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1. Improve first impressions. Touch up the paint on the front door and other areas that buyers see first.
2. Clean up the landscaping. Trim the hedges and trees.  Plant some annuals in the flowerbeds. Add some color
3. Paint the interior. A coat of light yellow or cream with contrasting white woodwork looks fresh and clean.
4. Refurbish the floors. Buff the hardwoods. Install new carpets – or at least get them professionally cleaned.
5. Take care of the big problems. If the house needs a roof or the front stoop is crumbling, get them fixed.
6. Buy warranties. Putting appliances under warranty gives homebuyers a secure feeling. [Trish is not a big advocate of this theory.  before you spend the money, talk to Trish Denny]
7. Improve energy efficiency. New windows or improved insulation tells a potential buyer the seller is on top of things plus they come with tax benefits. [Before going to the expense of new windows, etc - try giving them a good, detailed cleaning - with one exception: if they are foggy due to broken seals - - absolutely have them replaced!!]  
8. Replace light fixtures. Updated fixtures, especially at the entrance way and in the foyer, create a good first impression.  [Again, an even cheaper fix - clean exisiting fixtures and make them sparkle.  Replace burned-out light bulbs and increase the voltage - bright lights make rooms 'pop'] 
9. Buy a stove. Home owners whose kitchen isn’t top of the line can jazz it up for a few hundred dollars by buying a new stove, which gives the room a fresh feel. [Clean off counter tops, clean the stove and oven - inside and out, same with the microwave & fridge] 
10. Tidy up the bathrooms. Get rid of mildew, replace caulking, and replace stained sinks.

Source: U.S. News & World Report, Luke Mullins (01/21/2010)

*As you can tell by some of the [blocked comments], Trish Denny believes there are even more inexpensive ways to really make a house 'pop' for showings.  If you are serious about getting your home sold, contact Trish and the Denny team - our methods work.

Article submitted by Patricia (Trish) Denny of The Denny Team Real Estate, based in Baltimore County, Maryland

Before you start shopping for your New Home, it is imperative that you speak to a mortgage lender.  With all of the changes that are taking place in this industry, home buyers (and the professionals they are working with) need to know if the buyer(s) qualify for a mortgage and, if so, how much.  Additionally, there are often guideline, requirements, etc which go along with the loan being recommended - it is important that the Realtor and Lender are working together and get these items addressed upfront, which for the buyer means in their offer and potential contract.

Gone are the days of meeting a Realtor and going out to 'look at a few homes' before meeting with a lender.  While irresponsibile, the reason this took place (back then) was because so many Realtors knew Lenders were often able to 'pull a rabbit out of their hat' and locate a loan product that would get the propsepctive buyer into that house that buyer had just fallen in love with - that "I've got to have it" house.

Now, some lising agents are requiring financial information be submitted BEFORE they will allow a home to be shown.  This means the Buyer's Agent has to fax/email a copy of a pre-qualification letter and/or verification of funds to the List Agent (or their showing service) before they can schedule an appointment for you (the buyer) to see the house. 

While some prospective buyers are annoyed by this practice, it is applauded by many professionals in the industry.  No longer are seller's or seller's agents opening up houses and having strangers walk through who have no right being there - it's an intrusion.  No longer are Realtors asked to get in their cars and drive to TIMBUKTU to show a house, have their prospect fall in love with it, get everyone - seller, agents, brokers, etc - excited that the house get 'sold', only to find out the prospective buyer has something on their credit report that prohibits them from getting a loan.  Professionals simply are not wasting time, energy and their hard earned money for people who do not take the process seriously, which includes showing a little respect to the professionals who are there to help them.

One of the biggest benefits to the Prospective Buyer - even if they never buy a home - is they have an opportunity to clean-up petty little items on their credit report which is currently dragging down their credit scores and driving up costs on goods and services they are already spending their money on, like car & life insurance.  The vast majority of Americans have errors on their credit reports and are not even aware - those errors cost the consumer money.

So, before you start shopping for your New Home, it is imperative that you speak to a mortgage lender.  With all of the changes that are taking place in this industry, home buyers (and the professionals they are working with) need to know if the buyer(s) qualify for a mortgage, if so, how much, How much money you need to buy, what potential costs you face, what kinds of loan programs are available to you, and list goes on.  Bottomline: What's on your credit report can cost you money.  By simply attaining the knowledge - knowing what's there and fixing mistakes and errors - you, the consumer, can save a ton of money.

We hope this information is helpful.  If you need help or have any questions related to this or any other housing matter, please call us at 443-226-8559.   

New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities (this article was provided by: Michael Sheffield, Mid-Atlantic Sales Manager, Security Atlantic Mortgage Co., Inc.)

WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.

The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement. U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.

“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”

Announced FHA Policy Changes:
A) Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

B) Update the combination of FICO scores and down payments for new borrowers.
New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.  This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.   This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
(NOTE:  Trish wanted to stress to all prospective buyers that as of January 2010 and the foreseeable future, she is not aware of ANY lender loaning money to any applicant with a credit score below 680 and notes that most lenders are looking for even higher credit scores.  So, despite this 'change' by FHA, it appears that it currently does not apply in our marketplace)

C) Reduce allowable seller concessions from 6% to 3%
The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

D) Increase enforcement on FHA lenders
Publicly report lender performance rankings to complement currently available Neighborhood Watch data - Will be available on the HUD website on February 1.
This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
This change is included in a Mortgagee Letter to be released January 21st, and is effective immediately.
Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
Legislative authority permitting HUD maximum flexibility to establish separate "areas" for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

 
In addition to the changes proposed, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.

New Federal Requirements: Impact on the Mortgage Transaction

Beginning January 2010, All Mortgage Lenders will implement the RESPA (Real Estate Settlement Procedures Act) Reform requirements for all new applications with an identified property. The new requirements intend to help borrowers avoid surprises at closing by placing tolerance levels on all charges for services associated with obtaining the mortgage.

While RESPA Reform has many process impacts for lenders, settlement agents and attorneys, the transaction experience should remain relatively unchanged for the consumer, REALTOR® and Builder. To help ensure a smooth experience for all parties involved, all professionals connected with the Real Estate Transactions should be receiving additional education and information making them aware of these changes and how they impact home financing transactions.

(NOTE:  Patricia (Trish) Denny and the Denny Team Have and continue to receive training and information as it becomes available.  Each Prospective Buyer is now asked to provide the name and contact information of the lender the Buyer has elected to use, as well as, a copy of their pre-qualification letter.  An electronic copy of the buyer's pre-qualification is preferred.)

Contributed by Kevin Sniffen, Esquire on 1/13/2010

ISSUES IN SHORT SALES—TAXES

As if life were not difficult enough when you are asked to handle a short sale, there is a hot new issue that will make some people scream. Our local governments have decided to collect recordation and transfer taxes on an unprecedented amount—the seller’s loan balance. Because this is by definition higher than the purchase price in a short sale, the amount collected will also be higher than anticipated by anyone, and frankly, mostly unknown by anyone until the lender discloses the amounts due.

When a buyer comes along and makes an offer on property, the first thing they know is how difficult it will be to work with the short selling lender and how long it will take. Once the offer is accepted and the closing is set, you should be finished, right? Not so any more.

The recordation and transfer taxes have been traditionally calculated based upon the contract price. This makes sense because that is how the statute describes the calculation. However, now the Clerk’s offices have been instructed to refuse deeds unless the taxes are calculated on the total amount of the Seller’s loans outstanding! So much for the “short” sale. After weeks of calculating exact amounts, after all parties have toiled through to get the deal to closing, now there is going to be more money due in order to get the deed on record. This could run hundreds or even thousands of dollars. What do you think the buyer, seller and short sale lender are going to say to that?

The rationale being used is that the total amount of the loan is something the seller is “getting”, so the tax should be based upon that amount. The statute does not say that, but even still, most short sale lenders are not letting the seller walk away from the obligation to pay. Therefore the seller is not “getting” anything.

The Maryland Association of Realtors is aware of this problem and is working closely with the Maryland State Bar Association and the Maryland Land Title Association to come to some resolution. In fact, just this week Montgomery County decided to suspend collection of taxes based on the seller’s loan balance until further review. In the meantime, I would strongly recommend that in any contract related to a short sale, you assure that your clients understand this issue, and perhaps even draft the contract to reflect who will be paying these additional sums. For our part, we will be calling the Clerk’s office on every one of our short sales to get a confirmation before we send out draft HUD-1’s!

Please call us if you have any questions about how to handle these new problems! - Kevin

Kevin E. Sniffen, Esq.

Covenant Title Corporation

1623 York Road, Suite 101

Lutherville, MD 21093

Office: 410-280-9700

Direct Line: 443-949-3746

Fax: 410-280-9796

Cell: 410-409-9979

Annapolis, Baltimore, Salisbury, and wherever you are!

We provide legal, closing and other services! Call us today for more information!

FICO stands for Fair Isaac Corporation, which developed a score-based rating system that many companies use to measure an individual's credit risk.  this measurement has become widely accepted although it is a faulty standard that is based on debt, not a true measurement of wealth.

35% of your score is based on Payment History

30% is your debt/credit level

15% is length of debt/credit

10% is types of credit/debt

10% is new debt/credit

It is all about how much you owe, your access to borrow (available balances), debt to available credit levels, and your payment history.  No where does this calculation take into consideration the value of your assets, savings, ability to pay or overall net worth.  Yet, our 'system' is designed to put a lot of emphasis on each individual's FICO score.

A more detailed explanation follows:

A colleague had a chance to spend some time and chat with a Fair Issac IT employee at a recent trade show, and of course he brought up the subject of the FICO scores and their secrecy.

The IT-guy did admit that the official scoring IS secret, but is not that complicated to figure out given "everything that is disclosed publicly". The way scores are calculated are due to "weighting" - so if someone has some math backround, this sounds familiar.

First of all he says, scores are only within a specific range (I think I read 350 to 850 or something like that...that is there is no 'zero' score nor is there a 999 score) the actual range is 100% so 850-350=500 represents 100% every percentage counts as 5 points in that category....). It is apparently therectically impossible to score the lowest or the highest (like reaching infinity).

Now the 500 points (or 100%) is distributed as follows:
You start at 350 points - everyone gets that
35% (or 175 points) is 'payment history'
30% (or 150 points) is 'amounts owed'
15% (or 75 points) is 'length of credit history'
10% (or 50 points) is 'new credit'
10% (or 50 points) is 'types of credit'
---------------------------------------
100% or 500 points

Each category is calculated in its own way due to the nature of what it contains, for instance 'new credit' simply reduces scoring the more numbers (ie: inquiries) are put in there whereas 'payment history is the most complex requiring calculating number of accounts, average days due, length of account, etc)

Certain categories start out in the middle and + or - depending (like payment history) and some start out at max and go down as the numbers increase.

For instance, in the 'new credit' (which is the simplest apparently), you start with 50 points and it goes down by 10 every time you have a new credit app within the past 6 months. That number changes to 5 as the 3 months moves to 6 months and goes down to zero after a year. For instance you applied for a card this month, you lose 10 points. Apply for another, bang, another 10 points. You are down 20 points. as you pass the 3 months mark without applying for any new credit, the 20 becomes 10 - therefore you simply "gain" 10 points as time goes on. At the 6 month mark, you gain another 5 (as long as no new credit is applied for) and then another 5 at the one year mark. Now it sounds like you are GAINING points - but actually you are only winning them BACK from being lost.

Types of credit category: you start with 0. Now this is a 'portfolio' category. The 50 points "basket" is evaluated on the type of credit you have. Installment loans, or credit margins give you the MAX - the are harder to get and have a fixed monthy payment. 'Good credit' users have a healthy mix - like 2 installment loans and 2 credit cards and no finance loans. You get points mainly for a healthy mix - not just a number of credit cards. The numbers are something like 20 for Installment, margins, and car loans and 10 for credit cards up to 4, then you lose points (on CC's only). You lose points by having finance company loans (since their interest rates are highers and they are lenders of last resort and frequntly loans are 'secured' by home equity or a co-signer). The stronger your basket is, the higher your number goes - up to a max of 50 points of course.

Amounts owed category is "weighted". Basically it is credit used divided by credit available. The used divided by available factor is inversely scored. Mortgages do not count here. For instance, Having $20000 of credit and carrying all $20000 will give you very low points - maybe 10 points only out of 150 possible. But carrying a balance of 0 on $20000 available will score you close to 150 points! That means that although you have high credit limits, you don;t need or use that credit - a good risk and indication of good money management. Maxing out all credit limits (ie $20,000 owing on $20,000) will give you very few points - not 0 but something like 10.
However the higher the AVAILABLE credit number will give you more points. In other words 0/$500 does not carry the same as 0/$8000. And I was told that THIS category has the most significant impact. Keeping your balances low or nil will yield you close to 150 points reagrdless of any time element involved. Fin out when credit cards post their oustanding balances (usually it is your statement date but may be different) and make sure you can get your balanace paid off by that date - and then watch your score shoot up.

Length of credit history (75 points) is some convaluded formula that adds more points the longer you have credit history reporting for you. Basically it is 0 points when you start and maxes out at 75 if you have something like 40 years - which for most is around 58 years old !!! The MORE older accounts you have the better, and accelerates the score. Apparently they use points for months time accounts (ie 2 accounts x 200 months plus 2 accounts x 10 months plus 1 account x 5 months would give 425 month-accounts over a number like 800 = 54% and therefore give you 40 points out of 75 which is the percentage.

Payment History is a whopping 175 points and is the most complex. Late payments are killers here apperently. One late payment on an installment loan can wipe away 5 years of good payments. 60 days and 90 days erode your score in this category faster than water on your sandcastles. Collections are like grenades. And there is no easy fix except time and consistent good payments. The max is around 175 if all your accounts in the past 6-7 years are paid on time. ALL of them. Late payments are weighted (mean more) if they are more recent....and tend to be less destructive as they appear in the past. They "weight" these by looking at each account, seeing the reporting per month and seeing if each month was on time, 30 days late, 60, etc. They are not kidding when they say "pay your accounts on time". At least the minimums. Paying more than minimum does not count here (THAT will come up in the extended credit section if your balances are too high). They only want to see your payment history. Apparently there is no leeway or tolerance in this section. This tells them (creditors) how serious you are in paying your bills.

So out of the 5 sections, each one calculated on their own merits, they add up the results and come up ith your credit score. 350 + (165 + 110 + 67 + 40 + 40) = 772

So I did not walk away with the formula for Coke ...but I did get a general idea about how it all works.

Dave Ramsey, author of "Financial Peace University - Beat Debt & Build Wealth" has the following to say on the subject:

I (Dave Ramsey)  have had a real estate license for 30 years. Were I to put my personal residence on the market today, I would use an active realtor who knows his or her stuff in the marketplace, and I would gladly pay them commission. Now why would I do that if I could just sell it myself and save the commission?

If I sell it myself, I am exposed only to the buyers that I can attract from my newspaper ad, maybe a Craigslist ad, and those that drive by the front of my house. If you list with a high-quality realtor, you get the advantage of being exposed to their entire pool of buyers.

But most importantly, they will list it in the Multiple Listing Service, through which all things real estate go. An FSBO listing won’t be there. If you use a realtor and have a thousand potential buyers, and you only get three potential buyers from an FSBO, who has a better chance of selling the house? Who has a better chance of getting the best price? Market exposure is everything.

Add to that the fact that you’ll probably do three of these transactions in your life, and a good realtor did three last week. You will make several mistakes, but a pro will walk you through it. You have to get a good realtor, though. The rule is that 20% of the people sell 80% of the houses. Research has shown that, between mistakes, lack of negotiating skills, pricing errors and general exposure on the market, you’ll cost yourself more than the realtor commission.

One more thing: If you are selling a house by way of FSBO, I think I can get that house cheaper, because I don’t have to pay a realtor fee. But you think you can sell it for more because of that same reason, and we can’t save the same realtor fee. You’ll come out slightly better and with a lot less hassle if you use a top-shelf realtor.