Common Appraisal Adjustments Guidelines, More Marketing Material to Swipe/Adapt, Market Update

Yes, last week was another one for the history books (do you realize that our great grandchildren will be reading about us in the future?) . We talk about the market below in the update. However, there are still houses to be sold, loans to be closed and someone will be doing those- why not you- why not me? I have given you more marketing material below to swipe and adapt- please feel free to use it in any way you want. In addition, I have given you an outline of Common Appraisal Adjustments Guidelines- you may want to print this out and use for future reference also. Don’t forget our Halloween Breakfast/ Flu Shot Clinic on 10/31 (see below)- we hope to see you here. In the meantime, there are some things that we cannot control- they are what they are. But remember the “A”s this week- We can control our Attitude, our Actions and our Adaptability to what the market brings us. Here’s to an Awesome week! Linda More Marketing Scripting to “Swipe and Adapt” Many of you sent emails on the “Swipe and Adapt” marketing scripting that we sent out last week. Here is another one- it is up to us to get the word out that financing is still available without a large down payment, inventory is strong and it is a wonderful time to purchase. So, with that thought, you will find below wording that can be used on flyers, ads, letters, signs, banners- whatever you want to use it for. Please use it (feel free to modify it in any manner that you wish- however you want to change it up)- lets just get the word out!!!!!! When Is It The Right Time To Buy? This question is presented to me three and four times a day. And, frankly, no one can tell you that this is the perfect time to buy a home… However, I can give some pretty compelling arguments that NOW is a really good time to buy. Consider the following: · Home prices in some areas have dropped by 10% in the past year alone. · Values are at their lowest levels in five years. · Interest rates are at almost historic lows…. Did you know that the Average 30 yr fixed rate loan from 1992 to 2008 was 7.06%! · Historically, when rates are down home values are up, and when rates are up, home values are down. · Zero to 3% Down Loans can still be done! · The present combination of great home values and low interest rates makes for the perfect opportunity to purchase a home. This is probably the best time to buy a home in 20 years! We look forward to working with you. Thank you for your trust! The Davidson Group. Common Adjustments Guidelines Used by Appraisers I have asked our appraiser, Chris Smith of Smith Appraisals to give us a guideline on common adjustments. It is important to understand that these are estimates only and should only be used as such. Chris Smith and Smith Appraisals can be reached at ((214) 618-8058 Office (972) 467-0027 Cell and email chris@smithappraisalgroup.com. The following adjustments are very general in nature and may vary from neighborhood to neighborhood and property to property. There are a variety of factors which may influence each situation or scenario. This list should only be used as a guide with each adjustment supported by actual market data from within the area you are working. Sales or Financing Concessions: From a pure “market value” perspective financing concessions should be deducted dollar for dollar. For some time now, lenders have however been willing to allow appraisers to limit their adjustments for concessions to the amount exceeding what is considered typical and “customary” for the area. For example, if 1-3 points are common in an area and a sale has 4.7 points (or 4.7%), an appraiser might deduct 1.7 points. 4.7 (percentage actually paid) minus 3 (typical for the area) for a net deduction of .7% from the sale price. Please keep in mind that seller concessions in any amount are not real estate and should be deducted if your goal is to identify the true value of a home. Also, with the industry changing the way it is, lenders are becoming less tolerant of the practice of excluding only partial amounts of concessions and guidelines may be implemented to prevent this and many other practices used to manipulate or “stretch” values. Date of Sale/Time: Time adjustments are not typically made in this market. (If you are interested in knowing more about time adjustments and when and how they should be used, please feel free to contact me). Location: Location adjustments are among the most difficult to estimate because there a virtually unlimited number of possible scenarios. Some of these are proximity to a potentially positive or negative influence, mitigating factors, acceptability within a particular market, etc. Some sample adjustments are as follows: Sides or backs a busy street: 2-3%. This figure can and will fluctuate due to any number of variables. Fronts busy street: 2-5%, depending on proximity, etc. Sides or backs high tension power lines: 1-2%, depending on proximity, etc. Sides or backs water tower: 1-2%, depending on proximity, etc. Sides or backs light commercial property (retail): 1-2%, depending on proximity, etc. Site Size: $100,000-$200,000 home: $1,000-$2,000 per 1,000 square feet difference in size. $200,000-$400,000 home: $2,000-$4,000 per 1,000 square feet difference in size. $400,000-$600,000 home: $3,000-$5,000 per 1,000 square feet difference in size. $600,000-$800,000 home: $4,000-$7,000 per 1,000 square feet difference in size. View: Golf Course: 3-10%, depending on view, obstructions, etc. Creek: 2-6%, depending on view, obstructions, etc. Wooded Area: 1-3%, depending on view, obstructions, etc. Acreage: 1-2%, depending on view, obstructions, etc. Factors affecting view adjustments can be things such as fences, proximity, obstructions, etc. Design: Design adjustments are very subjective and may or may not be warranted for any particular style or design in any given area. Some examples of common design differences that may require an adjustment: Contemporary style homes often sell lower than their “traditional” counterparts. English Tudors often sell higher than cottages. We can discuss in more detail if anyone is interested. Quality of Construction: There is no rule of thumb for this but I’ll give you a fairly easy way to determine the difference from one neighborhood to the next in class. It’s more difficult within a neighborhood unless you are able to identify the various builders. It can be extremely difficult with true custom built homes because a wide range of quality of construction and finish out often exists from one home to the next, even though they may be built by the same builder. I’ll give some examples and we can discuss if anyone is interested. Age/Effective Age: Appraisers will typically make an adjustment for either age or condition but not both. I’ll give some examples in class and we can discuss. Room Count: Bathrooms: $100,000-$200,000 home: $2,000-$3,000 per ½ bath. $200,000-$400,000 home: $2,500-$4,000 per ½ bath. $400,000-$600,000 home: $3,000-$6,000 per ½ bath. $600,000-$800,000 home: $4,000-$7,000 per ½ bath. Bedrooms: $100,000-$200,000 home – 2 vs. 3 bedrooms: $2,000-$5,000. $200,000-$400,000 home – 2 vs. 3 bedrooms: $3,000-$7,000. $400,000-$600,000 home – 2 vs. 3 bedrooms: $4,000-$10,000. $600,000-$800,000 home – 2 vs. 3 bedrooms: $5,000-$15,000. **There is “typically” no measurable difference in value between 3 and 4 bedroom homes. This difference is most often accounted for within the GLA adjustment. Gross Living Area: $50,000-$100,000 home: $15.00-$25.00 per square foot. $100,000-$200,000 home: $25.00-$35.00 per square foot. $200,000-$400,000 home: $30.00-$40.00 per square foot. $400,000-$600,000 home: $35.00-$50.00 per square foot. $600,000-$800,000 home: $40.00-$60.00 per square foot. Price per foot adjustments will deviate from these guidelines depending on the size of a property. For example, a 2,500 square foot home selling for $100,000 ($40.00/foot) might require a price per foot adjustment of $15.00-$20.00 per square foot; whereas a 1,000 square foot home selling for $100,000 ($100.00/foot) might warrant an adjustment of $35.00-$50.00 per square foot. The lot value in each example should also be considered. **Please remember that much of the guesswork can be eliminated by using comparable sales with similar square footage whenever possible. Heating/Cooling: Typically relevant to cost. Garage Spaces: $50,000-$100,000 home: $1,500-$2,500 per space. $100,000-$200,000 home: $2,000-$3,000 per space. $200,000-$400,000 home: $2,500-$5,000 per space. $400,000-$600,000 home: $4,000-$8,000 per space. $600,000-$800,000 home: $3,500-$10,000 per space. Carports: 1 Car Carport $500.00-$1,000.00 2 Car Carport $1,000.00-$2,000.00 **Carport adjustments will vary depending on price range of the home and the quality of construction of the carport. Covered Patios: $50,000-$100,000 home: $1,000-$2,000. $100,000-$200,000 home: $1,200-$4,000. $200,000-$400,000 home: $2,500-$8,000. $400,000-$600,000 home: $4,000-$10,000. $600,000-$800,000 home: $5,000-$12,000. Fireplaces: $50,000-$100,000 home: $500-$1,500. $100,000-$200,000 home: $1,000-$2,000. $200,000-$400,000 home: $1,200-$2,500. $400,000-$600,000 home: $1,500-$3,000. $600,000-$800,000 home: $1,500-$3,500. Updated Windows: Updated thermal-pane windows (including storm windows) will typically add 1-2% depending on the price range of the home. The percentage will typically decrease as the price of the home increases. Above-Ground Hot Tubs: Above-ground hot tubs, like any other removable (portable) items, are considered personal property and therefore should not be given any value in an appraisal. That does not mean these items are worthless and should not be considered. It simply means that when you are determining what to buy or sell a property for it is important to understand that an appraiser is typically not at liberty to assign value to personal property. Pool/Spa: $50,000-$100,000 home: Pool $4,000-$7,000. Spa $1,500-$2,500. $100,000-$200,000 home: Pool $8,000-$12,000. Spa $2,000-$3,500. $200,000-$400,000 home: Pool $10,000-$16,000. Spa $3,000-$5,000. $400,000-$600,000 home: Pool $14,000-$18,000. Spa $4,000-$7,000. $600,000-$800,000 home: Pool $15,000-$25,000. Spa $5,000-$10,000. **All pool adjustments listed above are for in-ground, gunite swimming pools. Adjustments for more elaborate, high quality pools with amenities such as water features, stone work, fountains, “pebble-Tech” finishes, etc., can require significantly higher adjustments. Above-ground pools are personal property and given no value. Vinyl lined and fiberglass pools are typically worth about half the value of a very basic gunite pool in lower price range properties. Vinyl lined and fiberglass pools are typically worth even less in upper price range homes as the typical buyer of a more expensive home is generally more discriminate and prefers amenities consistent with the price and quality of the home they are purchasing. This is evidenced by the rarity of vinyl lined and fiberglass pools seen in more expensive properties. Halloween Breakfast and Flu Shots- It is fitting that we will hold our annual flu shot clinic here at the office (3200 Broadway Blvd in Garland) on Halloween morning- I think that they are pretty scary- don’t you :) although I do get one every year myself. We will have a nurse at our office from 8-9 AM for flu shots on October 31 if you would like one. I do need an RSVP for the flu shots by 10/29 so that the nurse knows how many shots to bring. The cost is $25 per person. So, to make it fun (and we are always looking for a reason to throw a party), we will be serving breakfast at the same time (Friday morning, October 31 from 8:00-9:00 AM). We will have scrambled “brains” :) (eggs) with tortillas with all the trimmings and homemade pico made by Chef David (my husband) who most of you know is an excellent cook. So whether or not you are getting a shot, come on by for food, fun and prizes. We look forward to seeing you here! Last Week in Review "THOSE WHO CAN SOAR TO THE HIGHEST HEIGHTS CAN ALSO PLUNGE TO THE DEEPEST DEPTHS." Lucy Maud Montgomery. Despite all of the government's efforts, markets here and around the world plunged this week as the financial crisis continues to grow. On Tuesday, the Fed and Treasury Department announced plans to purchase short-term commercial paper that many companies rely on to finance their day-to-day operations, to help businesses with their short-term credit and funding needs. The government hoped this announcement would help ease uncertainty, restore confidence, and give Stocks a boost. They hoped for a similar result on Wednesday when the Federal Reserve cut the Fed Funds Rate by 50 basis points, and coordinated an emergency global interest rate cut with the European Central Bank, Canada, the UK, Switzerland and Sweden. The Central Banks in Asia followed suit and cut their benchmark interest rates overnight as well. However, on Thursday, Stocks plummeted nearly 700 points to a five-year low, and on Friday Stocks ended the day another 126 points lower (after plunging 500 points three times throughout the day). Bonds and home loan rates also worsened sharply in the second part of the week, as Bonds dropped below several important floors of support, and home loan rates ended the week .50-1.00% higher than where they began. From a historical perspective, we are in the midst of a brutal bear market that began on October 9th 2007. Remember that a decline of 20% constitutes a bear market...and a 10% decline is a "correction." The last bear market occurred between March 24th of 2000 and October 9th 2002 saw a 49% drop. Overall, the average bear market lasts for 12.3 months, with the average decline being 32%. The current bear market is right in line with the average historical time frames, and the extent of the decline is worse than previous bear market averages, but still slightly better than the bottom made in 2002. So the historical data might suggest that we could be nearing a bottom. I will continue to monitor this situation closely, and let you know how this will impact home loan rates in the weeks and months ahead. One bright spot is that oil prices are also plunging, falling from a high of $147 per barrel last July to around $80 per barrel Friday morning...which at least makes a trip to fill up at the gas station slightly less painful. Forecast for the Week Last week was a volatile one despite the lack of scheduled economic reports, and this week several big pending reports could add to the volatility...even with the markets being closed on Monday in observance of Columbus Day. Wednesday will bring the wholesale inflation measuring Producer Price Index and the Retail Sales report for September. The Retail Sales report is a measure of the total receipts of retail stores, and changes in these numbers are closely followed as a timely indicator of broad consumer spending patterns. It will be especially important to see what kind of impact the financial crisis has had on recent spending trends. More inflation news will follow on Thursday, as September's Consumer Price Index (CPI) report, which gives a read on inflation at the consumer level, will be released. CPI tells us how much more expensive goods and services are this month over last month, and this widely watched inflation indicator will definitely make headlines. And given what's been happening in the markets, it will be important to note what's happening in the housing sector, which Friday's Housing Starts and Building Permits Report for September will reveal. STOP OVERSPENDING TO STAY ON BUDGET In today's economic environment, many people are paying more attention to their monthly budgets than they have in a long time. One of the best ways to rein in your budget is to get a handle on your spending habits. The tips below can help you figure out where your money is going every month, and whittle down unnecessary expenses. Taking inventory. Many people can name their major expenses, but don't remember all the little expenses that drain their wallets. To help you get a true picture of your spending, try writing down everything you spend money on during the course of a month. That means writing down not only your major expenses, but also those quick trips to the gas station, grocery store, coffee shop, movie theater, fast food restaurants, and so on. Also, if you pay for insurance or your garbage bill on a quarterly basis, write down what the monthly expense equals. Hierarchy of needs. Once you have all your expenses listed, it's time to analyze them. The best place to start is by grouping your expenses using highlighters. For example, you may want to use one color to highlight "must haves" like your house, automobile, life insurance, utility payments and so on. Next, use a different color to highlight items that may be important occasionally, but aren't required--such as, new clothes for work. Finally, use a different color to highlight unnecessary expenses that are nice, but could easily be cut out, such as mochas from the local coffee house. Now, you can make some purposeful decisions about what you can cut--starting with the easy items and working your way up to the important but not necessary. Don't forget, it's not always "either-or." For instance, you don't have to cut out mochas altogether; instead, you can cut down to one per week as a special treat. Give yourself an allowance. Sticking to your budget is easier if you have no other option. If you have a real spending problem, you may want to give yourself an allowance to live on. For example, try taking out $50 or $70 in cash for each week and putting your credit cards and checkbook in a safe place. That way, when you spend money, you'll actually see it leave your wallet...which means you'll see the impact more dramatically. This forces you to make some tough decisions. After all, if you go to lunch on Wednesday, you may not be able to go to the movies on Friday night. It'll be tough at first. But soon, being frugal will be second nature. Stop window-shopping. Marketing is a powerful force. To help eliminate the urge to overspend, avoid filling your lunch hour or Saturday afternoons by walking around the mall. Instead, spend that time walking around a local park, reading a good book, or playing a board game with a good friend. When you do need to shop, make a plan to go to a specific store or two... and go with a list! Of course, the key to having a list is only shopping for the items on it--no more, no less. Pedal to the metal. Make a list of all the places you drive and how far away they are. Then, get out your highlighters again. Use one color to highlight the items that are within 3 miles. These are the places that you can start walking to... that way you'll save on gas and get some exercise in the process. Use a different color to highlight all the places that range from 3-10 miles. Those are the places you can start biking to. Of course, if you want to save even more, you can get rid of your car or a second vehicle altogether. Not only will you save on gas, but you'll also free yourself from those ongoing car insurance and license expenses. If you live in a city with public transportation or where most of your stores are close by, this may also be an option worth exploring. The Week's Economic Indicator Calendar Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of October 13 – October 17 Date ET Economic Report For Estimate Actual Prior Impact Wed. October 15 08:30 Core Producer Price Index (PPI) Sept 0.2% 0.2% Moderate Wed. October 15 08:30 Producer Price Index (PPI) Sept -0.3% -0.9% Moderate Wed. October 15 08:30 Empire State Index Oct -10.0% -7.4% Moderate Wed. October 15 08:30 Retail Sales Sept -0.4% -0.3% HIGH Wed. October 15 08:30 Retail Sales ex-auto Sept 0.1% -0.7% HIGH Wed. October 15 02:00 Beige Book Moderate Thu. October 16 10:00 Philadelphia Fed Index Oct -5.0 3.8 HIGH Thu. October 16 09:15 Industrial Production Sept -0.8% -1.1% Moderate Thu. October 16 09:15 Capacity Utilization Sept 78.0% 78.7% Moderate Thu. October 16 08:30 Jobless Claims (Initial) 10/11 NA 497K Moderate Thu. October 16 08:30 Consumer Price Index (CPI) Sept 0.1% -0.1% HIGH Thu. October 16 08:30 Core Consumer Price Index (CPI) Sept 0.2% 0.2% HIGH Fri. October 17 08:30 Building Permits Sept 845K 854K Moderate Fri. October 17 08:30 Housing Starts Sept 880K 895K Moderate Fri. October 17 10:00 Consumer Sentiment Index (UoM) Oct 69.0 70.3 Moderate Have a blessed week. We are here to make it happen for you and your buyers…. Let our expertise close loans for you! We can be reached at 972-278-3400 or ldavidson@servicefirstmtg.com. Linda Linda Davidson, Senior Loan Officer, DE Underwriter Service First Mortgage 972-278-3400 office 972-497-6452 fax 1-866-963-3777 Toll Free www.davidsongroup.net Check out our blog: http://lindadavidsonmortgage.blogspot.com The Davidson Mortgage Group Ranking 6th Nationally in FHA/VA Purchase Units Closed! Ranking 33rd Team in the Nation in Total Purchase Units Closed! Ranking #69th Team in the Industry for Total Units! Voted #1 Area Mortgage Team For The Past 10 Years We ARE The Mortgage Experts! Your Lender for Purchase, Refinances, Reverse Mortgages and Commercial Lending!! P.S. The finest compliment that we can receive is a referral from you . We appreciate your trust! Linda