Monday, August 25, 2008

What are the limits of FDIC insurance?

What are the limits of FDIC insurance?

Bank accounts that have less than $100,000 in them and certain retirement accounts (IRAs held in CDs and money market accounts) that have less than $250,000 are fully protected by the FDIC even if the bank fails. If you want to exceed these account limits, you can keep your deposits fully protected by:

1. Dividing your money among several different bank companies. Note that dividing your money among several different branches of the same bank does not guarantee full protection.

2. If you prefer to keep your money in the same bank company, you can still be fully protected if you divide your money among various "ownership categories". Ownership categories include a personal account in your name, a personal account in your spouse's name, a joint account co-owned by you and someone else, and a trust account that names someone other than you as a beneficiary.

What are some common ways customers end up with uncovered deposits?

If you purchase a CD through an investment broker, this CD will often be placed with a bank at which you already have an account. If the CD and your other accounts exceed the $100,000 limit, you may not be full protected. Before purchasing CD's through a broker, ask where they will be placed.

In addition, keep track of the interest your accounts earn so you don't exceed the limits this way.

What will happen if your bank fails?

In most cases, depositors can fully access their funds by the next business day. Typically, failed banks are closed on Fridays, and funds are available by the following Monday. People can also usually use their ATM cards and write checks over that weekend as well. And for customers whose accounts exceeded the FDIC limit, all hope is not lost. Though this amount has varied, they can generally expect to recover 70 cents on the dollar of their uncovered funds after the bank's assets are sold.

The good news is that the vast majority of US banks are secure, but the above information will help you stay fully protected.

For more information, visit

Loan Tips - Calculating APR

We are often asked how the annual percentage rate (APR) that appears on the Truth-in-Lending disclosure is calculated. Here's how it's done:

1) In order to calculate the APR, we need to know the principal amount of the loan (the amount the buyer borrows from the lender), the interest rate, the term of the loan, and the closing costs. Let's assume the loan amount is $200,000, the interest rate is 6.5%, the term is 30 years, and the closing costs are $6,000.

2) First, the monthly payment is calculated by amortizing the $200,000 over 30 years at 6.5% interest. That gives us a payment of $1,264.

3) Next, we subtract the closing costs from the loan principal. However, we only subtract those closing costs that are related to the loan, not the costs that are related to the real estate side of the transaction. A good example of a closing cost that is related to the loan is the origination fee. An example of a fee that is related to the real estate transaction is the appraisal because even if the buyer paid cash for the house, they would still want to see an appraisal. Let's assume that out of the $6,000 in total closing costs, $4,000 of those costs are related to the loan. So, we subtract that $4,000 from the loan principal ($200,000), leaving us $196,000.

4) The final step is calculating what the interest rate would have to be for a loan of $196,000 in order to give us the same payment of $1,264. That interest rate is 6.695%. That is the APR.

The purpose of the APR is for the borrower to compare loans between different mortgage brokers. If each mortgage broker has the same loan amount, same interest rate, and same term, then whoever has the lowest APR has the best deal because they have the lowest closing costs.

Thursday, August 21, 2008

Fannie May Guidance

Fannie Mae has issued guidance regarding the amount of time that must elapse before someone can get a new loan when they have had a preforeclosure or a short sale. There is a difference between the two, even though most of us use the terms interchangeably.

A preforeclosure sale occurs when a borrower is delinquent on their mortgage and the lender accepts a lesser amount than is owed to speed up the foreclosure process and save expenses. There is a 2-year time period from the completion date before that borrower (the seller) will be able to get another Fannie Mae loan.

A short sale occurs when a borrower who is NOT delinquent sells a property and the lender agrees to accept a lesser amount than is owed. The borrower will be able to get a Fannie Mae loan immediately after the short sale, provided the short sale agreement states that they are not obligated to pay the deficiency (the amount between what is owed and what the lender actually gets).

Preforeclosure sales and short sales both lower credit scores, but there is no standard way of reporting these actions to the credit bureaus, so it is impossible to say how much the credit score will be affected. A preforeclosure sale typically lowers the score much more than a short sale, only because the borrower has had recent mortgage payment delinquencies. Those late payments will show up on the credit report regardless of how the preforeclosure is reported.

So How's The Market? August 2008

So, How’s the Market, August 2008 All statistics are taken from Metrolist data on August 4, 2008.

A passerby stops by a farm as he is driving through Colorado and waves at the farmer to come over to him holding a cold bottle of water. The passerby asks the farmer, “How’s the farming business?”

The farmer was working in the hot August sun on his tractor and this gave the farmer the opportunity to get off that darn machine and talk to the first person he had seen in 8 hours since he left his house at 4 AM to start his chores and to capture a drink of water from this person.

The farmer said, “We have had no rain, the bugs are eating my crop and the guy who buys my crop said he didn’t need as much as he used last year. The farming business is unbelievably good!”

The passerby is amused at the statement, but presses on, “How could your market be unbelievable when it seems everything around you isn’t working?”

The farmer then took a long drink from the bottle and smiled. The farmer said, “You look like a smart person, you drive a nice car and are well dressed. You come all the way out here and provide me a bottle of water. Why did you make such a trip?”

The passerby said, “I am a newspaper person, and am looking for a good story.”

The farmer said, “OK, farming is terrible, there’s no future in it and people in America will start to starve before you know it. Please write that verbatim in your paper as when the word spreads to the government how bad things are out here, they will increase the subsidy they already pay me, so seeing you made me think farming is unbelievable because I can get the newspaper guy to write something negative to help me!”

Everybody is looking to benefit from the current real estate market, whether it’s investors or newspaper people. Stories abound at the good and bad in the marketplace. The government passed a huge housing bill last week to help homeowners with the potential short term financial crunch that exists. The bill will basically give homeowners the ability to refinance if they are in a difficult financial situation due to poor judgments of obtaining a loan that probably shouldn’t have been written anyway. This will just be a short term fix and long term help comes from the local markets themselves.

Let’s take a look at the Denver marketplace, because some outstanding numbers are happening before our eyes. Does this mean we are totally out of the slower market Denver has experienced for 30+ months? No, but we do not need a short term fix in Denver and the long term prognosticators are looking good. Here’s why!

Inventory in the month of August was standing at 26,864 units for single family and condominiums. This is a reduction of 4,461 units from one year ago or a 14.24% decrease in homes on the market year over year. Anytime you have inventories continue to decrease, prices will increase. August of 2008 is also the first time in 5 years that the inventory of active listings decreased from July to August.

See the two charts below to see how inventories have changed in August of each year since 2004.

See attached pdf file for charts

Clearly, the Denver real estate market for active listings is experiencing reductions in active listing numbers. This trend historically would reduce during the fall and winter, where housing inventory decreases, but rarely does it every decrease in the summer months. When the housing market hits 22,000 units, the supply will not meet the demand. In looking at sold data, we can justify this number as the benchmark by which housing prices in Denver will go up.

Sold data has lagged behind the other indicators for more than 2 years, but appears now to be poised to start to increase year over year. In July of 2008, there were 4433 recorded sold properties in the Denver market for single family and condominiums.

Here’s the sold data for the last 5 years.

See attached pdf file for charts

As the numbers indicate, 2008 was the first July to experience a rise in sold data over June in 5 years. The next chart shows the actual numbers for sold data. One month hardly makes a trend, but this is the data we believe will show the Denver market having some long term trends to positively affect the housing market.

See attached pdf file for charts

If we were to annualize the sold data for 2008 based upon the July figures, the projections show the total number of sold properties to be 44,736 for the entire year of 2008. If the listing inventory hits 22,000 units as a medium level, the Denver Market would have a 5.9 month supply of homes. Hence, the marketplace will see appreciation when this occurs. Our best crystal ball suggests this will be in the first half of 2009.

The number of properties Under Contract in the market stands at 7306 as of August 4, 2008. This is up 476 units over 2007 or a 6.9% increase in the number of properties yet to close. This is another figure which indicates that the number of closing in August should exceed the August closings of 2007.

Homes priced above $750,000 have not experienced the same inventory drop nor increased in sold data as below this price level. We can attribute the slower upper end market to difficulties in obtaining financing and large levels of inventories. This price point takes time to get to a more robust market and will do so when the lower price points start to see appreciation. The more appreciation homeowners see from 0-$500,000, the more buyers will have equity to buy into the upper end market. Considering Denver has not had but 1-2% appreciation for 7 years, it is inevitable that this level of the market will take time to catch the pace that has been exhibited below the $750,000 range in the last couple of months.

For more information Contact
Team Koz - Michael Kozlowski

Housing and Economic Recovery Act Update:

Housing and Economic Recovery Act Update:
Conforming/FHA Loan Limit Calculations

Conventional Conforming Loan Limits – Effective Jan. 1, 2009
Effective Jan. 1, 2009, new calculations will be used to derive conventional conforming loan limits in accordance with the Housing and Economic Recovery Act of 2008.

The Economic Stimulus Act, signed earlier this year, established temporary higher conforming loan limits for 2008 in areas in which the median housing price exceeded the conforming loan limit up to a maximum of $729,750. The Housing and Economic Recovery Act of 2008 makes the high-cost area concept permanent, but changes the calculation.

Calculation Formula
Effective Jan. 1, 2009, in a high-cost area, the conforming loan limit will increase to the lesser of:
• 150% of the standard conforming loan limit ($625,500 if the single-family standard loan limit is $417,000); or
• 115% of the median house price in the area (with the 2008 temporary loan limits, the calculation is currently 125% of the median house price).

NOTE: HUD has not indicated what timeframe will be considered to determine the median area house price. Because of the continued changes in the housing market, the median area house price may be significantly different throughout the year. So the timeframe used by HUD is key to determining what the actual 2009 loan limits will be.

Below is an example based on the 2008 limits (prior to the release of the temporary loan limits):

Property Type 2008 Standard Limit*
(115% of local median housing price) High Cost Area Limit
Not to Exceed 150% of Standard Limit**
Single-family $417,000 $625,500
2-family $533,850 $800,775
3-family $645,300 $967,950
4-family $801,950 $1,202,925
* 2008 standard limits are established as base limits to be indexed annually beginning 2009.

** These examples are generated using 2008 standard limits.

FHA Loan Limits – Effective Jan. 1, 2009
Earlier this year, the Economic Stimulus Act temporarily increased the FHA loan limits. As of Jan. 1, 2009, the Housing and Economic Recovery Act permanently changes the calculation for the increases to the FHA loan limits as follows:

• For single-family properties, the limit will be 115% of the local area median home price, as determined by HUD (the percentages for 2-, 3- and 4-family residences will now be determined using the same ratios that are used to calculate the conventional conforming loan limits for 2-, 3- and 4-family residences).

• The ceiling will be 150% of the conventional conforming limit for a residence of applicable size (new ceiling of $625,500 for single-family properties).

• The floor will be the greater of 65% of the conventional conforming limit for a residence of applicable size (floor of $271,050 for single-family properties), or the limit in effect for the area in 2008. This is not a change from the 2008 temporary loan limits!

Understanding Your Homeowner's Insurance

Understanding Your Homeowner's Insurance
...before it may be too late.

For nearly all consumers, owning a home represents a large investment. But suppose your home is vandalized or damaged by a storm? Having insurance can protect you from such unpredictable losses.

When purchasing insurance, it is important to READ YOUR POLICY. Your policy is the contract between you (the insured) and your insurance company. The time to learn about your coverage and conditions is not after you have suffered a loss but before, while you have the opportunity to discuss the policy with your agent. If you do not understand the policy or want to modify it, contact the insurance agent or company for additional information. Also important is the written application for insurance that usually becomes part of the policy. Carefully examine the application before signing it to make sure the information is accurate and complete.

Choosing A Policy

When insurance policies are sold, they are issued on either a monoline basis or as a package policy. A monoline policy contains only one type of coverage, such as liability insurance, while a package policy includes several different types of coverage, such as property insurance and liability insurance. A package policy is generally less expensive than insurance coverages purchased separately. Homeowners policies are package policies that include property, liability, injury to someone on your property due to your negligence or that of a member of your family; or somebody else's property is damaged as a result of your negligence.

It is important to be aware of the different perils that you are insured against. It is up to you to determine whether you need the most extensive type of coverage or whether your insurance needs can be met with a basic policy. Some of the coverages excluded under a policy, such as earthquake damage and power interruption, can be "bought back" for an additional premium. Correspondingly, some coverages listed under a policy can be excluded, such as offpremises theft, resulting in a reduction in premium. However, some coverages, such as flood insurance, are always excluded and the only way to obtain them is through Federal insurance programs.

For more detailed information, be sure to contact a reputable insurance agent or sales representative.

Most Common Types of Homeowner's Insurance

Homeowners - 1 (HO-1) policy or Basic Policy, insures your home and contents against listed perils. Most insurers sell more comprehensive policies, such as the Homeowners-3, which includes these and other perils: Fire, Lightning and Smoke Damage, Windstorm and Hail, Glass Breakage, Vehicle or Aircraft Damage, Bodily Injury Liability, Damage to Property of Others, Personal Property (at Home), Personal Property (away), Burglary and Theft, Riot and Civil Commotion, Cost of Legal Defense, Explosion, Vandalism and Malicious Mischief, Medical Payments, Additional Living Expenses (If forced to live away from home temporarily).

Homeowners - 2 (HO-2) policy or Broad Form Policy, insures your home and contents against the perils in the HO-1 policy, plus other additional listed perils: Falling Objects, Water From Plumbing Systems, Electrical Damage to Appliances, Weight of Ice or Snow, Freezing of Plumbing Systems, Rupture of Water Heaters and Heating Systems.

Homeowners - 3 (HO-3) or Special Form Policy is the most widely used policy by homeowners. This policy covers your home for all risks of physical loss, except those that are specifically excluded, such as flood, earthquake, war, nuclear accident, etc. Check your policy for a complete listing of perils excluded. Coverage for loss of your home's contents is also covered for many of the same perils for which your home is covered.

Tips on Evaluating Your Home and Personal Property

The first step in determining how much insurance you will need is to make an analysis of the value of your home and your personal property within it. In determining the value of your home, you must calculate how much it will cost to replace it if your home were totally destroyed. You can enlist the help of your insurance agent in determining this figure. In fact, most insurance companies make a physical inspection of your home when they first insure it. Using formulas that take into account whether your home is of brick or wood frame construction, total area, number of floors, number of rooms, etc., the company will be able to give you an accurate replacement cost value.

Determining the value of your personal property will require an extensive analysis on your part. You should go through each room of your house and list every piece of furniture and fixture within it. As you compile your inventory, you should supplement it with receipts indicating the purchase price and date of purchase and photographs of major items. Your inventory should be updated on an annual basis or, at the very least, whenever you purchase a large appliance or piece of furniture.

Some people periodically videotape all their possessions. If you videotape, make sure all the drawers and/or doors of your furniture are open so you have a record of what is stored. When complete, you should store your inventory or videotape in a safe place away from your home, such as your safe deposit box. You might also store this information in the home of a friend or relative.

Wednesday, August 20, 2008

Has the Market Hit Bottom?

Compliments of:

Michael Kozlowski
Team Koz - Prestige Real Estate Group

Commentary by Walt Baczkowski

RISMEDIA, August 5, 2008-At the top of the most frequently asked questions’ list is, “How will we know when the market has ‘bottomed out’ and we should buy a home?”

Historically, two major indicators that a market has bottomed out are: a decline in the number of listings and an increase in listing and sold prices. Obviously the key here is making your move at the right time-which would be right before these two items begin to manifest in the market.

Based on sales data provided by MLSs, it appears that we are beginning to realize a slight decline in listing volume. I say “appears” because with the factors affecting the market today-and the foreseeable future-this may be a seasonal issue or being caused by any number of things.

Tracking the listing volume over the next several months will provide additional information regarding this question. In regard to sold prices, this is more difficult. Real estate-owned property or property in some stage of the foreclosure process has been driving the price point for real estate for some time now.

With a significant volume of lending institution-owned property on the market selling at what historically, could be viewed as discounted prices, we do not anticipate seeing an increase in sales prices in the near future.

With sales showing increases compared to last year in most areas and declines in listing volume, it would appear that the market is slowly changing from the buyer’s market we have experienced for the past several years.

A large listing inventory remains, however, and problems in the job sector-coupled with rising fuel costs and the overall economic state in the country-will undoubtedly prolong the market conditions we are currently experiencing.

During this time, we are also seeing a plethora of innovations and new ideas coming forward. We all need to do something that differentiates us from our competition. New services and products have continued to be introduced over the past few years, only to fail shortly thereafter or morph into something entirely different.

However, a point to keep in mind is that self respect and common sense should remain at the top of everyone’s list. This has been-and remains to be-the basis of business success.

Walt Baczkowski is president of the Metropolitan Consolidated Association of REALTORS®.

To contact him, please e-mail

RISMedia welcomes your questions and comments. Send your e-mail to:

Team Koz - Prestige Real Estate Group! Your Metro Denver Real Estate Experts!

How is the Market?

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Presented by:

Michael Kozlowski
Broker Associate/Owner
Prestige Real Estate Group
9200 E. Panorama Circle, Suite 140
Englewood, CO 80112
303.949.2755 Cellular
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With years of experience in the entire Metro Area, Denver, Littleton, Highlands Ranch, Lone Tree, Castle Rock, Parker, and All Metro Denver real estate as well as intimate local area knowledge, I work extensively to help buyers and sellers meet their real estate goals.

If you are looking to buy or sell a home or would just like to know some more information, feel free to call or Email us.

As Top Producers, our extensive marketing gives a homeowner the opportunity to get the maximum value for his/her property.

For buyers, we help negotiate the best possible deal and search until we find the perfect property. Nothing satisfies us more than seeing the smiles that come with a successful sale or the purchase of a lifetime.

Thanks again for choosing Team Koz as your on-line Denver, Littleton, Highlands Ranch, Lone Tree, Castle Rock, Parker, and All Metro Denver real estate source.