Copy for Real Estate Guide Column for 10-3-10
REAL ESTATE PATTERNS
By Ken DuVall

VACANT HOMES POSE INSURANCE RISKS

As the U.S. housing market struggles to rebound, many homeowners are stuck with hard-to-sell properties longer than expected. Some frustrated home sellers who must relocate for a new job opportunity, want to downsize, or simply want to buy a new place have left homes empty. Vacant or unoccupied homes can leave the homeowner exposed to loss and liability that may not be covered by their insurance.

In many cases, people who have been trying to sell their homes for awhile have moved forward with their plans regardless, leaving a vacant home on the market. Having an unoccupied home can create several insurance implications that typically are not covered under a standard homeowner’s policy.

Homeowners policies are meant to insure homes that are occupied, so they generally include exclusions for neglect or property abandonment on a home left vacant or unoccupied for a specified number of consecutive days.

In insurance terms, a vacant home is one the resident has moved out of and taken their belongings with them. An unoccupied home is one where the resident is not staying at the home, but the furniture and other belongings remain.

Because vacant and unoccupied homes pose a higher risk for damage than occupied homes, insurance companies insure these properties differently and usually at a higher price. These risks include:

Break-ins: When a home has been unoccupied for awhile, it can show signs that nobody is around - unkempt lawn, full mailbox, no lights on - that can tip off burglars to an easy target.

No emergency response: Without anyone home to call 911 or respond to emergencies such as a small electrical fire, can turn into a much larger, more costly disaster.

Property liability: There is no one present to prevent others from entering the property or to supervise activity, which could increase the likeliness of an accident on the premises or property damage.

To keep a vacant home properly insured the definition of vacancy and unoccupancy can vary from policy to policy. Some insurers may not pay claims if a home is vacant for 60 days or more. Some policies might automatically shift to a different amount of coverage (e.g. liability insurance only) after a specific number of days unoccupied.

Many homeowners’ policies have a "vacancy clause" that can be triggered if the homeowner is gone for an extended period of time and some or all of their coverage may not apply in the event of a loss. If your home will be vacant or unoccupied for a long period of time, talk to your insurance agent to learn how they define vacancy and unoccupancy, and whether the company will pay claims if a house is unoccupied.

Many insurance companies offer an endorsement that will provide coverage for a dwelling that is unoccupied for an extended period of time. Vacancy policies can also be purchased for different term lengths to cover a few months to a year, depending on your need.

Ken owns Ken DuVall & Associates, REALTORS at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 8-27-10
REAL ESTATE PATTERNS
By Ken DuVall

THE FANNIE/FREDDIE SAGA

Fannie Mae and Freddie Mac may be in effect insolvent, but they're backing over half of all U.S. mortgages. Naturally, some people are nervous. The two government owned/supported enterprises (GSEs) stood behind 62% of new home loans this year, compared to 27% of new loans in 2006. Add in Ginnie Mae and fully 90% mortgages are supported by the U.S. government.

Right now, the loan market is almost entirely dependent on Fannie, Freddie, and Ginnie. Why should you care? Since the government seized Fannie and Freddie in 2008, it essentially owns them. So far, the mortgage giants have cost taxpayers roughly $145 billion to cover their losses, with more losses looming. If a bailout becomes necessary, the cost would approach $1 trillion.

Clearly, it doesn't benefit the housing system overall- or the government- to have a mortgage market that is almost exclusively government-backed. We need a way to bring the private sector back into the mortgage market. But if the government pulls back too quickly, it could trigger another housing crash.

Many scenarios are in play. The agencies could be disbanded in favor of new entities, or be split into two pieces -- a "public" securitization function and a "private" mortgage investment portfolio. In the public-private scenario, the private component would become fully private over time, with the government slowly removing its support. Such a scenario seems likely at this point.

While many industry watchers believe altering the housing finance giants is necessary, and that the federal government shouldn't play so large a role in the mortgage market, they also agree that given how shaky the housing market is, any major changes won't come immediately. We need to give some consideration before we disturb what has been crucial support of the mortgage market.

Given that there isn't much of a private mortgage market, the likely thing that can be done now are small, incremental changes that will get us where we want to be in 5 to 10 years. For borrowers, that means any changes to Fannie and Freddie would likely materialize slowly. We don't want to do anything that makes things worse.

Although Freddie and Fannie are almost single-handily propping up the market, such government involvement in the securitization of mortgages isn't sustainable. But right now, there's not much choice, with investors still too jittery to trust paper that isn't backed by the federal government. There's not a lot of alternative credit out there. We're stuck with probably the 90% of mortgages now backstopped by the government over the next few years.

The irony is that if we're really concerned about the health of the housing market and want to see it recover, we should be making it easier to obtain credit. Unfortunately, we're doing just the opposite. We're actually slowing or stifling the housing recovery by restricting the flow of credit. It's the classic closing the barn door after the horses are gone. Meanwhile, if you can qualify for a loan, the 30-year fixed rate dropped to its lowest level since 1971 last week to as low as 4.25%.

Ken owns Ken DuVall & Associates, REALTORS at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 8-20-10

REAL ESTATE PATTERNS
By Ken DuVall

RELIEF IS ON ITS WAY

Main Street may be getting its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion.

The move would be a stunning political and economic bombshell. The key date is August 17 (which falls after my press deadline) when the Treasury Department holds their much-hyped meeting on the future of Fannie and Freddie.

Also, Congress just came up with an extra $1 billion to help people who can't pay their mortgage because of unemployment or a medical problem. Under this new “Emergency Mortgage Relief” program, eligible homeowners who are at least three months delinquent can get up to $50,000 in no-interest federal loans to pay their mortgages for as long as 24 months. They would need a good record of mortgage payments before their employment or medical condition changed. They would also have to demonstrate a "reasonable likelihood" of resuming mortgage payments within two years.

The money for this program came in the financial regulation bill signed last week and will be made available October 1 to the U.S. Department of Housing and Urban Development. This follows two other federal programs providing assistance to unemployed homeowners. The Treasury Department is providing $2.1 billion to struggling homeowners in what it calls the "hardest hit" states. The Treasury awarded $1.5 billion to five states in June and will award $600 million to five other states later.

Here at home, the California Housing Finance Agency got $700 million from the “Hardest Hit Fund” beginning Nov. 1 for its program, “Keep Your Home”. Low and moderate income people who are unemployed or owe more than their homes are worth could be eligible for payment subsidies, principal reduction, or relocation expenses. Homeowners can have their payments reduced or suspended under the Treasury's “Home Affordable Unemployment Program”. Homeowners can't be more than three months delinquent plus other requirements.

Sales of homes for less than the mortgage amount have tripled since 2008, particularly in California. Known as short sales, this increasingly common transaction for financially troubled homeowners is projected to balloon to 400,000 in 2010, according to Core Logic. Where a quarter of homeowners owe more on their property than it's worth, short sales are appealing to investors, banks, and owners as a cheaper way out than foreclosure.

The White House on Wednesday said it would spend an additional $3 billion to help distressed homeowners in the states with the highest jobless rates to pay their mortgages. This latest round of funding pushes the total federal commitment up to $4.1 billion to help homeowners modify existing mortgages or make their monthly payments. The White House is authorized to spend up to $50 billion under the “Troubled Asset Relief Program”.

So hope and help is out there. Talk to your lender for further details.

Ken owns Ken DuVall & Associates, REALTORS at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 8-13-10

REAL ESTATE PATTERNS
By Ken DuVall

BIG TIME HOUSES

The biggest house in America is in Windermere, Florida near Orlando and Disneyland Park. The home is listed for a cool $75 million. This 90,000 square foot gem sits on a 10 acre parcel in the same gated community down the street from Tiger Woods (there goes the neighborhood!). It has 13 bedrooms, 23 bathrooms, a banquet kitchen with 10 satellite kitchens, a 20-car garage, and a quarter-mile of shoreline on Lake Butler.

The home has 3 swimming pools (things are tough all over!), a 2-lane bowling alley, a 2-story movie theater, an indoor roller rink, a video arcade, a fitness center, and only a pitiful 2 tennis courts! For $75 million it’s “as-is” with an unfinished interior, or he’ll complete the project for $100 million price. Nicknamed “Versailles” for the French palace, it’s the largest home for sale in the U.S. and ties for the priciest.

Construction came screeching to a halt as billionaire owner David Siegal just ran out of money. He’s the CEO of Central Florida Investments who made his fortune in Florida’s timeshare resorts. Today’s poor economy just sunk him.

Someone will probably buy this unique mansion. It just likely won’t be an American these days. The word is it’s getting interest from Middle Eastern and Russian buyers. During the boom, everyone wanted bigger, better, and more expensive homes. Now it’s a different deal for most people.

On the California front, football star Tom Brady and his supermodel wife Gisele Bundchen are building their dream home in Brentwood. The 3-time Super Bowl winning quarterback and his wife are building a sprawling 22,000 square foot 8 bedroom palace. The 3.75 acre Brentwood (just west of Beverly Hills) lot is near Gov. Arnie’s house.

Amenities include a 6-car garage, a covered bridge connecting two parts of the house, a nursery for their infant son Benjamin, and a lagoon-shaped pool with spa. There are cardio and weight rooms to keep both spouses in shape for their respective careers, and an elevator to make getting around the enormous two-story home a little easier. The total cost of the Mediterranean-style mansion: some $20 million.

The New England Patriot’s All-Pro quarterback and his Brazilian-born wife can cover the tab. Brady is in the last season of a 6-year, $60 million contract. Gisele earned $25 million last year. The couple paid $11 million just for the lot. Hey- if you’ve got it, why not flaunt it?!

Lastly, the Bel-Air 17,000 square foot home on 1.26 acres that Michael Jackson rented for $100,000 a month just hit the market last week for $29 million. The price has been reduced from its first asking price of $38 million. The owner tried unsuccessfully to re-rent it after the King of Pop’s demise there last year for $200,000 a month. There were plans to turn it into a Jackson public museum which didn’t work out. The gated French Chateau boasts 7 bedrooms and 13 baths, as well as a gym, screening room, spa facilities, a 7-car garage, and a wine cellar.

Ah, for the lives of the rich and famous, right? Well, I wouldn’t trade mine!

P.S. Happy birthday today to my precious wife Alla! We’ll have been married for 47 years next month. Groucho Marx once quipped, “We were married by a judge. I should have asked for a jury!”

Ken owns Ken DuVall & Associates, REALTORS at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.