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VOL. 37 | NO. 50 | Friday, December 13, 2013

Great year might have been better if only ...

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Data from the Greater Nashville Association of Realtors shows November and sales were up 4 percent over the same period last year.

Such growth was typical for the area from 1991 until 2007 and has been a hallmark of the city for years.

With the exception of 2012 and 2013, when values increased by double digits each year in some neighborhoods, the city has consistently sustained growth of three to six percent per year.

The anomaly of 2012 and 2013, a period in which prices increased by 10 to 20 percent, was made possible by the Great Recession, with prices decreasing by double digits from 2008 to 2010.

Apparently the days of 20 percent plus growth are behind us, and those who toil in the residential real estate market are hopeful the economy and the government will cooperate in the years, or at least THE year, to come.

Most real estate brokers in the area have experienced their best years in the business and enter this holiday season in thanksgiving for all of the closings during this banner year.

Yet, to the person, most will rival fishermen in tales of the ones that got away. From lenders to Realtors to buyers and sellers, this was the year of the “what might have been.”

Scott Ractliffe, a market leader and loan officer with Pinnacle Financial Partners, recently noted that he experienced more loans falling through this year than at any other time in his storied career.

Cory Owen, a vice president at Regions, noted in his market update that the Mortgage Bankers Association has released numbers showing that “roughly 30 percent of purchasers who apply for a mortgage are turned down.”

Owen, too, has had several fall through this year for unforeseen obstacles. These two are among best in the industry and when they meet unexpected challenges, there are serious impediments looming.

It is worthy of note that these 30 percent were people who applied for the loan and went far enough through the process to be declined.

Lenders like Ractliffe and Owen do not submit loans they feel will be declined.

The number of those discouraged in the initial loan interview is unavailable.

The current state of affairs in the US is that there is a smaller pool of potential homeowners than there has been in the past. In spite of this, home sales have improved.

In one of Owen’s cases, the underwriter did not approve of renting living quarters to the condo’s onsite maintenance personnel.

Most condos do not have onsite living quarters, and this was seen as a negative.

Owen was able to place the loan with Regions, which realized the ridiculous stipulation of the FHA.

Owen noted that most recently “the declinations of the condo loans is due to the strength of the budget and the balance sheets.”

Most homeowners associations (HOAs) budget enough to cover expenses and build a slight reserve.

In cases of large unexpected expenditures, they levy an assessment to the owners to cover it.

In order to appease Fannie Mae and Freddie Mac, Owen says, HOAs should build larger balances in their reserves. Yet, the HOAs were unaware of these guidelines and most budgets are in place.

For Ractliffe, once again a condo, the tax records, the white pages and the appraiser felt the 17-unit condo had the appropriate ratio of owner occupants versus renters, but the management company for the homeowners association submitted information stating there were more renters than owner-occupants. This HOA had the correct information.

Therefore, the sale fell through, as most lenders will not loan money on an investor-heavy development.

The news was devastating for the seller, who had graduated from Vanderbilt and taken a job out west.

Now, he may never be able to sell his home as no lenders will lend and buyers do not want to purchase non-liquid assets.

It is tough out there. To make matters worse, Ractliffe has learned that FHA maximum loan amounts are decreasing in 2014.

“For the Davidson County MAS, the single-family maximum loan amount will be $393,300,” Ractliffe notes.

The old limit was $417,000, down from the $432,125 the area had enjoyed for years.

With FHA being the loan of choice for most, this reform is monumental as it could force sellers to sell for less since many buyers are unable to get conventional financing.

On a lighter note, a new trend among old and young Realtors is to have the following message on their phones: “I am not able to get to my phone right now, but leave your name and number and I will return the call. If you would like a quicker response, please send a text message.”

Why would a text message merit a quicker response? Are they trying to kill off the competition by having them text while driving? Is it because conflict is more painful through oral discourse? Or that they can respond to a text while speaking with someone else?

Richard Courtney is a partner with Christianson, Patterson, Courtney, and Associates and can be reached at richard@richardcourtney.com.

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