BECAUSE IT’S UGLY, AND 3 OTHER BIG REASONS YOUR HOME ISN’T SELLING

image.jpg

Ever wonder why some homes sell and others don’t? There is no magical fairy dust that can turn a loser of a house into a palace. And, in fact, if there were such a think as magical fairy dust, sprinkling it in your home would make a big mess, and that’s a big no-no if you want to sell.

Getting your home sold is not all that hard if you stick to the basics. But if you’ve got some of the problems below, you may just be sitting on that unsellable home for a while.

Problem No. 1: Because your home is ugly

Yes, your home is ugly. If your Realtor didn’t tell you that, let us go ahead and say what he should have. And just so we’re clear, “ugly” can also stand in for:

Cluttered
Outdated
Dirty
Messy
Tacky

Very few people – investors looking for a deal aside – can walk into an untidy mess of a house and see the potential. If you’re not willing to clean it up, clean it out, and maybe make a few overdue updates, you may not get it sold. That goes double for over-personalization that is so in your face buyers can’t see past it.

“Everybody’s taste is different, so less is more when it comes to decor at sale time. Loud patterns and bold colors can be big distractions,” said MSN.

Solution:

You need to de-ugly-fy that house but quick. Pretty places around you are selling. If you have similar plans, similar features, similar lots and they’re selling while you’re sitting, it’s not hard to figure out why.

Take a good long look. If you don’t see anything wrong, bring in a few friends for their opinions. But only the ones who might actually tell you the truth.

Dirty Kitchen

Problem No. 2. Because your price is unrealistic

This is the No. 1 most common problem with homes that are not selling, says MSN. “If you’re guilty of having “a ‘what the heck are they thinking?’ price tag,” they say, you can expect to sit on the market for a while.

“Price is usually the overriding factor in any home that doesn’t sell. Whatever its problem, it can usually be rectified by adjusting the price.”

Adds U.S. News: “Without question, the No. 1 reason a home doesn’t sell is price. Sellers have an emotional attachment to their homes and tend not to be objective about the true value.”

Solution:

If it is an emotional attachment that’s getting in the way, take the emotion out of the equation and think of it simply as a business transaction. Many times the issue is a seller owes more than the home is worth or simply wants a higher price. But it’s the market that sets the price. And if it’s telling you your price is too high, it’s probably best to listen.

When all else fails, listen to your agent, who should have provided you with comparables that spell out recent sales and market trends. (Also See: It’s The Price That Sells a Home)

Problem No. 3: Because it’s a ‘project’ house

Maybe you’ve made the decision to sell and you just don’t want to put any money into a house that’s no longer going to be yours. But a house that looks like it’s going to take too much work – or too much money – to fix up is a turnoff.

“If a home looks as if it’s going to cost half as much to repair or renovate as it does to purchase, it’s going to take a long time to move,” said MSN. “Today’s buyer is a lot more reluctant to take on a ‘project,’ especially if there are houses around it that don’t need as much work. Ditto for homes that have strong pet or mold smells.”

The Solution:

“Fix it, or prepare to lop a large amount off the price,” said MSN.

Problem No. 4: Because you’re not cooperating

This is also the No. 1 reason houses end up overpriced. Uncooperative sellers also tend to ignore other advice from their agent, about keeping the home tidy (see No. 1), being available when needed, being open to price reductions, being able to make the house available for open houses, and agreeing to terms when there is a contract discussion.

“No offense, but maybe you aren’t showing your house off enough? If you aren’t using a real estate agent and work away from your home, your time might be limited, of course. But you should try to make your house as accessible and available as possible for a Realtor and a potential homebuyer to easily drop by and take a tour (which means having the place clean, too),” said U.S. News. “Having your home be shown only by appointment or only at designated times will severely cut down on the number of showings you get, and if the house isn’t getting shown, it isn’t going to get sold.”

The Solution:

Get in or get out. Or get in to get out. You have to commit yourself to a process that, quite frankly, can be inconvenient and a hassle in order to get your home sold, especially in more competitive markets. Being agreeable and available, however painful, for this finite amount of time, will pay off in the end.

Written by Jaymi Naciri

Advertisements

Homestaging Expert Has Tips to Make Your Home a “Star”

img_127621_4_hd

Even the stars are having trouble selling their homes.

Newly divorced Britney Spears recently unloaded her seven-bedroom house in Malibu for $12 million — $1.5 million less than the asking price — after nine months on the market.

On July 30, Paris Hilton put her Spanish-style house in Hollywood Hills, built in 1926, for $4.25 million. She paid close to $3 million for the house in November 2004. Will she get her asking price?

If celebrities can’t seem to get what they want for their houses, how are the rest of the country’s home sellers supposed to cope?

One solution: Home-staging. Beth Ann Shepherd is president of the luxury Los Angeles home staging company Dressed to Close , and bills herself as “home stager to the stars.” She lists among her clients the Black Eyed Peas’ Fergie, and actors Josh Duhamel, Greg Kinnear, Christina Ricci and Eva Longoria.

While she does focus on the rich and famous, Shepherd insists that her techniques can be tailored to everyone’s pocketbook.

First, “glamorize your curb appeal.” Whether it is all new sod, fresh landscaping, new exterior design, landscaping lights, or something as simple as an updated, modern front door and handle, “curb appeal is paramount to getting buyers through the front door.”

Make a memorable entrance. The minute a potential buyer walks in the door, he or she should think “looks good, sounds good, and smells good.” Put an oversized mirror in your entry (“people love to look at themselves”) or a dramatic piece of artwork. Fresh flowers and scented candles go a long way for this first impression, Shepherd says.

Next, refresh old or worn attributes of the home. If you have hardwood floors, have them sanded and re-stained in a darker color, since “dark wood floors are more popular than ever and quickly add drama to a home,” according to Shepherd.

If you have carpet, have it steam cleaned or replaced with a light taupe berber — appealing to most people and makes the room actually appear larger, she said. If you have stone floors, have them pressure cleaned.

Make your furniture unobtrusive. “Open your mind to new furniture layouts,” she said. “Remember, the fireplace does not always have to be the focus of your seating area. A lanai, beachfront or pool area may be more pleasing to the eye.”

Modernize your kitchen with stainless-steel appliances. Stainless steel appliances immediately add perceived value. If you have the room, add a glass-front wine cooler.

Get the five-star hotel look in your bathroom. “Everyone loves to go on vacation; therefore, bring the same thick, white, luxury hotel towels into your home bathrooms,” she said. Always have the thickest towels on your racks and have two hand towels carefully placed next to each sink. A wood tray with infused scented reeds or scented candles, beautiful bathroom cotton-ball, as well as a Q-Tip holder (with cotton and Q-Tips) are “delightful in projecting the five-star hotel look.”

Professionally built-out closets add value to your home. Have closets only one-half filled to capacity. Have all your shoes on racks and nothing on the floor. If your closets are scraped up or dingy, paint them white. Put cedar blocks for scent and always, always have matching wood hangars for every item of clothing.

Look at your master bedroom as if it were a luxury-hotel suite, she said. You only need a few items to impress. Thick white sheets and pillows. Thick white duvet and duvet cover. A nice tray with a couple reading books. Scented reed diffusers (or scented candles). One plant to reach the ceiling (adds perceived height to any room) and, if room, a nice chair with reading light in the corner or a sofa seating area.

Make sure your house “sounds good.” Hook your iPod up to inexpensive wireless speakers casually placed throughout the house and have “Frank Sinatra’s Greatest Hits” playing during open house and viewings. “I strongly recommend you invest in at least one plasma television,” she said. “If possible, one for the main TV-watching area and one for the master bedroom. You will get your money back in the sale of the home.”

Add perceived square footage by dramatizing outdoor areas. If you have a small patio, put an oversized leaning mirror on the back wall to double the size and place a café table with two chairs, two placemats and colorful napkins with interesting napkin holders. If possible, hang a candle-light chandelier or an outdoor light above the table. If you have a larger area, create an outdoor living room with eating area. Outdoor living rooms are impressive to buyers and add to the perceived value. Purchase extra-long white sheer mesh draperies and install rods around your trellises or outdoor area for that billowy drapery feeling found only in exclusive resort hotels throughout the world.

“This is a dynamic, fast way to provide the major, “Wow!” needed to sell your home higher and faster,” Shepherd said.

Written by Al Heavens

Steer Clear Of Common Real Estate Blunders

legal-mistakes

Real estate investment is a growing attraction for many, especially when the stock market doesn’t perform well. Everyone from first-time home buyers to seasoned investors are entertaining the idea of finding the perfect real estate deal. But developing long-term wealth in real estate requires an understanding of some basic blunders that could help avoid costly mistakes.

Here’s a look at some common errors to help you avoid a real estate transaction disaster. Together, Lisa Vander, CEO of Pacific Blue Investments and I share some of the top mistakes that investors and would-be investors often make.

  1. Leaping into real estate without a plan and vision.

    That’s like starting a business without knowing what product or services you’re going to sell; it’s unlikely you’ll get very far with that approach. Or it’s like going on a road trip without the map, “[People] end up with a [real estate] portfolio without any idea of what they’re really up to, or what their targeted goal is, or how long they want to own that property, or what types of different properties they want, or what rate of return they want from the equities they’re building,” says Vander.

  2. Thinking that you do not have enough money to invest.Even though interest rates are starting to creep up, there are still many good loans available where you don’t have to put 20-30 percent down. But remember, if you’re putting less down, your monthly mortgage will be higher, and if you’re purchasing an investment property, keep in mind that you must be prepared to sustain a negative cash flow for a period of time.

    “If you absolutely have no cash, you can certainly get no-money-down deals. You’re just going to pay for it. You’re going to pay a higher point. You’re going to pay a higher interest rate. But if it’s still a good deal you can go with no money down. It just means it’s more expensive to get started in the game,” explains Vander.

  3. Flipping property too quickly.When appreciation is high as it has been in some markets such as California, often people tend to want to buy real estate and sell it quickly to turn a profit. But the real benefit is in the long run.

    “[Investors] will actually hold on to [real estate], keep all of the gain through all of the cycles that [they] go through. Then, at the end of their plan, all of a sudden they’re sitting with a lot of gain, not only [from] tax benefits, but also the equity from appreciation,” said Vander. She adds, over time the loan will be paid down and typically rent will have increased.

  4. Focusing only on active income.Most of us never forget to think about our active income, the income from our 9-5 job, but we often fail to pay attention to our passive income streams, such as money that can be generated monthly from rentals.

    Investor, Margaret Bhola, used to wonder, “What’s going to happen to [my husband and me] when we’re no longer working traditional type jobs?”

    Bhola says she took Vander’s course and began to see how to build family wealth and passive income that would provide security for her future. Through investing in real estate she and her family are creating a brighter financial picture.

  5. Not building a real estate team.Surrounding yourself with the best experts from the real estate agent to the financial planner will help you achieve your desired outcome faster and with fewer headaches than if you go at it alone.
  6. Spending your return on your investment.Take your hand out of the cookie jar. If you have a positive cash flow on a property, evaluate where the money should go; you might consider taking some equity and combining the positive cash flow to reinvest in another rental.
  7. Expecting a positive cash flow from all real estate.When you calculate cash flow, appreciation, loan reduction and tax benefits, (including interest write-off and depreciation) having a negative cash flow is not necessarily a bad thing. Vander points out that, “Usually a negative cash flow on a property won’t be for a long period of time.”

    Vander compares it to the concept of making a contribution to a 401k, “Every single month you make a contribution to your retirement plan. Why do people consider a contribution to real estate anything different, if you know what your rate of return is for the money that you’re putting into it?”

  8. Not diversifying your portfolio.A real estate portfolio should be diversified much like a stock portfolio. “You might have a couple of condos, a couple of apartment buildings, you might have a couple of single-family residences, you might decide you want to buy some raw land,” says Vander.

    If one market isn’t performing as well, you can still rely on the other real estate investments.

  9. Not understanding real estate tax benefits.Owning real estate has powerful tax benefits. Strategically using them to your advantage is key to developing long-term wealth. “Most people don’t understand that there is tremendous power and long-term benefit through the use of depreciation and the interest write-off on the loan. And it’s the misunderstanding of the depreciation that is very common among beginning investors,” says Vander.
  10. Not sticking to your desired outcome.Whether it’s your first home or your fifth investment property that you’re wanting to buy, staying committed to the end result will get you there. You have to keep the vision and the plan firmly planted in your head. Writing down and sharing your goals and fulfillment dates with others will help make you accountable and keep you on track.

Written by Phoebe Chongchua

 

Can’t Afford It? Let Your Parents Help

parents-help-header.jpg

Question: My parents are retired. They have some money in their IRA account and have offered to help me purchase a condominium unit. The price is approximately $300,000. I am a first-time home buyer and would like to know how this works? I have a decent income but just cannot afford the price. I am concerned that if I wait too long, the price will even be higher.

Answer: There are several ways that your parents can assist you. However, before you all start down this path, make sure they consult their own financial advisors and their own attorney. They want to be assured that there will be no adverse impact on their tax situation or on their estate plan. They also must be satisfied that they will have enough money each month for themselves, should they decide to financially assist you. Also, your parents should confirm that they have the right to use their IRA funds to assist you with your real estate purchase. Some pension plans have restrictions on the use of pension funds.

Also, if you have brothers or sisters, discuss any plan with them before it is implemented. You do not want to create a sibling rivalry situation. Put yourself in the shoes of your sibling; how would you react if your parents assisted your brother or sister?

Once these formalities have been resolved, here are some suggestions. I will assume that your parents currently have $300,000 in disposable liquid assets:

Direct Loan: Your purchase price is $300,000. Your parents can lend you the entire purchase price, and you will take title to your condominium in your name only. You will sign a promissory note, agreeing to repay this money over an agreed upon period of time. To secure payment of this note (and to allow you to deduct the mortgage interest for tax purposes) you must also have a deed of trust (the mortgage document) recorded against your property in favor of your parents.

The terms of the note and deed of trust could parallel what you can get from a commercial lender. For example, you can agree to repay the loan from your parents in equal monthly installments, based on a fixed rate of 6 percent per annum, amortized over 30 years. This would give your parents a monthly income of $1798.68 — although the interest portion they receive is taxable income to them. The IRS allows family members to offer a lower interest rate than would be available commercially, but you must confirm this rate with your tax advisors.

Under this approach, you get a mortgage without the hassles — or the expenses — of a commercial lender and your parents will get a decent rate of return on their investment. If they want, your parents can gift you up to $11,000 per parent on a yearly basis; in other words, this year your parents can forgive $22,000 of the loan balance, and continue the process on a yearly basis.

Partial Loan: In the example above, your parents will lend you the entire sales proceeds. However, should they not want to provide the full $300,000, they can lend you a portion of the purchase price and the balance you will get from a commercial lender. For example, instead of borrowing $240,000 (i.e. 80 percent of the purchase price) from a commercial lender, you obtain a loan from the lender in the amount of $150,000. The difference of $150,000, would be lent by your parents, under the same terms and conditions as described above.

Here, however, there is a potential risk for your parents. Their loan would be secured as a second deed of trust. Should you go into default on the first mortgage, there is the possibility that your parents could lose their investment if the property is foreclosed upon by the first lender. Typically, a foreclosure by a first trust lender wipes out any subordinate mortgage liens.

Shared Ownership: Instead of lending you the money, your parents can purchase the property with you. They can still put up all or part of the purchase price, and title will be in all three names. There are numerous ways that title can be held. Generally speaking, title can be held 90 percent in your name and 10 percent in your parents name (or vice versa); title can be held 50-50, as joint tenants with right of survivors. Or — if your parents want their portion of the condominium to go into their estate on their death (rather than to you) — title can be held as tenants in common. This is complex and your financial advisors and attorneys will have to assist you on this matter.

There are tax benefits available to both you and your parents under a shared ownership arrangement. It is important to remember, however, that you must enter into a written agreement with your parents spelling out ownership rights and responsibilities. This agreement should be completed before you go to settlement.

Your Parents Make The Purchase: Another possible scenario is for your parents to purchase the property in their name and lease it to you. You would, of course, not get any tax benefits under this approach. Your parents could, on a yearly basis, gift you up to $11,000 for each parent, and this gift could be a percent of the title ownership. For example, a $22,000 gift the first year would equate to approximately 7.3 percent of the purchase price ($22,000 divided by $300,000). Your parents could give you a deed to this percent of the property this year, and a similar percentage on a yearly basis until you will own the entire property.

Until you own the condominium in your own name, you will have to pay rent (based on the percentage of the property owned by your parents, and your parents would get the benefits of most of the tax deductions.

There are numerous creative ways in which your parents can assist you. Sit down with them and discuss all options, and — even though they are your parents — prepare and sign a written agreement memorializing the terms you have agreed upon. This documentation may be beneficial to you in future years.

Written by Benny L. Kass

Home Inspections In Hot Markets

hot-market.jpg

Don’t let the stiff competition in hot seller’s markets this spring persuade you to forego a home inspection on a home you want to buy.

As with any spring crop of seller’s markets, this year’s comes with perennial “as-is” listings and others that prompt the buyer to make an offer without the contingency of a home inspection.

Don’t do it.

“How do you know what the ‘as-is’ is if you don’t have the home inspected?” asked Dane Hahn, broker owner of Exit 11 Real Estate in Stratham NH.

With the buyer tagging along, a licensed and/or trade group-certified home inspector gives a property the once over, inspecting systems, structures and components — that are visually accessible — to identify material defects, conditions that may significantly affect the value, desirability, habitability or safety of the home.

A narrative report — rather than or in addition to a checklist — describes the inspector’s findings and not only points out defects, but gives the potential buyer the opportunity to more intimately know the home, learn how to operate systems and schedule future maintenance. Inspection finds can also become negotiating tools.

“The real reason to get an inspection is that the average citizen is not an expert. From a cosmetic standpoint he or she may be satisfied with the carpet, but what about the wiring? Does the furnace need to be replaced? These are not things the average buyer would have any sense of. The discovery is what you are paying for,” said Hahn.

There are also some liability issues.

Wise sellers obtain home inspections to provide evidence about what they know about the condition of their home. Not disclosing known conditions that can affect the value of salability of a home can be grounds for legal action in many states.

“One would hope that credible agents will represent sellers and tell them that it’s a good idea for sellers to provide home inspections,” said “dirt lawyer” David Hofmann, counsel with Hoge, Fenton, Jones and Appel in San Jose, CA.

“The seller’s risk is if the buyer discovers something later, they may say the seller knew or should have known and can go after a suit for seller disclosures,” Hofmann added.

Hofmann says that doesn’t preclude the buyer from obtaining his or her own general home inspection, as well as additional inspections. Termite and roof inspections are often mandated by law. Inspections by structural engineers to determine a home’s seismic and wind storm resistance may also be necessary in areas where those conditions exist.

“I think buyers should get as many inspections as they possibly can. That leads them to being fully aware of conditions. People so concerned about getting a property tend to over look things in their anxiety over getting a home, but then they close and face the reality of complications in the property. An offer to buy ‘as-is,’ with no inspection, no contingencies and to close as soon as possible is very risky business for agents and buyers,” said Hofmann.

Some argue real estate agents who suggest buyers forego home inspections are not living up to their fiduciary responsibilities to best represent the buyer.

“Any Realtor who doesn’t recommend the buyer get a home inspection will be taking on liability he or she doesn’t want. If you bought a house and, a year after you bought it, find $10,000 worth of repairs, you’d be hearing that echo of the Realtor saying ‘If you really want this house you don’t want to get an inspector,'” said Hahn.

Perhaps the only time a buyer may forego initiating a home inspection is when he or she accepts the seller’s home inspection, but then only within certain guidelines, advises Jerry McCarthy of San Mateo, CA-based Building Systems Inspection and Analysis.

McCarthy, spokesman for the California Real Estate Inspection Association, says buyers can sometimes pay a reduced fee to have the seller’s inspector virtually retrace his steps by going over everything in the original report.

“Have a meeting with the inspector and go over the report. Pay a reduced fee, the inspector will give you a report in your name, you have someone you have met. This works very effectively. If it’s an older house, tell the seller you want the guy to come back out and go over the report and have a personal tour” with the inspector said McCarthy.

He added, “But there are two schools of thought. Get my own report and pay the full price and I have two reports. That way I have a better shot at feeling I know the home,” McCarthy said.

Written by Broderick Perkins

Be On The Lookout For Water Problems During Home Inspection

house-flood

A home inspection involves hiring a professional home inspector to examine the house’s major systems — including heating and central air conditioning, interior plumbing, electrical systems, the roof, attic, visible insulation, walls, ceilings, floors, windows, foundations, and basements — to let you know if there are any problems or defects.

Water, even a constant drip gone unnoticed, can cause thousands of dollars worth of damage behind walls, on structural beams, and in the foundation.

“Sometimes, particularly with first-time homebuyers, the more obvious cosmetic home concerns, such as landscaping, painting and flooring overshadow the more critical issues, such as water damage, which can have serious consequences and cost quite a bit to correct or repair,” said Kathleen Kuhn, CEO and president of HouseMaster, a home inspection company with more than 380 offices throughout the United States and Canada. The company has performed more than 1 million home inspections since 1979.

HouseMaster’s Resale Home Deficiencies Survey found structural damage, plumbing systems and water seepage are three of the most commonly found defects in older homes for sale.

Some of the water problems you and your inspector should keep an eye out for during the inspection include:

  • Water seepage and wet basements. If you have small cracks in the foundation and porous walls, heavy rains can potentially build up against the foundation and ultimately leak into your basement and could eventually cause serious and costly structural concerns. How do you alleviate the problem? Make sure those foundation cracks are sealed. Also, surface water run-off should drain away from the house. Direct gutter downspouts away from the foundation.
  • Roof leaks. The biggest problem area is the flashing, the areas where the roof plane changes, like at a chimney or plumbing vent. Regularly check your flashings. Check the interior of your roof at least once a season. If you have constant leaks in the attic, damage or mold growth in the insulation can occur.
  • Poor water pressure. This can be a sign of water service supply deficiencies or costly piping upgrades. First you should determine if the problem might be caused by blocked faucet aerators, partially closed or defective faucets. If you have old galvanized piping in your house, the issue might be interior corrosion or deposit build-up. The best thing you can do is replace the blocked sections of pipe. And perhaps the biggest water issue these days is mold, which can cause panic in homeowners and is prompting the number of insurance claims and amount of jury awards that are on the rise.”Mold has been around for years and is commonly found in homes,” said Mike Casey, president of the American Society of Home Inspectors, the largest professional society for home inspectors in North America. “But while often harmless, too much of certain kinds of mold in a home can be dangerous. Mold always indicates excessive moisture and the source should be corrected immediately.”

Once you have found the house of your dreams, the ASHI says the following steps should be taken to prevent mold growth:

  • Wash mold off hard surfaces and then dry them completely. Absorbent materials, such as ceiling tiles and carpet, may have to be replaced.
  • Keep drip pans in your air conditioner, refrigerator and dehumidifier clean and dry.
  • Use exhaust fans or open windows in kitchens and bathrooms when showering, cooking or using the dishwasher.
  • Place vents for clothes dryers and bathroom exhaust fans outside the home.
  • Remove and replace flooded carpets and drywall.
  • Maintain low indoor humidity, ideally between 30-50 percent relative humidity. Humidity levels can be measured by hygrometers, which can often be found at local hardware stores.
  • Clean bathrooms with mold-killing products.
  • When painting the home, add mold inhibitors to paint.
  • Do not carpet bathrooms.
  • If the problem persists, or if anyone in the house is susceptible to mold and mildew, have the problem evaluated by an expert in mold/moisture intrusion.

Written by Michele Dawson

Is It Time To Buy Less?

bfl-weblogo

It has been a most-interesting few weeks in one of the nation’s hottest real estate markets, the area just outside my front door.

As someone now in the process of selling, I am elated by current market conditions: As long as the check clears I heartily approve of interest-only loans; I believe the availability of 100-percent financing is a Constitutional right and if lenders are content with drive-by appraisals it’s okay by me — even if the investment property I’m selling is barely visible from the road.

But I’m not a seller every day. When the property settles I will be a buyer and my view will quickly change. And regardless of which side of the transaction one is on, financial sanity on a national level is important to us all.

All of which brings us to Alan Greenspan, the chairman of the Federal Reserve. Despite all the yammering and mooing about a national real estate bubble, Greenspan has finally explained what readers of this column have long heard: There is no national real estate market. There are many local markets. A nationwide drop in average prices would have a modest economic impact in most areas and no impact at all for many owners.

“Although a ‘bubble’ in home prices for the nation as a whole does not appear likely,” says the Fed chairman, “there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.”

“The housing market in the United States is quite heterogeneous, and it does not have the capacity to move excesses easily from one area to another. Instead, we have a collection of only loosely connected local markets. Thus, while investors can arbitrage the price of a commodity such as aluminum between Portland, Maine, and Portland, Oregon, they cannot do that with home prices because they cannot move the houses. As a consequence, unlike the behavior of commodity prices, which varies little from place to place, the behavior of home prices varies widely across the nation.”

In other words, as has been said here repeatedly, real estate is a localized commodity. Looking at national trends does not tell us what’s happening down the street or across town.

One of the realities which dampens real estate speculation is that homes actually have a “use” value, it’s a place to live in or rent. If you own a house and local price trends moderate or even fall, it’s not great news but the practical impact may be zero, especially if you have a fixed-rate loan and no urge to sell.

So why do we talk about the national real estate market? Because it’s an easy benchmark to watch. What we really need to talk about are sales in the neighborhood and sales in a ZIP code as we see with the Market Reports posted online by local brokers.

“Speculation in homes is largely local,” says Greenspan, “especially for owner-occupied residences. For homeowners to realize accumulated capital gains on a residence — a precondition of a speculative market — they must move.”

There is a different market for mortgage financing, however. That market is nationwide and growing numbers of high-risk loans should make us all nervous.

It is here that my thoughts as a seller differ from my thoughts as a citizen. Yes, I am elated to sell property to anyone with a check of the proper size, but I wonder why lenders make such risky loans and whether the economy is well-served by such financing.

“The dramatic increase in the prevalence of interest-only loans, as well as the introduction of other relatively exotic forms of adjustable-rate mortgages, are developments of particular concern,” according to Greenspan. “To be sure, these financing vehicles have their appropriate uses. But to the extent that some households may be employing these instruments to purchase a home that would otherwise be unaffordable, their use is beginning to add to the pressures in the marketplace.”

Lastly, in an oblique way, Greenspan touched on the matter of real estate commissions.

It is routinely said that real estate commissions should fall because commissions have dropped for stock brokers, travel agents and such. However, the electrons required to sell 100 shares at $2 each are no different than the impulses needed to sell 100,000 shares at $20 each — in both cases we merely have a few electronic blips moving from here to there.

But homes are not interchangeable — economic theory holds that real estate is a “nonhomogeneic” commodity — a fancy word meaning all properties are unique.

Greenspan says that “because of the degree of customization of homes, it is difficult to achieve significant productivity gains in residential building despite the ongoing technological advances in other areas of our economy. As a result, productivity gains in residential construction have lagged behind the average productivity increases in the United States for many decades. This shortfall has been one of the reasons that house prices have consistently outpaced the general price level for many decades.”

Uniqueness, of course, is why no one buys a home over the phone, sight unseen. It’s also the reason local brokers who physically exist in your ZIP code consistently have value while brokers far away in some distant galaxy are irrelevant.

Greenspan says, “Although we certainly cannot rule out home price declines, especially in some local markets, these declines, were they to occur, likely would not have substantial macroeconomic implications.”

If Greenspan’s comments had subtitles, they would say In English that even if home prices fall, they won’t fall everywhere and the overall impact is likely to be minimal on a national scale.

That said, do your part. If it requires interest-only financing, a stated-income loan or a 100-percent mortgage to buy property, if you can’t finance the home of your dreams with a fixed-rate loan, look toward the future: Buy small, buy less, save more and stop racking up credit card debt. You’ll be grateful if and when interest rates rise and home sales moderate on your street.

Written by Peter G. Miller