Choose a Realtor

Choose a REALTOR® to Sell Your Home
Brought to you by http://www.realtor.com/

Once you've decide to sell your home, finding a REALTOR® is the next step in the process. In making this important decision you should understand:

• Who is a REALTOR®


• How to evaluate an agent


• What a REALTOR® will do for you


• Selling on your own

If you’re not in a "must sell" situation (job transfer, career opportunity, family upheaval, financial hardship), but rather in an "elective" one, you may want to consider adding on to your current home (if you need more space) or refinancing to lower monthly mortgage costs (if finances are a concern).

Who is a REALTOR®?
The terms agent, broker and REALTOR® are often used interchangeably, but have very different meanings. For example, not all agents (also called salespersons) or brokers are REALTORS®. Learn who is a REALTOR® and the reasons why you should use one. As a prerequisite to selling real estate, a person must be licensed by the state in which they work, either as an agent/salesperson or as a broker. Before a license is issued, minimum standards for education, examinations and experience, which are determined on a state by state basis, must be met.

After receiving a real estate license, most agents go on to join their local board or association of REALTORS® and the NATIONAL ASSOCIATION OF REALTORS®, the world's largest professional trade association. They can then call themselves REALTORS®. The term "REALTOR®" is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics (which in many cases goes beyond state law). In most areas, it is the REALTOR® who shares information on the homes they are marketing, through a Multiple Listing Service (MLS). Working with a REALTOR® who belongs to an MLS will give you access to the greatest number of homes.

How to evaluate an agent
Without any obligation, you can invite local REALTORS® to visit your home and give you a "listing presentation" about why they're the best ones to market it for you. Two to three presentations will probably give you a good opportunity for choice. A listing presentation includes having the REALTOR® review with you the reasons why you should list with that particular individual, and providing you with information that will assist you in making initial decisions about selling your home.

Recent laws in every state have defined the duties of someone specifically retained as a real estate agent. Most states require a real estate agent to explain his or her role at the outset of any conversation. A professional agent will promptly provide this such a disclosure. Look for an agent who:

• Is a member of the local board or association of REALTORS®


• Explains and discloses agency relationships (the role of the agent, i.e., who they are representing--the buyer or the seller) early on in the process, at "serious first contact"


• Advises you on how to prepare your home for the market
  Shows some enthusiasm for your property, listens attentively, instills confidence, operates in a professional manner, and has a complementary personality style to yours


• Has already researched your property in the public records and the MLS


• Brings data on nearby homes that have sold (or failed to sell) recently

The following are important questions to ask a potential agent:

• Are you a REALTOR®?


• Do you have an active real estate license in good standing. To find this information, you can check with your state’s governing agency.


• Do you belong to the Multiple Listing Service (MLS) and/or a reliable online home buyer’s search service? Multiple Listing Services are cooperative information networks of REALTORS® that provide descriptions of most of the houses for sale in a particular region.


• If there's no nearby MLS, how often do you cooperate with other local brokers on a sale?


• What have you listed or sold in this neighborhood lately?


• Do you cooperate with buyers' brokers?


• What share of the commission will you offer a cooperating broker who finds the buyer?

And in addition to the criteria mentioned above, there are number of very important reasons you will typically prefer to work with a REALTOR®. Among them are the fact that they adhere to the NAR’s highest standards of ethical conduct and professional training.

What a REALTOR® will do for you

There are many important reasons to use a REALTOR®. Some of the duties your REALTOR® will perform for you include:

• Walking through the process of selling your home from beginning to end
  Providing comparable information about the prices for which other properties have sold and analyzing data for you to gain a true comparison


• Supplying information regarding local customs and regulations you may want to consider


• Sharing information about your home through the Multiple Listing Service and on the Internet


• Placing advertisements for your home


• Fielding phone calls


• "Qualifying" potential buyers to make sure they would be financially able to buy your property


• Negotiating the sales contract


• Alerting you to potential risks


• Complying with the disclosures required by law


• Providing you with an estimate of the closing costs you will incur
  Helping you prepare for a smooth closing of the transaction.

Selling on your own

"You can get rid of the broker, but you cannot get rid of the broker's work" is an old caution for those who intend to offer their homes "For Sale By Owner" (FSBO). Selling on your own is not an easy undertaking. It requires a significant amount of time to study the process, understand your obligations, and do some of the complicated work that a real estate agent does. In addition, selling on your own requires extra help from outside professionals, such as a REALTORS®, accountants or attorneys for some of the jobs that require specific expertise.

The following are some major pitfalls to avoid:

• As a personal safety measure, only show your house to those individuals with whom you've made a prior appointment that's been confirmed by phone.


• Don't price the house so low that it sells too quickly - pay for a market value appraisal by an experienced appraiser.


• Hold out for a buyer with written pre-qualification from a lending institution.


• Find out your legal obligations.


• If you require only limited services, some REALTORS® will agree to help with the transaction for a predetermined fee. You can call real estate companies and ask for the managing broker and see if they're interested in furnishing "unbundled services."

Bill and Cynthia Berkley

Jennifer C. Devine

Realty Executives Fine Homes

615-376-4500

http://www.homesaroundnashville.com/

Home Sales

US home sales rise, defy forecasts


US home resales increased 0.6 percent in November, industry data showed, suggesting the slumping property market is stabilizing.

The National Association of Realtors said existing-home sales amounted to a seasonally adjusted annual rate of 6.28 million units in November, well ahead of the 6.15 million figure expected on Wall Street. This followed a 0.5 percent increase in October.

The November sales level was 10.7 percent below the pace of a year ago, reflecting the tumble in the real estate market after years of spectacular growth. David Lereah, NAR's chief economist, said the report suggests the worst may be over for the housing slump.

"As the housing market recovers from its correction, existing-home sales should be rising gradually during 2007 -- it looks like we may have reached the low point for the current cycle in September," he said. "We've entered a more sustainable period of home sales now, and we expect greater support for prices over time as inventory levels are eventually drawn down."

The latest report showed housing inventory levels fell 1.0 percent at the end of November to 3.82 million existing homes available for sale, which represents a 7.3-month supply at the current sales pace.

The median existing-home price for all housing types was 218,000 dollars in November, which is 3.1 percent lower than November 2005 and slightly below the October median.

The report came a day after government data showed new US home sales rose 3.4 percent in November, also defying expectations for a further slide.

Story from Breitbart.com

Interest Rates

Overnight real estate rates stay put 30-year fixed rate at 5.68%; 10-year Treasury yield at 4.6%


Long-term mortgage interest rates were flat again Wednesday, and the benchmark 10-year Treasury bond yield inched up to 4.6 percent.
The 30-year fixed-rate average stayed at 5.68 percent, and the 15-year fixed rate held at 5.44 percent. The 1-year adjustable was unchanged at 5.31 percent.
The 30-year Treasury bond yield increased to 4.73 percent.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

In other economic news, the Dow Jones Industrial Average lost 7.45 points, or 0.06 percent, finishing at 12,463.87. The Nasdaq was down 1.94 points, or 0.08 percent, closing at 2,427.61.

Stock and bond figures are current as of 7:30 p.m. Eastern Standard Time.

Home buyer resol-utions for 2007

Time to get credit, finances, representation in order

By Ilyce Glink

As we get ready to say goodbye to 2006, it's worth looking back at the year that was for home buyers. With more than 8.5 million existing and new homes sold, and with 30-year mortgage interest rates still hovering at 6.5 percent, it's been a banner year for residential real estate.

In looking back on 2006, real estate observers say the winds changed this year. By the time the year is done, existing-home sales will have dropped 8.6 percent to just under 6.5 million, according to the National Association of Realtors (NAR).

New construction fared worse in 2006. Some builders announced that their new-home starts had dropped by nearly 50 percent -- and watched their stocks tumble in the wake of the news. According to the National Association of Home Builders, new-home sales are continuing to trend downward, although levels are expected to stabilize next year. NAR believes that new-home sales will fall nearly another 10 percent to 957,000 next year.

While this news wasn't so great for developers and sellers, it is good for home buyers. Home prices began to moderate in 2006, with some sellers dropping their list price in order to make the sale.

What's coming up for 2007? Interest rates should continue at the current, historically low level although some mortgage industry observers are forecasting that the Federal Reserve Bank will lower the Federal Funds rate, and long-term interest rates will fall as well. There will be good deals on existing homes and perhaps even better deals on new construction.

In all, it should be a good year. If you're planning to buy a home in 2007, here's my annual list of New Year's resolutions you should consider making:
As a buyer, I resolve to:

Get my credit and finances in order.

Plenty of would-be buyers are paying off their credit cards, car loans, school loans and other forms of personal debt. While having personal debt doesn't mean you can't qualify for a loan, it can lower the amount of the mortgage a lender might be willing to give you.

If you keep one resolution this year, choose to clean up your credit. One of the best things you can do to prepare for buying a home is to make your monthly debt payments on time. Even if you have a lousy credit history, lenders will be more forgiving if they see you've gotten your act together in the last six to 12 months.

Federal law now requires each of the three main credit-reporting bureaus (Experian, Equifax and TransUnion) to give you a free copy of your credit history once a year.
To get yours, go to http://www.annualcreditreport.com/. At the time, buy a copy of your credit score from Equifax. The cost is $6.95, which is still less than buying it through MyFico.com (that costs $14.95).

Get my credit in shape.

Put a lid on your spending, perform "plastic surgery" on your credit cards, and don't max out any one card or your credit score will suffer. If you're going to cancel an account, do it in writing, but you get bonus points on your credit score the longer you maintain a credit account. So a credit card account that you opened in 1984 is worth a lot more than one you opened last month.
Don't forget that good credit also means job stability. Most lenders require that you work for the same employer for at least a year, and maybe two, before they'll approve your home loan application. If you're self-employed, they'll want to see at least two years of tax returns before you'll qualify for a conventional loan. If you're offered a better job in your field, by all means take it. But if you want to buy a home, try not to jump from job to job within a relatively short period of time.
Know how much I can afford to spend before shopping for a home.
You have three options when it comes to figuring out how far your down payment and income will take you: You can guess; or you can pay a visit to your local lender, who will prequalify or preapprove you for a loan, or you can go online.

Your lender will look at your income, debt, assets and liabilities, and come up with the maximum amount you can spend on a home. Once you know how much you can afford to spend, you'll avoid making a common, heartbreaking, home buyer error: looking at homes you can't afford to buy.

Too busy to visit a lender? There are several Web sites that offer good mortgage information. Try Bankrate.com for a state-by-state look at current interest rates from lenders who work in your area, including online lenders. Every major mortgage lender has a Web site. And, don't forget to check the rates at your local credit union.

Know my neighborhood, and be comfortable with it, before I buy a home there.
Everyone wants to live on the best block in the best neighborhood. Unfortunately, that location may not be in your budget. You might be able to afford the smallest home on the best block, but that won't do you much good if you need four bedrooms and that home has only two. Balancing affordability with location means you may have to compromise. While you may be willing to compromise on how big a garden you have, you may not be willing to change your children's school districts.

Start looking at various neighborhoods and the amenities they offer. Is there a park? Shopping? Transportation? A house of worship? Do your friends and family live close by? Be careful not to limit your choice of neighborhoods too early on in the process. Explore new areas and the housing stock and amenities they offer.

Make sure you spend time during different parts of the day and night in the neighborhoods you like. Walk the streets, and go into local shops. Visit the neighborhood police department and local schools. Stop by the local park district offices and see what programs and classes are available. Drive the commute from prospective neighborhoods to your job during rush hour. Get to know the neighborhood and its residents inside and out before you buy.
Interview at least three brokers before hiring one.

There are traditional agents, buyer agents, exclusive buyer's agents (who never represent sellers) and discount agents. There are large brokerage firms and small neighborhood shops. You can even choose not to use a real estate agent, although as a buyer, you won't be out of pocket for the cost, so there's no reason not to use one.

Many buyers today opt to use buyer agents, or buyer brokers, who represent the interests of the buyer rather than the seller. One study showed that buyers using buyer agents or exclusive buyer's agents paid 5 percent less for their home than those who use traditional agents. That's $5,000 saved on every $100,000 spent.
Choosing which agent to use -- or choosing not to use an agent -- can be critical to your successful purchase. Look for an agent whose philosophy and mannerisms are compatible with yours. Look for someone you can trust, with whom you wouldn't mind spending a lot of time. Look for an agent who has ample experience, and who is knowledgeable about the neighborhoods you've selected for yourself.

Read and understand all documents before signing them.
So many folks don't even bother to read either their purchase contract or loan documents. That's unfortunate, given the enormous legal implications of a home purchase.

Take the time to read all documents thoroughly. Ask an attorney or broker to explain things that don't seem to make sense. It's important that you understand what promises have been made and what warranties have been granted, and what implications these documents have for your personal financial and emotional well-being.

If you don't understand the documents that you are being given and still don't understand them after the broker has explained them to you, seek help from someone you trust or hire an attorney to assist you in the process. If the broker explains something to you and seems to contradict the document, make sure the broker writes into the document what she told you.

Next week: If you're trading up, you've probably got a home to sell before you can buy. How can you sell in a slowing market? How can you compete against 10 other homes for sale in your neighborhood? Next week, we'll continue our look back on 2006 and I'll have your Home Seller Resolutions for the New Year.

Homes Around Nashville

It's a Great Time to Buy a Home

Low rates and extraordinary inventory have created perfect conditions for home buyers.
Take a moment to consider these facts:
You've never had more homes to choose from. There are currently 3.75 million homes for sale. Inventories in recent months have been at record levels, offering consumers the greatest choice in decades.
However, inventory levels are falling, and the selection of homes will become limited once again.

Former Federal Reserve Chair Alan Greenspan recently said that housing prospects are looking up. “Most of the negatives in housing are probably behind us. The fourth quarter should be reasonably good, certainly better than the third quarter.” According to industry estimates, 2006 will be the third-best year on record for home sales. Interest rates haven't been this low for nearly 40 years

At 6.4 percent, the average 30-year fixed rate mortgage rate remains near 40-year lows. This is more than an entire percentage point below 2000 levels. For a $250,000 loan, a drop from 7.5 percent to 6.5 percent means an annual savings of $2,000.

Real estate is a great investment

The average home value increased by 88 percent over the last ten years. In the decade to come, the number of US households is expected to increase by 15 percent, which means housing will stay in high demand.

While conditions for buyers are perfect now, that is likely to change next year as sales pick up, prices gain traction, and conditions improve for sellers. In today's real estate market, the best time to buy is now.

Article provided by the National Association of Realtors

Real Estate 2006

Good Evening! I hope everyone had a wonderful day! I thought you'd enjoy this article on some of the highlights and lowlights of the real estate world that happened this year!

I hope everyone is having a wonderful Holiday season! Check out our website at http://www.homesaroundnashville.com/ for more real estate information.




Top real estate stories of 2006
Provided by Inman News

The year 2006 for many real estate professionals will be remembered as the year the market turned. The year was by no means a bust for housing -- most economists still expect it to be the third best on record for sales -- but a slowdown hit hard in many markets, causing brokers and agents to hunker down and focus on the basics. Memorable developments in online real estate include the launch of Zillow, a free site that offers valuations and information on some 64 million properties, and the explosive growth of real estate blogs. Also this year, more brokers started sending listings to search sites Google Base, Trulia and Oodle. And 2006 had its share of controversy, with the Federal Trade Commission initiating law enforcement actions against a number of MLSs, former Homestore CEO Stuart Wolff going to trial for his role in a lucrative accounting scandal, and banking regulators laying down tighter restrictions on riskier nontraditional, or "exotic," mortgages.

Here are our picks for the most memorable real estate stories of 2006:


1) Stuart Wolff found guilty. Former Homestore CEO Stuart Wolff, who was in charge when the company was caught up in a major accounting scandal, went to trial this year and was found guilty of conspiracy, filing false statements with the Securities and Exchange Commission, lying to accountants, fraudulent insider trading, and falsification of corporate books and records. He was sentenced to 15 years in federal prison, and ordered to pay $5 million in fines and restitution. Wolff is appealing the conviction and sentencing. Another former executive, Peter Tafeen, entered a plea agreement in March and agreed to testify against his former boss, Wolff. Tafeen pleaded guilty to one count of securities fraud for his participation in a fraudulent advertising scheme and was sentenced to 30 months in federal prison followed by three years of supervised release.


2) Zillow opens for business. The brains behind online travel giant Expedia made their debut in real estate this year with the launch of Zillow, a site that offers free access to online home-value estimates, coined as "Zestimates." The company quickly became Internet famous and climbed to the top of Web traffic results for real estate sites. Many real estate professionals have complained that Zillow's home-value estimates are inaccurate, and the company has said it intends to improve its data over time. Zillow's launch also set off a wave of copycat offerings and caused many Web sites to feature their home-value offerings front and center.
In December, Zillow announced it would allow consumers and agents to mark homes on Zillow as "for sale." The company also said that homeowners now can post a "Make Me Move" price for a property.


3) Important fair-housing ruling has implications for online listings sites. A U.S. District Court Judge in November ruled that online classified service Craigslist.org is not a publisher and can't be forced to stop its users from posting alleged discriminatory housing advertisements. Craigslist was sued in February by the Chicago Lawyers' Committee for Civil Rights Under Law, a nonprofit consortium of 45 law firms that works to end discriminatory housing practices. The ruling is the latest of several in which courts have held that Web sites that serve as intermediaries to allow users to post ads or commentary enjoy protections under the Communications Decency Act not afforded to print publications such as newspapers.
FTC ramps up antitrust crackdown. The Federal Trade Commission in October announced a "real estate competition sweep" that included seven law enforcement actions. The agency announced litigation against two multiple listing services and settlements with several other MLSs based on policies restricting a classification of property listings. Five consent agreements resolved separate investigations against the MLSs over similar policies that prohibited the display of certain property listings on some home-search Web sites, and the litigation targeted two MLSs in Michigan that refused to withdraw similar policies. One MLS, MiRealSource, has since agreed to settle, pending FTC approval. The FTC is proceeding in its complaint against RealComp II Ltd., a corporation owned by several Realtor boards and associations in Michigan that has about 14,800 members.

Also, the Justice Department's antitrust lawsuit against the National Association of Realtors proceeded this year and is still pending. The NAR has said it has no plans to settle the suit, which alleges the trade group's policies for online listings display are too restrictive, so we're bound to see this story again all throughout 2007.


4) RE/MAX unveils national network of home listings sites. RE/MAX International this year launched a national network of broker IDX Web sites, enabling consumers at www.remax.com to search among more than 1.7 million available home listings.Every RE/MAX office in the country has the chance to sign up for a broker IDX Web site to be included in the listings network. IDX, or Internet data exchange, is an Internet-based exchange of property listings data among real estate brokers. In addition to a spot in the national network, RE/MAX brokers have access to a back-end lead management system called Lead Street.


5)Real estate blogoshere comes to life. Real estate blogs really took off this year, with more solo agents getting into the mix and more blogging on collaborative sites. The weekly Real Estate Blog Carnival was born (thanks to Zillow for initiating this) and has picked up steam in its more than 20 weeks going strong. The blog carnival convenes at a new host blog each week where the blog publisher chooses the best posts of the week and displays them for real estate blog junkies to enjoy. Also, Inman News added the "Most Innovative Blog" category to the annual Inman Innovator Awards in July.


6) Year of market correction: Home sales decline, and decline again. Major market change hit the real estate industry in 2006. Inventory increased substantially in many markets and home builders started seeing their home orders decline and cancellations rise. The rate of existing-home sales ended a six-month slide and rose 0.5 percent in October compared to September, but remained 11.5 percent below the October 2005 level, according to the National Association of Realtors.

Home-price growth also cooled in many markets. Nationwide home-price appreciation in the third quarter was 0.86 percent, or an annualized rate of 3.45 percent -- the lowest since the second quarter of 1998, according to the Office of Federal Housing Enterprise Oversight. That compares to a 5.1 percent annual appreciation rate in the second quarter of 2006. Nationwide, home prices were up 7.7 percent in the last 12 months.


7) Hedge your housing bets. The Chicago Mercantile Exchange officially launched trading on housing futures contracts in May, allowing people to invest in the residential real estate market without actually owning property. Futures contracts currently are available for Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, D.C., and the Merc uses the S&P/Case-Shiller Home Price Index for each city in the futures market.


8) 'Exotic' loans get all the attention. In recent years, so-called "exotic" mortgages have increased in usage as buyers in expensive markets looked for new financing methods to be able to afford homes. These nontraditional loans -- including interest-only, no doc loans and various option adjustable-rate mortgages -- grabbed the attention of regulators, who grew concerned that many borrowers didn't understand the risk involved. Federal banking regulators published new guidelines for banks to follow when originating and underwriting nontraditional mortgages that carry potential payment shock for borrowers. The new guidelines require lenders to analyze a borrower's ability to repay not only the initial loan amount, but also any additional principal that may accrue in the case of a payment-option loan with negative amortization. Some banks and industry groups have said the guidelines are too restrictive.

9) Movement grows for MLS consolidation and data sharing. A number of multiple listing services this year pushed for consolidation and data sharing among MLSs that serve overlapping markets. In Chicago, plans are in the works to merge the Multiple Listing Service of Northern Illinois (one of the largest MLSs in the nation) and MAP MLS to form one larger broker-owned MLS. In Southern California, the Southern California Multiple Listing Service (SoCalMLS) and the Southland Regional Association of Realtors (SRAR) announced an agreement to form the second-largest multiple listing service in the nation. In Northern California, a group of MLSs formed the Northern California Real Estate Exchange (NCREX) in an effort to merge into a single MLS with a common database, common rules and a single fee for members.
Also in line with changing MLSs, the National Association of Realtors this year formed an advisory group to consider the future of MLSs.
Kickback probes, lawsuits spread. The title insurance industry continued to feel the weight of regulator attention this year as more probes into affiliated business arrangements and alleged illegal kickback schemes unraveled. An investigation in Washington state found the use of incentives and giveaways in the title insurance industry so pervasive that officials decided to focus on future prevention and compliance. That led consumers who bought title insurance from the companies to file a lawsuit seeking to recover the amounts the companies allegedly overcharged the plaintiffs and an injunction blocking further illegal inducements.


Article provided by Inman News.

Good Afternoon!

I hope everyone is staying warm and dry on this rainy day in Nashville. Just wanted to keep you up to date on the weather forecast for the next 10 days. I hope everyone is having a Happy Holiday season. If you are looking for a new home or deciding whether to sell your existing home, check out our website at www.HomesAroundNashville.com for all your home search needs.

Take care!

The Homes Around Nashville Team
Bill and Cynthia Berkley
Jennifer C. Devine
Realty Executives Fine Homes
615-376-4500




Forecast Conditions

TonightDec 12
Showers Early
N/A/50°
100%


WedDec 13
Mostly Sunny
63°/42°
10%

ThuDec 14
Sunny
67°/45°
10%


FriDec 15
Sunny
69°/45°
20%


SatDec 16
Partly Cloudy
69°/52°
10%


SunDec 17
Partly Cloudy
68°/47°
10%

MonDec 18
Mostly Sunny
69°/55°
10%


TueDec 19
Partly Cloudy
71°/52°
10%

WedDec 20
Showers
58°/42°
60%


ThuDec 21
AM Clouds / PM Sun
51°/33°
20%

www.weather.com

Closing Costs

Home buyer closing costs could drop with fed's help
Written by Jack Guttentag

Every consumer taking a home mortgage today pays a tax in unnecessary charges for the various third-party services required to deliver the mortgage. These include services provided by title insurance companies, mortgage insurance companies, appraisers, credit reporting agencies, flood insurance companies, and escrow companies.

The taxes don't go to government, and in most cases the service providers don't keep them. Rather, they are paid to those who are positioned to direct which service provider will receive the business; these referral agents are mainly lenders, Realtors and builders. The payments include referral fees, which are sometimes legal and sometimes illegal. Some of the tax is absorbed by marketing expenses directed to the same referral agents.

The problem is not that there isn't competition in these industries, as the competition is actually intense, but it is directed to referral agents rather than to the consumers who pay for the service. Competition directed to referral agents drives prices up rather than down, since most agents are more interested in being paid for the referral than in negotiating lower prices for consumers.

Under the Real Estate Settlement Procedures Act (RESPA), referral fees are illegal, but this rule has been completely ineffective because it has left the power to refer business unchanged. Small referral agents often ignore the rule and large ones develop affiliated business arrangements, which convert illegal referral payments into legal referral payments.

There are several ways to eliminate or neutralize referral power. Much the most effective way is to require lenders to pay for all third-party services that they require, passing the cost on to borrowers in their rates and fees. Competition by third-party providers to sell lenders would then force the prices down, and rate competition by lenders would force them to pass the savings on to borrowers. This would require federal legislation, however, and the prospect of that ever happening is remote.

An approach proposed by HUD several years ago, which did not require new legislation, would have allowed lenders and others to package third-party services with loans, selling the package at an all-inclusive price. I supported this concept, but it was done in by its complexity, which included something to hate by every interest group in the country.

A third approach, which I recently proposed to HUD, aims to induce some referral agents to become agents of borrowers as a competitive strategy. A lender who negotiates lower prices with third-party providers and passes those prices on to its borrowers can gain a competitive advantage. There are, in fact, lenders who would do this now if not for a well-intentioned HUD rule that prevents it.

To use lower third-party fees as a competitive tool, loan providers must guarantee those fees. Otherwise, they have no way of distinguishing the fees they quote to borrowers from those quoted by competitors. Indeed, without an explicit guarantee, the low fees quoted are indistinguishable from those of low-balling competitors who have no intention of delivering.
But guaranteeing third-party fees is hampered by a HUD rule against marking up the prices of third-party services. Consider a loan provider who guarantees an appraisal fee of $400. If the actual cost comes in at $500, he must take the $100 loss, but if the actual comes in at $300, he must charge $300 to comply with the markup rule.

My proposal is for HUD to revise its rule toward markups on third-party charges as follows: Markups would be permitted by any loan provider that guarantees its own and all third-party charges.

The goal is to encourage loan providers to guarantee their own and all third-party fees. (I use the term "loan provider" because it covers both lenders and brokers, since the proposed rule should apply to both). On refinances, this would be all third-party fees. On purchase transactions, the guarantee would cover charges of service providers selected by the loan provider.

As loan providers offering fee guarantees become a force in the marketplace, borrowers will discover that they can shop rate and total guaranteed fees. This would fundamentally change the way the market works, and put downward pressure on all fees.

On purchase transactions, where the title agency is usually selected by the Realtor or builder, a new and in many cases lower-cost option would become available. In states where home sellers are obliged to purchase title policies for buyers, the availability of a lower-cost policy available through the buyer's loan provider could change the way business is done.

HUD could make the necessary rule change on its own, with minimum political flak. But HUD is a very politically sensitive agency, and I have no political clout. My hope is that others who do have clout will chime in to make it happen.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania.



CHECK OUT OUR WEBSITE AT WWW.HOMESAROUNDNASHVILLE.COM for more real estate information.