have income limits and restrictions on selling the property within a time frame, but the question is---can you qualify? The answer may surprise you.

      The Georgia Dream Program is probably the most popular down payment assistance program in Metro Atlanta. It ranges from $5,000 to $7,500. It requires that the home be your primary residence, you haven't owned a home in 3 years, and that you attend home buyer classes. It is in the form of a second mortgage that is repaid when you sell or refinance the home. Income requirements for a couple are $69,000 in the Atlanta MSA with a max home price of $250,000 and $59,500 in the rest of the state with a max home price of $200,000.

     The HomeStretch Down Payment Assistance Program is unique to Gwinnett County. It is $7,500 and is only repayable in the first five years; after five years, the loan is satisfied and doesn't have to be repaid.  It has a $40,150 income cap on a single person and $45,900 for a couple. Gwinnett County also offers a Neighborhood Stabilzation Program (NSP) that gives up to $22,500 towards the purchase of specially designated homes up to $200,000.  I have a list of county-specific down payment assistance programs on my website.

     HUD still has one of the most attractive 'down payment assistance' programs it reduces your required down payment on an FHA insured loan from 3.5% of the sales price to $100. You have to pay full price for the home, but HUD homes are usually 10-15% less and competing homes in the area in my experience. Your lender can use the HUD appraisal on file if it's less than 90 days old, saving you another $400. HUD also does a BASIC inspection and list of escrowed repairs so if cash is tight, you can skip a home inspection, and have some BASIC insight of the home's condition saving you another $250-$400.

      So on top of the sub 4% interest rates & record low home prices, you can still get down payment assistance.  The down payment was usually the main inhibitor (along with credit scores) delaying people from buying homes.  While putting down 20%  is more favorable in the long run, it can be a staggering number once you add it up on the home of your dreams but now, it doesn't have to be.