In springtime, when all things hopeful and botanical bloom, there was a widespread sprouting of press announcements, particularly from the major banks, about increased dollars allocated to the business of jumbo loans.

Alas, the soil for such pronouncements has proven poor. A dearth of jumbos persists and the market appears to be wilting.

As an executive at one mortgage research company told me, earlier this year there was a flurry of activity with Bank of America and other major banks announcing jumbo loan programs, “but I haven’t heard anything since then. The market doesn’t appear to have changed much. I think some of these announcements were made to generate good press. The banks were saying, ‘Hey, we are open for business — don’t forget us,’ but they weren’t doing anything more than what they were doing before.”

Jumbo loans are basically any mortgage where the principal amount exceeds the statutory purchase limit of Fannie Mae and Freddie Mac, which has been set at $417,000 (Congress raised the upper limit in some high-cost areas to $729,750). In other words, with a conventional mortgage, Fannie Mae and Freddie Mac will buy the loan from the lender in the secondary market.

The agencies won’t purchase jumbos, which in the past were securitized and bought by private investors. That process completely closed down with the onset of the recession and the collapse of the credit markets.

If you’re BofA, or even ING Direct, which is also offering jumbo loans, then the loans have to be held in the bank’s portfolio. Hence, these lenders are being very circumspect about the loans they make since they can no longer shed the risk to other investors.

“Lenders that have stepped into this space are predominantly portfolio lenders, so they are a little more restrictive in the kinds of loans they are interested in writing,” notes Keith Gumbinger, vice president of HSH Associates Financial Publishers in Pompton Plains, N.J. “Fewer outlets are interested in lending them and when you do find them, the terms and credit restrictions are definitely tougher than they have been.”

Back in March, an Inman News story reported that BofA had cut interest rates on jumbo mortgage loans in the hopes of expanding its share of the market. Nevertheless, borrowers would still need strong credit (minimum 720 FICO score), at least a 20 percent downpayment, and assets sufficient to cover six months of payments.

In general, the big banks don’t have attractive rates on jumbos and “are very strict in regard to underwriting and property valuations,” says Dan Cutaia, president and chief operating officer of Fairway Independent Mortgage Corp. in Sun Prairie, Wis. “Unless you have a lot of equity and you are ‘gold’ to a lender, it will be difficult to find a jumbo loan, and if you do, you are going to pay a significant market premium.”

Fairway Independent Mortgage has been writing jumbo loans, which it brokers to companies like ING, but the deal has to be “absolutely golden,” with lots of equity and great credit. In short, the borrower has to be perfect.

Before the credit crisis, Fairway Independent did about 15 percent of its lending in the jumbo category; well into third-quarter 2009 the company wrote just over $2 billion in jumbos, which is less than 5 percent of its overall lending.

The good news is that prime-quality jumbo loans have a better history of defaults than conventional loans, which translates into a better risk profile on an individual loan basis. In a portfolio of loans, everything changes.

If $100 million of conventional loans came to market (which isn’t happening, but let’s fantasize), that could mean 1,000 loans of $100,000, or 100 loans at $1 million. Just a couple of loan failures in the jumbo portfolio could be more devastating than a higher number of failures in the conventional portfolio. In other words, actual losses could be higher with jumbos although the percentage of losses is lower.

The bad news with the jumbo-loan sector is that things could get worse before they get better.

“The big issue is that there are a trillion dollars of jumbo mortgages out there and these mortgage holders do not qualify for the federal government’s modification plans. Many of these people are now having financial difficulty,” says Steve Ozonian, executive chairman of Irvine, Calif.-based Sorrento Capital.

So far, the industry has not experienced a sizable destruction in jumbo-loan mortgage portfolios, as individuals who took these loans boasted good incomes at the time they signed their mortgage documents.

Since then, some of these good folk have lost their jobs.

Fortunately, when the now unemployed got their jumbo loans back in the mortgage heyday years between 2002-07, they were able to also get from the lender significant lines of credit, in some cases upward of $1 million. Ozonian believes a lot of the unemployed jumbo borrowers are using their lines of credit to continue to make mortgage payments.

The higher-end home market could experience a higher proportion of defaults and REOs at the end of this year and through 2010, says Ozonian. “The amount of jumbo-loan defaults will accelerate if we don’t allow people to modify, refi, or get out from under these homes.”

If Ozonian’s prediction comes to bear, the already narrow jumbo loan market will squeeze down even further.

A plan for the government to partially insure lenders when they agree to modify troubled borrowers’ loan terms could help stabilize housing markets, restore confidence, and bring buyers back into the market.

Federal Deposit Insurance Corp. chairwoman Sheila Bair wants the Bush administration to provide incentives for lenders to do as many as 2.2 million loan modifications.

Under a proposal unveiled by the FDIC Friday, the government would pay servicers $1,000 for each loan modified to defray their expenses, and then agree to cover up to 50 percent of losses if a loan should re-default.

Assuming one in three modified loans were to re-default, the plan would cost taxpayers $24.4 billion, but prevent 1.5 million foreclosures by the end of next year, the FDIC said.

The plan and others intended to stem foreclosures could help stabilize housing markets, but “speed is of the essence,” said Paul Bishop, managing director of research for the National Association of Realtors.

NAR, which has its own four-point legislative plan to stimulate housing markets, has concentrated on incentives for buyers like a $7,500 tax credit for homebuyers and government-backed interest-rate buy-downs (see story).

NAR also wants Congress make credit more easily available to would-be homebuyers. One way to do that, the group says, would be to make permanent the temporary increase in the upper loan limits for Fannie Mae, Freddie Mac and FHA. The limits, boosted in February to $729,750 in high cost areas, are set to come back down to $625,500 on Jan. 1.

NAR has also been adamant that the Bush administration use at least some of the $700 billion earmarked for the Troubled Assets Repurchase Program, or TARP, the way it originally said it would: to buy up “toxic” assets like mortgage backed securities. But after earmarking the first $250 billion in TARP funds to buy shares in troubled banks, the Treasury Department now says it does not plan to buy any mortgage-backed securities.

While NAR hasn’t formally endorsed the new plan to guarantee loan modifications put forward by the FDIC, the group is generally supportive of initiatives and programs aimed at mitigating foreclosures, Bishop said.

“To the extent that the FDIC plan puts, in effect, a ceiling on the rise in foreclosures sooner rather than later, that’s all good,” Bishop said. “It’s not only how many foreclosures are prevented, but giving homebuyers in the market a sense that maybe we do have a handle on it after all. Whereas now there’s a sense that we don’t know where the end to foreclosures is.”

The FDIC’s foreclosure prevention plan and the buyers incentives and access to mortgage credit advocated by NAR are “complimentary in what they aim to accomplish,” Bishop said.

Limiting foreclosures not only slows growth in inventory and price declines, but provides reassurance to would-be homebuyers who are reluctant to buy into a downturn, Bishop said.

Once that happens, the government must also make sure that buyers who are ready to get off the fence have the financing and incentives needed to make that happen.

First-time homebuyers are key to a recovery, he said, because they are the the least encumbered.

“They don’t have a home to sell, and may be able to get out into the market more quickly than an existing homeowner,” Bishop said. “To the extent that the four-point plan we’ve put out really works to bring first time buyers into the market, that will be one of the key aspects to success for any of these plans.”

Although the Bush administration was said to be weighing Bair’s plan, last week it rolled out a less ambitious loan modification plan involving Fannie Mae, Freddie Mac and the HOPE NOW alliance of 27 loan servicers.

The administration’s plan, which FHA Commissioner Brian Montgomery said might help “hundreds of thousands of borrowers,” involves a streamlined loan modification process in which borrowers’ loan payments would be reduced to 38 percent of gross monthly income by lowering their interest rate, lengthening the term of the loan, or reducing principal and adding it to the back of the loan.

Having placed Fannie Mae and Freddie Mac in receivership, the government has a large say in how they are run. But while Fannie and Freddie own or guarantee about 58 percent of all single-family mortgages, those mortgages represent only 20 percent of serious delinquencies.

About 60 percent of seriously delinquent mortgages have been sold to investors in private-label mortgage-backed securities who may be less willing to engage in loan modifications.

The FDIC said that while foreclosures are costly to lenders, the pace of loan modifications continues to be “extremely slow.” Only 4 percent of seriously delinquent loans are modified each month, the FDIC said.

Fannie and Freddie have boosted loan modifications by 60 percent this year, but are still only averaging 4,600 a month. About 92 percent of borrowers Fannie and Freddie have worked with have been able to keep their homes.

Can a Limited Liability Company (LLC) purchase a residential property under the name of the company and plan to use it’s primary residence and also conduct our business from there? Please tell us the pros and cons of making this purchase.

There are probably too many issues to discuss in this answer, but I’ll give you a few to start mulling over.

If the home is your primary residence, you may lose tax benefits by placing the home in a limited liability company. For one, under current tax law, if an individual owns a property, that individual can sell the property and exclude up to $250,000 from federal income taxes if that individual used the property as his primary residence for two out of the last five years ($500,000 can be excluded from gain for married couples).

If the LLC owns the property, the LLC is usually not considered a person for purposes of the primary-residence exclusion. In your case, if the LLC is disregarded for purposes of your owning the home in a similar manner as living trusts are disregarded, you would be entitled to federal income tax benefits as if you owned the home in your name. But for local property tax purposes and state income tax purposes, you may find that those taxing authorities might not allow you to benefit from reductions in state income taxes and local property taxes for homes owned by individuals (also known as the homestead exemption).

Many local governments won’t give those real estate tax benefits to corporations and companies. These real estate tax benefits can be substantial and you might not want to miss out on them.

If you run your business out of this home, you may run afoul of zoning laws in your municipality. In some cities, you may not use more than 10 percent or 15 percent of a home for a home office if the property is located in a residential neighborhood.

For federal income tax purposes, if the home is owned by the LLC, you might create unusual circumstances in your ability to deduct all of the real estate taxes, amortize the entire value of the home, or to deduct the entire amount of the interest payments for the loan on the property on your federal income tax form, particularly if you use all or part of the home for your business.

Since you have indicated that the home will be your primary residence, it’s unclear why you would want to hold the property in the name of the LLC.

If your intent is to protect your personal assets from liens and creditors’ claims against your business, you might be making a mistake by having the home owned by the LLC. If your business is sued and loses in litigation, the assets of your business will be at risk. If you don’t have adequate homeowners insurance and someone slips and falls on your property, the home will still be at risk and you could lose it.

On the other hand, if the LLC runs its business separately from what you and your wife do in the business and if the LLC is sued, the litigation will risk only the assets held by the LLC. You could lose the LLC, but you shouldn’t lose the home. (Still, it seems as though you’d be taking a fairly big risk by mixing your personal assets with the assets of your business.)

Finally, if you’re planning to own the home and obtain loans on the home, you may find it difficult to get a lender to give you a loan on the basis that the home is a primary residence. Because the home is owned by the LLC, most lenders may treat the home as an investment property and you may end up having to pay greater costs to close the loan on the property and probably pay a higher interest rate on the loan.

Talk to an estate planner to help you solve some of your issues. You’ll probably find that he or she feels the home should be owned separately from the business but that you and your wife can lease a part of the home to the LLC. The rent would be income to you on the personal side, but you would be able to deduct some of the home expenses as business expenses due to the rental of that portion of the home to the LLC business.

With the property market in turmoil, especially in the United States, real estate agents around the country are ratcheting up their efforts to woo the Russian oligarchs, Korean industrialists and other international buyers who have been making headlines with splashy top-dollar purchases.

Buyer: London businessman
Where: New York City
Property: A 5,450-square-foot Victorian townhouse close to Central Park. Special features include a large garden, two living rooms and a terrace on the fourth floor.
Price: $7.95 million; buyer paid asking price.
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Atlanta Fine Homes Sotheby’s International Realty

Buyer: Italian couple
Where: Atlanta
Property: A two-bedroom, 2,113-square-foot apartment in the Sovereign, a new 50-story high-rise in the upscale Buckhead neighborhood. The building features a broad terrace and a pool.
Price: $1.242 million
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Steve Mitchell/Associated Press

Buyer: Russian fertilizer tycoon
Where: Palm Beach, Florida
Property: Donald Trump’s lavish 6-acre waterfront estate. The 60,000 square-foot mansion includes gold fixtures, a 50-car garage and a 475-foot beachfront.
Price: $95 million

“They are the most aggressive buyers in the market right now,” said Kevin McBride, an agent with Atlanta Fine Homes Sotheby’s International in Atlanta. In international hubs like Atlanta, overseas clients now account for anywhere from 10 to 30 percent of sales, industry experts say.

Even Immobel, a company based in Warsaw that specializes in translating online real estate listings into 13 languages, has seen the number of U.S. agents using its services jump by 30 percent in the last year, according to Janet Choynowski, the company’s chief executive. Agents are “really eager to reach out to buyers proactively by any means they can,” Ms. Choynowski said.

But even before the financial meltdown of the last few weeks, there was growing concern that the much-publicized flow of international buyers into the United States was slowing.

Earlier this year a study by the National Association of Realtors found the number of agents who sold a home to an international buyer actually decreased in the last year, from 18 percent to 13.3 percent.

And the dollar has strengthened in the last six months, diminishing the so-called “currency exchange discount” that helped make U.S. property a bargain for many foreign buyers. The euro was worth $1.60 in July; it has been about $1.29 recently. The British pound has dropped from $2.10 in November 2007 to around $1.59.

“The dollar has gotten stronger and that makes the investment appeal that much weaker,” said Melissa Cohn, president of Manhattan Mortgage Company.

Ms. Cohn says the number of international buyers in New York City has dropped by 50 percent in the last six months. And with credit tight, the list of mortgage companies in the city willing to finance a purchase by a foreign resident has dropped from 10 to 4, she says.

That is not good news in Manhattan, where international buyers typically buy a third or more of the apartments in new buildings, according to local experts.

But international buyers continue to play an important role in the local market. For the W NY Downtown, a 56-story project under development in Manhattan, 74 percent of the initial sales have been to foreign buyers, primarily from South Korea, the United Arab Emirates and Italy, a project spokesman said.

In Miami, which has been particularly hard hit by the market slowdown, as many as 50 percent of sales in some neighborhoods are to overseas clients, despite the credit crunch and strengthening dollar, says Teresa Kinney, chief executive of the Greater Realtor Association of Miami and the Beaches. This month the organization was host to a contingent of 150 international agents, including 103 from Russia, who toured properties and networked with Miami agents before they headed to the National Association of Realtors’ annual convention in Orlando, being held from Nov. 7-10. And in the past year group members have traveled to events in Paris, Madrid and Moscow to forge alliances.

“It’s our biggest source for new business in Miami,” Ms. Kinney said.

Around the country, industry executives are organizing similar initiatives. In September, the Texas Association of Realtors, for the first time, led 100 agents from Texas to Guadalajara, Mexico, to a trade conference. Mexican citizens were the third-largest group of international buyers in the United States last year, behind only Canada and Britain, according to the National Association of Realtors study.

Four thousand miles away in Hawaii, Dano Sayles of Coldwell Banker Island Properties is expanding his participation in international groups and attending conferences around the world to make new contacts.

“What really saved my market in south Maui last year was the Canadians,” said Mr. Sayles, who specializes in homes of more than $2 million.

In Honolulu, Sakara Blackwell, president of Optimum Realty, recently hired staffers who speak Mandarin and Korean, hoping to take advantage of moves by China and Korea to loosen restrictions on their citizens making foreign purchases. Overseas buyers now represent about 20 percent of her business.

“A couple of years ago it would have been zero,” Ms. Blackwell said.

The outreach to international markets also has been increasing on the Internet.

As global markets slow, agents say different types of international buyers have been emerging. In many markets, “vultures” are going after depressed and foreclosed properties, sensing that the bottom is near. Others are looking at a luxury real estate as a safe good investment, more than simply a second home.

“People are buying in the U.S. not necessarily because they think it’s cheap; they’re buying because they see it as a safe haven for their money,” said Ms. Choynowski of Immobel.

Many of those buyers aren’t affected by credit problems — they’re paying in cash, agents say.

But the recent headlines and sharp price drops in many markets have left both investors and second-home buyers confused and uncertain. Media reports often don’t reflect the luxury market, which performs differently than the general overall market in many cities, industry executives say. “People don’t know what to believe,” said Bruce Hiatt, owner of the Luxury Realty Group in Las Vegas.

So these days many international clients are “Lookie Lous” — industry slang for those who are shopping but not buying — says Bahar Tavakolian of the New York-based Fox Residential Group, which organized an international division two years ago when foreign buyers were emerging as a big factor in sales.

Many of her foreign contacts are surprised to find there are few bargains in Manhattan, with the median price of a condo about $1.2 million, according to the Prudential Douglas Elliman real estate agency.

“I get more calls seeking advice” than those actually wanting to buy, Ms. Tavakolian said. adding that she believes the whole nature of the international business has changed recently.

But many U.S. companies hope the number of foreign buyers will bounce back once markets settle or the dollar weakens again. Partly in preparation for that time, the industry is continuing to lobby for reduced visa restrictions, including a special permit for foreign retirees, which might help encourage international deals.

“People are buying across borders,” Ms. Choynowski said. “That’s just the way it is now.”

Sellers in financial distress require something extra from real estate practitioners. Facing a short time to sell before foreclosure and sometimes prickly negotiations with lenders, some listing agents are turning to the growing cadre of stagers who employ the ancient Chinese technique of feng shui to dissipate the negativity of financial woes.

Proponents say feng shui can remove the disquieting vibes that overwhelm such homes by balancing the negative energy emitted by the property’s objects, places, colors, circumstances, and even residents.

Buyers may not recognize this spiritual housecleaning beyond the subconscious level, but it still has a positive effect, say Katrine Karley and Pandora Seibert, co-owners of Professional Staging with Feng Shui & Design, in Sarasota, Fla. Sellers who aren’t financially stressed themselves but who live in a neighborhood studded with foreclosures can also benefit from an energy or chi realignment, the pair explains.

“I’m a believer,” says Wendy Kay Foldes, broker-associate with Cityscapes International Realty Group in Sarasota. “The first time I worked with Karley to add feng shui to a difficult listing, it sold to the very next person who looked at it.”

The two-bedroom condo had been on the market for two years without an offer. Karley immediately shifted the furniture to create a configuration “with better flow,” she says, and added red flowers and place mats that energized the black and white decor. It sold the next day.

Feng shui has a place in every facet of real estate marketing, says Karley. Yard signs should be placed at eye level (rather than close to the ground) on the right side of the yard as you face the property. This positioning will help draw in buyers. Attaching a 3-inch round mirror to the sign brings two additional benefits: By facing out toward the street, the mirror brings more energy to the property. By catching the eye, it holds a potential buyer’s attention to the property longer.

For sellers facing severe financial woes, she advises that 27, yes 27, items “from couches to ceramic figurines” be rearranged within the home. “The digits add up to nine, which is considered powerful. Doing this should help money flow toward a house,” says Karley.

In homes that are still occupied, feng shui stagers remove physical clutter and perform what they call a spiritual ‘space clearing’ using bells, chimes, incense, chanting, and sometimes rice to purify a space and change the chi from negative to positive vibration.

“Blessing or chanting removes negative energy and is a form of clearing out the old ‘stuff’ we sometimes call ‘hungry ghosts,’” explains Karley. “The chanting is to move good energy around the property.”

If all that sounds a little too ‘new age’ to you, Karley tells of one Florida builder who had nine homes on the market for about nine months and was getting desperate. The bank was closing in on him, so he figured he’d try feng shui in an attempt to salvage his subdivision.

“Time was of the essence because the bank wasn’t willing to wait any longer,” explains Karley. She made numerous visits to the properties for blessings to remove the fear and misfortune that had befallen them. She used a technique called ‘tracing the nine stars,’ in which feng shui practitioners place nine small round mirrors in the nine power places on the property. “We also concluded that the entrance to the subdivision needed a water element, so the developer installed one,” recalls Karley. Water is synonymous with power and money, according to feng shui principles.

The various measures seemed to help. Within 45 days of Karley’s arrival, seven of the nine homes were sold. Other than the feng shui actions, nothing else was done to enhance the subdivision’s appeal.

“The buyers got ‘positive’ homes that felt great to them, and the developer survived,” says Karley. Hiring a feng shui expert may cost several hundred dollars for a preliminary consultation or $1 per square foot for a total energy overhaul, but improving a home’s inner harmony may well be worth the price. By Charimaine Engleman-Robins, a sales associate with Hunt Real Estate of Florida in Sarasota, Fla.

Questions to Ask Your Feng Shui Practitioner

* What type of feng shui do you practice? (Some forms focus on issues of energy and direction, while others rely more on Chinese astrology and numerology.)

* How long did you study? (Most certification programs take two years.)
* How much experience do you have?
* What kind of projects have you completed?
* What references can you provide?

Also, ask yourself if you feel comfortable with the person. Your own instincts about the practitioner count for a lot.

The 2008 National Association of Realtors reveals that the number of first-time buyers have risen as a percentage of the market share and they plan to own their homes longer than buyers in the past.

Lawrence Yun, NAR chief economist, said a higher share of first-time buyers makes perfect sense, and it’s a trend he expects to grow.

“First-time buyers are much more flexible in entering the market because they aren’t concerned about selling an existing home,” he said. “Given low home prices, plentiful supply, and affordable interest rates, it’s been an optimal time for entry-level buyers with a long-term view.

“Considering the temporary first-time buyer tax credit and improvements to the FHA loan program, we expect stronger entry-level activity as the flow of credit improves that, in turn, should free more existing owners to make a trade in 2009.”

The number of first-time buyers rose to 41 percent from 39 percent of transactions in last year’s survey and 36 percent in 2006. “Although modest, this is a meaningful gain for the 12-month period ending at the close of June, and more recent independent data show a stronger uptrend in first-time buyers who are helping to reduce excess inventory,” Yun said.

According to the NAR study, the median age of first-time buyers was 30, down from 31 in 2007, and the median income was $60,600. The typical first-time buyer purchased a home costing $165,000 and plans to stay in that home for 10 years, up from seven years in 2007.

The median down payment by first-time buyers was 4 percent, up from 2 percent in 2007; the number purchasing with no money down fell from 45 percent in 2007 to 34 percent in the current survey.

“The study covers transactions through the middle of 2008, so we can assume the down payment numbers have shifted recently because credit tightened and no-down payment loans all but disappeared around the close of the survey,” Yun explained.

Of first-time buyers who made a down payment, 69 percent used savings and 26 percent received a gift from a friend or relative, typically from their parents. Another 7 percent received a loan from a relative or friend, while 16 percent tapped into a 401(k) fund, stocks or bonds. Ninety-two percent chose a fixed-rate mortgage.

The percentage of buyers who purchased a home in foreclosure jumped to 6 percent of transactions in the 2008 survey from 1 percent in 2007. Another 38 percent of buyers considered purchasing of a home in foreclosure but did not, primarily because they could not find the right home.

Commuting costs factored greatly in neighborhood selection, with 41 percent of buyers saying they were very important and another 39 percent saying transportation costs were somewhat important.

“Since fuel costs began rising in the latter part of the survey period, it’s reasonable to assume they’ve become even more important to home buyers since,” Yun said. “We’ve heard from our members that commuting costs are playing a bigger role in buyers’ decisions.”

Environmentally friendly features also were important, cited by 90 percent of buyers. Heating and cooling costs were of primary importance, followed by energy efficient appliances and energy efficient lighting.

The study found that 81 percent of sellers used full-service brokerage, in which real estate agents provide a range of services that include managing most of the process of selling a home from listing to closing.

Nine percent chose limited services, which may include discount brokerage, and 9 percent used minimal service, such as simply listing a property on a multiple listing service. All of these types of services are provided by REALTORS as well as non-member agents and brokers. The results are identical to findings in 2007 and comparable to findings in 2006.

Primarily, sellers want agents to price their home competitively, market the property, find a buyer and sell within a specific timeframe. Home buyers are consistent in their expectations of real estate agents.

Buyers thought the most important agent services are helping find the right house, and negotiating sales terms and price. Because agents often are chosen based on a referral or were used in a previous transaction, two-thirds of buyers contacted only one real estate sales associates in the search process.

Sixty-one percent of buyers are married couples, 20 percent are single women, 10 percent single men, 7 percent unmarried couples and 2 percent other. Twenty-six percent are nonwhite, 9 percent were born outside of the United States, and 4 percent primarily speak a language other than English.

Seventy-eight percent of all respondents purchased a detached single-family home, 9 percent a condo, 8 percent a townhouse or rowhouse, and 5 percent some other kind of housing.

Fifty-five percent of all homes purchased were in a suburb or subdivision, 17 percent were in an urban area, 16 percent in a small town, 10 percent in a rural area, and 2 percent in a resort or recreation area. The median distance from the previous residence was 12 miles.

The biggest factors influencing neighborhood choice varied by household type, but overall they were quality of the neighborhood, cited by 62 percent of respondents; convenience to jobs, 51 percent; overall affordability of homes, 41 percent; and convenience to family and friends, 38 percent.

Other factors valued highly by consumers include quality of the school district, 27 percent; convenience to shopping, 27 percent; and neighborhood design, 24 percent.

Legislation is impactful to the cyclical nature of this business. And today, there are critical issues on the horizon that will affect the next leg of this cycle. Here is our take on the current pressures facing housing and the economy:

We expect a lame-duck special session of Congress in November with the following outcome:

* A second consumer stimulus package in the $150-$300 billion range, mostly helping the most affected (the unemployed, etc.).
* An employment stimulus package, possibly in the form of tax breaks to businesses, an extension of the NOL look-back period to 4 years because it will help more than home builders at this point, and “Federally encouraged” lending by banks.
* Unfortunately, no tax credit for home buyers.
* A sustained low Fed Funds rate.
* The implementation of an unprecedented homeowner loan modification program.

Additional measures that may be postponed until next year:

* Additional regulatory powers that could make it more difficult and expensive for banks to make and securitize loans.
* A more formalized process for bank asset disposition.

The Waxing Phase: What Will Be Revealed?
It has been nearly three months since the passage of the Housing and Economic Recovery Act of 2008 (a.k.a. the Housing Stimulus package), and less than one month since the Emergency Economic Stability Act (a.k.a. the Bailout) was signed into legislation.

As each initiative burst onto center-stage, they were scrutinized for their ability to restore consumer confidence, stave off a recession, and grease the dehydrated wheels of national (and then global) lending machines. Instead, attempts to plug the leaks proved ineffective. When housing and the economy needed a welding kit, they were handed bubble gum.

But, almost immediately following the Bailout, it was apparent that the current administration would be pressured into one more attempt at a “fix.” Last week, the much-discussed idea of a second stimulus got a nod of support from Federal Reserve Chairman Ben Bernanke. Following the election, Congress typically would not be scheduled to reconvene until January 3, 2009, when new elected officials take office. But now that Bernanke is throwing his weight behind a second stimulus, there is strong indication that Congress will scramble to fast-track the consideration into a structured bill during a lame-duck session. Reports are that both the House and Senate will convene on November 17.

Word in Washington is that the package being discussed ranges from $150-$300 billion in total. Many feel that the bulk of its eventual provisions will likely target individuals (by way of extensions in areas like unemployment benefits, loosening qualifications for food stamps, low-income heating assistance, etc.). Leaders are still pondering what they can do on the business side.

So what does this mean for housing?

In an earnings call with analysts on October 29, Centex CEO Tim Eller referred to a “coalition” of builders supporting stimulus measures that would ultimately have a “strong impact on housing supply and demand.”

The package of measures he cited includes:

* Offering a home buyer tax credit, which we discuss below.
* Targeting the potential foreclosures from an estimated 2 million ARM resets due to occur in the next two years. The FDIC and Treasury are reportedly hammering out details on a foreclosure relief plan this week that would provide $50 billion of bailout money to troubled homeowners. But the impact of potential ARM resets is an anticipated aftershock to the current fallout caused by the subprime mortgage quake.
* Offering below-market mortgage rates.

Eller also noted that other industries back these ideas because they recognize the impact housing has on the general economy. “There [are] a lot of constituencies and stakeholders in this – it’s not just the builders,” said Eller. “That is our message, and that is the coalition that we are building.”

In our October 8 e-mail newsletter titled Running with the Devil, we took an in-depth look at the Bailout and highlighted key housing initiatives that were excluded. Here’s an update, along with our take on the odds of their likelihood of making it into this next piece of legislation:

* The Senate is (again) talking about a net operating loss (NOL) carry-back extension. When discussion on this issue began earlier this year, it was viewed as a housing handout for a small number of public companies. The fact is: the tax benefits apply to many private companies as well – not just in housing.

Today, banks, insurance companies, automakers, retailers and others desperately need it for the same reason: if businesses can’t carry back losses, they lose deferred tax assets. Now that the entire economy is in a recession, there is more momentum behind this push.

ODDS OF INCLUSION: 50%
The Senate has already telegraphed they would like to include it. House Democrats are still not in favor, but recognize both banking and housing need to be invigorated. Insiders predict a one-year extension.

* The industry is increasingly vocal about its desire for a true home buyer tax credit of $15,000 or more. Last week, during the company’s quarterly earnings call with analysts, Pulte’s CEO called for a $20,000 tax credit with no repayment provision. We’ve heard more of the same this week as the bulk of public builders report earnings. He and other builder executives have made it clear that last summer’s $7,500 tax-credit-as-loan incentive was not effective at stimulating demand. But there are questions as to whether political leaders view a do-over as warranted.

Conventional opinion is that there were two strikes against the current tax credit initiative:
1. The Dollar Amount: In late summer, when the initiative was being formed, the large public builders hoped for a higher dollar amount and expressed their disappointment with the $7,500 figure. The only other time a buyer tax credit was implemented was in 1975, during the Ford administration. Indexed for inflation, that $2,000 credit would amount to nearly $8,200 in today’s dollars, which is above the credit currently offered.
2. The Tax-Credit-as-Loan Structure: The fact that this was not a true credit, but a loan that needed to be paid back, was a great source of confusion. Some builders used the scenario to a marketing advantage, offering to assume the pay-back status and wiping out the connotation of a $7,500 “loan” – but to no avail. Consumers who were uncertain about making a purchase decision – even with prices that had dropped by $120,000, free pools, free landscaping, upgraded appliances and more – have not viewed the tax credit as the final nudge they need to jump into a new home purchase.

ODDS OF INCLUSION: 50%
One could argue that, by addressing the concerns above, a true buyer tax credit would be an effective stimulus. But, now that it has been tried once, the initiative carries a stigma of failure. In addition, such an initiative is estimated to cost roughly $75 billion. Layer that in, and it becomes even tougher to imagine Congress allocating such a large percentage of any new package directly at this measure.

Another consideration: Banks are getting relief in a variety of forms. Home building should lobby hard to ride the coattails on measures that are applicable. One example: An IRS measure that promotes M&A activity. If a bank acquires another bank with losses, normal rules dictate the new owner can’t take those losses in the future. That rule has been waived for banks. Home builders should have that too. Why not encourage companies that want to do M&A and stay afloat?

The Waning Phase: What’s In the Shadows?
Today, financial stability is priority number one, including the ability to assure and continue lending for small businesses, plus the restructuring of mortgages and mortgage lending. Both parties are calling for government to get involved in the mortgage issue in some form: either to re-write existing contracts so that troubled borrowers get a windfall, or to provide a huge infusion of cash to make up the deficit.

The thinking is that if the government directs its funds toward buying mortgages and restructuring bad loans, stability will be restored. However, one link in that food chain is broken: Remember, just because we are pumping finds into the banks, doesn’t mean they are forced to lend it. Are banks really going to loan funds to people who get a down payment by virtue of the government giving it to them?

As always, the pendulum swings . . . question is, where does it stop?

Theory 1: “We’ll never do this again because, in the end, nobody wins.”
Given the rampant abuses, many speculate that – regardless of the powers in place – we will overcorrect into a “never-again” period, creating a highly regulated environment. Underwriting standards are likely to revert back to what they were 20 years ago.

Theory 2: “Can we try to make it happen again?”
A clean sweep of Democrats might not want to undermine what they turned Fannie/Freddie or the CRA into. The party’s “welfare mentality” will put the onus on the banks to encourage low-income and minority lending. Some who subscribe to this theory even believe that a Super Majority in Congress would make moves to liberalize the FHA. We might see a return of initiatives like DPA, a re-packaging of subprime-like lending and other creative programs that push to get people into houses.

Today, as much remains unknown, industry leaders shouldn’t abandon their core business strategies in response to the outcome of this election – or any other election, for that matter. But as you head to the polls next week and continue to navigate through the ensuing stormy climate, keep this perspective in mind:

The ownership society that Presidents Clinton and Bush respectively envisioned is a laudable goal – supporting the idea of Americans living in homes. But there is a level of practicality that can’t be ignored: Creating an environment where homeownership can flourish is desirable. But forcing it to flourish brings trouble.

Directors for the National Association Realtors on Monday formally signed off on a real estate stimulus proposal that includes a temporary $7,500 tax credit for all buyers, with no repayment requirement, and a temporary federal buy-down of mortgage rates to 4.5 percent or less. The tax credit, as proposed, is intended for all buyers — not just first-time buyers.The group’s plan also calls upon the federal government to make permanent the temporary increase in FHA, Fannie Mae and Freddie Mac loan limits to $729,750 in high-cost areas. The limits are scheduled to roll back to $625,000 on Jan. 1.

And the plan reiterates the association’s long-standing aim to permanently block banks from engaging in real estate brokerage and management.

Dale Stinton, NAR CEO, said that the group’s proposal would cost an estimated $100 billion per year and its temporary relief measures would run for two years.

Realogy Corp. floated the idea of government-financed interest-rate buy-downs in October, saying they could unleash pent-up consumer demand for housing (see story). Traditionally, sellers have used interest-rate buy-downs as an incentive, paying lenders extra points up front to obtain a reduced interest rate for a buyer, often for the first two or three years of a loan.

Stinton said NAR arrived at the 4.5 percent or lower interest-rate buy-down level for a 30-year fixed-rate mortgage as “a result of some surveys and focus groups and talking to some brokers around the country,” and that the group’s research indicates that a buy-down in interest rates to 3 percent to 4.5 percent would get the market rolling again.

“We think in a couple years things will come back to where they should be,” Stinton said. He said interest-rate buy-downs could be funded as a part of the $700 billion federal plan to bring liquidity back to the financial markets.

Under the proposal, the rate buy-downs would apply to the purchase of “all new and/or existing homes sold up to $1 million in price,” and “There are a number of ways in which the government ultimately could decide to structure and fund this program, which could be addressed as part of the stimulus packages currently being discussed in Washington.”

Stinton said, “It’s a small price to pay, in my opinion, to stop the hemorrhaging,” adding that a more prolonged market slump could prove far more costly.

He also said that past stimulus efforts fell short in getting “the demand side moving again.”

“We have to find a bottom to this market, from the real estate point of view and from an economic point of view,” he said.

Several directors proposed to amend the language in the four-point plan, though most amendments failed as NAR officials urged directors to adopt the given language as a starting point for federal lobbying efforts.

Although Congress is expected to consider passage of another stimulus bill when it returns for a “lame duck” session, some economists have recommended that it focus on government-funded infrastructure projects like roads and bridges that create jobs and stimulate spending (see story).

Also at the NAR board of directors meeting, association officials announced the approval of the charter for the group’s federal credit union launched by the group.

The group’s budget, approved at the meeting, anticipates that membership could drop to about 1.06 million in 2009, down from an earlier projection of about 1.08 million. The revised projection is also down from a peak membership of 1.36 million in 2006 and a level of 1.24 million as of Oct. 31, 2008.

Offering a few concessions to the real estate industry, the Bush administration is moving forward with regulatory changes that it expects will dramatically alter the way mortgage loans and settlement services like title insurance are marketed and sold to consumers.

The new rules, which would not be enforced until 2010, would require loan originators to stick closely to cost estimates provided to borrowers on a new, standardized disclosure form. The rules would also provide incentives for lenders to package settlement services such as title insurance with loans.

Officials at the Department of Housing and Urban Development claim the new rules will help borrowers comparison-shop between competing loan offers or complete loan packages, saving them an average of nearly $700 at the closing table.

“Millions of families go to the settlement table … without clearly understanding what they are paying for,” Housing Secretary Steve Preston said in announcing changes several years in the making. “In many respects, it’s clear that the current way people buy and refinance their homes isn’t serving us very well at all and has contributed to the current housing crisis.”

The new rules are intended to help borrowers avoid paying excessive loan origination and closing costs, and understand potential issues like payment shock from adjustable-rate mortgage (ARM) loans, balloon payments, and prepayment penalties for refinancing.

Preston said HUD plans to publish the new regulations under the Real Estate Settlement Procedures Act, or RESPA, in Friday’s Federal Register. If Congress does not stand in the way, the RESPA rule changes would take effect within 60 days after publication.

HUD will allow a one-year transition period, during which companies that want to start doing businesses under the provisions of the new rule can do so. But lenders and mortgage brokers would not be required to use the new, standardized Good Faith Estimate and HUD-1 settlement statements until Jan. 1, 2010.

That day may never arrive, as industry opponents could still appeal to Congress to block implementation of the rule, or ask the incoming Obama administration to propose a new RESPA rule that would supersede it.

Industry opponents say HUD — which has been attempting to update the 34-year-old law since 2002 — has overestimated the benefits of RESPA rule changes to consumers, while underestimating the costs to loan originators, title insurers and settlement services providers.

Some industry groups, including the National Association of Realtors and the American Land Title Association, maintain HUD’s proposed incentives for packaging settlement services with loans could actually reduce competition by promoting further industry consolidation.

To encourage packaging, the proposed rule changes put forward by HUD in March would allow lenders leeway to pass on volume discounts to consumers and use average-cost pricing.

That could allow big lenders to pressure settlement services providers into reducing their prices in order to be included in the lenders’ preferred packages, Anthony Lindsey, CEO of GlobeCrossing LLC, testified on behalf of NAR at a congressional hearing in September.

HUD has said such pressure by lenders will save consumers money. But NAR thinks that in the long run, small settlement service providers will be driven out of business, leaving the companies that survive free to raise their rates, Lindsey said at the hearing (see story).

To prevent last-minute changes in fees charged for settlement services, HUD proposes placing “tolerances” limiting fee increases for services provided by a lender or a company recommended by the lender to 10 percent. No tolerances would be imposed on fees when consumers select their own settlement services.

“This is a consumer revolution that occurred today, and I don’t think people will fully appreciate it until it’s implemented in January 2010,” said Jeff Lazerson, president of Mortgage Grader. “We were the only industry that I can think of that the written estimate wasn’t worth the paper it was written on.”

Laguna Niguel, Calif.-based Mortgage Grader operates one of a growing number of Web sites that not only allow consumers to shop for mortgages online, but fully disclose the fees charged. Lazerson believes HUD’s RESPA rule changes will be a boon for Mortgage Grader and Fair Closing Costs, another site his company operates that helps consumers shop for settlement services (see story).

But ALTA maintains that HUD lacks the legal authority to impose tolerances, which effectively changes the good faith estimate into an offer. Although HUD officials say tolerances will remain a part of the final RESPA rule, they will allow 30 days to “cure” violations.

Mortgage brokers and mortgage bankers also have issues with HUD’s proposed disclosures, pointing out that the Federal Reserve will require a different set of disclosures to meet Truth in Lending Act (TILA) requirements.

In an Aug. 7 letter, 243 members of the House of Representatives asked HUD to withdraw its proposed RESPA rule changes and limit itself to working with the Federal Reserve to create simplified disclosure forms that also meet TILA requirements.

HUD, which received more than 12,000 public comments after announcing the proposed rule changes in March, said it would attempt to strike a balance between the needs of consumers and the real estate and lending industries in its final rule. But HUD refused to withdraw the rule.

In a speech this summer, Preston called it “absolutely reprehensible” that so many lawmakers were “fighting to stall progress, especially when they know so many families are in trouble because they didn’t understand the terms of their mortgage.”

Today, Preston struck a more conciliatory note, saying that HUD hopes changes to the final rule “will convince our industry partners and those in Congress that we have approached this rule-making process in a thoughtful manner.”

But HUD’s changes appeared to be mostly minor. HUD dropped a proposed requirement that settlement agents read a “closing script” that takes borrowers through their settlement statement to make sure it jibes with the good faith estimate, or GFE. Industry opponents said reading the script would be costly, time consuming and impractical.

Instead of a closing script, HUD has created a new page on the HUD-1 settlement statement that’s intended to help consumers compare their final loan terms and closing costs to the GFE themselves.

The GFE has been reduced from four pages to three, and each designated line on the final HUD-1 will now include a reference to the relevant line from the GFE.

HUD had not released the text of the final proposed rule when it announced its imminent publication, but promised that it would be posted later today. Having not seen the actual language of the rule, industry groups were guarded in their comments.

“I think those are good things, they represent movement in the right direction,” said Ed Miller, ALTA’s chief counsel and vice president of public policy, of the changes HUD officials revealed at a press conference. “The script was not workable. It didn’t take into the effect of laws and regulations at the state level, and we are happy HUD was responsive to our complaints.”

But while those changes address some industry concerns, it’s unclear if HUD has left in place some or all of the packaging incentives that could have a big impact on settlement services providers.

It’s believed that HUD has removed provisions allowing volume discounts from the final rule. If that’s the case, the change, taken in conjunction with a 30-day right to cure fees that exceed tolerances, “could mitigate a lot of the problems” with tolerances, Miller said.

If lenders lowball estimates of fees for settlement services simply to win business, settlement service providers shouldn’t be held responsible, Miller said.

“Most industry groups had concerns about tolerances and volume discounts put together,” Miller said.

HUD and the Federal Reserve also remain on a path that will lead to the federal government requiring two sets of different — and in some ways incompatible — loan disclosure forms: one for RESPA, and one for TILA.

TILA disclosures will require lenders to disclose annual percentage rate, or APR, which incorporates some fees into calculating what it will cost borrowers to pay the loan back. HUD’s GFE provides the interest rate on the loan, not the APR — a practice some say could stump consumers.

“If you’re handed (HUD’s GFE) and the TILA (disclosure) form at the same time, and one shows APR and the other the interest rate, you create confusion right from the get-go,” Miller said.

HUD says it’s trying to help consumers choose not just the best loan — the focus of TILA disclosures — but the best loan package, including settlement services. Because APR does not include all fees, it may not be a good indicator of who’s offering the best deal.

“HUD was completely right in that thinking,” Mortgage Grader’s Lazerson said. “The APR stuff is just a smoke screen for lenders to make more profit at the consumer’s expense.”

John Courson, chief operating officer of the Mortgage Bankers Association, said HUD could address the issue by using an “all in” APR that includes all fees.

“That number can be shopped apples to apples,” Courson said. “The borrower can change the APR depending on what they do or don’t want to finance into the rate.”

Courson said the MBA is disappointed in the “continued inability of the Fed and HUD to work together to harmonize disclosures.”

Preston told reporters today that while HUD agrees there may be opportunities down the road to work with the Fed on more compatible disclosures, RESPA reform needs to be done quickly.

The Obama administration will reportedly be able to roll back any regulatory changes that have significant economic impacts if they are made after Nov. 20.

“Our initial reaction is we appreciate HUD’s effort — they’ve made a good start … but we think they could do more,” Courson said.

While HUD appears to have adopted a number of the MBA’s suggestions in creating the final GFE and HUD-1 statements, Courson said, disclosures of yield-spread premiums sometimes paid to mortgage brokers should be more clear.

HUD’s standardized GFE does not identify yield-spread premiums by name, but it would require that the rebates be applied to a borrower’s closing costs. HUD says that would allow borrowers who choose to pay a higher interest rate in order to reduce their closing costs to do so, without mortgage brokers pocketing the rebates without their knowledge.

Mortgage brokers, however, complain that banks don’t disclose service-release premiums when they sell loans in the secondary market that they don’t have to report.

HUD officials said they were intent on creating disclosure forms that didn’t create consumer bias for or against mortgage brokers or bank loan officers.

In seven rounds of consumer testing, borrowers were able to select the lowest-cost loan 92 percent of the time, whether it was originated by a mortgage broker or lender, said HUD Assistant Secretary for Housing Brian Montgomery.

Dear Ginny: If the house I’d like to purchase doesn’t pass inspection, will the entire transaction be canceled and money refunded?

Oh, if only life (and real estate) were so black-and-white — being a grown-up would be so much easier! Unfortunately, home inspections are not pass-fail. Rather, they are part of your due diligence duties as a responsible home buyer. They give you the information you need to decide whether to proceed with the purchase and/or renegotiate terms with the seller. Your ability to cancel the deal and get your deposit money back is governed by the terms of your contract, and standard practices vary from state to state.

Mindset Management

Before you even begin inspections — in fact, before you start house hunting, cultivate clarity about your position on the condition of your target property. Be introspective about your level of tolerance — if any — for actually doing or managing repairs and upgrades, your ability to fund repairs, and your interest in living in your home while work is being done. Get clear on what I call your Vision of Home — what do you want your daily life to look like after you buy your ideal property? Do you want to spend your spare time throwing sophisticated soirees in your pristine digs or bribing your buddies to pitch in at your painting parties? Do you want to move in to Pottery Barn chic or are you excited at the prospect of working hard to customize your place to your exact specifications. Are you OK with painting and replacing flooring, but not much else, or do your handyman skills put Bob Vila to shame?

Even if you decide that your dream digs will be in move-in condition, you must understand that no property is perfect. The older a property is, the less perfect it is likely to be, though older properties often have compensating factors, like charm and higher-quality materials and workmanship than modern construction. Early on in your house hunt, ask your Realtor to brief you about what the norm is in terms of condition in the neighborhoods, price range and property type you’ll be shopping from. And it’s up to you to brief your Realtor on your level of fixer-friendliness, or lack thereof.

Finally, to get the three basic inspections — pest, property and roof — costs an average of about $700 in a metropolitan market — more for luxury homes. If you have inspections, hate the results and choose to back out of the transaction at a time when you can get your deposit back, you will still be out the cost of inspections. Some buyers are tempted to skimp on inspections for that reason, but that is foolhardy.

The upfront costs of inspection are an investment in avoiding drama and huge expense later. I once had a client who was in contract to buy a home that had been gutted to the studs and rehabbed in its entirety — the windows and appliances still had their tags on! Nevertheless, we ordered a property inspection and were told that two-thirds of the foundation needed to be replaced, which would run about $80,000. For a second opinion, I called a foundation specialist who disagreed with the original inspector — he said the entire foundation needed to be replaced, which he could do for about $90,000, but that to prevent the drainage problems from recurring, a $30,000 drainage system needed to be installed. Had my buyer neglected to have an inspection because everything was new, she would have been signing up for a huge, nasty surprise later on.

Need-to-Knows

In most areas there are very few or no requirements a home must “pass” before it can be legally sold. Where there are, they tend to be very basic requirements, like lead testing, smoke detector installation or water heater strapping to resist earthquakes. (Note that government loans may have additional requirements, like no broken windows, etc.) The real test of a property is whether it “passes” your requirements for condition. Many times, in order to know this, you must collect all your inspection reports, make decisions about what recommended repairs you feel you would need to complete in order to feel comfortable owning the property, and collect bids to determine how much the repairs will cost. From there, you and your Realtor should decide whether to ask the seller to contribute to or complete any repairs, and precisely what to ask for. If the repairs are too major or the inspection report findings too grim, you might elect to simply cancel the deal and look for another property.

This begs the question of whether you can cancel the deal and get your money back if the inspection results don’t meet your approval and you are unwilling or unable to either (a) resolve the condition issues with the seller or (b) to take the property as-is. Different states have different standard practices on this matter, but most fall into two camps: contingency-period states and objection-period states.

If you are in a contingency-period state, like California, you put an earnest money deposit into escrow when your offer was accepted. From the date of acceptance your contract provides a certain number of days (17 days, unless you and the seller agreed otherwise) in which you can remove or exercise your contingencies. Contingencies are just your right to back out of the contract for various reasons — including that the condition of the property is not to your satisfaction. In your contract, you agree that at the end of your contingency period, you will either exercise your contingencies (backing out of the deal) or remove your contingencies (indicating that you plan to move forward and close the deal).

Most California contracts include an agreement that your deposit becomes nonrefundable and goes to the seller if you remove your contingencies and then later bail; in exchange, the seller agrees not to sue you if you breach the contract in this way. However, in a contingency state you must proactively sign a document that formally removes your contingencies for your deposit money to become nonrefundable — if your contingency period expires, and you haven’t removed your contingencies and you decide to bail, you are still legally entitled to get your deposit money back. The flip side is that if your contingency period expires and you don’t remove them, the seller can issue you a 24-hour notice forcing you to either remove them or cancel the deal.

Ideally, though, you will get your inspections and review the reports early on in the contingency period, to give yourself ample time to get repair bids, get your loan underwritten, and have the appraisal completed and reviewed with time to spare. If you are in a contingency state, and you decide to back out of the deal because of negative inspection results before you have removed your contingencies, you are entitled to receive your deposit money back, minus any inspection costs you have incurred.

If you are in an objection state, you have an objection period instead of a contingency period. If you do not make a repair request or back out of the deal within the objection-period time frame, your deposit money automatically becomes nonrefundable. Note that many bank-owned properties are sold under boilerplate contracts that create an objection period, even in contingency states. So, if you are in an objection state, you must make your move and cancel the deal before your objection period runs out, or you will not be able to get your deposit money back.

Action Plan

1. Get clear on how much fixing you are prepared to do or to pay for, before you start house hunting.

2. Communicate this to your Realtor.

3. When you get into contract, get clear on when your contingency or objection period expires. And read your contract and any addenda to be sure you understand how and when you are entitled to cancel the contract and get a deposit refund.

4. Don’t skimp on inspections — attend them and read the reports, collect repair bids, then decide whether you can resolve any condition issues with the seller.

5. If you can’t resolve all condition issues, cancel the deal, but make sure you do it before your contingency or objection period expires to ensure a quick and easy refund of your deposit money.