Stigmatized Homes: Buyers' Opportunity by Jim Woodard on Creators.com

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Stigmatized Homes: Buyers' Opportunity

A home that has a reputation for being haunted may be an outstanding bargain for a homebuyer. This and other types of stigmas can push the price down by 10 to 15 percent on average, according to one study. In some cases, the price reduction is much more.

The National Association of Realtors defines a stigmatized property as "a property that has been psychologically impacted by an event that occurred, or was suspected to have occurred, on the property, such event being one that has no physical impact of any kind."

A home can qualify as stigmatized if a murder, suicide or other death occurred in it, or it might be known as a site for drug sales or production activity. The number of homes that might be branded as "stigmatized" is substantial and has steadily increased over the past year, according to NAR.

Most homebuyers think: location, location, location. But for stigmatized homes, it's: history, history, history.

Take the California condominium where Nicole Brown Simpson

and her friend Ron Goldman were stabbed to death, allegedly by O.J. Simpson. Nicole had purchased the home shortly before her murder in 1994.

Soon after the murders, the Brown family put the unit on the market where it remained for more than two years. The condo finally sold for some $200,000 less than Nicole paid for it.

Q: Are mortgage rates getting even lower?

A: Mortgage interest rates continue their downward trend. Freddie Mac reported that the average 30-year fixed-mortgage rate sank to 3.91 percent in late December, setting a new all-time record low. Adjustable Rate Mortgage products also hit new record lows.

The 15-year fixed rate settled in at a historic low at 3.21 percent. To put the declines into perspective, Freddie says today's homebuyers are paying over $1,200 less per year on a $200,000, 30-year fixed-rate loan than they would have just 12 months ago.

Q: Are many homeowners still refinancing their mortgages?

A: Here's what Michael Fratantoni, vice president of research for the Mortgage Bankers Association, said on that subject:

"Refinance applications continue to account for the vast majority of total application volume.

As part of legislation to extend the payroll tax holiday, guarantee fees for loans purchased by the GSEs and mortgage insurance premiums for FHA loans will eventually increase.

"Given the announced implementation of this change, we do not expect to see an impact on mortgage rates and application activity until at least February."

Q: Is home foreclosure activity up or down?

A: In a recent study by RealtyTrac, it was revealed that foreclosure activity dropped 3 percent in November when compared to the previous month. But filings at various stages of the process showed starkly different movements.

Scheduled auctions hit a nine-month high following the default surge that began in August. At the same time, REO sales activity is at a 44-month low. Total filings are down by double-digits from a year ago, but RealtyTrac doesn't view the numbers as making a trend, it was reported.

Q: Are sales of reverse mortgages dropping?

A: Yes, with major investors exiting the reverse mortgage space, originations of government-backed Home Equity Conversion Mortgages have dropped by 950 to 1,100 loans a month, according to a report from National Mortgage News.

"Federal Housing Administration monthly reports show HECM endorsements totaled around 4,650 in both November and October.

Back in September and August, FHA reverse mortgage endorsement totaled 5,600 and 5,800 respectively," the report noted.

Wells Fargo, Bank of America and other banks announced last year that they were dropping out of the reverse mortgage business. Many seniors are opting for a less expensive home equity line of credit instead of a reverse mortgage.

Q: Is housing the key culprit in holding back our economic growth?

A: Apparently so. The housing market is holding back economic recovery, according to a report from the credit bureau Equifax.

The company's latest analysis of national credit trends points to shadow inventory and REOs (bank-owned homes) as major mortgage market depressors. Growth in these areas has led to bigger write-offs. Equifax says write-off dollars for home finance in 2010 more than doubled that of 2006 and 2007 combined.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.