4 Things to Consider Before Converting Basement

Finished space can add resale value, but only if done right. If you're fortunate enough to have a basement in your home, you may have the potential for a substantial amount of additional living space right below your feet. But if you're thinking of converting that cold and unappealing area to a warm and cozy new space, there are several things you'll want to take into consideration first.

1. Is it safe?

One of the very first things you want to look at with any basement conversion is safety, and that can take a lot of different forms. Is there convenient and safe access from inside the house in the form of a stairway that meets current building codes, or is there an exterior entrance that works for what you want to use the space for? Is there a sufficient amount of headroom? Would structural supports for the upper floors be in the way, and if so, can they be moved or altered to allow for the necessary space? If you'll be creating a sleeping room, is there safe and legal egress?

2. Is it dry?

Now we get down to what's a big issue in a lot of basements, and that's moisture. Newer homes are often designed with the proper drainage systems and exterior waterproofing to keep the basement areas dry and ready for building, but many older homes had basements -- "cellars" -- that were designed for cool storage and were never really intended to be occupied. If you have a basement with ongoing or seasonal moisture issues, you need to consult with an experienced excavation contractor before you get started on a conversion project. See what it would take to have a drain installed and have the exterior walls properly waterproofed, and perhaps have the exterior grade adjusted to change the flow of water runoff around the exterior of the home. In some cases, you may need to change gutters and downspouts to channel roof water to a different location, or possibly install a sump pump to handle seasonal water issues. No matter what, be sure that your basement moisture issues are handled before you start closing things up.

3. What will the space be used for?

Once you've determined that you have a space that's safe and dry, decide what you want to use the converted basement area for. That will make a big difference in your design, and also in your construction costs. For example, it may be a big game room, in which case you need little more than wall, floor and ceiling finishes. On the other hand, you may be looking at a bedroom or two, perhaps for guests, with a full bathroom and maybe even small kitchen facilities. In that case, you've got plumbing issues to consider, as well as a lot more electrical wiring, and also ventilation. Some basement spaces are even used as rentals in order to generate a little additional income. If that's your intention, you'll need to take into consideration what the access will be for your tenants, so as to provide privacy for them and for yourselves. You'll need to talk with your plumber and electrician about how the electrical and plumbing services will be split and metered to the spaces. And, of course, you'll need to confirm with your local jurisdictions that having renters is a legal use of the space.

4. Finishing the space

Options abound for the actual finishing of the space itself. One of the first considerations is insulating it, so that it's warm and energy efficient, as well as quieter. The preferred insulation method used by many of today's builders and remodelers is extruded polystyrene insulation. Extruded polystyrene is a high-density, water-resistant, closed-cell foam available in sheets, typically blue or pink, as opposed to the expanded polystyrene -- commonly known as beadboard -- which is white and is comprised of small round foam pellets fused together. Expanded polystyrene has a lower R-value, and is not approved for moisture contact applications. You can apply 1 1/2-inch polystyrene (R-value of 7.5) or 2-inch (R-10) directly to the walls with adhesive. The sheets are 2 feet by 8 feet, and the long edges are notched to accept furring strips every 2 feet. You can then install drywall or other wall finish materials directly to the furring or, depending on the level of insulation you want to achieve, you can add a second layer of rigid foam to the furring, then add your wall finish. Conduit can be attached to the walls first for electrical wiring, and the polystyrene is easy to route out as needed over the conduit. Obstacles such as posts or other structural supports can be framed around using two-by-fours. Horizontal duct runs and large horizontal plumbing runs can be framed into overhead soffits. If there's a sufficient amount of headroom, a suspended ceiling allows for the installation of decorative, sound-deadening tiles that are easily removable to allow access to overhead utilities.

Basement conversions can be a very rewarding use of existing space, and they can add a lot of resale value to your home -- but only if they're done right. If you have any questions about moisture control, insulation, structural issues, zoning or anything else, be sure to get them answered by the pros before you get started!

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Fannie and Freddie Set Timeline Requirements for Short Sales

By Carrie Bay DSnews

Beginning June 15, real estate agents working with distressed homeowners whose loans are backed by Fannie Mae and Freddie Mac should expect to receive a decision on a short sale offer within 30-60 days.

The GSEs issued new guidelines Tuesday that fall under the Servicing Alignment Initiative rolled out last fall and aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales.
Not only is a short sale an effective foreclosure alternative when home retention is no longer an option, but it keeps homes occupied and helps to maintain stable communities, according to the Federal Housing Finance Agency (FHFA).
Addressing real estate practitioners’ No. 1 complaint about short sales, FHFA directed Fannie Mae and Freddie Mac to establish a new uniform set of minimum response times that servicers must follow in order to facilitate more efficient short sale transactions.
The GSEs’ new short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration, whether it’s through the federal government’s Home Affordable Foreclosure Alternative (HAFA) program or a GSE program.

If more than 30 days are needed, servicers must provide the borrower with weekly status updates and come to a decision no later than 60 days from the date the BRP or offer was received.
According to the GSEs, this 30-day add-on will provide some leeway for servicers who may need more time to obtain a broker price opinion (BPO) or a private mortgage insurer’s approval for a short sale. All decisions must be made within 60 days.
In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.
The GSEs plan to use the new short sale timelines to evaluate servicer compliance with the Servicing Alignment Initiative.
Edward DeMarco, acting director of the FHFA, says the GSEs new borrower communication and timeline requirements for short sales “set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”
GSE servicers must comply with the new minimum communication time frames for all short sale evaluations conducted on or after June 15, 2012, although servicers are encouraged to begin implementing the new requirements sooner.
“I applaud Fannie and Freddie for finally coming out with real guidance with real world timelines for their servicers,” commented Anthony Lamacchia, broker/owner of McGeough Lamacchia Realty Inc., which specializes in short sales. “There is no question that this will help short sales and the market as a whole.”
Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since 2009. Fannie Mae’s short sale completions shot up by 101 percent over the same period, totaling around 79,800 in 2011.

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FHA will keep funding flips - Waiver for 90-day resales extended through 2012

Waiver for 90-day resales extended through 2012
By Inman News, Wednesday, December 28, 2011.

Inman News®


For the second year in a row, the Federal Housing Administration is extending a temporary waiver of its "anti-flipping" rule, meaning homebuyers relying on FHA-insured financing will continue to be able to buy homes that have changed hands in the last 90 days.

The waiver is a boon for investors seeking to rehab and flip properties, because it expands the pool of eligible borrowers to include those relying on FHA-backed loans, popular with first-time homebuyers and others who lack the cash to make large down payments.

In extending the waiver through 2012, FHA said all transactions must continue to be arms-length. In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the lender can document the justification for the increase in value, FHA said.

FHA instituted the anti-flipping rule in 2003 to protect its mutual mortgage insurance program from losses on homes that were merely flipped, rather than rehabbed. Homes repossessed by Fannie Mae, Freddie Mac, and state- and federally chartered financial institutions were exempt from the rule.

In February 2010, the Obama administration waived the waiting period for resales -- including homes purchased and rehabbed by private investors -- in the hopes of stabilizing home prices and revitalizing communities hit by foreclosures.

It often takes less than 90 days to acquire, rehabilitate and sell properties, the Department of Housing and Urban Development said at the time. Some sellers of rehabbed properties had been reluctant to enter into contracts with FHA buyers because of the cost of holding a property for 90 days, HUD said

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10 ways to keep lid on energy bills

By Paul Bianchina (edited by Clara Lyons)
Inman News™

No one likes wasting money, especially in these tough economic times. So it certainly makes sense -- dollars and cents -- to make a small investment of time and supplies to close up those heat-wasting air leaks around your home. It'll pay back big dividends in reduced energy bills and a warmer, more comfortable house this winter. So let's look at some of the areas where those drafts may be lurking, and see how to take care of them.

1. Doors and windows: This should be an obvious one. If you can see gaps between your siding and your windows or exterior doors, close them up with a bead of clear or paintable acrylic latex caulk. Larger gaps can be filled with foam backer rod before applying the caulking.

2. Exterior penetrations: Some of these areas are going to be obvious, while some may take a little bit of searching. Some examples of exterior penetrations where air can leak into the house include exterior faucets, dryer vents, exterior electrical outlets, exterior light fixtures, holes that have been drilled for phone and TV cables, conduit penetrations, exit points for plumbing drains, and penetrations for air conditioning lines. Closing these penetrations may require a variety of different techniques, including caulk, expanding spray foam, or, in the case of electrical boxes and fixtures, specific gaskets that are designed to fit the boxes.

3. Exhaust-vent covers: Dryer vents, range hood vents, bath fan vents, and other interior ventilation equipment typically terminate outside the house in a plastic or metal cover that has one or more louvers on it. The louvers are designed to be in the closed position whenever the fan is not in use, so that outside air doesn't leak in. Check all of these louvers to be sure they're closing completely, with no air leaks. If they aren't, you can adjust the spring tension to hold them closed more tightly; add foam weatherstripping tape for a more air-tight seal; or replace the entire vent cap with a new one.

4. Gaps around interior vents and recessed lights: Inside your home, heated air can be leaking out around that same ventilation equipment, where vent pipes pass through the walls or ceiling, or where vent covers meet wall and ceiling surfaces. Recessed light fixtures can also be real air-leakers. Around the vent pipes and recessed light cans, seal any gaps with caulking. For the vent covers and recessed light covers, remove the covers, then adjust the springs and/or add foam weatherstripping tape to create a tight seal between the cover and the ceiling.

5. Heat-duct penetrations: Gaps around heating-duct cans where they pass through the floor or wall allow cold air to enter from the crawl space, while gaps around ceiling-duct cans allow heated air to escape into the attic. To close those drafts, first remove the register, then use a combination of caulking and/or metallic duct sealant tape to close any gaps between the sheet metal cans and the floor, wall or ceiling surface.

6. Fireplaces and woodstoves: Lots of gaps can occur around these appliances. With a conventional fireplace, keep the damper closed except when burning a fire to prevent heated air from escaping up the chimney. Consider investing in a set of air-tight doors, which close off the air leaks and also make your fires more efficient. Look for gaps around woodstove and gas fireplace flue pipes, and air leaks around masonry chimneys. Use a metal collar if necessary around flue pipe penetrations, and seal gaps with heat-resistant sealant specially formulated for this application.

7. Attic and crawl space hatches: These can be real air losers if they're not weatherstripped, so take care of that with some foam tape. Make sure the hatches are insulated as well.

8. Interior doors to unheated spaces: If you have any interior doors that lead to unheated spaces, including basements, garages or attics, be sure the doors are weatherstripped to prevent air leakage. If possible, replace older, hollow-core doors with solid-core or, better yet, insulated metal doors.

9. Sill plates and penetrations: This one's not as easy to deal with, but it's well worth the effort to try to do whatever you can with it. Air can leak both into and out of the house through gaps where the sill plate meets the foundation or the siding, and around plumbing and wiring penetrations drilled through wall plates in various areas. If you have a gap between your siding and the bottom of your exterior wall, especially in older homes where the use of sill sealers was not a common practice, consider closing up this big air gap with a bead of caulking or expanding foam. In the basement, crawl space and attic, if you can access any of the pipes and wires that pass through the wall plates, seal the penetrations with expanding foam.

10. Deregulation has come to the energy market, creating opportunities to save money on your energy bill and still get your bill from the same provider. Paste this url into your browser and see if your area is included:
http://energy.5linx.com/Default.aspx?language=en-US&strRIN=L432054

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The Time to Buy is NOW!

The signs have been there: record-low interest rates and reasonably priced homes.

This week, the Wall Street Journal presents two factors that make now “an excellent time to buy a house.” First, the ratio of home prices to yearly rents is close to its pre-bubble average. Second, when mortgage rates are considered, houses are the most affordable they have been in decades.
The article goes on to explain that whether or not buying is a better deal than renting depends on the relationship between prices and rents, the cost of financing and other factors. The good news is that the numbers all seem to be heading in the right direction.

According to Moody’s Analytics, the nationwide ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble. With all things being equal, a lower ratio means buying is preferable to renting. Even though the price/rent ratio is not as low as it has been, house payments are more affordable than they have been in decades because mortgage interest rates are so low.

And, despite public opinions otherwise, mortgage money is available according to information in the article attributed to Stan Humphries, chief economist at Zillow, a home and real estate consumer website.

The article closes with this advice: “When prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.”

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5 Reasons to Loosen Rules for Investors & Underwater Owners

A plan to jump-start housing
By Jack Guttentag
Inman News™

Share This Editor's note: This is the third in a three-part series.

Previous articles in this series argued that, absent a liberalization of Fannie Mae and Freddie Mac lending terms, a second round of home-price declines was very likely. Renewed price declines would have a devastating effect on homeowners and the economy, and would also increase Fannie and Freddie losses on both old and new loans.

This makes the liberalization of lending terms a requirement of responsible conservatorship.

The changes needed include a rollback of risk-based price adjustments to where they were before the financial crisis, and relaxation of misguided underwriting rules.

Previous articles focused on the need to modify rigid affordability rules, eliminate income documentation requirements for sterling borrowers, and eliminate the requirement for property appraisals on purchase transactions. This article identifies a few more.

Liberalize lending terms and remove restrictions on loans to investors

Investors buy houses to resell or to rent rather than to occupy. During the go-go years, investors bought houses to resell at a profit, and in the current depressed market they are buying houses either to sell or to rent until the market improves.

Laurie Goodman has shown how important investors are to restoring a supply-and-demand balance in the current market. The problem is that there are fewer investor loans now, when we need them, than there were before the crisis -- when we didn't need them.

The major barrier to additional home purchases by investors is the onerous rules imposed on investor loans by Fannie Mae and Freddie Mac. In September 2006, Fannie Mae charged 1.5 to 2.5 points extra if the borrower was an investor rather than an occupant, and investor loans could be up to 90 percent of property value. Today, the price increment is 1.75 to 3.75 points, and the maximum loan is 85 percent of property value.

Fannie and Freddie also limit the number of loans that any one investor can have to four, with up to 10 allowed under more restrictive lending terms. This restriction has the effect of limiting the home investor market to small players.

The higher prices, lower maximum loan-to-value ratios, and limits on the number of loans an investor can have are all counterproductive in the current environment. Investor activity would be stimulated if 90 percent loans were available at a 1 point price increment and limits on loan numbers were eliminated. When home prices start rising by more than 3 percent a year, the old rules could be reimposed.

Eliminate LTV and appraisal requirements on HARP loans

The Home Affordable Refinance Program (HARP) was designed to make refinance possible for underwater borrowers who are current on their payments and whose loans are owned by Fannie or Freddie. A major problem with the program is a maximum loan-to-value ratio (LTV) of 125 percent, which cuts out a sizable segment of the potential market for no good reason.

I can see why the agencies might have limited the program to borrowers with LTVs above 125 percent. The net loss to the agencies from refinancing is lower for high-LTV loans than for lower-LTV loans because high-LTV loans are more likely to default and lower interest rates will prevent some of these defaults.

The loss to the agencies from refinancing underwater mortgages is the interest loss on loans that would have remained in good standing had the refinance not occurred. This loss is not related to the LTV. The benefit to the agencies is the loss avoided on loans that would have defaulted but don't because of the rate reduction. This benefit is larger for higher-LTV loans, which are more likely to default.

By scrapping the LTV maximum in the HARP program, the agencies would also be eliminating the need for appraisals, which would simplify the program and expedite the implementation.

Concluding comment

There are many more changes in Fannie and Freddie rules that would help to generate increased housing demand, but my internal editor says that more examples are not needed. The overriding need is recognition by the agencies and its conservator that assets are not conserved by acting as if Fannie and Freddie are small lenders with no power to affect the market.

These entities are a major part of the market, and their assets are best conserved by policies that convert the currently anemic market into a healthy one. Once that principle is accepted, I will be happy to flesh out the list, and so will many others.

The author, Jack Jack Guttentag, is professor of finance emeritus at the Wharton School of the University of Pennsylvania.

4 Dont's When Selleing a Home

By Melissa Dittmann Tracey, REALTOR Magazine

Kelly O’Ryan, an office manager for Coldwell Banker in Lexington, Mass., recently highlighted several tips of what home owners shouldn’t do when trying to sell their home in an article at RISMedia. Here are a few don’ts that made it on their list, see if you agree!

1. Don’t slack off on home maintenance. Houses in need of TLC often attract investors or property flippers, which are known for submitting low-ball offers. To attract offers and the highest bids, sellers should attend to any upkeep and maintenance issues before putting the house for sale.

2. Make sure the home isn’t being overshadowed outside. Nothing kills curb appeal more than a home you’re selling that you can’t even see. Be sure to trim trees or bushes to ensure they aren’t blocking any windows or the exterior of the home.

3. Remove wallpaper. Wallpaper and borders can be a nuisance to remove so you might want to take these personal decor touches down before you list the home. Neutralize the homes in subtle colors that will appeal to the most buyers and allow buyers to better visualize their personal decor moving in.

4. Don’t keep an empty home empty. Buyers can struggle in picturing themselves moving in if a home is left empty. Vacant homes can feel cold and rooms can look smaller than they really are. That’s why O’Ryan reminds us why builders spend thousands of dollars staging model homes. If your listing is vacant, consider staging it to bring in furniture and accessories to help define the various rooms functions.

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