Suffice it to say that like any other professional service provider, real estate agents are contracted vendors that deserve to get paid for their time and services.  That does not mean; however, that they deserve to be kept or get paid when they are the “wrong” agent for you, if they do not do their job competently or if there are other fundamental disagreements that undermine the foundation upon which the relationship is based.  You are paying for value and are entitled to get just that. 

We are all human and can only do our best to make the right choice.  If you put in the time and effort up front and still end up working with a real estate agent that, while good, is not working out for you, there are options.  First of all, you will not be the only one in the relationship to know it.  Remember, good real estate agents are supposed to be able to read people.  If there is a true disconnect, they know it and may even be proactive with you about it.  Selling or purchasing a home is a process and things can change once the process begins. 

Again, a good real estate agent who senses a disconnect should and will bring it up.  Things change and that is okay.  Maybe your home is not selling or fetching what you thought it would or other evolving financial factors force a different approach to buying or selling.  Maybe you have seen what is out there and want to go at the process differently.  Maybe once you got down the road a bit with your chosen real estate agent, the personalities just do not mesh well.  Again, things change and that is okay.  It does not do either of you any good to waste time in an unproductive relationship (which is what drives a good agent to address it head on) and making a change before it gets ugly is also better for both sides. 

Most real estate agents, good and bad alike, are big picture people.  They know that even if they are the best agent on the planet, bad news travels like wildfire while good news typically moves slowly or just stays at home (pun intended).  A good real estate agent, after trying to fix a broken client connection, will probably be okay parting ways.  They want you to be happy and left with a good impression/feeling about them even if they were not the one that sold your home or found your dream house.  Think about it this way, if your trusted mechanic who only knows engines discovers a transmission problem while working on your car, he/she is not going to just try to fix it.  They will tell you and refer you to a qualified transmission person.  Same goes for real estate agents.  If it is honestly not working out, you will part ways nicely and probably with a referral that you can trust. 

Remember, we are focused here on working with quality real estate agents with a high degree of professionalism and integrity.  If you feel like you are getting trapped or have lost control, one of two things is likely going on:  (i) you are not working with a good real estate agent as I have described; or (ii) you are not being fair.  I will write a future post on getting out of contracts with real estate agents (when appropriate & how to do it) to address (i).  For (ii), you need to do a gut check, talk to your friends and/or colleagues about it, send me a message – get as objective an opinion as you can.  It is not uncommon at all for buyers and sellers to be so engrossed with the process and all the things that need to get done, and the unavoidable stress of it all, that they are not seeing things as they truly are.  Get some outside perspective. 

Another common reason sellers change real estate agents is that their home has been on the market too long without selling.  It is hard, no, it is impossible to say whether or not it is appropriate to do that.  It certainly can be.  The price may be off.  The agent may be stretched too thin.  You might want a fresh approach.  It could also be totally and completely unconnected to the agent and his/her efforts on your behalf.  We live in unprecedented times insofar as real estate goes.  In this market, sometimes the best real estate agent with the best strategy can strike out for no good reason at all.  Just happens. 

Responsiveness is another reason why both buyers and sellers fire real estate agents (and, incidentally, this is a typical reason agents fire clients).  You should talk to your real estate agent up front about accessibility and responsiveness expectations.  Unless you are the agent’s only client, you both need to be practical and realistic.  Can you call your real estate agent at 10 p.m. at night or 7 a.m. in the morning?  Can they call you at those times?  This also feeds into the type of agent you choose and the personality match.  Just make sure you talk about it and see eye to eye before signing on the dotted line. 

It is important to keep in mind that you and your real estate agent may disagree on things that come up during the process.  In fact, it is pretty much assured.  That should not automatically lead to a break up.  Part of your real estate agent’s job and duty is to stay objective.  That means they may be required to tell you things that you do not want to hear; things that are in your overall best interest.  They should and will remind you of your stated priorities that got tossed out the window when you saw the three car garage with a built-in oil changing pit.  Often, they are just doing what you asked for at the beginning of the process.

You should expect a reasonable amount of stress and tension to exist during this process.  Remember, that is part of why you hired a real estate agent to begin with.  They do not experience the stress in the same way you do; they are not the ones making a major decision and life change, you are.  Real estate agents, even the best, can definitely be wrong; they can blow it too; but, they are the cooler heads in the room by design.  The key is not to make rash decisions.  Have your disagreement; get hot.  Do your freak out thing within the boundaries of respect.  Then make sure to sit with your agent when the heat of the moment is gone and you are calm to dissect what took place, distill the real issue(s) and arrive at your plan to move through them together. 

Well, we are almost at the end of our journey through real estate agent land.  We have discussed many things and shared many lessons.  You now know when you need an agent; how to know the good ones from the not so good; whether all agents are the same; how to find a good agent; how to evaluate what kind of client you are; and when it is time for a new agent.  The final post in this series will address the unfortunate situation where you and your agent cannot agree to amicably end your relationship and you need to force the break up.

Stacy was recently featured in an article in Muscle and Performance magazine (April, 2011).  If you are pregnant and looking for ways to exercise safely, check out what Stacy has to say in Stacy’s Muscle & Fitness Article.  Or, if you just want to see some gratuitous six pack abs shots of scantily clad guys and girls, here is the link to the full April, 2011 edition of Muscle and Performance magazine where her piece appears:  http://www.muscleandperformancemag.com/past-issues/2010/april. 

Stacy is a certified personal trainer and nutrition consultant who has been in the industry for 10 years. The last six of these years have been spent helping clients at Fitness Together achieve their personal goals. Athletics have been a part of Stacy’s life since her early youth. She grew up playing a wide array of sports, but eventually found her love in the game of soccer. Soccer, along with her academic achievements, helped pay her way through college as a Division 1 scholar athlete. After various injuries that put her on the sidelines, she found herself intrigued by the body’s ability to recover and rebuild through proper exercise techniques and nutrition. This is when she decided to pursue a career in fitness/nutrition, obtaining her BS in Exercise Science and graduating with honors at the top of her class. Stacy has a unique ability to apply her intricate knowledge of the human body to help enhance our clients’ fitness and weight loss goals. In her free time, she keeps herself active by working out daily, boxing, running, and enjoying the outdoors with her friends, family, and dog! Stacy has a true passion for helping others achieve their goals. 

For more information about Stacy or if you have any fitness or nutrition questions, shoot her an email at ftbethesda@fitnesstogether.com.  Additional contact information can also be found by clicking on my Trusted Referral Partners page above. 

Your wants, your needs, your personality – those are what will tip the scales in favor of one great real estate agent or another.  Let’s dive in.

What kind of client are you? 

You would not walk into a Ford dealership looking for a Honda or vice versa.  Nor would you hire an engineer to do your taxes.  Same holds true with real estate agents.  Ultimately, the best real estate agent for you will be one that provides support where needed, direction where desired and resources where appropriate.  All of those things depend on you.

Are you technically savvy or do you still play Ultima on your Apple II E?  Do you need or want lots of handholding or are you more comfortable functioning independently?  Do you have a ton of time to devote to this process or are you under the gun (keep in mind – you should never be in too much of a hurry that you don’t see the forest for the trees)?  Do you have specific needs; what are they?  Are you relocating to a new area that you know nothing about?  Are you extremely picky and difficult to work with (you know who you are!) or are you more laid back in your approach?  Do you work better with men or women; people older than you or people younger than you?  All of these things matter in selecting the right real estate agent for you. 

In the current real estate environment, thanks to the internet and social media, buyers and sellers have access to more and more information everyday that was traditionally only available to real estate agents.  Whether you are surfing www.homesdatabase.com, www.redfin.com, www.zillow.com, or assessment databases run by most states and counties, there is an almost limitless amount of information available on homes for sale and property values. 

If you are technically savvy buyer with time to spare, you can probably find out as much about a property listing as a real estate agent can.  Sort of begs the question as to why buyers need agents – emphasis here on “sort of.”  If the process of buying a home was limited to just finding the property you want, then perhaps all of my agent friends would need to find other ways to earn a living.  That and it would not be much of a “process” either.   

Identifying the type of home you want to buy or even the actual home you want to buy is just the beginning of the process.  A good real agent can help you identify the type of home you are looking for if you are struggling with that.  A good real estate agent will ask you a ton of questions, many that could seem silly, too far into the future or financially irrelevant.  It is best to answer them all as openly and as honestly as possible.  They have done this before and can help you narrow down a sprawling universe of choices to something manageable based on you, your spouse, your family and a mix of your needs, wants and finances. 

Even if you know what you want, have done the research, have houses picked out to see, and are ready to go, there is still plenty of value a quality real estate agent can add.  First, no matter who you are, you should never go to see a property without having an objective third party with you.  You could bring a buddy or a family member or your Aunt Jenny who used to be an agent or whatever.  Better than nothing; but, bringing a licensed professional that has seen countless properties and knows what to look for, what to ask about, and, what to “read” from the experience is definitely the way to go.   

Most of us that put in some time and effort can come up with good questions, see many, if not most things and so on; but, only an experienced professional has been around the block and can fill in the gaps.  Remember, as is the case in many of life’s arenas, it is not what you know; it is what you don’t know that can hurt you.  Very, very true in this process.  A good real estate agent can bridge that gap for you; in fact, is their job and their fiduciary to do just that. 

For buyers, helping you to identify what you are looking for, helping you research and find appropriate properties to see and going to see them with you hopefully brings you to a point where you are ready to make an offer.  Again, this is not a time to be forging ahead full speed by yourself.  Getting the offer right, with the appropriate contingencies and addendums is crucial.  A poorly set table will lead to a tough meal.  Even if you “know what you are doing,” you are emotionally connected to the process and it will be close to impossible to remain objective.  Like they say in my world, an attorney who represents himself has a fool for a client. 

Beyond seeing the house with you, your outstanding buyer’s agent (called a selling agent for some reason that has eluded me for 10 plus years) will evaluate the Disclosures with you; will run and manage the home inspection process (a critical part of the process probably worth a separate post); will connect you to a reputable settlement company and/or lender, if you need it; will ensure that the final contract reflects your expressed intent; will manage the negotiation with the seller/seller’s agent (called the listing agent) and will continue to run and manage these ongoing, shifting and overlapping processes until the home is yours.  Definitely easier said than done considering the number of twists and turns this process can take; from the simplest to the most complicated transaction. 

Another function that a really good real estate agent must perform is to stay detached and be the reasonable, objective and grounded voice for you throughout the process.  Believe it or not, buyers and sellers can get so entrenched in the emotions that are necessarily interwoven on both sides of the deal that they lose sight of the end goal – for the seller to sell and the buyer to buy.  Transactions blow up for all kinds of non-economic reasons that should never lead to such a drastic result.  A good real estate agent can prevent that.  Conversely, they can also force it where it should happen.  You, the client, is far too deep in the proverbial water to get out when all signs say they should.  

There is one final benefit to working with a real estate agent on the buyer’s side that I want to mention.  Just like there are jobs that never make it to Monster, CareerBuilder or Craigslist; so too are there homes that never make it to the open market.  The best real estate agents, unlike members of the general public, are tied into the channels of the market and are really the ones that know when something is going to get listed.  They necessarily maintain relationships as part of their profession to gain an edge over the next guy.  Knowing about properties before they get listed can be extremely valuable; a deal maker or breaker. 

For sellers, while the same bottom line is true where you have to match up what you need and want with what an agent brings to the table, the decision whether or not to use a real estate agent is typically much easier.  For the overwhelming majority of people out there, having a listing agent is a must.  Listing agents are your conduit to the market.  They know how to prepare your home to be listed and seen by other agents and buyers; they know how to price it (critical); and they know the channels to exploit to get your home the traffic it needs to sell.  Unless you are a former agent or stayed at a Holiday Inn Express, chances are, you simply cannot perform these functions to the same level of competence as a good real estate agent (even a bad agent might have you on this one). 

Even in a crazy hot market, where homes are selling within hours of going on the market, a listing agent, like a buyer’s agent for someone that knows the exact home they want to purchase, can still add value to the process.  First of all, “going on the market” is typically the function of a listing agent.  They are the ones that actually do that.  Further, they can manage the complicated offer review and acceptance process; especially helpful in a hot market where multiple offers are coming in with conditions, escalation clauses and so on.  Moreover, listing agents also serve as the objective, detached voice for their seller clients who get too deep in the process to make good, balanced decisions.   

Remember, we are assuming your real estate agent is in the “good to great” agent category.  Listing agents below this threshold can fall victim to self interest and list a home with their best interests in mind (getting it sold and sold fast) instead of their client’s.  Same goes for the buyer’s agent.  They too can exert improper influence one way or another and put a buyer in a home they should not be in or at a price that they should not be paying, or both.  These scenarios are clearly bad for the clients and a clear violation of the agent’s fiduciary duty; but, you can bet the farm that it happens every day and probably more often than anyone will freely admit.   

How to go about finding a good real estate agent? 

Now that you know what a good real estate agent can do for you, what kind of client you think you are and have a sense of the kind of agent you need, you have to actually go out and hire one.  Considering the overall intensity of the decision, you want to try to get it right the first time.  You may have to work with several real estate agents until you get better at evaluating them; but, that is okay too.  While there are some sticky contractual obligations between agents and clients to be aware of, you can and, at times should, fire your agent.  But; first, how to find one.

For me, there is only one answer to this important question.  The best way to find a great real estate agent is by referral and through networking.  The last thing you want to be as a buyer or seller is an agent’s first client (or even first few clients).  Like most other professions, real estate agents learn their trade through training, experience and, most importantly, through making mistakes.  As such, experience is key.  That is not to say you should not work with a younger agent.  They may have parents in the business.  If they are good, they most certianly spent time working under a mentor.  Bottom line – one of your goals in finding and working with any real estate agent is to avoid being a learning experience for them.  I am not saying that there won’t be any learning done, experience gained, curve balls or thinking on their feet as part of the process; just that you don’t want to be a guinea pig to the extent you can avoid it.  [Think Seinfeld - do you want to be the guy getting operated on in the room where other doctors are watching and learning?  Hell no!]

You can avoid that, or at least do your best to, by talking to others about their real estate agents, what they liked, what their challenges were, how they would do it better next time, etc.  Don’t forget to find out what kinds of clients these people were before ending the inquiry.  Your best friend may have had the best real estate agent ever . . . for them.  That agent might be the wrong choice for you – and not because of them!  Then go and meet with the real estate agents that you think are the best matches based on your referral and networking research.  Ask good, direct, honest questions and make sure to do plenty of LISTENING.  Worthy real estate agents will tell you exactly why they are or are not a good fit for you.  They may even have a referral for you if they do not feel that they are the best choice for you. 

The bottom line here is that you may need to kiss a lot of frogs to find your prince or princess.  I urge you to put the time and effort in at the beginning of the process to make the best possible first choice you can make.  While it is not impossible for buyers and sellers to fire their real estate agent and get a new one, it sure is a whole lot easier to get it right up front.

Despite all good intentions and sufficient time spent researching, networking and interviewing agents, there are times when the wrong decision gets made by clients and by real estate agents.  Remember, they are choosing you as well.  When that happens, it is important to carefully evaluate the relationships before making a change.  There is plenty already invested making it worth consideration before making a change.  In my next post, we will examine when it is best to make a change and how to go about doing it.

Right out of the gate, I can say with the utmost confidence that real estate agents play an important and critical role in the real estate transaction process.  No doubt about it.  The value a competent real estate agent can bring to bear is a game changer for everyone involved:  buyers, sellers, other agents, lenders, appraisers, surveyors, contractors, movers, and, most importantly, settlement attorneys (okay, maybe not most importantly).  The key, like many other vendor/vendee and principal/agent relationships, is to know when you need a vendor/agent and how do go about picking the right one. 

I have been swimming in the same pool with real estate agents since 2001 and have picked up a few insights along the way.  As an accident of timing rather than by design, I rode the bubble up to its peak and then, to quote Wyclef Jean, “With what goes up, must come down, the laws of gravity.”  And, so, I rode it down as well and continue to ride. 

One positive thing about the crash insofar as the contraction of the real estate industry goes, is that most of the real estate agents in the game for the quick buck are long gone.  Whether they were good or bad, they likely made a killing and got out; for them, hopefully not too late.  Necessarily, those that remain are, by enlarge, the better agents who have seen bubbles before, know their trade and continue to provide value to their clients.  Still, it is an important relationship, not to be entered into lightly and there remain plenty of real estate agents to avoid.  [That was gentle and nice, right?] 

When do you need a real estate agent? 

For both buyers and sellers, the first question to answer is whether or not you even need a real estate agent.  While the answer is predominantly yes, you should have one; there are some instances where it may not be necessary and it depends heavily on the person asking the question.  In fact, if you catch one of my real estate agent friends in a sharing mood and after 10 cocktails or so, they would probably agree, no guarantees. 

The answer lies in the functions a real estate agent performs; a good agent, one worth engaging and paying for.  For you buyers that think the cost of an agent can be dismissed because the seller pays for both, think again.  No matter what side of the HUD1 the agent’s fee ends up on, it plays a role in the overall transaction. 

For the moment, hold this “do I need a real estate agent” question in the back of your mind while I share with you qualities that good real estate agents possess and the many important roles they play in the process of transferring real estate.  An understanding of these concepts, along with understanding what kind of client you are, is required to really answer the question correctly. 

What makes a great real estate agent? 

Whether working for buyers or sellers, a great real estate agent will know the market.  Specifically, they will be connected to the ebb and flow of the financial and real estate markets across a broad spectrum – from globally to locally.  No, your real estate agent does not need to know details about the financial condition of any particular foreign country or what the cost of a shack on the coast of Kuala Lumpur costs.  My point here is that a good real estate agent will “get it.”  They will understand the general nature of how money and property are related to and affected by events from around the world to those around the corner.  Clearly, the more local information counts more; but, both can matter. 

A second essential characteristic of a great real estate agent is the ability to also “get” people.  Not only does your real estate agent need to understand and work well with you; but, they also need to be able to connect with and productively flow with the other side and their agent.  Keep in mind that real estate agents have to accomplish this in an often emotionally charged, tense, life changing (good and bad) event for both parties.  Even the most well adjusted, happiest and best buyers and sellers can find themselves on edge at some point during the process.  Oh yeah, let’s not forget that this is typically the largest financial transaction of people’s lives.  Add all that up and what you get is a complicated personal, emotional, financial and business transaction out there.  A good real estate agent understands that and is able to work effectively with everyone. 

Beyond those two critical attributes, great real estate agents must also have a solid mix of: 

• the patience of Job;
• a sharp eye for details – details about the property, the people, everything;
• a quality network of service providers (more about that later);
• familiarity with the contracts, addendums and settlement documents used in the process;
• ability to negotiate firmly without damaging the overall relationships or, worst case, kill a deal;
• honesty & integrity
• follow through
• charisma
• natural tendancy to talk “to” people, rather than “at” them or “down” to them
• accessibility
• drive, desire, focus, unselfishness

As far as the exact role of a real estate agent, that can vary greatly depending on what the client (buyer or seller) is looking for and their particular needs.  In the responses to my survey on this question, there were many overlapping elements.  The overall gist was that real estate agents are professionals that guide their clients through the largest financial transaction of their lives.  That they take an otherwise challenging, complicated and stressful process and make it significantly more palatable for their client.  That they care about the client and successfully meeting the clients needs more than getting a check at the end of the day.  That they zealously advocate for what their client is looking for and remind the client of their original goals, needs, expectations, etc. when they get off course.   

What makes a bad real estate agent?

Now that you know what makes up a great real estate agent, it is much easier to understand what makes a bad agent.  Quite simply, bad real estae agents lack the qualities set out above in sufficient supply to get the job done.  A great real estate agent will have a mix of the characteristics set out above; there is no being great without such a mix. 

For example, take a real estate agent that knows everything there is to know about finance and the real estate markets on a global, national, state, local, city, town, street and block level; yet, cannot read people or remember which contract addendums are required.  They might make a great addition to a team of real estate agents; but, that is not the person you want to work with one on one.  The mix is critical and, to be truly great, an agent must score high marks across the spectrum. 

An important note about vendors and inappropriate steering.    Good real estate agents know reputable title attorneys, lenders, home inspectors, builders, plumbers, landscapers, electricians, movers, designers, and so on.  The key is that a quality real estate agent will refer you to the right professional in their network of trusted service providers when appropriate and necessary . . . for you.  Just like a bad mechanic will always find something wrong with your car to fix for a fee, a bad real estate agent will always find a reason to send you to one of their buddies to get something done.  Not only might the work or service itself be unnecessary; but, the referred professional may not be the right person for the job to begin with. 

Despite federal law to the contrary, the real estate industry is fraught with “scratch my back” interrelationships, with real estate agents at the top of the proverbial food chain.  In fact, I am sorry to say, the kickbacks, steering and other prohibited and inappropriate behavior is more akin to an infection that the industry cannot get rid of.  With little to no actual enforcement of the law; however, there is little incentive for all of the money making circles out there to play by the rules.  But; I digress, a post (maybe a whole book) for another day. 

The point here is that as a client, you need to know that this type of unfair play exists and what to watch out for.  Just like you get a sense from your slimy mechanic that something isn’t right, so too will you (if you are paying attention) get a sense that something is off if you find yourself lining the pockets of your real estate agent’s referral partners. 

Don’t get me wrong.  There are plenty of good real estate agents that make outstanding referrals to friends and colleagues of theirs, that they have known for years; maybe even a family member.  That is what you want, right (hint:  the answer is yes)?  Getting connected to someone that is a known provider of excellent service is part of what your real estate agent should be doing for you.  The line gets crossed when you do not actually need the service referred or if the provider is not the best one for the job. 

I can tell you that as far as the referral to the title attorney, whether or not the real estate agent is getting something inappropriate out of it, the consumer is generally protected.  Title company fees are all pretty much the same and the insurance rates are regulated; so, they are the same.  You may just not get as high a level of service from the real estate agent’s “buddy” title company; but, in the end, you will still get what you came for – a closing where you buy or sell a home.  Business for a title company is a volume thing; so, there is no reason to expect they will not do their job.  Any inappropriate behavior is simply to drive the work to the front door.  Once inside, it is all the same. 

Are all real estate agents really the same? 

Yes, this is a rhetorical question and, no, real estate agents are definitely not all the same.   

First of all, just like in any profession, some real estate agents are just not good at their job.  For whatever reason, they are not competent nor qualified to do what is necessary and required of them.  They may be great people; but, they are just not good real estate agents.  Review the information above and avoid them as best you can.  If you get stuck with one, see below on how to know it and how to get out. 

Beyond the unqualified and incompetent, beyond the agents that are just okay, there are plenty of very good real estate agents out there.  Now that you know the characteristics that good agents bring to the table, you need to figure out how to pick one and that can be tough since there are so many good ones if you know how and where to look. 

The real differentiator here is you.  Within the subset of good agents, some are better at:  short sales & foreclosures; distressed assets; new construction; fix-er-upers; co-ops; condos; thriving singles areas; family neighborhoods; urban walkable; and so on.  Once you sift through the plethora of agents you should not be considering to begin with, knowing what you need and want will bring you the rest of the way to your final decision.

My next post will dig into a topic you know much better than I.  We are going to talk about you.  In order to find the right real estate agent, you have to know what kind of client you are likely going to be; so, do not miss:  Picking the Right Residential Real Estate Agent:  Know Thyself First to Succeed.

There have been just a few changes over time, perhaps even today while you are reading this, that play a role in making that choice [insert sarcasm here].  Times have changed; social values have changed; the roles of men and women in the economy have changed; life expectancy has changed; the process for buying and financing homes has changed; the ways people work and live have changed; the ways people save and spend money have changed; the speed, accuracy and flow of information has changed; all in all, everything has changed.  As we will see, all of these changes, and more, play critical roles in deciding whether to rent or whether to buy.

A true, comprehensive discussion of this topic could fill a doctoral thesis or a whole Time Life collection of books that you could buy on TV for $19.99 each (“but wait, there’s more . . .”).  My goal here is to speak plainly, practically and directly to those of you wrestling with this question in the big picture.  In Posts to follow, I will also try to put somewhat of a local spin on the question based on the experience of living, working, owning and renting in the DC metro area as I have done and still do.

First, a bit of history.  Then, some current events.  It is important to get a sense of the two before looking at the practical side of this quandary.

Old Way (the “history”) 

• Grow up living at home, generally through high school graduation.
• Get a job when you turn 18 or serve in the military – either way, you are out of the house & earning money; probably saving it too. 
• Go to college, probably get at least a part time job & live at home or find a place to live on/off campus; but, either way, typically not a free ride. 
• Rent an apartment with friends, classmates, workmates, etc., or alone if possible.
• Study and/or work hard, save, save, save; graduate, get a job, work hard, save, save, save.
• Make a sizeable down payment on a small home or townhome, usually with a spouse, and finance the rest with one mortgage loan from a local or regional bank where you actually know someone (and they know you).
• Work hard, save, save, save; small home or townhome grows in value over time.
• Use equity in home and/or some savings to move up and into a bigger home; typically when kids enter the picture or some measure of professional success/security attained.
• Continue process over time of buying wisely, building equity, saving, moving forward.

 New Way (the “current events”) 

• Grow up living at home, generally through high school graduation.
• Go to college, study and live either entirely on your parents’ dime or, at the very least, with scholarships and/or financial aid, load up on “free” credit cards & spend, spend, spend.  [Caveat here:  of course there are still plenty of people that do not rely on their parents for college and pay their own way.  These people are to be admired and praised.  For purposes of this Post; however, they are not the problem.  They already “get it.”]
• Skip college and go straight to work while living at home, load up on “free” credit cards & spend, spend, spend.
• Skip college, skip work, come up with a great idea, it goes viral, you retire rich forever at 21.  [I highly recommend this option if you can swing it!]
• Graduate college, find a job (hah, if you are lucky), mimic a boomerang, move back home.
• Spend, spend, spend & keep running up those credit card balances.
• Once possible based on income and available credit, rent an apartment with friends, classmates, workmates, etc., or alone.
• Eventually, without much in the way of long term financial or family planning, buy a home with little to no down payment, financed anywhere from 90% – 125%  by up to three mortgage loans from lenders you have probably never heard of.
• Spend, spend, spend.
• Encounter real life issues like recessions/depressions, job loss, unemployment, underemployment, real estate crisis, soaring health care costs, uncontrollable fuel & energy costs, constantly rising food costs, childcare, and so on.
• Lose equity, cannot refinance, rates adjust, lose home, file bankruptcy, credit wrecked, now what.

Granted; I have taken plenty of literary license here to make a point.  This is not the way it always happened nor is it the way it always happens.  The goal is to illustrate the shift in values and behavior by the majority, or by enough of the minority to cripple a nation and perhaps the whole world.  And, yes, I speak in sweeping generalities, again to make a point.  I am not looking to single out any religious, ethnic, racial or other group.  Fortunately or unfortunately, depending on the day for some, I believe people in all groups and in all walks of life have to face the new, current economic and social reality.  That is the backdrop against which I write. 

From what I read, see, hear and experience, apparently, “people” used to have stronger values to which they adhered to more strictly.  I will even soften that a bit by acknowledging that perhaps people have the same actual values and feel just as strongly about them; but, it sure is a whole lot easier to toss them aside when you lose your job for no good reason, or get a Notice of Foreclosure or of Eviction, or get sued, or suffer any of the other fearful examples of our current times.  For many, if not most, entrenched values have a funny way of taking a back seat to practical reality.  Although, some would argue with conviction, perhaps rightly so, that it is when one is on the brink or staring into the proverbial abyss that those values and adherence to them matter most.  Those with the strength to do that deserve accolades and admiration.  Most go another direction. 

In any case, it is safe to say that there has been a shift away from working long and hard, focusing on saving, planning and preparing for the future, buying within one’s means and having skin in the game, using credit conservatively, etc.  These days, for my generation and those after us, it appears to be all about the here and now, the immediate, whatever is right in front of us controls and the rest can wait.  We do not save, we consume.  We do not plan, we act.  We use and abuse credit and live far beyond our means.  That “we” includes me, many of my friends and peers, work colleagues, local, state and national governments – just about everyone save those in the minority, the “old-schoolers” still breathing and walking among us.   

That shift in values and patterns has a direct impact on the buying versus renting question and contributes significantly to making the answer an elusive one.  The classic lawyer answer “it depends,” is about as concrete as you are going to get in this arena.  So, let us take a look at some scenarios, the corresponding considerations and where they lead to along the “it depends” continuum.  [Please note:  if you do not currently have a job or other source of income, both renting and buying will be a stretch and, while I can relate and empathize, this Post probably won’t do you much good until you solve that situation.] 

Conventional rent versus buy considerations. 

It used to be so simple, right?  If you were new to an area or just leaving home, you would rent.  If you were not able to put money away over time to afford a sizeable down payment, you rented.  If your job had you moving around on a regular basis, you likely rented, especially if you were single.  Basically, if you were geographically stable, employed and able to sack away a 20% down payment, you bought.  Otherwise, you rented. 

Renting sometimes gets a bad rap; but, under the right circumstances, it can be a sound personal and fiscal choice.  The traditional justifications for residential buying no longer carry the same power and security.  Specifically, putting a chunk of post tax, hard earned and even harder saved dollars into a home with the plan to live there, gain equity and ultimately sell and move up is a distant memory in most cases.  Values have dropped so much and things are in such disarray across the board that even the vaunted income tax write-off for mortgage interest does not pack the same punch as it used to.  In fact, that write-off has been on the chopping block in Congress lately.  These days people are left wondering just what income is it that they are looking to offset with that write-off. 

Renters do not have to worry about the fluctuation in value of the home they are in; the owner does.  Renters do not have to pay property taxes; the owner does.  Renters do not have to maintain the home beyond normal wear and tear usage; the owner does.  If the roof is leaking, if the HVAC is down, if a pipe bursts – that is the renter’s immediate issue in terms of limiting damage; but, it is the owner’s responsibility and COST to fix it.  In some cases, renters do not even have to cut the grass; the HOA or condo association that the owner pays for handles it.  See, renting does have its perks.   

In an environment where owners are not realizing the value gains that offset the economic and non-economic costs of being a landlord, renting looks that much better.  Now, let us take a look at the different situations people are in today and how the rent versus buy question plays out. 

You currently live at home or affordably rent. 

Congratulations.  You may not believe it; but, you are in the most flexible of all situations with the biggest upside and smallest downside.  If you are making ends meet either at home (and your folks are not kicking you out) or in your rental, you have the luxury of time.  That is your small downside; you can stay put and plan your next move strategically. 

Home values, mortgage rates and underwriting standards are in constant flux.  While values are anyone’s guess these days; it appears that rates will stay low and underwriting standards will remain stringent for the foreseeable future.  So; for you, that means you can study the market, find your sweet spot, take advantage of the historically low rates and take your time getting through underwriting.  To get through that process and get a loan, generally speaking, you will need good credit, a cushion between your monthly income and expenses, and a reasonable loan to value ratio (translation:  ability to come up with a decent down payment – skin in the game counts big!). 

The big upside here is that values are down just about everywhere.  If you are renting, looking to buy, and have the credit to take advantage of the low rates, you can get more house for less money than ever before:  pretty much, the best pure buying market in history.  The practical reality for you is that you can buy a home for less, finance it for less and move in with equity.  That’s right; you can get plenty of house, for an affordable cost, that has built in value for long term savings.  You can also try to stretch yourself into more house than you need and run the risk of it coming back to haunt you. 

If you are the handy type (which I am the furthest thing from, everyone knows that my toolbox is necessarily filled with tools AND band-aids), or if you do not mind living with some disarray while projects are started and completed, you can do even better.  Case in point, my childhood buddy JB.  JB picked up a home in a very affluent Montgomery County neighborhood.  When he bought it for peanuts around 2000, you could barely call it a home.  I mean, he and his girlfriend (now wife) lived there; but, it was a disaster.  One needed a ladder to get in and out of the basement level.  I am sure he took plenty of crap for his choice, including from me; but, fast forward 10 years and JB’s family lives in a beautiful home and they are laughing all the way to the bank. 

The process was simple.  JB and his girlfriend were renting and got into the house super, super cheap due to its condition.  They lived there, endured the mess, worked on this or that to make it better and to get through.  Over the next several years, their home quadrupled in value if not more.  They were able to borrow a fraction of what the value was at the time (admittedly way, way overinflated) and do a complete tear down.  End result, even after the ongoing market correction, is an amazingly beautiful, new home with a reasonable mortgage, valuable equity for the future and, most importantly, a great BBQ & beer backyard.  Nicely done! 

You currently own a home and are either even or above water. 

Consider yourself lucky.  To own anything right now and be even or above water is a blessing.  You must have gotten in a long time ago and did not abuse the real estate boom, pulling all the inflated value out of your home, only to watch that value disappear faster than Lindsey Lohan’s sobriety following an AA/NA meeting.  Either that or you are part of the minority that saved money for a down payment, bought within your means and, again, did not go crazy with your equity during the boom. 

You too have some flexibility; but, chances are, you are facing pressure to move forward or you would just stay put.  That pressure often comes in the form of adding mouths to feed to the family.  I can tell you from personal experience that it is not the need to store extra food; rather, it is all the crap that comes along with that extra mouth to feed that requires more space.  Toys, clothes, books, regular diapers, swim diapers, stuffed animals, towels, toiletries, backpacks, wipes, train tables, bulldozers, balls and baskets, cribs, bassinettes, beds, changing tables, rocking chairs, and so on.  It is a wonderful problem to have. 

The favorable buying market can work to your benefit; however, you can pretty much dismiss the thought of making a killing on your current home.  Perhaps you have enough equity to make a true step up purchase; one where your equity serves as your down payment and you do not significantly increase your debt load.  If you do not have that kind of equity, perhaps you have saved some money for a down payment or have the ability to put something together for that.  Translation:  bigger house, same mortgage, flat equity.  Of course, you will need good credit to make this work.  Otherwise, you will pay a higher interest rate which means a higher monthly payment which means you just lost your value proposition.  You might as well stay put. 

You currently own a home and are underwater. 

Welcome to America my friends:  the land of baseball, opportunity and underwater homes (oh yeah, and party politics at the cost of our nation’s credibility and stability).  You are not alone and, yes, your situation sucks.  One choice is to just ride it out.  If you can afford to pay your mortgage (don’t waste your time and energy trying to refinance unless you are only slightly underwater and have awesome credit) and do not have any pressure to move (e.g. job change, young kids, older kids moving back home, senior parents moving in, etc.), you might as well stay put. 

If you have to make a move or do not feel like living in the same upside down home forever, you might want to consider renting.  The other option would be to sell at a loss and then be able to somehow make up that loss both in terms of net worth (what lenders look at when evaluating you for a mortgage) and in terms of coming up with a sufficient down payment.  Unless you are independently wealthy, a lottery winner or have a silver spoon dangling from your mouth, option one is likely what you are looking at. 

In the end, renting may provide a tolerable compromise.  I say “in the end” because it is quite a process to get from start to finish here.  As an owner with a mortgage, you are going to have to make a choice as to the lesser of available “evil” options to achieve the end goal of getting out of the underwater asset and into a rental.  Those choices include:  (i) short sale; (ii) deed in lieu of foreclosure; and (iii) foreclosure.  I have previously posted extensively on each of these topics on this site and strongly encourage you to inform yourself as to the characteristics, advantages and disadvantages of those options before moving forward with any of them.  They all have their own constantly changing mixed bag of pluses and minuses that you need to understand before experiencing. 

So, fast forward to the situation where you are no longer burdened by the ownership of a home that is not worth what you paid or owed on it.  At this point, renting can be a wonderful solution.  It is important to remember that one still must apply for a rental.  There are still qualifications for being accepted as a tenant and it is not made easier by having to address a short sale, deed in lieu or a foreclosure.  All have negative credit implications.  The upside is that every day more and more people are in this situation.  That means more and more landlords are going to have to see their way through to accepting people as tenants with real estate related credit blemishes. 

As with most scenarios when these decisions are being made, the more institutional the landlord, the smaller the chances for being able to personally connect with someone in order to explain what happened, why you would be a good tenant, how you could afford it, etc.  While I can see how the landscape is shifting in favor of working with people with fallout credit issues from the global real estate crisis, there is nothing that says that they have to and you should be prepared to address that head on. 

Bottom line – if you can get out from under the distressed asset you owe on and can connect with a landlord that is interested in renting their place to someone that is not perfect; but, can demonstrate the willingness and ability to pay, renting could be a fantastic option.  Chances are you will get a bigger living space at or less than what you were paying on a mortgage for an overvalued home. 

You currently own a home and are in foreclosure. 

Sadly, you too are not alone.  Not by a long shot.  No sense in reliving the past several years of the real estate rollercoaster, the resulting crashes and value losses (with more yet to come); suffice it to say that there are millions and millions of Americans in this situation with more joining the ranks daily.  Your options are certainly limited by your current situation; however, renting may be a viable option in your not too distant future. 

Much the same as those living in homes that are underwater; but, who can currently afford the payments (or choose to afford the payments until it strategically suits them otherwise),  in the end, renting may provide a tolerable compromise.  With a foreclosure underway, your time period for taking action is shortened; but, you still may be able to make a choice as to the lesser of available “evil” options to achieve the end goal of getting out of the underwater asset and into a rental.  Again, those choices include:  (i) short sale; (ii) deed in lieu of foreclosure; and (iii) foreclosure.  I have previously posted extensively on each of these topics on this site and strongly encourage you to inform yourself as to the characteristics, advantages and disadvantages of those options before moving forward with any of them.  They all have their own mixed bag of constantly changing pluses and minuses that you need to understand before experiencing.  

So, fast forward to the situation where you are no longer burdened by the ownership of a home that is not worth what you paid or owed on it.  At this point, renting can be a wonderful solution.  It is important to remember that one still must apply for a rental.  There are still qualifications for being accepted as a tenant and it is not made easier by having to address a short sale, deed in lieu or a foreclosure.  All have negative credit implications.  The upside is that every day more and more people are in this situation.  That means more and more landlords are going to have to see their way through to accepting people as tenants with real estate related credit blemishes. 

Again, as with most scenarios when these decisions are being made, the more institutional the landlord, the smaller the chances for being able to personally connect with someone in order to explain what happened, why you would be a good tenant, how you could afford it, etc.  While I can see how the landscape is shifting in favor of working with people with fallout credit issues from the global real estate crisis, there is nothing that says that they have to and you should be prepared to address that head on. 

Bottom line – if you can get out from under the distressed asset you owe on and can connect with a landlord that is interested in renting their place to someone that is not perfect; but, can demonstrate the willingness and ability to pay, renting could be a fantastic option.  Chances are still that you can get a bigger living space at or less than what you were paying on a mortgage for an overvalued home that you could not afford. 

You lost your home to foreclosure. 

Once again, sounding like a broken record here, for whatever it is worth, you are not alone.  For better or for worse, never before in the history of our country have so many homeowners been displaced by foreclosure.  These former homeowners and their families need to live somewhere and face limited options.  They can stretch out the foreclosure and corresponding eviction process as long as possible (for several years in some cases); they can move in with family and friends; or, if they are lucky, they can rent. 

A concluded foreclosure is a significant obstacle to overcome in most rental situations.  Unless it is someone you know, someone that is desperate (may not be a good idea for other reasons), or someone that will otherwise look past the foreclosure without much concern, you are going to have to deal with that blemish.  Remember, to keep your sanity, your pride and your self esteem intact, it is critical to remember that it is not personal.  It is business.  Think about the situation in reverse and what you would want from someone coming out of a foreclosure that was looking to rent your place.  Chances are that you would not just hand over the keys on a handshake.  Neither will anyone else. 

My suggestion is to be as open and as honest as possible with any prospective landlord.  Address the foreclosure issue head on.  Maybe offer to get a cosigner; maybe offer to pay a few months rent in advance (hopefully you saved while not paying the mortgage); maybe a letter from your employer that your job is safe.  Your role is to do whatever it takes to show that the foreclosure was a departure from an otherwise solid history of incurring debt and paying your bills on time.  Chances are that your prospective landlord has not escaped the pain of the last few years either and will be open to something reasonable.  

Again, the more institutional the landlord, the harder it is going to be to get past the foreclosure issue.  Over time; however, I personally believe there will have to be a softening of standards across the board, from the biggest banks and property managers down to the little guys, in order to avoid empty rental spaces and empty homes.  Other than transitional moves and people with adjustable rate mortgages (the tiny minority at this point), who other than those displaced by the years of real estate crisis will be left to rent and/or to borrow?  If standards of renting and lending do not adjust to this reality, there will not be too many of us left that can qualify to rent or borrow to own.  

As you can now surely see, the renting versus buying debate in the current social and economic environment is complicated.  For many, it is like an onion, where there is layer upon layer to get through and they all make you cry.  Like onions though, once you get through the cutting and the crying, you can turn it into something entirely digestible.  No matter where you come out on this issue, stay flexible and connected to the various sources of information out in the marketplace.  Things are changing so quickly, for better, then worse, then better again, that this whole piece may be outdated by the time you have finished it. 

Stay tuned.  Whether you are looking to buy or to rent, you are probably thinking about real estate agents.  A good agent can be an invaluable asset in both situations while a bad one can make an already stressful process unbearable.  My next Post will break down when you need an agent, when you don’t, how to go about finding a good one and how to know when you have a bad one.

All my life, I have worked on being less focused on the principle and more aware of the big picture.  Call it a quest to better my “is it worth it” meter.  Well, thankfully, I have finally found the antidote to my often principle driven blindness.  That’s right; you guessed it, my boy.  These past three years, which have passed in a flash and at a glacial pace at the same time, have been an ongoing exercise in figuring out what is worth it, what is not and, ultimately, how to pick my battles and minimize conflict.  For me, and perhaps you too, lessons learned in the daddy arena can and often do have broader applications in the adult world. 

As a daddy, I have noticeably less trouble figuring out what is worth it, when to fight the good fight, and more importantly, when to let it go.  While that is a nice observation, it is the “why” that offers insight on how to bring that success into my adult life.  The key lies in what is going on inside my head and heart when evaluating and processing input as a daddy versus as an adult, interacting with other adults. 

While I have been a dad for more than these past three years, my education in daddy-hood did not begin in earnest until three years ago.  For me, it took being an everyday dad, an every second of every minute of every hour of every day dad.  That is probably so due to just how stubborn I am and just how principle focused I can be.  Nothing short of full immersion was going to put a dent in this thick head of mine. 

Truth be told, the immersion process began in earnest during the months leading up to my son’s arrival.  I read, digested and absorbed book after book, blog after blog, article after article about  so many things related to the new, life changing experience that was about to happen.  I read and talked to countless people about things like:  being a good partner for my prego wife; getting the house ready, getting myself ready, what would happen right out of the gate, what to expect in the first month, quarter, year, and so on.  Nothing like fully engaging the brain to begin a process that is driven by the heart.  Oh well, hindsight is always crystal clear and it was good information anyway. 

What you cannot read about and what no book ever tried to relate (not that it could really be grasped until experienced anyway), is the fundamental shift in thought that occurs the minute that little bugger comes out.  As I have blogged previously, for me it was a visceral, noticeable, and remarkable shift that took place automatically, without thought or effort, all in less than a nano second.  Specifically, it is this fundamental internal shift that I feel drives the result about being better able to pick out worthy the battles and how to minimize conflict. 

We all see the world through our own eyes.  Whether you wear glasses, contacts or nothing at all, everyone has “lenses” through which we see that are colored, shaded, cracked or even sometimes broken by life’s experiences.  Whatever comes in and gets processed undoubtedly changes what and how we see whatever follows and is to come.  When my “daddy clip-ons” got permanently affixed to my set of lenses, my worthiness processing engine and my tolerance for conflict changed . . . for the better. 

Making daddy decisions, any decision, from the smallest (e.g. is this a good time to pee?) to the everyday (e.g. what am I going to pack my kid for lunch?) to the significant (e.g. is it safe to leave my kid with that day care provider?) engage a new, enhanced decision making process that is full of factors never before considered and designed to obtain results never before desired.  Interestingly, because it is a new system, it is constantly being challenged, taking in new information and evolving.  Definitely a lifetime process considering the learning curve and the ever shifting playing field! 

These newly considered factors and desired results that run from the rational to the irrational, from the minutia to the broadest strokes possible, are what focus, strengthen and augment the ability to filter what is important, what is worth it, and to pick battles and to reduce conflict.  What sorts of factors you ask?  Since that is the basis for what you are reading and considering (I hope) here, let me toss out a few – they all start with “Hmmmm,”: 

• . . . if I pee now, and actually close the door (a rare luxury now), will my baby roll off the bed, do a triple lindy, get hurt and hate me for life?
• . . . if I accidently leave a toy in my newborn’s bassinet or in my baby’s crib, will he choke on it or get poked by it [a real fear to be sure; but, considering that most you reading this had parents that thought a swaddle is what you sat on when riding a horse, put us on our bellies to sleep in a crib full of toys and blankets and did not know what a seat belt, let alone a car seat was, I think the pendulum has swung far from center) ?
• . . . if I swaddle (a.k.a. baby burrito) my little one wrong and put them at a 41 degree angle instead of a 45 degree angle, will he cry all night and never develop healthy sleeping habits?
• . . . if do not continue to introduce my toddler to a variety of foods despite his messy and repeated protests, will he eat PB&J forever?
• . . . if I snuggle my little guy in his new bed before he falls asleep, will he always need me to be in there to fall asleep with him or can he hack it?
• . . . if I do not push my rough and tumble adventurer to push the limits of safety and physics, will he grow up shy, timid and afraid of challenges?
• . . . if I choose this day care provider, preschool, soccer class, swim instructor, etc., will they be the “right” choice that will work for my kid and me/us?
• . . . if I let my stubborn little negotiator get away with an extra ten minutes on the iPad tonight, will he never learn discipline, boundaries, limits, etc?
• . . . and so on, forever. 

Luckily, for our purposes here, the actual answers to these questions, and the zillions more like them faced by parents every day, do not actually matter.  Incidentally, just in case you are looking for an answer, that’s easy, same answer for each one, “it depends.”  ☺

The point is that when making daddy decisions, there is not an option left out, a thought not considered, a down line benefit or consequence not evaluated (if possible, of course).  Use whatever corny euphemism you want for these decisions – you kicked the tires, looked under the hood, left no stone unturned, dug deep, thought it through (a cousin of the “think before you speak” mantra that has haunted me like Casper’s unfriendly brother, Foot in the Mouth).  One does all of this instantaneously when wearing the daddy hat, for there is little time to waver or the game is over anyway, and it is done for very good reasons.

The goals are to be safe; to be consistent; to be flexible to each new or repeating situation; to teach; to allow for learning; to create safe zones for making mistakes; to consider the feelings & emotional state of the recipient; to fashion and elicit good behavior; to foster and enrich patience, love, kindness, determination, self help, awareness; to grow critical learning and coping mechanisms for life’s unavoidable challenges, joy and pain; and to do anything and everything else possible to help your little one be the best they can be with a side helping of trying to keep them (and you?  too late?) out of therapy for a long as possible.  Again, how actively you are engaged in the process and/or your relative success (remember, all success and failure; gains and losses in this arena are relative and can only be scored in hindsight) does not matter.

Here is what matters – the short and the sweet of it all.  When is the last time you engaged in this kind of intense, detailed, considered and wide sweeping process when interacting with other adults?  You know, when you take your daddy or mommy hat off, or even just put it to the side for a minute, and exist in the “real world”?  Not with family or close friends who you typically show more regard; I am talking about with “everyone else out there” if you will.  If you are anything like me, the answer is not nearly enough and that is being kind, very kind.

Now, I am in no way, shape or form suggesting that we need to, or that it is even possible to bring that level of analysis and scrutiny to every relationship and into every human interaction in life.  Unless you are a well trained, highly practiced Buddhist monk, for whom I have the highest respect, it is just not going to happen.  Lucky for me and you, this is not a black and white arena.  Just bring a little of it, some measure of heightened thought about “the other person” when engaging your worthiness meter or your conflict barometer.

When it is your kid, as it should be, it is all about them and you and them.  Try making your interaction and connection with others, with strangers, a little less about you and a little more about them and you and them – just like you did when you first put on that daddy or mommy hat.  Trust me, I know what I suggest here is not easy.   That jerk who parks in the rush hour lane definitely deserves to have his windows bashed and his tires slashed.  That rude shopper that has 20 items in the 10 item express lane deserves a swift removal to the back of the longest line in the store.  That moron talking on the phone, texting and surfing the internet all at the same time while driving deserves to have their license yanked.  I get it.  I know.

So then, why in the world should you and I even care of think about doing this if it is a challenge and does not come naturally (for most)?  We should care and we should try because it is US that ultimately stand to gain.  By sharpening and honing our worthiness meter and paying more attention to our willingness to engage in conflict, we will most assuredly find ourselves getting upset less and experiencing less conflict.  OUR STRESS LEVEL WILL DECREASE AND WE WILL BE HAPPIER.

Just remember, if it were your kid, you could do it, you would do it and the result for you both would be better.  The reverse engineering of adult relationships through lessons learned as a parent.  Hmmm.  If it makes being an adult as much fun and as enriching as being a daddy, I am all for it and maybe you should be too.  Remember, I always enjoy feedback, push back and shared experiences.  Let me know how it goes and good luck!

Now, for the rest of us, the millions and millions of people that do not have a job that pays so well, have less than stellar credit and have little to no cash in the bank or have to break out a history book to refresh yourself of what equity in your home used to be, this post is for you.

Here in the DC Metro area, we are extremely lucky.  It may not feel like it sometimes with the heat, the politicians (hmmmm, could all the hot air emanating from Capitol Hill and the White House, respectively, be contributing to the heat wave – certainly can’t be helping), the traffic and so on.  However; if you believe in numbers and statistics, the DC area is the place to be.  The job opportunities here, thanks in large part to the Federal government and all of its spin offs, are the best in the country.  Similarly, depending on what you read, we are the only region showing an uptick in real estate values (Prince George’s County being the major, major exception) and the region never dropped off as much as the rest of the country, even at its worst.  

So, what is my point?  Good question.  My point is that there are options for those looking to purchase a home here in the region in addition to standard lending channels.  Unknown to most, there are a multitude of agencies and programs to help people get homes and you do not have to be destitute to qualify.  In fact, it is highly likely that most people with decent jobs automatically assume they cannot qualify for help.  Not true; not true at all.

In today’s Washington Examiner, a comprehensive list of assistance for home buyers in Maryland, DC and Virginia is provided.  There is no author for me to credit (Staff Writer) for the information set out below; however, the link to the article is:  http://washingtonexaminer.com/local/real-estate-news/2011/07/local-programs-offer-housing-help-tight-economy.  I hope you find the information useful.

DISTRICT OF COLUMBIA

IRS Taxpayer Assistance Center
500 N. Capitol St. NW
Telephone:  800-829-1040

First-Time Homebuyer Federal Tax Credit:  The credit offers from $2,500 (if married and filing separately) to $5,000 for a home in the District purchased during the tax year by Dec. 31, 2011. Income and previous home ownership restrictions apply.

Department of Housing and Community Development
Telephone:  202-442-7200
Website:  www.dhcd.dc.gov

Home Purchase Assistance Program:  Provides interest-free loans of up to $40,000 for down payments and an additional $4,000 toward closing costs. The loan is deferred for the first five years and amortized over 40 years. Most recipients contribute $500 or a percentage of liquid assets. One option allows buyers to purchase homes that require repairs with a combined $5,000 to $35,000 loan from the first trust lender, and a Home Purchase Assistance second trust loan toward down payment and closing costs.

Employer Assisted Housing Program:  District government employees who are first-time homebuyers may be eligible for matching down payment funds of up to $1,500 and a deferred loan of up to $10,000. The separate Negotiated Employee Assistance Home Purchase Program offers grants from $3,000 to $26,500 to District government employees covered by certain collective bargaining agreements.

Home Purchase Assistance Program Enhancement, Neighborhood Stabilization Program 2:  Revitalizes neighborhoods hit by foreclosures and vacant properties. Down payment assistance of up to $77,000 including closing costs is offered in Deanwood, Ivy City/Trinidad and Historic Anacostia on a first-come, first-served basis.

For more information on these programs:

Lydia’s House:  202-373-1050; www.lydiashousendc.org/OurPrograms/OurPrograms.htm#ChangingNeighborhoods

Latino Economic Development Corp.:  202-588-5102; www.ledcmetro.org/en/homeownership

Manna Inc.:  202-832-1845, www.mannadc.org/template/index.cfm

University Legal Services:  202-547-4747 or 202-396-1201 (Northeast); 202-889-2196 (Southeast); www.uls-dc.org/About_ULS-HCP.htm

Housing Counseling Services:  202-667-7006; www.housingetc.org/

MARYLAND

Community Development Administration, Maryland Department of Housing & Community Development
Telephone:  410-514-7000 or 800-756-0119
Website:  www.mdhousing.org

Maryland Mortgage Program
Telephone:  800-638-7781
Web site:  www.mmprogram.org

Down Payment and Settlement Expense Loan Program:  Buyers approved for a CDA first mortgage loan through the Maryland Mortgage Program may apply through participating lenders. The 30-year, no-interest, deferred loans of up to $5,000 are repayable when the house is refinanced, sold or transferred. There is no minimum borrower contribution.

Partner Match Programs match funds offered by employers, builders and developers, and others for additional assistance to DSELP loans for buyers approved through the MMP.

House Keys 4 Employees:  DHCD will match contributions from participating employers for up to $2,500 as a no-interest, deferred loan. The new Smart Keys for Employees enhancement to House Keys 4 Employees provides an additional $1,000 if the property is in a priority funding area and is within 10 miles of the borrower’s employment or within county boundaries.

Builder/Developer Incentive Program:  For eligible buyers, the MMP will match contributions from participating builders and developers for up to $2,500 on no-interest, deferred loans.

Community Partner Incentive Program:  Eligible borrowers who receive contributions from a community partner can get matching funds of up to $2,500.

For more information: 800-638-7781; www.mmprogram.org/downpayment.aspx

For additional resources:  www.mmprogram.org/counseling.aspx

MONTGOMERY COUNTY

Housing Opportunities Commission
Phone:  301-929-6700
Website:  www.hocmc.org

First Trust Mortgage Purchase Program:  Provides a 30-year, fixed-rate interest of 4.5 percent on first-mortgage financing for homes in Montgomery County. Maximum sales price: $429,619. Call 240-773-9200 for more information.

Revolving Closing Cost Assistance Loan Program:  Offers closing cost assistance to qualified buyers at a 5 percent interest rate for 5 percent of the closing and/or down payment costs up to $10,000. Maximum sales price: $429,619. At least one borrower must work in Montgomery County.

Montgomery County Employees Closing Cost Assistance:  Montgomery County has registered as an employer with the state’s House Keys 4 Employees to offer employees of all agencies listed in the county budget the opportunity to receive additional assistance through gifts or loans toward the purchase of a first home in Montgomery County using a state mortgage. Call 240-773-9200 or 240-773-9195, or visit www.hocmc.org/housing/mortfin/MortFin-Homeown.asp. Note: Closed waiting lists on the commission’s home page may refer to rentals, not purchases for first-time buyers.

CITY OF ROCKVILLE

Department of Community Planning and Development Services
Telephone: 240-314-8200

One- and two-bedroom condominiums are available under the city’s Moderately Priced Dwelling Units program. An income of more than $22,000 is usually required and there are income limits that vary depending on the size of the family. Townhouses may become available in the future for families with children.

R.E.A.C.H., a joint loan program between the city and the nonprofit organization Housing & Community Initiatives Inc., offers a no-interest loan for down payment and closing costs of up to $12,000 to be repaid over seven years. Applicants must live or work in Rockville. Call 301-590-2765 or visit www.hcii.org/Reach.html.

PRINCE GEORGE’S COUNTY

Department of Housing and Community Development
Phone:  301-883-4663
Website:  www.co.pg.md.us/government/agencyindex/hcd

My Home Program:  With the help of this new program initiated in early March, the county hopes to purchase at least 75 homes in the county for resale, said Acting Director Eric Brown. The county is offering qualified buyers no-interest, deferred loans for up to 5 percent of the purchase price for a 10-year term. Buyers must contribute 1.75 percent of the purchase price or 50 percent of liquid assets over $3,000. Homeowners do not have to repay the loan if the property is their primary residence for 10 years. “To get at least 75 families in homes would be wonderful, especially in this economy,” Brown said.
For more information: Call 301-883-5456 or visit www.princesgeorgescountymd.gov/MyHOME.

Housing Choice Voucher Homeownership Program:  This locally administered HUD program converts a voucher subsidy for rentals to home purchases for first-time buyers. The amount is based on income. The minimum income requirement is $30,000.

The American Dream Payment Initiative is no longer available.

More resources:

Latino Economic Development Corp.:  240-777-4960

Asian-American Homeownership Counseling Inc.:  301-760-7636;  http://aa-hc.org/?page_id=114

VIRGINIA

Virginia Housing Development Authority
Telephone:  877-843-2123; loans: 800-227-8432
Website:  www.vhda.com/Homebuyers/VHDAHomeLoans/Pages/VHDAHomeLoans.aspx

The quasi-governmental, mortgage-financing agency has committed financing to local governments to increase affordable housing by providing low-interest loans for eligible first-time buyers. The VHDA provides these loans through designated lenders. Some loans do not require a down payment. All loans have maximum income, sales-price and/or loan limits, which may vary by jurisdiction.

Conventional fixed loans:  Provide 30-year, low fixed-rate loans and low fixed monthly payments for up to 97 percent of the sales price or appraised value.

Federal Housing Administration loans:  Eligible buyers access FHA-insured, low down payments and low 30-year fixed interest rates.

FHA-Plus loans:  Offers a low, 30-year fixed interest rate on both the first and second mortgages. Buyers must have cash available for 1 percent of the purchase price. Buyers receive an FHA-insured first mortgage plus a second mortgage to help fund down payment and closing costs at 3.5 percent to 5 percent of the sales price.

VA loans:  Offers a low fixed interest rate, zero down payment and low fixed monthly payments.

SPARC and HomeStride are no longer available.

ALEXANDRIA

Office of Housing
Phone:  703-746-4990
Website:  http://alexandriava.gov/housing/info/default.aspx?id=361
Email:  homeownership@alexandriava.gov

Federal Home Loan Banks’ Affordable Housing Program:  Offers a $7,500 grant that is forgiven after five years for eligible buyers. The grant may be used toward the FHA down payment requirement. Borrowers contribute at least $1,500. Apply through a participating lender, or ask your lender if he participates. Lenders may use various names for these grants, so mention the Federal Home Loan Banks when inquiring.

Moderate Income Homeownership:  Provides no-interest, 99-year deferred-payment financing of up to $30,000 for income-qualified applicants who have lived or worked in Alexandria for at least six months. The property price limit is $399,600. Purchasers must contribute at least $3,000. Check with the city, as availability may change. Additional assistance is available to police officers and sheriff’s deputies who purchase in designated locations in the city. Call 703-746-4990.

Employee Homeownership Incentives Program:  A $10,000 no-interest, deferred loan is available to city and public school employees.

The Homeownership Assistance Program:  Provides first-time homebuyers who live or work in Alexandria second-trust, deferred payment loans of up to $50,000 for principal and interest write-downs, down payment assistance and settlement costs. Purchasers must contribute $2,000 or more of their own funds. Property purchase-price limit is $362,790.

ARLINGTON COUNTY

Community Planning, Housing and Development
Phone:  703-228-3765
Website:  www.arlingtonva.us/departments/CPHD/housing/CPHDHousingHousingDivision.aspx

Moderate Income Purchase Assistance:  Loans of up to $90,700 are available. Applicants are no longer selected by lottery but on a first-come, first-served basis until funds are depleted. Provides up to 25 percent of the purchase price of a home on the market or an Affordable Dwelling Unit as a 30-year, deferred, no-interest, second-trust loan. The maximum purchase price is $362,790, with a down payment of at least 1 percent. When the property is sold or refinanced, the homeowner must repay the original loan plus a share of the net appreciation of the property. For ADUs, appreciation is based on area median income.

Live Near Your Work:  The county offers public school employees who work at least 30 hours a week a taxable but forgivable loan of 1 percent of the purchase price to a maximum of $5,000. The loan is forgiven over three years as long as the home is owner-occupied and the buyer remains employed by the school system.

The Homestride Program:  Provides $20,000 toward down payment and closing costs to assist employees of Arlington County, Arlington Public Schools, George Mason University and Virginia Hospital Center. Must be used in conjunction with a VHDA first trust mortgage.

The county’s Fannie Mae and Freddie Mac loans occasionally offer enhanced underwriting features for police, teachers, nurses, members of the military and other first responders.  Applicants do not have to have lived or worked previously in Arlington County.

FAIRFAX CITY

The City of Fairfax does not offer first-time homebuyer assistance. Residents may apply for properties offered by Fairfax County, but they will not get the preference offered to Fairfax County residents.

FAIRFAX COUNTY

Department of Housing and Community Development
Phone:  703-246-5100
Website:  www.fairfaxcounty.gov/rha/homeownership

First-Time Homebuyers Program:  This component of the Affordable Dwelling Units Program offers townhomes and condominiums from $78,000 to $170,000. Preference points are given to those who live or work in Fairfax County or have at least one child younger than 18. Restrictive covenants apply.

Other resources:

Housing and Community Services of Northern Virginia: 703-372-5440; http://hcsnv.org/services.asp

Reston Interfaith Partnership for Permanent Housing: 571-323-9555; www.Restoninterfaith.org

CITY OF FALLS CHURCH

Housing and Human Services Division
Telephone:  703-248-5005
Website:  www.fallschurchva.gov/Content/Government/Departments/CommunityServices/HHS/HousingSvcs.aspx?cnlid=2267

Down Payment and Closing Cost Assistance:  Offers a deferred, no-interest, second mortgage loan of up to $20,000 for homes on the market or Affordable Dwelling Units in Falls Church city. Liquid assets should not exceed $30,000. The loan is repaid when the home is sold. Buyer should contact a VHDA mortgage lender.

Affordable Dwelling Unit:  Resales of single-family homes or condos are available to qualified, low- and moderate-income applicants on a rolling lottery basis. Applicants must apply first to get on the certified buyers’ list. Loans must be pre-approved. Resale is restricted to 15 to 30 years. Households cannot have more than $30,000 in total liquid assets.

LOUDOUN COUNTY

Loudoun County Department of Family Services: Housing
Phone:  703-737-8043
Website:  www.loudoun.gov/housing

Affordable Dwelling Unit Program:  Provides newly constructed or resale townhouses or condominiums priced from $120,000 to $180,000 for income-eligible residents who live or work in the county. Total household income must be more than 30 percent and less than 70 percent (65 percent for condominiums) of the area median income. Subject to restrictive covenants. For more information: loudoun.gov/Default.aspx?tabid=2119

Down Payment/Closing Cost Assistance:  First-time homebuyers purchasing an Affordable Dwelling Unit or other home can borrow up to 10 percent of the sales price, or $25,000, whichever is less, at 5 percent interest. This second-trust loan is payable over 30 years, with the first three years deferred and interest free. Funding is available on a first-come, first-served basis. Applicants must have lived and/or worked in Loudoun County for at least six months. For more information: 703-777-0353; www.loudoun.gov/Default.aspx?tabid=2120

Public Employee Homeownership Grant:  Offers a secured, forgivable loan to full- or part-time Loudoun County government and public school employees, whether or not they are first-time homebuyers. Loans are forgivable at 20 percent of the amount annually over five years, providing the buyer does not leave employment or sell or cease to occupy the home. There are no monthly payments. Although technically a forgivable loan, the product is called a grant because it does not have to paid back as long as the buyer meets the conditions.

PRINCE WILLIAM COUNTY

Office of Housing and Community Development
Telephone:  703-792-7530
Website:  www.pwcgov.org/housing

Housing Choice Voucher Home Ownership Program:  Assists participating and prequalified Home Choice Voucher rental-program participants buy a home in Prince William County with vouchers. Assistance is for up to 25 years for a mortgage of 20 or more years, or 10 years for a mortgage of less than 20 years. Qualified buyers must satisfy employment requirements and have a household income of at least $40,000. Credit and ownership counseling are required. Buyers are responsible for 3 percent of the contract price. Applications for the rental program portion of this program are not being accepted at this time.

Homeownership Assistance Program:  The county is no longer accepting applications for this program. New applications will be available in September, subject to funding. County staff recommends that prospective first-time buyers get prequalified and apply in September.

Neighborhood Housing Rehabilitation Program:  Provides assistance to repair housing including making homes more energy efficient and accessible. Income limits apply.

Read more at the Washington Examiner:http://washingtonexaminer.com/local/real-estate-news/2011/07/local-programs-offer-housing-help-tight-economy#ixzz1TVWbjTTF

I recently saw a statistic in the newspaper or in an industry publication that related the amount spent on claims out of every $10.00 in premium collected in different types of insurance policies.  For property & casualty lines of insurance (auto, boat, renter’s, errors & omissions, homeowner’s, etc.), carriers pay out over $9.00 in claims for every $10.00 collected in premiums.  By contrast, title insurance underwriters pay out less than $0.50 in claims for every $10.00 collected in premiums – that’s right, less than fifty cents.

Hmmmmm.  Interesting.  Those sort of numbers kind of beg the question as to why in the world do you need an owner’s policy of title insurance and why does your lender require a lender’s policy, huh?  Sure does.  Well, the folks at www.foxbusiness.com recently highlighted 3 reasons why every homeowner needs title insurance.

Before sharing those three important reasons with you, let us take a brief moment to review the broad strokes of title insurance generally as well as a small disclaimer from yours truly.  First, title insurance, the insurance that looks backwards.

Almost without exception, all of your other insurance policies are in place to address something that happens in the future.  If you crash on the way home tonight, you will rely on your car insurance.  If it is bad, you will rely on your health insurance.  If it is really, really bad, your family will rely on your life insurance.  Similarly, if there is a fire in your home or if a tree falls on your roof or there is a theft of personal belongings, you will rely on your homeowner’s coverage.  All forward looking.  Not so with title insurance.

Title insurance, by design, looks backwards.  Nothing that happens to your property after your closing date is covered.  You have other insurance lines for that.  Title insurance is designed to cover things that took place before you purchased your home.  As in any home purchase or refinance, part of my job (or the job of any title attorney or settlement company) is to review the land records and judgment/lien records to ensure that clean title is passed.  Title insurance comes into play when either something is missed, or, more likely, when there is something out there that is not able to be discovered.  It doesn’t happen much; but, it does happen.

If someone shows up at your door and says they have the right to build a driveway across your front lawn, or has a deed that says they actually own your home, or claim they were defrauded out of their prior ownership of your home, and so on, that is what implicates a title insurance policy.  You or your lender finding out about this is certainly something that will happen in the future; but, the act or event at issue is from the past.

In situations such as those described above, your title insurance policy will be used to cover or offset (depending on the particulars of the policy and its coverage) the costs associated with finding out if someone else does in fact own all or part of your property or have rights that would disturb your ownership and possession.  It will also be used to cover or offset (again, depending on the particulars of the policy and its coverage) your loss if in fact someone else does have some sort of rights to your property.  [No, sorry, this does not apply to Pepco or Comcast or Verizon when they come and dig up your lawn to install equipment]

Now, it is only fair that I share that I earn a portion of my living from the sale of title insurance.  As part of my role as a title/settlement attorney, I am also a licensed insurance agent for title insurance.  While that clearly takes me out of the arena of being an objective party, I can tell you that when I bought a home, I most certainly paid for both the owner’s and lender’s policies of title insurance and will do so again in the future.  For me, and for 99% of the people I have closed over the past 10+ years, it is just not worth the risk not to get it.  Over time, the up front, one time cost fades into the background and gets cheaper and cheaper every day.

Without further delay, let’s jump into why it is even more important these days to make sure you are covered by title insurance.  Keep in mind that if you get a loan, you will pay for the lender’s coverage and that coverage is for the lender and the lender only.  A lender’s policy does nothing for you as the owner.  Owner’s coverage is never required; but, again, 99% of the people I have worked with over time get it.  These days, in the wake of the economic collapse centered on real estate, the staggering foreclosure problem and the general rise in fraudulent activity, title insurance is more important than ever.

[the following is from www.foxbusiness.com and is not the original work of the author of this post]

Why title insurance matters even more today

Today’s housing market makes title insurance more important than ever. Sloppy foreclosure procedures, corner-cutting sellers and flat-out fraud are a growing part of today’s real estate world.  The only thing standing between you and very heavy losses may be your title insurance policy.  Here are three reasons why homeowners need to protect themselves and their investment with title insurance:

1. Mortgage fraud is alive and well. Incidence of mortgage fraud is up following the financial crisis.  Some of these fraudulent acts can result in title disputes.  According to the latest mortgage fraud report from the FBI, one type of fraud involves faking deeds that get notarized and recorded with the local jurisdiction, where clerks often will not conduct due diligence on that claim.  Title insurance would cover you, the rightful owner, in a case like this.

2. The home building industry is in trouble. Financially-troubled developers may resort to shady practices to turn a profit, and unsuspecting home buyers may be the ones to take the hit.  In March 2010, the Texas attorney general charged a home builder, Casa Linda Homes, with knowingly selling homes encumbered with liens.  Those who bought homes with cash–meaning no mortgage lenders had insisted on a title policy–found themselves with the strong possibility that they would lose their stakes in their new homes.

3. Mortgage foreclosure procedures can be sloppy. Court challenges to shoddy foreclosure procedures may leave some homeowners exposed.  In one landmark case, U.S. Bank v. Ibanez, the Massachusetts Supreme Judicial Court upheld a 2009 ruling against both the bank which had foreclosed on a home and the party who bought the foreclosed home.  The court ruled the original mortgage had been transferred to the bank improperly and therefore the foreclosure also was improper, giving the home back to the owner who had failed to keep the loan current.

Legal experts have concluded that because the decision was applied retroactively, many folks who bought foreclosure properties in good faith may no longer own them and, unless they have title insurance, the property could very well revert to the previous owner without compensation.

Title insurance isn’t just for your mortgage lender.

Don’t get confused between the two different types of title insurance.  For one, there’s the coverage that your lender gets, which insures that the lender’s interest in the property has priority over claims from any others.  That’s not the same as a policy that covers your interest in the property.

If you finance a property, your lender will require that you pay for the lender’s policy.  It’s up to you to add an owner’s policy for your own protection.

Here’s how to save money on title insurance.

While it’s foolhardy to save money by skipping title insurance altogether, that doesn’t mean you can’t save money on your policy.

Your lender will pass along its cost for title insurance to you, but for your owner’s policy, you can and should shop around.  If you’re going to refinance, start with your current title insurer, then check online for more quotes. Many states regulate title insurance premiums.  [me again – MD, DC & VA are regulated for residential policies]

If you buy both the lender’s policy and your policy together, title companies generally offer substantial discounts.  [Nah, not really, or at least not in MD, DC & VA]

If your property was purchased or refinanced within the last five years, you are eligible to save with what is called a short-term or reissue rate.  These discounted rates vary from state to state as well, but range from 5 percent to 60 percent off the standard insurance rate.

Keeping your title charges to a minimum can shorten the break even period for a refinance or make a home purchase more affordable.  Most people understand the importance of shopping and comparing mortgage rates, but relatively few understand that they could be leaving money on the closing table by not negotiating their title charges as well.

The original article can be found at HSH.com:  3 reasons every homeowner needs title insurance.

Read more:  http://www.foxbusiness.com/personal-finance/2011/05/04/3-reasons-homeowner-needs-title-insurance/#ixzz1LU7EsIix

Article link: http://www.foxbusiness.com/personal-finance/2011/05/04/3-reasons-homeowner-needs-title-insurance/

For my boy, and probably yours too at this age, whether it is oatmeal, yogurt, PB&J, raisins, noodles, applesauce, chicken tenders, whatever, every bite counts.  As adults, we know that if one raisin or one chocolate chip hits the floor while we are eating, it is really no big deal.  There are plenty more in the fridge or pantry or grocery store if you run out.  Not so for our little mini-me’s.  If my boy sees a raisin hit the floor, he actually experiences a loss.  In our family, food that falls on the floor or ground is “for the birds”; so, he will not end up eating it.  However; even if there is a pile of them still on his plate, I know that he is thinking about the one that hit the floor a zillion times more than I ever would.

What I take away from that and what I am throwing out there for you is that us adults could use more of that kind of intensity and focus on the minutia in our everyday lives.  How often do we rush through something because of the stress we are under or because of the number of things on our never ending “to do” lists?  If you are anything like me, the answer is all the freak’n time.  While we manage to get all of our “things” done, or as much as we possibly can, we too are experiencing a loss without even knowing it.  We have all heard the saying “the devil is in the details.”  Well, I propose something quite the opposite.  What if there is really joy in the details?  What if there is more to be gained in any particular process than just the end result, the crossing it off our list part?

Imagine for a second that you are Picasso or Rembrandt or Dali (or some other artist who I am sure my wife would bet against my knowing their names) and you are getting ready to create a masterpiece.  It does not have to be a masterpiece; it could just be another nice creation, one of thousands.  You have your pencils, paper, paints, brushes, creativity catalysts, concubines, and so on ready to go.  Now, let’s say you could just take your bucket, put all the different paints in there, shake it up, toss it onto your canvas and presto, it all comes out just right and you are done.  Another masterpiece for the museum walls.  Do you think Picasso or Rembrandt or Dali would have done that even if it were possible?  I think not.  I think they would say, just like a chef or a hairdresser or a home builder would say, that the true joy comes from the process itself — from thinking about each stroke, each ingredient, each brick, each cut or layer.  They would say that getting through the process of creation, even struggling through it as the case may be, is where the true joy lies.

Let me suggest, even implore, that the same holds true for us – your every day, overworked, stressed out, multitasking selves.  Clearly, some tasks simply require results.  There is not much hidden value in changing a diaper or cleaning up after your little one, a.k.a. Dr. Destructo.  Obvious value there – you are either no longer smelling poop or there are fewer things for you to trip over.  For everything else, and perhaps even those tasks I just mentioned (I am just not that high minded yet to see it), there is joy and value hidden in the process, in the details of whatever it is that you are trying to accomplish.

Don’t believe me?  Well, I invite you to prove me wrong.  Take a few days and put this increased focus and intensity into play on your otherwise mundane processes and see what comes of it.  What I think you will find is that your results will come with a greater degree of satisfaction or joy and you may even discover a few things along the way.  You never know what you are missing until you start paying attention.  Let me know how it goes.

Scout, and many others, have been railing for years about the evils of Fannie & Freddie and the damaging effects of the whole concept of publicly backed mortgage securities.  Others, myself included, have responded back that Fannie and Freddie are in need of some serious repair; but, that doing away with them is too harsh with far reaching consequences that support reform over removal.  Well, thanks to an article that my buddy sent me, today is a day of vindication for Scout and those that share his position on thetitleattorney.com.

It is hard to argue against the logic and numbers in “Government Mortgage Guarantees Are Unnecessary. Many predict calamity for the housing markets without them. Federal Reserve data tell a different story” by Peter J. Wallison.  This brief, concise piece from the Wall Street Journal, April 21, 2011, makes an extremely compelling argument in favor of phasing out both Fannie and Freddie in favor of Congress creating the legal framework for a private system of mortgage finance.  See the full article at 2011 April Govt Mortgage Guarantees Unnecessary.

In his article, Wallison lays out in simplistic terms where private, nonbank institutional investment dollars are going.  Of course, more telling is where they are not going.  The fact is, only about one seventh of a pool of 13 trillion dollars (yes, trillion, hard to even imagine) was invested in government-backed mortgage securities.  Hmmm.  Sure seems like the government stamp of approval, a la guarantee, just is not worth what the government is telling us it is.  We continue to pump billions of taxpayer dollars into Fannie and Freddie so that they can put out a product that has a one seventh market share?  It gets better.

How about the fact that at the end of 2010, these same investors had more mortgage assets that were NOT backed by the government than ones that were?  So, even after getting slaughtered over the last few years in the “open” market during the real estate meltdown, the money still favors private as opposed to public guaranteed mortgage backed securities.  Wallison also points out that more than 50% of the demand for the Fannie and Freddie backed product is from “U.S. and foreign governments, or from organizations the government controls or regulates.”  Sounds like some good ole Danny Snyder self dealing to me.  Either way, it certainly does not help to support the Fannie/Freddie/FHA cause.

I’ll be the first to say that this is just one article, by one scholar, written with a very broad stroke; but, sure did make me think differently about the issue and it just might broaden your mind as well.  Or, maybe you are like my buddy Scout and you knew this all along.  I hope you get as much out of the article as I did and thanks for reading.

Bryan