Houston Real Estate Blog

Relative To The Subprime Mortgage Problems Of The Last Year Could It Be That The Lending Community Has Learned Its Lesson

2008-04-21T23:31:06.6655759-05:00

Relative to the sub-prime mortgage problems of the last year, could it be that the lending community has learned its lesson? It certainly has reacted to the problem in typical fashion: When the market is flying high, lenders will make a loan to a corpse, in our present market, well, bring a pint of blood and your first born child. It is dishearting to me because I have never understood why good lending practices didn't come first. I have had to adhere to good practices to retain a share of market return. It should have been good enough for them as well.

For the appraiser, appraisal criteria has been narrowed and will become even tighter in the future. Lenders are letting us know that federal regulations will also become stiff. As I look at the proposals of Attoney General Cuomo of New York with regard to this, at first I could say "its about time"; give an appraiser an 800 number to turn in a lender for bad practice? The winds of political expendiancy tell me this provision won't last long.

No matter what takes place in the halls of Congress relative to this mortgage mess, we appraisers should remember why we got into this profession; we perform this service because we know how and they don't, and it not the appraisal you do today nor the appraisal that you may not get tommrow, it is Serundipity; what you find along the way, that most important. (what do you want for a philosophy major???)

Remove that PMI

2005-03-15T16:10:29.164-05:00

PMI is an insurance premium that is taken out by a mortgage company that protects the lender in the event of foreclosure; this has nothing to do with protecting the borrower. When you purchased your house your lender added mortgage insurance, also called PMI, to your monthly payment unless you made at least a 20% down payment. This payment is based on the original mortgage amount and is paid as part of your monthly mortgage payment until you have an appraisal that shows that your house has increased in value, including additions and/or improvements to the point that your loan is 80% of your current house value.

The FEDERAL HOMEOWNERS PROTECTION ACT of 1998 requires lenders to inform homeowners if they are no longer required to make PMI payments. Homeowners may also request cancellation of their PMI premiums with a certified appraisal showing that borrower has more than 20% equity in the home.

Getting an appraisal is the first step toward lowering your monthly mortgage payments. If the market indicates that your home may have reached a value above the requirement for PMI (generally this is 20%), chances are you can eliminate monthly PMI payments permanently.

Thomas M. Ponce
I am Houston Real Esate Appraiser for The Ponce Group, a Houston Appraisal company.

Houston's Downtown Redevelopment

2005-02-15T15:51:58.526-06:00

Over the last 10 to 15 years, people in major cities throughout the United States have been returning to the inner city as a place of residence and the city of Houston has join in this trek back to downtown as well.

Many urban and regional planners set sort of a flowery, “it takes a village” milieu to the whole process by stating that people return to the inner city because it reflects the character of the town and a need to return to roots. However, there are far more down to earth reasons why this is taking place.

Kevin Byrd, a Masters Degree candidate at Virginia Polytechnic, states that people in the United States lived in tight communities for decades because of the convenience of goods and services. Living near the rail road tracks or a vital port was not seen as a negative. Separating yourself from a town or city meant going in to the deep, dark unexplored wilderness which was not good for those who were poor with a long rifle.

The invention of the automobile in the beginning of the 20th century; most especially after World War II, enabled people to escape the downtown area for a more suburban lifestyle. Relative to this factor, land values began to rise, and land consumption took place at a rapid pace. As the population rises and the city spreads in size, the infrastructure must stay at least at a level pace with this growth, which it usually not the case. Where the infrastructure stops, so does the suburban growth.

The invention of the internet at the end of the 20th century and the use of it as a business tool has changed the way some of the population works. (In their pajamas) This has also changed where you have to physically be to enjoy your lifestyle.

The market players for the move back to downtown Houston has been young singles or young couples and empty nesters. Not having a need for schools for children and having work and recreation nearby, is a plus for them.

The housing consists of loft condominiums which have been built within older office buildings and warehouses which were too costly to return to original use. There is one full service condominium with another under construction with a completion date of 2006.

The beginnings of the Metro rail system to downtown will become more of a factor as the price for housing a car in the inner city becomes more costly and the rail is able to take you more places. Placing the rail through the Texas Medical Center and redeveloping the Mid-town area, however, was the wisest move made and a very controversial endeavor.

The downtown Houston nightlife is well established with the theater district, restaurants which cater to ‘after 6’ activities, and Minute Maid Park, the home of the Houston Astros.

Park space, which has always been at a premium in Houston, is somewhat addressed off the downtown area but not well within walking distance.

Overall, the move of the city to an interurban community is on the right tract. The future will tell how long and how powerful the attraction will be.

Thomas M. Ponce
I am Houston Real Esate Appraiser for The Ponce Group, a Houston Appraisal company.

Automated Valuation Models

2005-01-01T15:47:54.292-06:00

A word on the AVM.

AVMs or Automated Value Models have been popular in the lending world over the past few years and the internet has many a service which states that it can render a value for a property. These services can be very helpful to those who need to survey data on neighborhoods for ranges of value and users statistical requirements.

However, let the consumer beware; AVMs are not appraisals. Those who compile them are not following proper appraisal adjusments and procedures and in no way do they subscribe to the rules or guidelines for appraising as laid out by federal law or mortgage associations. Because of this, they are held to no scrutiny for quality of their data or their work. These compliers never went inside your home; didn’t measure it, nor saw your new carpet and new paint or the lack thereof.

So remember, AVMs are only as good as you can throw them…and at my age, that isn't very far.

Thomas M. Ponce
I am Houston Real Esate Appraiser for The Ponce Group, a Houston Appraisal company.

Appraising 101

2004-12-15T15:27:52.447-06:00

Appraisers are surveyors of the market place; constantly looking at the actions of buyers and sellers and reporting what we see to those who need the information. In the broadest sense, all who utilize real estate are appraisers; however, the professional difference is we perform our analysis of the market as disinterested third parties. We have no desire for the property to be appraised. Our concern is for the property to be appraised according to federal laws, ethical balance, and meeting the need of our client.

For the most part, appraisals are needed by lenders who are willing to loan money for real estate purposes. The appraisal tells the lender what the property is worth as of a specific date so that the lender can make an informed decision relative to risk.

I was very fortunate to be trained by the staff of Charles L. Osenbaugh in the late 1970’s.

Mr. Osenbaugh was very strict as to how we reflected on the profession. He reminded us that people were the kings and queens of their castles and that for most people; the purchase of a dwelling was the most expensive endeavor in their lives. Consequently, you had to leave the buyer and the seller with the knowledge that you knew what you were doing and that they were making good decisions.

A lot of financial water has gone under the bridge over the last 30 years. The fads and foibles of the market place are of little use to me these days. My concern is the public trust. We have to be true to the actors in the market and true to ourselves.

P.S. If you've ever wondered, what's my home worth? Feel free to give us a call.

Thomas M. Ponce
I am Houston Real Esate Appraiser for The Ponce Group, a Houston Appraisal company.