Real Estate Info

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M

Mean Home Price (of New or Existing Homes Sold):

The mathematical average of the prices of all homes sold in the period. The mean price of homes sold generally runs higher than the median price due to the number of very high-priced homes. The National Association of REALTORS® usually releases home price figures for existing homes sold on the 25th of the month for the previous month; corresponding figures for new homes are released a few days later by the Bureau of Census.

Median Home Price (of New or Existing Homes Sold):

Of all the homes sold during the particular period, precisely half sold for more than the median price, and half sold for less. When determining the median, only one home price matters - that of the home in the middle. Because homes sold for exceedingly low or high values only count as one unit when determining the median - i.e., their values don't matter - median home prices are generally a better indicator of home price trends than mean, or average, home prices (where all the values matter). The National Association of REALTORS® usually releases home price figures for existing homes sold on the 25th of the month for the previous month; corresponding figures for new homes are released a few days later by the U.S. Census Bureau.

Mortgage:

Mortgage loans are long term loans, usually spanning 15 or 30 years, that are directly tied to a home or other piece of real estate property. The borrower acquires a mortgage loan in order to take possession of their home. While the borrower, also known as the mortgager, has ownership and use of the property, he or she does not hold the actual title until the mortgage loan has been paid back in full. Mortgage loans come in many forms and with many options and terms. Some common types are fixed and adjustable-rate mortgages. Borrowers can either lock in a fixed interest rate or let the rate change as rates change in the market. Even though mortgages are long term loans, they can be paid off in full through a process known as refinancing. Essentially, the borrower gets a new mortgage on the home and uses the proceeds to pay off the existing mortgage. If you are considering refinancing your home, there are several factors you should think about before making your decision. These factors include the interest rate on your current mortgage, the current market interest rate, how long you plan to live in your current home, and whether or not you need money for other things such as home improvements, a new car loan, or paying off credit cards.

Mortgage Application Index: Purchase:

An index published weekly by the Mortgage Bankers Association of America which gauges the number of applications submitted for the purchase of a home. The survey covers about 40% of all retail residential mortgage transactions and is released every Wednesday for the week ending the previous Friday.

Mortgage Application Index: Refinance:

An index published weekly by the Mortgage Bankers Association of America which gauges the number of applications submitted for the refinancing of a home. The survey covers about 40% of all retail residential mortgage transactions and is released every Wednesday for the week ending the previous Friday.

Mortgage Broker:

Many lenders use the services of a mortgage broker to perform what is known as the "Origination" of the loan - to meet with and pre-qualify the borrower, verify the credit and property aspects of the loan, and then provide it to the lender for actual funding. Mortgage brokers represent the consumer. Their goal is to try to understand the needs of each consumer as well as possible and then identify and source the best loan possible for that consumer. Mortgage brokers typically generate their customers either from marketing directly to consumers or through referrals from happy customers. Be sure that you ask for customer referrals when selecting a mortgage broker.

Mortgage Loan:

A mortgage loan is money lent for the purpose of buying real estate. Mortgage loans are secured by the property that they are used to buy. If the borrower or "mortgagor" fails to pay back a mortgage loan, the lender can seize the property in a process known as foreclosure. There are many different types of mortgage loans available and each one is designed for a specific purpose. Some are more flexible that others and it is important to learn a little about each type to better determine which one is right for you. It's like shopping for anything else. You need to see all of what's out there before you can make the final decision.

Mortgage Quote:

A mortgage quote is an interest rate offered to a borrower by a lender for a home loan. The mortgage quote is tied to a number of factors including the loan type, loan length and the credit history of the applicant and can vary quite a bit among lenders. Mortgage quotes are an important step in purchasing or refinancing a loan. Mortgage rates can change hourly so it is important to check rates frequently and when you do make a decision, make sure you find out if the mortgage quote you have been given has any expiration period associated with it. When considering a mortgage rate, be sure to understand not only the specific interest rate you are paying but also whether or not your loan is an interest-only loan or you are paying off principal at the same time. You should also be sure to understand the term of your mortgage, is it a 5 year, 10 year, 30 year or one of the many hybrid variations available. Depending upon the number of years, the amount you end up paying in interest and principle and vary enormously. Lastly, be sure to find out if there are any other costs associated with closing your mortgage that are not included in your mortgage quote. Generally mortgage quotes do not include closing costs, property taxes, insurance costs, PMI costs and other miscellaneous costs which are all important costs to understand when thinking about what you can afford.

Mortgage Rate:

A mortgage rate is the amount of interest charged on the money lent for the purchase of a home. Mortgage rates are expressed annually as a percentage and have fluctuated greatly over the years. These rates are tied specifically to the purchase of real estate property and the loans associated with them are secured by the property. Mortgage rates can also vary greatly by lender and borrower and are based on many factors including market conditions, the loan type, geographic location, the loan term and the credit history of the borrower. When mortgage rates go up, it becomes more expensive to borrow money for the purchase of a home. As mortgage rates drop, consumers are able to afford to borrow more money and purchase a more expensive home. When mortgage rates drop, existing homeowners with fixed-rate mortgages should consider refinancing to lock in the lower rate.

N

New Home Sales:

The Census Bureau surveys builders nationwide and bases their figure on the number of contracts signed for new homes. Because it reflects contracts rather than closings (as is the case with existing home sales), new homes sold should more quickly reflect changes in mortgage rates and the economic environment. The reported figure is generally a seasonally adjusted, annual rate.

R

Refinance:

Refinancing is when you get a new loan to pay off an existing loan on the same house. Your new home loan may have different terms, a lower interest rate or be larger than the amount of debt owed on your existing loan. In the case of the latter, you would end up with a cash surplus known as "equity take out." Your are taking equity from your home and converting it into cash to pay for other things. Home refinancing is often done when interest rates drop because home owners can lock in a lower rate and lower their monthly payments. It is also a great way to consolidate bills and pay off expensive credit card debt.

S

Searchitis:

An uncontrollable addiction to checking home listings multiple times per day. Please remember to feed your cat/dog/fish/kids.

Second Mortgage:

A second mortgage is a mortgage on real estate which has already been pledged as collateral against another mortgage, the first mortgage. The second mortgage typically has rights to the same real estate but those rights are subordinate to the rights of the primary or first mortgage. When getting a second mortgage, the lender will typically only lend up to the difference between the total estimated value of the real estate minus the first mortgage. Like all mortgages, lenders will also consider your cash flow to ensure that you can afford to make their interest and principal payments on top of your other mortgage payment commitments. Like standard mortgages, second mortgages can have varying terms, ranging from a year up to 20+ years depending upon your personal situation. Second mortgage rates and costs tend to be similar to other mortgage rates and costs although sometimes second mortgages are more expensive to reduce the risk lenders are taking by being subordinate to the primary lender.

Securitization:

The pooling of mortgage loans into a mortgage-backed security. The principal and interest payments from the individual mortgages are paid out to the holders of the MBS security.

T

Turtling:

An overwhelming urge to pull your shirt up over your head and hide from the world as you try to grasp all the real estate industry jargon. Consult a doctor if it lasts

U

Underwriting:

The determination of the risk a lender would assume if a particular mortgage loan application is approved. Ability and willingness to abide by the mortgage loan terms, as well as the value of the property involved, are critical to the underwriting analysis.

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A

Adjustable-rate Mortgage (ARM):

An Adjustable-rate Mortgage (ARM) is a mortgage loan with an interest rate subject to change over the term of the loan. The interest rate is tied to the performance of a specified market rate, such as the cost of funds index calculated by the 11th District of the Federal Home Loan Bank Board, or the yields on one-year or six-month U.S. Treasury securities. The amount of times the interest rate can change and how often it can change are usually determined at the time the loan is created. Usually there is also an interest rate maximum that is set for the loan. One thing to remember regarding adjustable rate mortgages is that even a minor increase in interest rates can greatly affect the monthly payments on a mortgage loan. For example, a 30-year mortgage on a $250,000 loan at 5.5% results in a monthly payment of $1419. If, over time, interest rates rise to 7%, the monthly payment jumps to $1663 for a difference of $244 per month or almost $3000 more per year. When reviewing an adjustable rate mortgage loan, make sure that interest rate changes and subsequent increases in monthly payments will not stretch your budget beyond its limits. The benefit of an adjustable rate mortgage is that it generally has lower fees and a lower interest rate than a fixed rate mortgage. There are also many more variations of adjustable rate mortgages, allowing borrowers more flexibility and ease when getting that first home loan. Also, if rate drop significantly, borrowers with adjustable rate mortgages will automatically benefit from a lower rate without having to refinance. Something to consider regarding adjustable rate mortgages is that if interest rates are hitting their all time lows and are expected to rise in the near future, it may be a good time to refinance to a fixed rate mortgage loan and lock in the low rate.

Amortization:

The paying down of principal over time. In a typical mortgage loan, the principal is scheduled to be paid off, or fully amortized, over the term of the loan.

Basis Point:

One one-hundredth of a percentage point. For example, if mortgage rates fall from 7.50% to 7.47%, then they've declined 3 basis points. A full percentage point is 100 basis points.

Bill of Lading:

The receipt for your goods and the contract for their transportation. It is your responsibility to understand the bill of lading before you sign it. If you do not agree with something on the bill of lading, do not sign it until you are satisfied that it is correct. The bill of lading is an important document. Don't lose or misplace your copy.

C

Cash-out Refi:

A refinancing of a mortgage in which the new principal (the borrowed amount) exceeds the outstanding principal of the original loan by at least 5%. In other words, the homeowner is taking equity out of the home. Of the mortgages it owned that were refinanced during the first three quarters of 2000, Freddie Mac estimates that more than 4 out every 5 were cash-out refis.

Conforming Mortgage Loan:

Any mortgage loan that's at or below the amount that Fannie Mae and Freddie Mac can purchase and/or securitize in the secondary mortgage market. For 2001, the loan limit is $275,000. In 2000, it was $252,700.

Consumer Price Index (CPI):

A measurement of the average change in prices paid by consumers of a fixed market basket of a wide variety of goods and services. The broadest, and most quoted, CPI figure reflects the average change in the prices paid by urban consumers (about 80% of the U.S. population). The so-called "core CPI" excludes the volatile food and energy sectors in an attempt to determine the underlying rate of inflation. Strictly speaking, the CPI is not a "cost of living" index because its fixed market basket does not allow for the substitution of goods and services due to price changes. The CPI is released by the Bureau of Labor Statistics in mid-month for the previous month.

Conventional Mortgage Loan:

Any mortgage loan not guaranteed or insured by the government (typically through FHA or VA programs).

Credit Rating:

A seemingly arbitrary number that determines if your money situation is healthy, in need of a little cold medicine or a full body cast.

Credit Report:

A credit report shows borrowing and repayment history. It shows the amount of an individual's past and present debts and whether any debt payments have been missed. Debts can include money owed on credit cards, auto loans, mortgages and more. Credit reports also show an individual's address history, indicating how often and to what extent a person has moved. Lenders use the credit report information to determine a loan applicant's borrowing potential and interest rate. A credit report that shows late payments on debt may cause a lender to charge a higher interest rate or not lend at all. In addition, a credit report that shows little or no history of borrowing can also raise the interest rate. Lenders prefer to see some history of borrowing and repayment rather than none at all. Three main companies track the credit histories of individuals and issue credit reports. These are Equifax, Trans Union and Experian. These companies get their information from a variety of sources including creditors and public records.

Credit Score:

A credit score is a number based on an individual's credit report that indicates overall credit risk. If a borrower has a high credit score, he or she is considered more likely to be able to pay off debt in a timely manner. A low credit score indicates higher credit risk and may cause a lender to charge a higher interest rate or not extend credit at all. The most common type is called a "FICO" score, named after the Fair Isaac Company that created it. FICO scores range from 350 to 850 with the median score falling around 720. A score above 750 gives a borrower the best chance of securing the lowest possible interest rate on a loan. High scores qualify for lower interest rates and increase the number of lenders competing to provide the loan. Components that determine an individual's credit score include their borrowing and payment history, the length of this history, the amounts currently owed, the types of credit used and the level of recent credit history.

E

Existing Home Sales:

Based on the number of closings during a particular month. Because of the one-to-two month period between a signed purchase contract and a closing, existing home sales are more influenced by mortgage rates a month or two earlier than the prevailing mortgage rate during the month of closing. New homes sold, on the other hand, are counted when the purchase contract is signed. The reported figure is generally a seasonally adjusted, annual rate. Data are released by the National Association of REALTORS® on the 25th of each month (or the following business day) for the previous month.

F

Fannie Mae and Freddie Mac:

The nation's two federally chartered and stockholder-owned mortgage finance companies. Forbidden by their charters from originating loans (that is, from providing mortgage loans on a retail basis), these two Government-Sponsored Enterprises (GSEs) purchase and/or securitize mortgage loans made by others. Due to their directive to serve low-, moderate-, and middle-income families, the GSEs have loan limits on the purchase or securitization of mortgages (in 2001, the conforming loan limit is $275,000). The difference between these two entities often comes down to size (Fannie's larger), business strategy and execution.

Federal Funds Rate:

Also known as the fed funds rate, this is the rate that banks charge each other on overnight loans made between them. These loans are generally made so that bank can cover their daily cash flow and reserve requirements. As the rate rises, banks have an increased incentive to keep more of their own cash on hand - making less money available to lend out to households and businesses. The Fed doesn't actually set the fed funds rate, which is determined by supply and demand of the funds; instead, it sets a target rate and, through its own purchases or sales of securities, affects the supply of funds.

Federal Open Market Committee (FOMC):

The arm of the Federal Reserve that sets monetary policy, the FOMC is scheduled to meet eight times a year. The 12 members of the FOMC include the seven governors of the Federal Reserve System, the president of the New York Federal Reserve Bank, and, on a rotating basis, four of the presidents of the other 11 regional Federal Reserve Banks.

Fixed-rate Mortgage (FRM):

A fixed-rate mortgage (FRM) is a mortgage loan with an interest rate that does not change over the term of the loan. At the time the loan is created, the rate is set and the borrower will not be subject to fluctuations in interest rates due to changing market and economic conditions. A fixed rate mortgage usually comes with higher fees or interest rates than an adjustable rate mortgage and is best when rates are expected to rise significantly in the future. While borrowers with fixed rate mortgages don't benefit from drops in interest rates, they still have the option of refinancing the mortgage loan to take advantage of the lower rate and reduced monthly payment. The only drawback is the cost of refinancing which should, if you are refinancing at a significantly lower rate, be offset by your savings in interest payments. To recap, the main risks of a fixed rate mortgage are higher closing costs and potential additional closing costs when the borrower refinances to take advantage of a drop in interest rates. The main benefit is the peace of mind knowing that the mortgage rate and monthly payment on your home loan will not change, even if market interest rates triple.

H

Home Equity:

Home equity is the difference between the current value of the house and the amount of money owed on the mortgage. For example, if you owe $75,000 on your mortgage, there are no other liens on the property and the current market value of your home is $125,000, then the home equity amount is 125,000 - 75,000 = $50,000. The down payment that you make when purchasing a home will provide you with some initial equity.

Home Equity Line of Credit:

A home equity line of credit (HELOC) is a loan that allows you to borrow money when you need it. The amount you can borrow is based on the appraised value of your home and you can borrow and repay as much and as often as you like. The only requirement is that you make a monthly payment to cover the cost of the interest on the amount borrowed. A home equity line of credit is like having a credit card with a low interest rate and high credit limit. Because it is secured by the value of your home, lenders can offer much lower interest rates than a standard credit card company. And your credit limit can be up to 80 percent of the appraised value of your home so you have a potentially much greater borrowing capacity.

Home Equity Loan:

A home equity loan is a loan that is secured by a home and limited by the current market value of the home and any additional liens or mortgages that exist. A home equity loan is also known as a second mortgage and home owners can sometimes borrow up to 125% of their homes appraised value. For example, if the home is worth $200,000 and there is a mortgage on the home of $150,000 with no other liens on the property, then the amount available for a home equity loan may be as much as $250,000 - $150,000 = $50,000. The full 125% of the appraised value may not be available in all cases and every lender will have unique requirements and limitations. Home equity loans are used in place of other types of loans when cash is needed for bills and other expenses because the interest is tax deductible and the interest rate is lower in many cases. Borrowers can still use the money from a home equity loan to buy cars or pay for a child's college tuition. Unlike a home improvement loan or construction loan, the money does not have to be spent on the home itself and can be used for anything the borrower wants. With home equity loans, borrowers can put their home equity to work for them by using the equity to buy income property or other sound investments. One thing to remember is that a home equity loan will reduce your equity in the home by the amount of the loan and will increase your monthly mortgage payment. As with any financial or investment decision, you should first consult with a financial advisor.

Home Improvement Loan:

A home improvement loan is money lent to a property owner for home repairs, updates or remodeling. Home improvement loans are not necessarily secured by the property they are intended for and may simply be classified as home improvement loans by the lender. These loans can be secured or unsecured and are usually short term. Home improvement loans are intended to increase the value of your home so it is important to think carefully about where best to put the money. After all, the money spent on home improvements is added to your overall cost of the home and you want to be able to recoup this cost if and when you decide to sell.

Home Loan:

A home loan is money provided to you by a bank or lending institution to pay for your home. In return, the bank holds the title to your home until you've paid back the loan plus interest. The money lent to you in a home loan is "secured" by the home itself. This means that in the event that you are unable to pay back the loan, the lending institution has the right to sell the property in order to pay back the loan in a process known as foreclosure. A home loan is also known as a mortgage and has many variations with different terms and interest rates. One of the key benefits of a home loan is that the interest paid on the loan is tax deductible. Home owners can deduct interest on up to one million dollars of their mortgage debt. This can translate into huge savings in income tax.

Homeownership Rate:

The number of households residing in their own home divided by the total number of households. Late in the month following the end of each quarter, the U.S. Census Bureau releases an estimate based on a quarterly survey. A record homeownership rate of 67.6% was reached in the fourth quarter of 2000.

House Price Index:

A quarterly measure of the change in single-family house prices. The HPI is a repeat sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties, and is based on mortgages purchased or securitized by Fannie Mae and Freddie Mac. Homes with mortgages above the Fannie/Freddie conforming loan limit (in 2001, it's $275,000) are not included in the sampling, nor are homes insured or guaranteed by the FHA, VA or other federal government entity. This index is distinct from the similarly constructed Conventional Mortgage Home Price Index published by Freddie Mac. Indexes are available for the nation, nine Census regions, each of the 50 states and the District of Columbia, and 329 Metropolitan Statistical Areas (MSAs). Released by the Office of Federal Housing Enterprise Oversight (OFHEO) on the first business days of March, June, September and December for the previous quarter.

Housing Starts:

The Census Bureau's monthly count of the number of private residential structures on which construction has started. Data for a particular month is released about two weeks into the following month. Data on permits issued is also released. The reported figure is generally a seasonally adjusted, annual rate.

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This marks the third year in a row ERA Real Estate has received an award from this prestigious organization.

Last year, the company was the recipient of the 2005 J.D. Power and Associates Award for "Highest Overall Satisfaction For First Time Home Sellers Among National Full Service Real Estate Firms."

In 2004, ERA Real Estate received the award for "Highest Overall Satisfaction For First Time Home Buyers Among National Full Service Real Estate Firms."

"Being recognized for customer satisfaction once again by a well-respected organization such as J.D. Power and Associates is a testament to the dedication and commitment of our sales associates and staff," said Scott Lauri, Broker/Owner with ERA Absolute Realty.

"This award is a reflection of our promise to our customers to be "Always There For You' throughout the home-buying and -selling process," he added.

Locally, ERA Absolute Realty offers a host of products and services dedicated to meeting the needs of sellers such as the ERA Sellers Security Plan, a guaranteed sales program that offers sellers the freedom to close on their next home even if their current home hasn't yet sold.

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Sales of previously owned homes in the U.S. fell less than expected in August, as prices fell compared with a year earlier, the National Association of Realtors said Monday.

The median home price was $225,000 in August, compared with a revised $230,000 in July. Last month marked the first year-to-year median price decline since April 1995, and it was the second-biggest in the survey's 38-year history.

Home resales fell to a 6.30 million annual rate, a 0.5% decrease from July's unrevised 6.33 million annual pace. Inventories of unsold homes rose to 3.92 million, a 7.5-month supply at the August sales pace, the most since April 1993.

The weakness in existing home sales followed a report last week that construction of new homes and apartments plunged by 6% in August, pushing building activity to the lowest level since early 2003.

The housing sector, which had enjoyed five boom years of record sales, has been slowing sharply this year under the impact of rising mortgage rates and a slowing economy.

NAR chief economist David Lereah said an anticipated decline in prices compared with a year earlier has begun and is likely to continue until the end of the year, helping to support sales. "With sales stabilizing, we should go back to positive price growth early next year," Mr. Lereah said.

The August resales level was above Wall Street expectations of a 6.20 million sales rate for previously owned homes. The average 30-year mortgage rate was 6.52% in August, down from 6.76% in July, according to Freddie Mac.

Existing home sales were mixed regionally. Sales rose 0.7% in the Midwest and 1.9% in the Norhtheast. They were down 2.3% in the West and 0.8% in the South.

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From MarketWatch

http://www.realestatejournal.com/

To some it's a source of family harmony. To others, however, it's a source of great family division, anger and strife. Yes, it's the old family cottage or vacation property or compound or camp or call it what you will. And now with summer coming to a close, many Americans are trying to figure out what to do with their piece of heaven on earth.

Should they sell the property that has produced fond memories of times spent with loved ones? Or should they give it their children? Or should they do something entirely different?

Andrew Lee, a lawyer with Schaden Katzman Lampert & McClune in Broomfield, Colo., says families should deal with the issue in four steps.

1. Have a heart-to-heart

The first step is a sit-down between the family cottage owners - the parents usually - and their children. "It's best to talk about it ahead of time," he says. "Otherwise it could be a huge mess."

The parents need to ask their children straight out whether they want the property long before asking an estate-planning attorney to draft some expensive legal document. In his experience, Lee says there is a good chance, about 50%, that the kids don't want the property for one reason or another.

In some cases, the kids already have their own second home. In other cases, some of the children may live very far away from the cottage. And in still other cases, some or all of the kids may not be able to afford the property or its upkeep.

Indeed, parents should not be surprised to learn that the only reason children and grandchildren go to the family cottage is because of the parents or grandparents and if the senior generation were to pass away the kids would have no interest in visiting the property, says Lee.

"Often parents find that keeping the cottage in the family is more trouble than it's worth," he says. So, if the parents determine that the next generation has no interest in owning the family cottage, well, case is closed and the parents have saved a bundle in legal fees.

Children who do have an interest in the property, however, must go into it with their eyes wide open. They need to know the monthly nut: the mortgage, if there is one; real estate taxes; utilities; any management fees or association dues and the like. And if the family cottage doubles as a rental-income property, they'll need to know what sort of income the property generates.

In some cases, parents will learn that some but not all of the children will want the cottage. In that case, Lee says the parents will have to figure out how to pass on their assets; the house goes to the kids that want it while more money goes to the kid that doesn't want it.

2. Transfer the property

Getting a handle on whether and who wants the cottage is one piece of the puzzle. Figuring out the right way to pass the property down is the other big puzzle piece.

Often, families will use the cheap and easy way to transfer property, says Lee. They will simply add members of the next generation as joint owners with rights of survivorship or they will completely transfer the property to the next generation during the owner's lifetime by deed.

"Though easy to implement, these types of lifetime transfers can often have unintended consequences," says Lee.

For instance, adding a family member to the title of property or completely transferring the property to a family member is a taxable gift that, in some cases, could trigger a current federal gift-tax bill, he says.

In addition, if a child is co-owner on the property, then it would not qualify for the marital deduction, a tax break given to the first to die of either parent. Again, Lee says putting a child as a co-owner could create an unintended estate tax bill.

And in still other cases, adding a child as owner to a family cottage could result in a transfer tax and, worse yet, higher real estate taxes.

3. Create an LLC

Figuring out what "legal entity" should hold the family cottage must also be addressed, says Lee. Lee prefers using a limited liability company or LLC rather than a trust or "C" corporation to hold the property. The LLC is tax friendly. Plus, the LLC reduces exposure to liability.

"If mom and dad can get the kids to agree now and they are bound by those agreements there'll be less problems later," says Lee, who also recommends that family-cottage owners create an LLC to hold the property whether or not they have designs on passing it down to future generations.

4. Draft an operating agreement

Not matter how the family cottage is owned, Lee says it's crucial that there's an "entity agreement" in place that becomes the law of the land. The operating agreement, for instance, will spell out how the bills will be paid and the source of those funds.

In some cases, family members who don't use the family cottage as often as others will feel they may not have to pay as much toward the bills. The agreement will address that. In other cases, family members will collide on who gets to use the family cottage, especially around the holidays. The agreement will address that. Lee recommends that a family member serve as the calendar manager and another server as the operational manager.

And in still other cases, there will be disputes. The agreement will address how decisions will be made and how disputes will be resolved. That's especially important when it comes to sell the family cottage or one member of the LLC wants out.

In the latter case, Lee says the operating agreement will address how a member's share will be valued as well as perhaps how often a member can cash in their share of the family cottage.

-- Robert Powell has been a journalist covering personal finance issues for more than 20 years, writing and editing for publications such as The Wall Street Journal, the Financial Times, and Mutual Fund Market News.

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From The Wall Street Journal Online

With the housing market clearly sagging, economists and investors are watching a variety of gauges to get a handle on the severity of the contraction.

Last week, the Commerce Department reported that construction starts on new homes dropped 6% in August from July, to an annualized 1.665 million. That "housing starts" figure was about 5% lower than forecast and 20% lower than the year earlier 2.075 million. The month-over-month decline was the sixth one this year and put housing starts at the lowest level in more than three years.

The government estimates housing starts by surveying a sample of people who have applied for building permits. In places where permits aren't required, the process includes driving around looking for new-home construction.

Other gauges track new-home sales, existing-home sales, median house prices and the inventory of unsold homes.

New-home sales for August will be released by the Commerce Department Wednesday, and are expected to be down about 17% from a year ago. July's sales were down 21.6% from a year earlier, to an annualized 1.072 million homes sold.

New-home sales figures reflect market trends more quickly than do existing-home statistics. That's because new homes are counted as sold when the contract is signed, and existing homes are counted as sold only when the deal closes, which may be 30 to 60 days later.

Existing-home sales data, coming Monday from the National Association of Realtors, are expected to be down about 13% from August 2005. The annualized rate of 6.33 million existing homes sold in July represented an 11.2% decrease from last year.

The median sales price of existing homes, which is a good indicator of the market's momentum, was $230,000 in July, up 0.9% from the July 2005 price of $228,000, according to the Realtors group. That's smaller than the double-digit year-over-year gains posted in 2005.

Some parts of the country, including the Northeast, the Midwest and the West, are reporting falling home prices. The Realtors association has said the national median house price may fall in coming months, although any decline is expected to be limited. August numbers will be announced with the existing-home sales figures Monday.

Meanwhile, there's been a spike in the number of existing homes for sale. The Realtors group says 3.86 million homes were on the market last month, up from 2.76 million a year earlier. In addition to reflecting a diminished appetite on the part of buyers, that growing inventory may reflect the unwillingness of sellers to lower their asking prices enough to tempt buyers. With more houses for sale, buyers have less incentive to bid up prices, and home builders have fewer reasons to start construction on more units.

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By Sara Schaefer Munoz
From The Wall Street Journal Online

When it comes to flat roofs, beauty is clearly in the eye of the homeowner.

Eager to squeeze in more square-footage — and increase property values — while adhering to community height restrictions, a growing number of builders and homeowners are building homes with flat roofs. But these box-like structures and their party-friendly roof decks are sparking a backlash among neighbors who think the houses are homely, detracting from neighborhood character and blocking views and sunlight. Now, a number of communities are slapping new rules on builders that require sloping roofs.

Communities everywhere from Delaware to Washington are addressing roof pitch. The waterfront town of Bethany Beach, Del., several months ago passed a minimum-roof-pitch requirement after a spate of new, box-like homes dwarfed the town’s older cottages. St. Augustine, Fla., last fall banned flat roofs for homes on some smaller lots over concerns about style and rooftop parties, and the city of Kirkland, Wash., near Seattle, is holding a series of community meetings with homeowners and developers on house-to-lot ratios, which address, in part, concerns about the increase in flat-roofed homes.

Many popular home styles, of course, such as Prairie and Pueblo, have flat or low-pitched roofs. And in some parts of the country, such as Santa Fe, N.M., some ordinances even aim to keep roofs flat. Still, in many suburban American communities, the majority of homes have sloping roofs. But now, some Realtors, builders and local officials say, flat tops are increasingly infiltrating neighborhoods that traditionally featured sloping-roofed cottages and bungalows.

The trend is being driven in part by people seeking the best return on their investment amid soaring property values in recent years. It also demonstrates how zoning restrictions communities passed in recent years have backfired. In response to runaway development, many municipalities tried to prevent oversized homes on small lots. But in some cases, the unintended result was flat-roofed, boxy homes seen as out of character with surrounding styles. By using a flat roof, builders can sometimes squeeze in a second or third floor, adding square footage while staying under neighborhood height restrictions.

Kirkland, a city of about 50,000 people near the headquarters of Microsoft Corp., several years ago limited square footage on smaller lots, but officials say that move — coupled with height restrictions — may have encouraged flat roofs and boxy homes as people sought more space on the upper floor. "We may have gotten that wrong," says Kirkland Mayor Jim Lauinger. "When you have people taking away a peaked roof and putting on a flat roof to get additional volume, you’ve really altered what the neighborhood used to look like."

Steve Rabuchin, a Kirkland resident, learned that first-hand when a 5,000-square-foot, flat-top home went up recently on the lot below his 2,700-square-foot hill-side property. Because workers on the house chopped down trees, the Rabuchins now have a view of Lake Washington — but with a broad expanse of flat, black roof in the foreground. "They maxed out everything they possibly could and ended up with a box," he says.

Yet builders say the flat-roof style allows them to get the best return in areas where land is pricey. John Lux, a Kirkland-area developer, built five homes with flat roofs this year, compared with one in the previous two years, squeezing in two stories and a partially exposed basement by using the flat-roof style. "The city is wanting to see smaller homes on these lots, but it just doesn’t make sense financially," he says.

Flat roofs can also have drawbacks for owners. They generally don’t stand up well to heavy rain and snow, and can require more frequent maintenance than roofs with a traditional pitch, contractors say. Flat roofs can also be more expensive to build, requiring more structural support. Yet Realtors say that flat-roofed homes can have a "wow" factor from inside, offering higher ceilings and the possibility of roof decks.

But some Realtors say that out-of-place flat-roofed homes could be tougher to sell. "Most people don’t want a place that sticks out like a sore thumb," says Chuck Riley, a Realtor in the Washington, D.C., area.

Most homes going up with flatter roofs are in older neighborhoods, where the lots are so expensive that developers build as big as they can to make the investment worthwhile. Some big home builders are espousing the design: Pulte Homes Inc., based in Bloomfield Hills, Mich., recently put flat roofs on a town-home development in Baltimore as a way to offer roof decks and add more living space. The Maryland division president says the company is planning more homes in the same style.

Flattening the roof isn’t the only way builders are staying under height restrictions in certain neighborhoods. Builders will also grade the land higher at the base of the house, so the first story is partially underground and they can build higher, says Vince Butler, chairman of the Remodelers Council of the National Association of Home Builders. "When folks are trying to get the most space in their house they end up going up or down."

Builders also report that people on small lots increasingly are putting in big basements and protruding dormers — portions of a home that often don’t count against square footage restrictions. In some areas where regulations are strict and land is in short supply, it’s not uncommon for builders to lift an entire house up on hydraulic jacks and put in a partially exposed first story underneath. This adds another story without going over height limits; it also makes for easier approval by architectural review boards because the addition is partially underground, says Paul Winans, a California remodeler and chairman of the National Association of the Remodeling Industry.

Flat roofs can spur some strong emotions. In St. Augustine, Fla., residents in a series of meetings debated the merit of boxy homes before local officials passed an ordinance requiring that roofs on smaller lots have a minimum pitch. "When you plunk down one of these square boxes, it stands out — it’s an affront to the historic nature of the town," says John Marples, a resident who spoke at one of the hearings.

But residents Thomas and Elizabeth Dreisbach are chafing under the new restrictions. They own a 1,300-square-foot home on one of the city’s smaller lots. They would like to enlarge their house by adding a flat or slightly pitched roof to get a deck, more space and increase the home’s value. Now, they will have to request a variance. Otherwise, they’ll try to put a large roof deck on top of a sloping one, which Mr. Dreisbach says won’t look as nice. "These restrictions are just causing architecture to be uglier and are taking money out of people’s pockets," he says.

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BY MICHAEL L. DIAMOND
BUSINESS WRITER

Melissa and Frank Picciolo had already made a deposit this summer on a new Manalapan home built by Hovnanian Enterprises Inc., when they decided to press their luck.

They wanted a finished basement. They wanted upgraded kitchen cabinets. And they didn’t hesitate to ask.

"Within two weeks after we put a deposit down, we went back and forth; could we include this and that? They would go back to their administration, come back and say, "Yes we can do that,’ " said Melissa Picciolo, 30.

Shore-area home builders are struggling with a downturn in the residential real estate market for the first time in nearly a decade. Builders are holding the line on price increases, but they’re offering incentives and slowing their production.

It has created opportunities for buyers such as the Picciolos, but it has also created financial difficulties for builders.

"With the economy the way it is, we’re ready to negotiate, which is something home builders haven’t had to do a lot of" in recent years, said Douglas Fenichel, spokesman for Red Bank-based Hovnanian. The company, New Jersey’s largest home builder, has seen its stock price fall nearly 50 percent during the first eight months of the year.

Home builders are slowing down nationwide. New home sales in July were down 21.6 percent from the same month a year ago, according to the U.S. Commerce Department.

New Jersey’s decline hasn’t been as pronounced, but the state isn’t immune from the nation’s real estate troubles.

"We’ve come off a little bit from last year, but the market here is not slowing anywhere near as rapidly as in other areas of the country," said Patrick J. O’Keefe, chief executive officer of the New Jersey Builders Association. "We weren’t at the white-hot levels that were prevalent elsewhere."

What’s the problem? O’Keefe and other experts said it’s a combination of rising interest rates and workers’ wages that aren’t keeping up with home prices.

Mortgage rates, which were at historic lows, essentially allowing home buyers to afford more expensive homes, have been rising for several months. The average 30-year fixed-rate mortgage in New Jersey was 6.5 percent for the second quarter, compared with 5.79 percent for the same quarter a year ago, according to the National Association of Realtors.

Moreover, homes are getting less affordable. New Jersey consumers who want to buy a median priced home, which was $373,900 during the second quarter, need to make $90,768 a year. The median family income, however, was $81,309, according to the association.

Economists have said much of New Jersey’s job growth this decade has come from lower-paying jobs instead of the technology, telecommunications and pharmaceutical sectors that once were synonymous with the state.

"There is a very cautious eye being cast on the horizon, not solely because of cyclical reasons, but because New Jersey’s competitive position is weak and getting weaker relative to the rest of the country," O’Keefe said. "An economy that is losing its economic momentum is one where the housing sector is in danger of losing customers."

Home builders have been hurt this year. Hovnanian in August lowered its third-quarter earnings expectations to $1.10 to $1.20 a share from its previous guidance of $1.40 to $1.50 a share, in part because of a slower sales pace and more pronounced use of concessions and incentives.

Meanwhile, Toll Brothers Inc., a Horsham, Pa.-based company that regularly builds in New Jersey, said its net income of $174.6 million, or $1.07 a share, for the third quarter, was down from net income of $215.5 million, or $1.27 a share, the same quarter a year ago. Its stock is down about 30 percent this year.

"The continuing malaise in the housing market, we believe, is the result of an oversupply of inventory and a decline in (consumers’) confidence," said Robert I. Toll, the company’s chairman and chief executive officer.

O’Keefe said home builders don’t want to be stuck with inventory, which is an expensive scenario since they would have to pay for property taxes and maintenance. So they have offered more incentives, such as premium lots at no extra charge, finished basements and slick kitchen appliances.

It’s a scenario that puts buyers in a stronger position. The Picciolos have a 2-year-old daughter, Victoria, and they are outgrowing their Old Bridge home. So they signed a contract to buy a home at Hovnanian’s Meadow Creek development in Manalapan that will give them nearly twice as much room, Melissa Picciolo said.

She said they considered the declining state of the real estate industry before they bought the house, but jumped in anyway; they think they can sell their current house relatively easily and mortgage rates are still considered low.

"It worked out really nicely," Picciolo said. "I was excited about the basement for my husband and daughter and the kitchen for me. There was something for all three of us."

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BY JANE MEGGITT

http://examiner.gmnews.com/

UPPER FREEHOLD - For at least a quarter of a century, the township has been asking the county to take jurisdiction over Sharon Station Road.

However, at the Sept. 7 Township Committee meeting, the governing body voted 4-1 to ask the township engineer to suspend all work related to the transfer of jurisdiction until the township attorney completes a review of local truck bans and related matters. Deputy Mayor William Miscoski abstained from the

presentation submitted by members of his and other subdivisions who call themselves Concerned Residents of Upper Freehold.

After citing several dangerous truck traffic incidents occurring on Sharon Station Road and near the Galloping Brook development off Route 526, Nolan said it is the safety of their children that most concerns residents.

Nolan said that residents have met with the county about this situation, and were encouraged by the answers given about possible remedies to the problem.

"We are disappointed," he said, "that our [Township] Committee advised us to perform this task ourselves rather than doing it on our behalf."