Real Estate Market

THE JAN JACKSON GROUP NEWS

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7 THINGS YOU NEED TO KNOW ABOUT APPRAISALS

1.  Who pays the appraiser?  The appraiser works for the mortgage lender.

2.  Who can talk to the appraiser?  Anyone with an interest in the real estate transaction is allowed to communicate with the appraiser and provide information about the property.  However, an agent or other person with interest in the transaction may not intimidate or bribe the appraiser, and the appraiser may not disclose any confidential information.

3.  How an agent helps the process?  An agent will collect any relevant documents in advance and have them available at the property for the appraiser.  These documents may include plats, surveys, deeds, covenants, HOA documents, floor plans, specifications, inspection reports, neighborhood details, recent comparables, and a detailed list of upgrades.

4.  What guidelines does an appraiser follow?  An appraiser follows the Uniform Standards of Professional Appraisal Practice.  These standards are incorporated into Texas law and Texas Appraiser Licensing and Certification Board rules.  Appraisers also follow any additional requirements from the mortgage lender.

5.  Why does the lender give a copy of the sales contract to the appraiser?  Fannie Mae and Freddie Mac require an appraiser to analyze the sales contract and confirm analysis in the appraised report.  The appraiser will review the terms of the contract, including the interest rate, down payment amount, seller contributions or other personal property items that might be included in the sale.  Appraisers compare the terms of the contract with what is typical in the market and verify the seller is owner of public record.

6.  What does an agent do if there is an issue with the report?  An appraiser may only discuss the results of the report with the appraiser's client, the mortgage company, or parties designated by the client.  If an agent thinks there are errors in the report or want the appraiser to consider additional information, they will contact the appraiser's client in writing.

7.  What will an agent do if there is an issue with an appraiser?  Appraisers are required to be competent in the geographic area where they are working.  If an agent suspects that an appraiser is not competent to appraise the property, they may contact the mortgage company that ordered the appraisal to share their concerns.  They may also contact the Texas Appraiser Licensing and Certification Board since they enforce rules and laws to which appraisers are subject.

THE PLIGHT OF FIRST-TIME BUYERS

It's not a $64,000 question, but rather a $41,000 one.  "Where are the first-time buyers?"  It's important because $41,000 is the amount renters have missed out on by not buying three years ago when prices were at a low point.  The annual median home price was $166,100 in 2011 and $197,000 in 2013.  The median nation home price this year is expected to hit $207,000.  Money left on the table.

Unfortunately, our most recent data show first-time buyers are a shrinking share of the market, only about 27% of buyers, compared to 40% in a more normal market.  It;s not that young households don't want to buy.  It's that desire is not matching up with their ability.  Many young households are saddled with student loan debt while job creation and wages have been heading up only slowly.  And the qualified mortgage rule that took effect this year to ensure lenders don't make bad loans won't help, since it tightens how much student loan and other debt loan applicants can carry.

This situation is worrisome, because all of the recent growth in household formation has been among renters.  Unless a healthy portion of today's 40 million renter households become home owners, the housing market cannot grow much.

There are two fronts to be tackled if first-time buyers are to get back to more normal levels.  First, we must monitor the impact of the QM rule on otherwise qualified buyers to see if lenders are being too risk adverse.  There's reason to think they are, because mortgage default rates have been at historic lows in the last few years.  That suggests lenders have restricted underwriting too much in anticipation of QM.  Second, builders need to step up home building, bringing construction levels closer to historical norms.  More inventory helps tame price growth, and it gives buyers something they don't have much of now:  selection.

The bottom line:  Housing is under-performing.  In 2000, when the market was boring, with no bubble and no crash, there were 5.2 million existing home sales and 1.6 million housing starts.  Today, home sales are struggling to reach 5 million annually and new starts total only about 1 million, yet the country has 34 million more people and mortgage rates remain historically low.  Those on the sidelines are missing out.

Contact Information

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The Jan Jackson Group
21330 Aldine Westfield, Ste. 107
Humble TX 77338
281-443-6633
Fax: 281-443-7815