A family came into our office yesterday to ask about where to stay in Jackson.  Our office is on the southern end of town, and we are the first major sign of civilization.  We talked for a while and found them a place to stay in Jackson and then helped they get reservations in Yellowstone.  Based on their vacation schedule and their interests, Oly Olson and I made some suggestions about what to do and how much time to budget.  We gave them about four days of things to do in 24 hours, so they should be able to keep busy

I realized how much fun they would have over the next few days.  The weather has been rainier than usual, so the number of tourists in Jackson Hole is down.  But the rain is making the vegetation especially green, and the photo opportunities with the sun and the rain and the clouds should make for some memorable photos.  The rain never lasts for long, since summer is typically the driest time of year, so if they get out when it clears and then do something indoors when there is a cloudburst, or do some driving to get to their next destination, they should make the most of their time during their vacation.

The early summer is when they will be able to see the most baby animals in the park, and when the wildflowers are at their peak.  The busiest time for tourists is between July 4 and the middle of August.  Fall colors are best in the second half of September and early October.  They should be spectacular this year with the extra moisture this spring.  The parents were already planning another trip back without the kids.

Owner financing just about disappeared in the last five years due to the ready supply of cash and credit on the open market. It is has regained popularity since the supply of loans has been greatly reduced.

Owner financing means that the buyer does not get a loan to buy the property from a bank. The typical transaction requires the buyer to pay 10% or more down payment. Then the buyer gets title to the property and the mortgage payments are made to the seller instead of to a bank.
These transactions can be written by the buyer and seller, or they can get an attorney to draft them. Some title and escrow companies handle these transactions and have standard forms that buyers and sellers can use. The escrow department receives the payment from the buyer each month and then pays it to the seller.

Here is an example of owner financing:
The seller has a lot that they want to sell for $100,000. The buyer pays $10,000 at closing and signs a mortgage for $90,000. The loan is to be paid in 15 years. They interest rate is 6%. The monthly payments are $759.47. The buyer pays this every month to the Title and Escrow Company. The Title and Escrow Company pays this to the seller. There is a service fee every month of a few dollars that the Title and Escrow Company keeps. When the mortgage is paid off, the mortgage is released.

Owner financing is most popular with vacant land, since banks are not as willing to lend on vacant land, and the risk of damage to the property is much less without a home on it.

The closing process can be confusing and even overwhelming for buyers and sellers alike. Often a real estate transaction in a resort market such as Jackson Hole, Wyoming or the surrounding areas of Teton Valle, Idaho and Star Valley, Wyoming involves many people in a variety of places that may never see each other or even know each other’s names.

Think about what is involved. A seller owns a house in Wyoming or Idaho and lives in Pennsylvania. Their family has not used the house as much as they used to, so they find a real estate agent to sell their house. Another agent finds someone that want to buy it while on vacation from Oregon. They get financing from a company based in Ohio. A company in Texas provides the title insurance. A company from Illinois will insure the house. You get the idea.

The escrow company takes on the duty of gathering all the documents and money as required by the Contract to complete the transaction. As the documents and money comes to the escrow company, they make sure that they have everything that is required. When everything is in order, they file the new deed at the county courthouse and then pay the seller the money that owed. The money provided by the buyer and the lender is paid to the seller, the seller’s lender, the title insurance company, and various other people such as the inspector and the appraiser.

Find a real estate agent that is willing to monitor the process and look for problems that arise as the sale approaches closing. It is good to have an agent attend your closing with you, to help with any last minute questions. They won’t have all the answers, but chances are they will know who to contact to get help.

Something I have come to realize is that loans are something that are not always available. We all tend to think that our bank always has money and if we are not able to get a loan, it is something that we have done and that we need to correct it. Sometimes that is the case, but often the bank may not have access to someone in the secondary market that will buy the loan if the bank issues it. The trouble is that many banks will not say that is the case. I know a mortgage broker that will readily tell me when she has access to certain loan types and when that loan is not available. Other lenders will not tell you that, and will start restricting the type of loan that they offer or will raise the credit score that they require.

If you are interested in buying real estate, I suggest finding a mortgage broker that is willing to look over your financial situation and give you a first response regarding your ability to borrow money. They can see things that are positive and negative about your situation from the lender’s point of view and can make suggestions regarding how to be a more popular borrower. Some things are not always obvious to the first time home buyer.

Find a real estate agent that stays in contact with various lenders and networks with other agents regarding the various loan opportunities. If they have a good relationship with a few lenders, they can usually find someone to counsel you about borrowing money for a real estate purchase.

Weekly Economic Commentary courtesy of Richard Uhl, Vice President, Real Estate Loan Manager, First Interstate Bank, Jackson Wyoming

“IF A WINDOW OF OPPORTUNITY APPEARS, DON’T PULL DOWN THE SHADE.” – Tom Peter

The Fed saw their regularly scheduled meeting as a window of opportunity to make a blockbuster announcement:  over the course of 2009, they will purchase an additional $750 billion of Mortgage Backed Securities (MBS), as well as $300 billion in long-term Treasuries, primarily to help shore up the housing market and keep Home Loan Rates low.  Result….bonds exploded higher, but Home Loan Rates did not drop as dramatically.  Why?  Two reasons….one, the Fed is currently targeting a portion of the securities market that is keeping rates in the 5.00% range and two, mortgage volumes are so high (lenders and investors are working at maximum capacity) that the improvements to Bond pricing are not necessarily being passed through to the Home Loan Rate sheet (note:  there is also still concern for future inflation).

Good news: Housing Starts for February came in better than expected and actually increased for the first time in eight months.  Fed Chairman Bernanke stated the recession should end in 2009, and he is confident of the long-term outlook for the US economy.  An update on Mark-to-Market (the accounting rule which has had a devastating impact on the financial markets), the Financial Accounting Standards Board (FASB) will propose to allow companies to use more “leeway” in applying the accounting rules they use to value their assets.  Result…better first-quarter financial statements for companies, stocks have been moving higher lately in the hopes that Mark-to-Market will be fixed.

Existing Home Sales came in stronger than expected at a 4.72 million pace, versus prior estimates of 4.45 million (inventory rose slightly from a 9.6 month supply to a 9.7 month supply).  Last week China was saying they were concerned over the value of Treasuries but today top Chinese officials had a change of heart and said they will continue to purchase our debt, strengthening our dollar.  Treasury Secretary Geithner unveiled the Public Private Investment Program, a private investment fund designed to remove toxic assets from financial institutions.  Again, he is being knocked for not providing details of the plan….more specifically, how to price the assets being purchased by the government.

New Home Sales will come out on Wednesday and Durable Goods Orders (cars, furniture, appliances, etc.), an important indicator of economic activity.  The final figures for 4th quarter 2008 Gross Domestic Product (GDP) will be out on Thursday and Friday will bring the Fed’s favorite gauge of inflation: Core Personal Consumption Expenditure (PCE) Index.  It will be interesting to see what these reports show regarding potential inflation ahead.

New Wheels – The average price of a new vehicle purchased in the USA has declined 2.3% over the last 12 months (source: Department of Labor)

Many people move to Jackson Hole for the outdoor lifestyle and take jobs to support that lifestyle.  Eventually they get a permanent job and want to stay in Jackson.  The prices in Jackson Hole and the surrounding communities have come down substantially.  People that have been renting in the area are finding home ownership has again become a possibility.

A good way to start the process is to go see houses.  Besides seeing what is on the market, take some time to chat with the agents.  Finding an agent that is interested in helping you with the home buying process is very helpful.  Find someone that seems interested in your needs and your situation, instead of just trying to convince you that the house they have listed is your best choice.

Another important person in the home buying process is someone who will help you understand the loan process and is willing to help you get a loan that suits your circumstances.  I have found that a good mortgage broker is key to making this process work.  Take the time to have a mortgage broker review your finances and help you prepare for home ownership.  Many of the criteria lenders use to decide what loans to make are not obvious to the first time home buyer.

When you look at houses, make notes about what you like and what is important.  See yourself living there and think about how your day will go in that house.  Do you need storage space and a garage?  Are you willing to deal with a yard and landscaping?  Do you need space for pets?  What is a “must have” and what is a positive but not critical?

Many first time home buyers want to stay in Jackson Hole.  Others see an opportunity to get more for their money in neighboring areas such as Teton Valley and Star Valley.  Buyers need to weigh the commuting time with the chance of getting more space and better quality for less money.  Everyone has their own priorities, so take some time and pencil out your plan.

Many buyers that I meet ask about buying foreclosure homes.  Buying a house at a foreclosure sale is complex transaction and not been very common until recently.  Every state is able to set their own rules regarding foreclosures, so a buyer needs to study the laws of their state.  Wyoming is a “mortgage” state.  This means that when an owner stops making payments (defaults) on a loan, the lender needs to print notices in the local newspaper a number of times saying that they are foreclosing on a property.

On the day of the foreclosure, buyers need to bring certified checks to the sale.  If a buyer does buy the foreclosure, the process is not necessarily over.  The previous owner has a right of redemption, so if they can come back within 90 days, they can repurchase the property if they pay the property taxes and 10 percent interest.  Although it is unlikely that a previous owner can come back with money to redeem the property, it does happen.

If no one bids on the property, the lender takes title to the property.  After 90 days, the lender will own the property.  The lender typically does not want to own property, so the lender either will list the property for sale with a real estate agency or will take offers from potential buyers.  These properties are called REOs (Real Estate Owned).  Buyers that are interested in purchasing REOs need to realize that the sales decision is being made by a lender that is typically a corporation.  The decision making process on the part of the lender is typically much slower than if the seller is a typical homeowner.  Buyers may be required to be pre-qualified for a loan and provide documentation when they submit an offer.

A buyer that is interested in foreclosed properties may be able to find a great bargain, but also needs to know that they need to be willing to do the work to learn about the property, and also be ready to work with a lender that may appear to be slow in responding and making a decision.