Talkin Waukesha Real Estate Weblog

The Greater Milwaukee Realtor’s Association sent out a notice to Realtors advising them to be cautious when hosting open houses because police have recently received reports about people targeting open houses in an effort to steal from the Realtor and/or the homeowner. Once again, I’m reminded that times have changed in the real estate industry.
Back in the ‘day’, a Realtor would enter their listings into the Multiple Listing Service (MLS). The MLS was a sacred collection of homes for sale that could only be accessed by Realtors. In order for the public to have access to detailed information about a home, they HAD to work with a Realtor. One of the only options for the curious, was to wait for the listing Realtor to have an open house. Then the neighbors, the curious, the drive-bys and an occasional legitimate buyer would be able to look at the house anonymously. Open Houses have always been just another marketing tool. At the height of the market, national statistics indicate approximately 2-3% of listings sold because the buyer found it at an Open House.
Things have changed a bit (actually a LOT). Now all the sacred MLS information is available to the public online. In addition, the data available is exponentially more detailed. There used to be a single photo posted. Now we have multiple photos and even virtual tours of properties. A ‘legitimate’ buyer often weeds out properties sitting in the comfort of their livingroom, rather than driving around to open houses on a Sunday.
Another thing that has changed is the public notice of Open Houses. Before the advent of the internet, the main option a Realtor had was to put an ad in the Sunday paper. The price was ridiculous – $90.00 to say “Open Sunday 1-3 Cute Bungalow, 3br, 2ba, hwf $129,900 Realtor 262-555-1212”. Makes you want to buy doesn’t it?? Not much wonder in why that vehicle became a victim of technological advancement. Circling the Opens in the Sunday morning paper and then hitting the road just doesn’t happen anymore. A void has been created by the lack of a central source of Open House listings. A few have tried to establish an online source of Open Houses but none have surfaced as “the” resource yet.
So first, the motivation of serious buyers to drive around ‘looking’ has been diminished. Secondly, driving traffic TO an open house has become more difficult and limited. Thirdly, there are time and safety considerations. More and more brokers are reconsidering the effectiveness of holding Open Houses and as a result Less and less brokers are doing them. So now, even for those professional ‘lookers’ there are slimmer pickins on a Sunday afternoon. Less Open Houses + Less Serious Buyers out trolling = lower percentage of success in actually making a sale from an Open House. It’s always been a “shotgun” approach to marketing, but one that is making even less sense in this new real estate market.

When you eat, sleep and breathe something that has gone toxic, sometimes you just have to take a break and take a long nap. People often ask me “how’s the real estate market?” My pat answer is “do you read the paper or watch the news???!” Perhaps Polyanna would have a different answer. Sometimes I just don’t know what to say.

I finally decided I’d scout for a dose of sunshine – afterall, the government is offering either $6500 or $8000 to anyone who wants to buy a home. Interest rates remain at an all time low. Yes, the lending market has tightened a little (like a noose!), but if you have a few dollars as a downpayment, decent credit and a job….. wait a minute… you need a JOB. ‘Nough said.

The “Realtor Newswire” must have some good news – it’s their job to prop up Realtors and keep us informed. Here’s what they had to say about the national market last week:
- Residential construction has declined 21 of the last 25 months and is down 9.3 percent from last year. It is at the lowest level in 50 years according to Warren Buffett.
- Short Sales now account for 15.9% of all sales, up from 10% in 2009.
- A survey shows that 29% of homeowners would love to move but are unable to sell their current home. (Now THERE is some pent up demand that will probably implode if other factors don’t change).
- This is the worst housing decline since the Great Depression that has left 1 in 5 mortgage holders owing more than their houses are worth.
- Distressed home sales accounted for 38% of the sales last month.
- Pending home sales are down (but that’s because they had a lot of snow out East or something like that).
- Fannie Mae needs another $15.3 BILLION from the federal government to stabilize its finances. This stems from a continuing stream of bad loans with 5.38% of their loans 90-days+ delinquent. (FYI, that’s – $15,300,000,000.00).
- Barclays Capital cautions there’s still a bit more of a drop, another 4 to 5 percent before officially hitting bottom and little chance of sustained gains any time soon. They expect home prices to remain disproportionately low without any form of notable rebound for years to come.

…..COME ON….. There MUST be a gem in this update! Oh, here we are: – The FDIC (who we all know has LOTS of money) is experimenting with a plan to help homeowners who are underwater by reducing their principal as long as they remain current. This program would be limited in scope for an as-yet-to-be-determined period of time for an as-yet-to-be-determined group of homeowners and will be administered by an as-yet-to-be-determined organization. Yippee!
- The Obama Administration is floating an idea to prohibit lenders from foreclosing on a home unless the borrower has been considered for the government’s HAMP (Home Affordable Modification Program). This is NOT to be confused with the government’s wildly successful HARP (Home Affordable Refinance Program).
- Good news… HARP was expected to expire on June 10 and has been extended for another year. Get your applications in early folks!

So now you have a snapshot into the National Real Estate Market. The question is – what about Waukesha? Well, unless we secede from the world, we’re a part of those statistics. Generally, we are more conservative and the swings aren’t quite as wide. The reality is this – there are three things that people will always need: food, clothing and shelter. So if you have a job….. buy a burger, a blouse or a house.

‘Tis the season to buy houses, Fala lalala, la la la la.  If you have a job and your credit rating is reasonable and you’re still paying a landlord for the roof over your head, you’re missing the chance of a lifetime to jump into the real estate market.  THIS is the best investment you can ever make.  By the way – it’s a LONG TERM investment, not a buy-flip-profit endeavor.

Everyone knows about the $8,000 tax credit from Uncle Sam.  That’s nice.  The rest of the country is trying to get you off your rented porch by giving you money if you become a home owner.  But there’s another “best-kept” secret.  There is OTHER money out there to help you purchase a home.  The state and feds have GRANT money to assist with your down payment and closing costs.  I don’t know about other areas, but I can tell you there are great programs in Waukesha County for first time home buyers, and not enough people know about them.

There is a non-profit agency called HBC Services (stands for Home Buying Counseling). They offer counseling to first time home buyers.  They’ll help you weed through credit issues, set up a budget and savings plan.  They’ll help you get keys for your own home!  If you attend a couple classes and you income qualify, they offer a $1500 closing cost assistance grant.  This grant is deferred until you sell the home.  In other words, you have to pay it back years down the road when YOU sell the house, but there’s no interest and no monthly payments.

There are also two other programs available to income qualified first time home buyers:  HOME Consortium Down Payment Assistance and the Down Payment Plus from the Federal Home Loan Bank.   One grant is $5,000 and the other is $4,000.  Both are forgivable after 5 years.  Every year you own your home 20% is forgiven until it disappears altogether.  Quick math…. $8,000 + $5,000 + $4,000 + $1,500 = $18,500…. Not a bad deal, is it??

So what’s the income qualification??  If you are single, your annual income cannot exceed $39,600.  If there are just 2 of you:  $45,250.  If you are married and have one child: $50,900 and $56,550 if you have two children.  These numbers are based on 80% of the County Median Income.  They probably figure if you make more than that, you should already own a home!

How do you take advantage of this?  First, you want to work with a Realtor who is familiar with this program.  I am amazed at how many Realtors have no idea this money is available! You also have to work with a lender who participates in these programs.  You can find these lenders by working with a Realtor who knows about the programs!  You also need to go through HBC Services to qualify as a participant in the program. It’s that easy – and…it’s really not a secret – tell someone!

Poor Old Wisconsin Avenue….. This IS “Talkin Waukesha”, so I AM referring to Wisconsin Avenue in Waukesha.  Did you realize – there are TWELVE properties for sale in a THREE block stretch of Wisconsin Avenue ????  This is not just ANY stretch of Wisconsin Avenue…. This stretch is the Gateway to Downtown Waukesha!!  It’s the main drag into our up-and-coming Downtown.

Where, oh where have all the investors gone?   Where, oh where have all the entrepreneurs gone?  Where, oh where have all the visionaries gone?  WAKE UP!!!  This is PRIME Real Estate.

Look at all the wonderful things happening in Downtown Waukesha – why not be a Gatekeeper to the buzz that’s been started down there.  There are new businesses opening almost weekly, fun places to shop, interesting places to eat, Friday Night Live, Art Crawls, galleries, antiques and more! In addition, did you realize that every year almost 1.5 Million products are checked out from the Waukesha Public Library?  Those people all go down Wisconsin Avenue to get to the Library.  There are almost 22,000 attendees to their Children’s Programs; which translates into at least that many moms or dads driving down Wisconsin Avenue.  And then, there’s Cutler Park.  Events are held at Cutler Park  every Wednesday, Thursday and almost every weekend all summer long!  I would venture to say,  there is a strong argument that Wisconsin Avenue provides great exposure to almost any business.

There are those who say this is a bad market for businesses to start up or relocate.  OK, let’s forget about a high-exposure business location on a main thoroughfare in an up-and-coming business district with motivated sellers.  Here’s another plan – create some NICE urban housing!  Think of this:  People could live along this stretch and walk to the Library, or the Tuesday and Saturday Farmer’s Markets, Wednesday Jazz in the Park, Thursday Night Symphonic Band Concerts, Friday Night Live, and Saturday night Art Crawls.  They could walk to the bank, the coffee shop, the restaurants, the grocery store, the drug store or any one of the retailers.  They could patronize (not terrorize) the businesses in the area.  Now here’s a paradigm shift:  let’s get the people down there first, then the businesses will come with a ready-made clientele.   Why can’t Waukesha be an Urban Suburb?  Why do we have to settle for vacant store fronts, hundreds of rooms-for-let and all these for sale signs?

The City of Waukesha is waiting for some positive development.  They have even designated this area as a “redevelopment district”.  There is “TIF” money available for someone with a little ingenuity.  It doesn’t have to be only those willing to do a “labor of love” and lose money for the sake of improving our City.  Wisconsin Avenue is a Main Corridor…. A Gateway to Downtown!  This is an opportunity for someone to make a huge impact in Waukesha that will leave a Legacy to for decades to come.

Now that the dust has settled and the rainy season is upon us, we can look a little closer at the recent City-wide reassessment.  It’s always an event when this happens.  People wait with baited breath…. they can’t sleep…. the anticipation is almost overwhelming!  How much will my property value go up and what does that mean for my tax bill??????

It’s no secret, property values have dropped.  Will your property taxes drop accordingly?  This is just an educated guess….. NO !!!   With the slumping real estate market, the City Fathers had to devise a formula that would be palatable and yet serve the purpose of equalizing values*.

*Just a quick lesson – every 5 years or so, municipalities are required to assess properties at 100% of their fair market value.  Then as property values rise and fall, the “assessed value” stays the same and they assign a ratio of assessed value vs. fair market value.  The first year it’s 100%.  If property values go up by 5%, then the Assessed Value = 95% of Fair Market Value.  After about 5 years the ratio gets pretty wacked from reality and they do a re-assessment.

Back to the City Fathers:  It would be impossible to RAISE assessed values in a slumping market.  The outcry would be horrendous.  The panel that reviews contested assessments would be meeting until after the budget season.  It just would never do.  I would like to give great kudos for their strategy:  raise the price of the dirt!!

In a down market, it’s hard to substantiate increased values.  The price of the “improvements” hasn’t appreciated.  Their strategy?  They took the one part of the assessed value that’s hard to argue:  the price of the land.  Without 3 years of appraisal school, who can argue if your lot is worth $30,000 or $50,000.  Who knows?  Is it worth more or less, with or without a house on it?  What do City lots sell for anyway?  What compensating variables affect the value of the land alone?  Your improvements, your neighbor’s improvements?  The subdivision?  There are very few vacant lot sales in established neighborhoods.  Would they really set the  standard for the value of  land all over the City?  The bottom line then – whatever number they assigned to your dirt is a slam-dunk for sticking.  How can you contest it??  Brilliant!

We hear terms bandied about in this real estate market.  Everyone knows what a foreclosure is.  Some know what REO means –  no, it’s not the name of a ‘70s Rock Band (what would that have to do with real estate?).   You may have heard the term “Short Sale” and thought it was a quick, fun transaction.  It’s not.  Short Sales are the longest, most frustrating, unbelievably unforgiving transaction you can enter into!

Here’s the scoop on short sales:  Someone wants to sell their home.  They owe more than what the property is currently worth.  They are “upside down” in their mortgage.  When it’s time to sell, they ask the lender to take less money than what is outstanding and consider the mortgage paid off.

The seller may or may not be current with their monthly payments.  If they ARE current,  the lender will likely require the full balance of the outstanding mortgage.  If the seller is BEHIND – the lender has some motivation to take a “short” payoff NOW, rather than inherit the property LATER in foreclosure.  Most lenders are willing to consider remedies to avoid a foreclosure.  They don’t want the house – they want money.

First of all, if someone wants to (or has to) sell their home and knows they are upside down, one certain way to get the lender’s consideration for a short sale is to stop making their mortgage payments.  Yes – their credit will get trashed, but the other option is to pony up, perhaps thousands of dollars, in order to close.  If the lender won’t do a short sale, the seller has to make up the difference – ouch!

The seller, in order to be able to move on with their life, STOPS making their mortgage payments.  Now the lender will play in the sandbox with them.  An offer comes in and the lender is asked to take a short pay-off.  Most of these loans are owned by HUGE conglomerates (the ones we’ve been hearing about on the news for months).  They are NOT easy to deal with.  You never talk to the same person; they never give you the same answer; they lose the paperwork you fax them; they lose the paperwork you carefully scanned, PDF’d and emailed; they won’t call you – you have to call them; they assign the file to a different department; they have to get MORE documentation (you wouldn’t believe!); they have to get two more approvals; the list goes on.

Anywhere from two to five months later – IF the buyer has the patience to wait for what promises to be an open-ended amount of time – there MAY be a closing.  By that time, the buyer isn’t in love with the property, the seller is in financial ruin, and the real estate agent is frazzled from being in the middle.

The good news??  IF…..IF….you have the patience, the endurance, the vision, the intestinal fortitude, and the ability to ignore horrendous business practices…. IF…. You are willing to put up with a nightmare transaction – Short Sales are the best bang for your buck!! We’re seeing lenders take hits of 20%-40% of what is owed just to avoid putting these homes in their portfolio.  Find a good agent and hang on…. It’s quite a ride, but it can be worth the adventure!

I met with a mortgage banker yesterday. It’s always an interesting scene when a couple of veteran real estate professionals get together. There is a mix of sympathy, empathy, trepidation (which includes head shaking), conjecture and resolve. If I could summarize these type of discussions, I would use two words….. “who knows”!!

In the mortgage industry, there are a few “Thank You, Lord” prayers going up because of a recent boom in refinances. I have heard the chorus from appraisers as well. What I found surprising, though, were the amount of FHA loans being done. In some cases 7 or 8 out of every 10 loans are being funded by FHA. Many people have heard of FHA before. Most would say, it’s some kind of government backed loan. In fact, the history is rather interesting.

Believe it or not, there have been other periods in the history of this country when the government decided to step into what were historically “private sector industries” to push things along. The year is 1934 and I shouldn’t have to tell you about the economic state of the country at that time. The Federal Housing Authority was formed. They ramped up their services again in the 1940’s to help returning war veterans finance home purchases.

In the 1950s, 1960s and 1970s, the FHA financed privately-owned apartments for lower income, elderly and handicapped segments of the population. In 1965 the Federal Housing Administration was placed under the purview of the Department of Housing and Urban Development (HUD). Many will remember what happened in the late 1970s…. interest rates soared and property values started to fall. FHA was instrumental in helping to steady the market by making emergency funding available.

So in the grand scheme of cycling economics, here we are again with a mortgage market that has been rebuked and restricted because of it’s wild ways. We have a real estate market that enjoyed the ride, but is now lost and confused. And, once again, in steps the government. THEY have the best financial deal in town. Their debt to income ratios are the most favorable, they require the lowest downpayment and their interest rates are good. If you don’t mind waiting six to eight weeks to close (on a purchase OR a refinance), FHA is a great way to go. Conventional lenders are still in the corner licking their wounds and are being very discriminating about who they will finance.

With all the talk about $Billion$, you may wonder how you can benefit, even if it’s only a few $thousand $. Spend some time on their website – http://www.hud.gov/ . It’s worth the visit

I’ve seen enough foreclosures to last a lifetime. What a sad thing. Some of the homes I’ve seen were dearly loved. Not just a house, it was a home. There is a thoughtful décor in each room, neatly planted landscaping and maybe a child’s writing on the bedroom door “Spencer’s Room”. I imagine this family just fell on hard times and couldn’t hold onto their dream of owning a home any longer. These homes are in all neighborhoods, in all price ranges. The vacant houses with orange stickers on the doors and plumbing fixtures serve as reminders that they once belonged to people who started a journey they couldn’t finish.

I know a handful of people who are facing foreclosure. It’s a wretched thing. The pressure is crushing. For most people, the only way to deal with it is to simply become numb to what is happening to their lives. They can’t deal with the shame and the devastation, so they don’t. They just stop caring after a while because it’s too hard to try and claw their way out. It’s too frustrating and exhausting to call the lender and try to work something out. These financial machines can be ridiculous. A person who stops making their house payment because they hit a financial bump calls the lender and asks for a forbearance (tack the delinquent amount on the END of the mortgage) and the lender has this brilliant formula. Sure, send us two months house payments AND an extra $2,500 to boot and we’ll consider that. Huh? Apparently they don’t GET what it means to come to a mutually beneficial agreement. Hello – if someone stops making their house payment, it usually means they don’t have thousands of extra dollars sitting around. Maybe the banks WANT the houses back!

I don’t know for sure, but I suspect that of the $830 BILLION dollars being doled out of Washington, very little of it will help Spencer’s mom and dad, or your neighbor, or your friend, or your child, or anyone else who stands on the precipice of home ownership gone a-muck. Some of the proposals to give low interest rates and thousands of dollars to home buyers are just plain stupid. What got us into this mess to begin with? Maybe it was too easy to buy more than we should have. The problem is deep and wide and complex. There is no easy answer. This much I do know: just like any other dream that explodes, being foreclosed on is tough. People going through it need support and compassion.

Last month, for about five minutes, rates for 30 year fixed mortgages dipped into the 4.xx % range. I wasn’t one of the lucky ones who got to my lender in time to refinance, but perhaps you were. The last time we refinanced, I remember a very unsettling flurry of activity that followed. We got dozens of letter from other finance companies telling us to refinance with them! I had to ask: how do they know I’m in the midst of refinancing….. Who told them??

Well, just when they’re passing all kinds of restrictive “privacy” acts on one hand – they’re giving away your firstborn with the other. As it turns out, the process is something like this: I go to a lender and start the refinance process. My lender, as part of that process, pulls a credit report. Now, there are actually THREE main credit bureaus and a prudent lender will pull your score from all three because there is some degree of variance. Here’s the scary part. Those credit bureaus RELEASE to anyone who pays them, the fact that a lender just pulled your credit report. If another lender is buying the list of people whose credit reports just got pulled – YOU get their junk mail! It was very unsettling to me to realize that my private transactions are being sold by the very people who hold my deepest financial secrets. And, there’s not much one can do to stop it!

Just so you don’t panic (like I did) and freeze your credit, report potential fraud and call an attorney, rest assured, ALL they can sell is the “who”. They don’t give your social security numbers or any personal information on your report. The balance of the mortgage you’re refinancing is already public record (who knew?!), so the letters are really more of an annoyance than anything else. If you want to see what your credit report looks like at all three agencies, you are legally entitled to a free copy of your report. The credit reporting agencies are: Experian, Equifax and TransUnion. The ONLY free website that has NO OTHER STRINGS attached to get your free credit report (limited to one per year, per agency) is www.AnnualCreditReport.Com . The others you see advertised give you free credit reports, but want something else in return.

It baffles me, how much information is “out there” if someone knows where to look and how to get it. Here’s another one: If you’re shopping around for home owners insurance, you won’t be able conveniently forget past claims with your new insurance agent. That industry has a “Comprehensive Loss Underwriting Exchange” information database that lists five years worth of claims reported, how many resulted in loss payments and how much each loss cost. You can order your CLUE Report for yourself: www.Choicetrust.Com . You may feel like you’re paranoid checking all this public information about yourself, but hey – it’s free….and then you’ll have a C.L.U.E. !

I’m talking about whether or not the Groundhog will see his shadow! Maybe we don’t get all excited about it here in Wisconsin, but in Punxsutawney, Pennsylvania, they close down for a week of festivities which climax early in the morning of February 2.

Groundhog Day (which dates back to the 1700’s or earlier) was originally known as Candlemas Day. It is the mid-point between the Winter Solstice and the Spring Equinox. Traditionally on Candlemas Day, people would bring out their candles, have them blessed, and place them in their windows. Here is an Old English Song:

“If Candlemas be fair and bright,

Winter has another flight.

If Candlemas brings clouds and rain,

Winter will not come again.”

The Americans made their own version: “If the sun shines on Groundhog Day; Half the fuel and half the hay.”

You’re probably wondering what this has to do with houses. Not all that much, except I’m trying to think of things that will make the winter shorter. It’s that “halfway between” season of the year when things seem blah. So I have some suggestions that may parallel the Punxsutawney festivities – right in your own home. These are cheap, easy and fast activities that can push you right through to the Spring Equinox!

1). Clean. If you can still find pine needles from the Christmas tree (or Heaven forbid, you tree is still up), get out the Lysol and go to town. There is nothing better than floors, walls, sinks, and woodwork that gleam back at you!

2). Rearrange your furniture. Walk into the most used room of the house and pretend you’re moving in for the first time. Where would you put things if the room was empty? This is a great time to get rid of those TV trays that no one ever uses.

3). Change up the Lighting. Add a lamp, put up a mirror or put in brighter light bulbs to lessen the gloom.

4). Buy some house plants. They are really quite inexpensive, they add softness and color to a room and they improve the indoor air quality (maybe?). Heck, if you end up killing them because you don’t have a green thumb, it’s no worse than spilling a glass of good wine.

5). Paint. Think of all the things you could paint! Start with the obvious….. walls. Then stretch your imagination. When was the last time your ceilings were painted? How about painting that furniture you someday intended to refinish? Paint your kitchen or bathroom cabinets. Color is fun. Be bold (but NOT messy)!

6). Organize. A little Rubbermaid goes a long way!

7). Pitch. If you don’t need it, want it or use it at this time in history – give it to someone who WILL. Don’t save things for someday. Then it just becomes “stuff” and it can choke you. An uncluttered house feels so good!

Sometimes our home environment impacts our actions and attitudes more than anything else; especially this time of year. I hope next Monday is a cloudy day.