MaDNess IN THE HOUSING MARKET

One man’s ceiling is another man’s floor, ” sings Paul Simon (the one without the bow tie), sounding strangely like a developer and aptly summarizing the mood of the Dallas housing market circa now. If you’re buying, dive in and wallow; this is your market. If you’re selling… well, you know the score.

Clichés don’t help, but it’s an ill wind that blows nobody good. For decades Dallas managed, somehow, to avoid the inevitably cyclical nature of two things: the National Football League and real estate. Like the Cowboys when they were good, Dallas real estate seemed stuck in an endless upswing, and we all had such a good time we forgot Newton’s third law of motion.

Back when the real estate elevator was at the top, in 1978, we brought you “Madness in the Housing Market. ” We were serious when we described that little 3/2/2 charmer as a “growth stock” and advised that you sit on it for another year and triple your investment. Many of you did. Now, welcome to the basement. That little 3/2/2 albatross is liable to sit on the market for five months before it sells-at 30 percent off your original asking price.

Okay, buyers, get those Cheshire grins off your faces, Sure, you’re ecstatic. You found that beautiful 3/2/2, wbfp, sprkl, gm rm, c/ha, bltins, with a creekside back yard sculpted like a park. The sellers came gladly, swiftly, down $21, 000. You came up three and nailed it down. Naturally you’re gloating. But sellers are moaning, so try to muffle those squeals of delight.

It’s not yet time for sellers to celebrate, but there are some encouraging signs looming on the horizon. Most industry professionals feel we’ve hit bottom, and that ’88 is the year things will start to stabilize. Realtors city-wide have high expectations for the spring buying surge. One agent reported a recent Sunday so booked with showings that “it felt almost like three years ago. “

Another good sign for homeowners is the relative lack of activity from builders, which makes preowned homes more competitive with new ones. Builders have cut back severely on the amount of new construction and will probably continue to do so until 1990. Plus, we’ve about run through the glut of empty, overbuilt houses. Last year, Dallas had just over a seven-month supply of new homes; the six- to seven-month range is considered ideal for a balanced market.

All in all, we might see slight signs of improvement by the end of the year, though the real wrinkles in the housing market won’t start to be ironed out until next year. But don’t count on prices rising dramatically until 1991 or so.

It’s time to abandon the boom-years mindset of house as investment. Instead, it’s just four walls, a roof, a Eurostyle kitchen if you’re lucky. You can cook up some mean nouvelle cuisine in it, but don’t count on its making you any money.

Above all, look on the bright side. At least you’re not in Toledo, recently named by the National Association of Realtors as the most sluggish market in America.



Location, Location, Location

Admittedly, in Dallas’s depressed market, condition and price of a house are challenging location as key selling points. But locale will always be a mighty arbiter-people still want to be close to work, school, and play. To that end, here are some locations worth betting on in Dallas’s future: neighborhoods that have held their own through the bust years, and largely undiscovered pockets of homes poised to become the hot neighborhoods of the Nineties.



NORTHEAST DALLAS

Lake Highlands, a huge area that sprawls north of White Rock Lake up to LBJ, has held up extremely well the past three years, but many realtors say Dallasites as a whole seem basically unaware of the neighborhood. The main draws: it’s in the Richardson school district, and it’s got lots of trees.

In particular, keep an eye on Town Creek, a neighborhood of about 500 homes set between Skillman and Abrams just below LBJ. There’s a wider range of houses here than anywhere else in Lake Highlands-from contemporary homes on huge creek lots to cute country French manses, priced from $175, 000 (for a total redo) to $700, 000. Most are four bedrooms, about ten years old, but in all likelihood updated with Eighties colors. Residents tend to be mid- and upper-management types. The homeowners’ association is a sociable bunch, with organized ski trips and Halloween parties for the kids.

Just northwest of White Rock Lake, wedged between Northwest Highway and White Rock Lake Park, is Merriman Park, a still-secret pocket of about 500 homes that’s so nice and quiet one female resident sheepishly admits to jogging at 11 o’clock at night. Buying activity has slowed from past levels, but values are holding well. The real plus is a major new shopping center-complete with Simon David, the foodie’s nirvana-at Skillman and Walling (just past Abrams). The center’s developers are working with the neighborhood homeowners’ association to book an “acceptable” mix of tenants (read: several nightclubs reportedly have been turned down).

Houses are about thirty years old, typically three bedrooms, priced from $90, 000 to $140, 000. Lower-priced houses will probably require at least a cosmetic redo: harvest gold kitchens and avocado green carpet abound here.

The neighborhood is well situated for the dual-career commuting couple, about equidistant between his office in Far North Dallas and her office downtown. And after Supercouple has settled in, they can ship Superbaby off to Hotchkiss, the only Mon-tessori school in the Dallas school district.



EAST DALLAS

Hollywood Heights, situated near White Rock Lake between Lakewood Country Club and Gaston Avenue, has. in realtor-speak, “lots of charm. ” That means smaller, older houses-two bedrooms, forty or fifty years old, with no central heat and air-ripe for the renovating. If you’re not quite the urban pioneer type, there’s a goodly number of already updated homes on the market, with new kitchens, added bedrooms, and central air. Prices range from S165. 000 for an updated manse near the country club to $70, 000 for a house that needs work near East Grand, where, for added entertainment, you can keep count of how often frat boys steal the Corona Street sign.

Renovation work in Casa Linda is also starting to pick up again, after a lag while the market was down. The 600 or so homes southeast of Casa Linda Plaza date from the Thirties and Forties, which means no indigenous central heat and air. But offset that with hardwood floors, brick or stone veneers, huge lots, and mature trees. If you’re on your toes, you can find a completely updated house (blessed with central a/c); if you want a good deal, shop the houses that need work. There are a few two-bedroom homes, but three- and four-bedroom houses are the norm. Prices average $100, 000 to $135, 000.

Casa View, immediately northeast of Casa Linda, is also ripe for a comeback. It’s a larger neighborhood, dating from the Fifties and Sixties, with twice as many houses. Prices are low, a natural draw for single-income and/orj first-time buyers. Small, two-bedroom firame cottages go for $45, 000 to $50, 000, while three-bedroom brick veneers run $75, 000 to $80, 000.

These days, there are good buys to be had in Forest Hiils, which bumps up against White Rock Lske on the southeast. Houses and lots are large-2, 500 to 5, 000 square feet and one-half to three acres, respectively. The 500 or so homes span fifty years of design, from the 1910b through the early Sixties. Prices range from $200, 000 to $400, 000.



DOWNTOWN

There’s still not enough concrete development going on downtown to qualify it as a true hot neighborhood, but the once (and future?) heart of the city must have a mention. In the West End, the Preston Carter Co. investment group has announced plans to build apartments in the Wilkins Trunk building on Woodall Rodgers. In Deep Ellum, the Elm Development Co. has similar plans for the Mitchell Building on Commerce Street. (A small, test-the-waters project could be under way by late summer. )

Bart Wade, marketing vice president for Elm Development, reports a steady stream of calls from doctor-, lawyer-, and accountant-types interested in loft spaces-a sure sign of potential urban renewal. And what can these yuppie refugees plan to pay for a slice of urban history? Wade predicts monthly rents at 60 to 75 cents a square foot. Rents can’t go much higher than $1 per square foot, he adds, because at that point downtown would lose its competitive edge and heck, you might as well move to The Village.



SOUTHWEST DALLAS

In DeSoto, the hot spots are the brand spanking new neighborhoods around the intersection of Cockrell Hill and Wintergreen, near Thorntree Country Club. Houses in Windmill Hill have been moving extremely well the past year-three- and four-bedroom models, relatively cheap at $120, 000 to $350, 000. To the northeast is Club Ridge, where things are more expensive and slower-moving. There, $300, 000 to $500, 000 will get you four to six bedrooms. Both areas lie within the Duncanville school district, which likes to brag about last year’s four National Merit Scholars.

As Joe Pool Lake fills up with water, so does Cedar Hill fill up with new houses. Mountain Creek, a 3, 600-acre master-planned development north of the lake at KM. 1382 and Camp Wisdom, promises to heat up nicely. Only a few of the thousands of houses planned have been built, but property was selling before the developers could even throw a grand opening. Plans call for three- and four-bedroom homes at $90, 000 to $110, 000.

For a great deal on a preowned home in Cedar Hill, keep a wary eye out for sales in Highpoint, at F. M. 1382 and Highway 67 (the J. Elmer Weaver Freeway). Houses are only a year old, priced from $90, 000 to $110, 000, with-here’s the real selling point-assumable 8 to 9 percent loans and low equity. Homes come on the market fairly regularly, and they usually sell within a week. And wouldn’t you just die to live near a freeway named Elmer?

BURBS

Up Addison way, the newest hot spot centers around Preston Road (of course), just south of Arapaho. Sales have held steady, and there are actually fewer homes on the market than there were a year ago-about half as many. Still, low appreciation holds as true here as elsewhere, and though nobody’s losing money, there are some good buys. As a part of Prestonwood. the area shares in the basic amenities that cluster near Preston and the LBJ Freeway: mall after mall after mall, plus the Prestonwood Country Club and the Addison Airport. It’s an established neighborhood of second-time homebuyers. Houses are six and seven years old, mostly four bedrooms, priced around $200, 000. If you look hard and long, you might find a buy in the $150, 000 range.

Bent Tree, which meanders between the borders of Addison and Dallas (where the Dallas Parkway meets Trinity Mills), is not much of a secret, but it’s still a good buy. Completion of the Tollway has done a lot for business, particularly in Bent Tree West and North. In the western quadrant, you can find brand new homes at desperation prices for about $200, 000. Preowned homes, which may need new paint and carpet, run from $180, 000 to $250, 000. Across the street in Bent Tree North, houses run the gamut from $200, 000 to $600, 000, with a few million-dollar houses on creek lots thrown in to keep property values interesting. There are active homeowners’ associations, and kids get to go to Piano schools.

In Carrollton, buyers are active in High Country Estates, a big-house, big-lot neighborhood at Marsh Lane and Hebron Parkway. The area is a few years old and is just now seeing a decent level of activity. New homes as well as preowneds are available, from $250, 000 to $500, 000. it’s close to the Tollway, in the Lewisville school district.

For that little country town atmosphere, check out the bedroom community of Wylie, in particular the Rustic Oak and Stoneybrook subdivisions, both neighborhoods of predominantly first-time buyers. Houses are fairly new, most built in the Eighties, with three and four bedrooms for $70, 000 to $110, 000. You’ll be in the Wylie school district and about ten minutes from Lake Lavon.



PLANO

When you’ve got Penney’s from heaven, what more do you need? While the 1, 200 JCPenney transferees aren’t necessarily buying houses near the EDS Legacy complex, the move has nevertheless given Piano real estate a much-needed infusion of confidence.

Areas north of Legacy, so close to work at EDS, etc., have a lot of appeal. Estates of Forest Creek, a brand new neighborhood at Legacy and Coit, is selling pretty briskly. Not much is finished yet, but look for five-bedroom homes, some on creek lots, for $250, 000 to $450, 000. Whiffletree (a whimsical place, no doubt), just east of Forest Creek, is a multiphase project started about ten years ago. New houses are selling in phases five and six, and preowneds in earlier phases are also selling well. Prices are $350, 000 to $600, 000 for three to six bedrooms. Deerfield, at Preston and Legacy, has been extremely active. Houses are still new, since construction has only been under way for a year or so. Prices are in the $250, 000 to $500, 000 range for four to six bedrooms.

The Villages of Willow Bend, clustered around Park Boulevard at Preston Road, is also playing it strong and stable. The planned development is sort of in EDS’s back yard, plus there’s the nouveau riche appeal of nearby Gleneagles Country Club and Willow Bend Polo Club. Homes in Steeplechase and Old Shepard Place have been selling best, mainly because their $200, 000 to $700, 000 price tags appeal to a larger mob of buyers than do the mi11ion-dollar homes of Willow Bend Lakes and Willow Bend Country. (One $500, 000 house in Old Shep-ard Place sold within thirty-six hours. ) The developer has been offering below-market financing on a select group of homes, and nearly fifty of those sold within six months.



THE GREAT WHITE NORTH

Nobody really wants to voice predictions about Allen, McKinney, and Frisco, because all the glowing predictions made back in the early Eighties seem to have fallen flat. In McKinney, golfer-cum-developer Arnold Palmer and his partners have adopted a wait-and-see attitude with their 2, 000-acre Cross F Ranch luxury development, delaying for perhaps two years before breaking ground. Still, the three cities house a lot of undeveloped land, and Dallas doesn’t have much place to go but north. There is a modicum of activity-some raw land is being developed in south Frisco, and Allen now has residential zoning, improved roads, and its first real neighborhood, Raintree, on the west side-but things should continue to move slowly for the next several years.



WESTWARD, HO

In Tarrant County, the spot to watch is a development blessed with the mighty name of Perot. But this isn’t another of H. Ross’s ventures. It’s the dream of son Ross Jr., who hopes to emulate Papa Perot’s successful EDS complex with a 5, 300-acre project that’s already being likened to Las Colinas and the LBJ Corridor.

The Perot Group owns 16, 300 acres of land in north Tarrant County and south Den-ton County, north of Fort Worth, along I-35 above Loop 820. Out of this sparse pasture land, which encompasses the town of Haslet, the Perot Group is creating its centerpiece: a 2, 500-acre industrial airport, funded by the feds to the tune of $25 million and surrounded by a ring of high-tech manufacturing plants.

Ross Jr. ’s mixed-use development calls for almost 8, 000 houses on 3, 500 acres of land, all priced from $70, 000 to $100, 000. Centennial Homes has already committed to 80 acres-its biggest purchase last year-and 300 homes. Another 1, 700 acres are set aside for industrial development, 1, 300 for commercial, including a major shopping mall. Ross Jr. also hopes to link up all the major freeways in the area, perhaps even building the North Beltway, a sort of twin to LBJ,

Timetable for completion of the whole project is 2017, but construction on houses has already started.

Etiquette For a Mad Market



Relationships have been shifting among the mighty triumvirate of realtor-buyer-seller. Back in the boom years, buyers scrambled for the few available houses, and the ladies who lunch could afford to dabble in real estate. But no more. The bust has produced agents who are tough, scarred, but ever-optimistic; sellers who are still shell-shocked; and buyers who delight in playing the field. Gone are the days of the dilettante-realtors. They are sadly missed, since the stereotype of the Dallas real estate/socialite was a ripe one.

Gone, too, are the days when realtors could make a living-a good living-just by giving clients the addresses of houses on the market, then showing up at the office to write contracts. They are missed even more.

The Greater Dallas Board of Realtors lost 1, 901 members in 1987, dropping to a current roster of 6, 600. The realtors who have made it through the bust years are the tough ones, the experienced ones, the workaholics.

Joe Kobell, Ebby Halliday’s top producing agent, describes today’s successful real estate agents bluntly: “The ones who are surviving the business in Dallas right now seem to be the ones who have been in it a long time. Their skin is thick enough that they can get through these ridiculous offers from buyers and these ridiculous prices sellers think they can get. “

Embattled survivors seem to have gathered around the proverbial campfire in a tight-knit circle, growling defensively when anybody mentions “negative press. ” Realtors are just plain tired of all us media folks painting a down-and-out picture-however warranted by the facts-of Dallas real estate. So they eliminate the negative and accentuate the positive, kiss today goodbye and point toward tomorrow. But phrases like “blood on the streets” and “crash and burn” still slip out in conversation.

Survival strategies range from good ol’ fashioned hard work-Jennie Ling, who sold almost $25 million last year for Henry S. Miller, still reads the real estate classifieds every morning and makes cold calls-to New Age sales techniques: Beverly Lough-borough of Ebby Halliday says her office increased sales through “practiced visualization” of set goals.

There are still plenty of agents out there chalking up more than $6 million in sales a year. They’re the ones who know the market intimately, who converse fluently in the esoteric language of contracts, who work all day, every day. “You can’t imagine the hassle, ” says Beth Sutera, a top producer at Merrill Lynch. “The only time you ever get relief from the business is if you leave town. “

But down to specific sales techniques. Agents city wide have started screening buy-ers (the industry term is “prequalifying”). With more than 25, 000 houses on the market at any given time, an agent just can’t zip a couple of househunters into that big white Caddy and go cruising the city. Instead, buyers are interviewed in-depth: first, to find out if they’re serious about buying; and second, to narrow down the number of possible houses to hunt. Discussions center on parameters like budget, neighborhood, and general wishes and desires in a home. “We’re becoming more like the attorneys and the doctors, ” says Nancy Clarke of Ebby Halliday. “We need to find out your history, so we don’t waste a lot of time. “

With so many houses on the market, there’s also a lot of intra-realtor promotion going on, as listing agents champion properties to other agents on the premise that if you’ve seen it, you’re more apt to show it. The lures? A free lunch works every time, with perhaps an appetizer at listing number one, entree at listing number two, dessert at listing number three. Afternoon fashion or art shows are always in good taste. Throw in a little greed and things get downright exciting. Sutera holds raffles where, for touring five or six homes, agents have the chance to win $100, or even a TV. “The whole idea behind any of these promotions is to try to get somebody in and thinking about the house, ” she says. “And to make the seller feel like you’re doing something. “

How far will realtors go in search of a sale? One writer of our acquaintance happened to mention in a newspaper column that she would be moving soon. She promptly got a note in the mail from a Century 21 agent offering to help. Call it a creative and enterprising move if you will; we call it desperation.

It gets worse. The Board of Realtors began passing out what it calls “Extra Mile Awards” at the end of ’86, to realtors who habitually go above and beyond the. call of duly. Recipients so far have included a realtor who served as interpreter for a deaf-mute couple throughout the selling process, right down to talking to the caipet cleaners. John Marshall, another award-winner, fixed up the house of an elderly homeowner-cleaning, painting, mowing, hedgeclipping, the works. “I just rolled my sleeves up and went to work, ” he says. “It’s my nature. I hate to see a sale tail. I hate to lose a listing. “

“Tire-kickers, ” one disgruntled seller called the buyers who examined his Bent Tree home. We couldn’t have come up with a better description ourselves. Tire-kickers they are indeed, shopping around for a year or more, picking carefully over dozens of houses, checking and double-checking property values. “Buyers are pickier” says Joe Kobell. “They want it all. They want the clean houses with the manicured yards and the modern kitchens and the fresh wallpaper-and the best price. ” Way back in the days of the seller’s market, buyers might look at ten or twelve houses, max. Today, they can look at hundreds if they want (although most burn out after thirty or forty).

With the market in such a stale of flux, buyers are naturally cautious, waiting to buy until they’re sure prices have hit rock bottom. GeneBeaird, of Beaird & Beaird, a real estate marketing services company, compares the process to dress-shopping: you spot a nice little number in the window, maybe try it on. But you put: off buying it because you’re sure you can find it on sale somewhere else.

In fect, a whole mythology of rock-bottom prices has built up around Dallas, and that’s also inhibiting home sales, “We were low-balled a few times, just given ridiculous offers, ” says one irate seller, ’it was people who’d heard Dallas was a dire market and that whatever you offered somebody, they’d take it in desperation. People moving into the area definitely have some expectations that they’re going to get real steals. ” (The mindset is especially common among Yankee émigrés. )

No matter how the rumor mill has it, you cannot buy a $500, 000 house for $79, 500. And so lots of people have passed up good deals in search of a killing. The typical scenario goes like this: buyer and seller come to a tentative agreement. Then buyer goes to work, or to a health club, and hears about the friend of a friend who got a house down the street for $20, 000 less; or the friend of a friend of another friend who knows that interest rates are going down in a month. So buyer backs down.

To combat that sort of peer pressure, Beaird & Beaird has started coaching its builder clients to disarm buyers with “reasonable refutations to those sorts of stories. ” In other words, start explaining that no, rates aren’t going down to 5 percent, and here’s why. No, you can’t get a killing on a half-a-million house, and here’s why.

Still, Beaird offers a word of defense on behalf of the ridiculous-offer-maker. “We’re not brought up to barter; it’s not part of our social upbringing. When we’re told by our friends to barter on houses, we get real defensive. I hear that, and ray intellect says I should barter because I can get a better deal. But emotionally, psychologically, it tears me up. ” It’s not much, but it’s a better revenge than nothing, especially the next time somebody tries to undercut your asking price by ten grand,

The two hardest lessons of the bust have been aimed at sellers, and, after three years, they’re just now sinking in. Rule Number One: drop your price. Now drop it again. No, even lower than that. Rule Number Two: clean your toilets and make your beds every single day.

What buyers are looking for are cheap and sparkling houses, and, with so many to choose from, it’s imperative to be competitive. “It’s been tougher on sellers. There are a lot more homes on the market, and the sellers aren’t used to that. The sellers were used to putting a sign out in the yard, calling a realtor, and getting their houses sold immediately, ” says Jennie Ling.

Ah, but that was then. Now: Joe Kobell recalls one house in Preston Hollow, reappraised in 1984 for $309, 000, that sold last year for $250, 000-a 20 percent drop in value. (Ouch. ) Those numbers are reflected all over Preston Hollow and the Park Cities, where Ling reports sellers have been steadily dropping prices 20 to 30 percent all year. (As a general rule of thumb, set a competitive asking price by getting a new appraisal, then tack on no more than 10 percent. ) Face it. “If the actual value of your property, based on what somebody will pay for it, has dropped, it’s dropped. ” says Beth Sutera. “It’s gone. “

As if that’s not enough, there’s that degrading rule about cleaning the toilets. The average buyer is carefully scoping out The Competition, and you can bet that all thirty or forty of those houses have immaculate, scrubbing-bubbled baths and kitchens. “When there’s a lot of inventory, the houses that stand out are the clean, sparkling, nice ones, ” says Sutera. “In a seller’s market, you can get away with things; if there are only four or five houses to pick from, buyers have to make compromises. But in a buyer’s market, the seller has to be extremely sharp. They really have to have that house spiffy. ” And it has to stay spiffy for the average 114 days it takes to sell a house here.

Sellers are starting to catch on to this idea of competitiveness, though. They’ve been dangling some mighty tasty carrots in front of realtors and buyers-bonuses for selling that include color TVs, exotic trips, plain and simple cash, the ever-popular Mercedes. But though bonuses may be glamorous, they rarely work. You’re much better off just cutting your price by the amount of the bonus, or offering to pick up points at closing; that way you increase the pool of potential buyers who can afford your house. Trying to entice a buyer with a new car is sort of like succumbing to yet another fad diet, instead of facing up to the fact that you just have to eat less and exercise more.

Desperation, anyone? Several hard-pressed sellers have talked about raffling off houses. One Dallas celebrity (who prefers to remain nameless, as befits true celebrity) was all set to hold a raffle, except he unexpectedly got a contract on the house.

On the smaller-but-no-less-blatant scale: Gordon O. Dodson, who’s had his Bent Tree home on and off the market for fourteen months, erected three-by-five-foot metal signs in front of his house and just off the Tollway listing his home’s amenities underneath a screaming “MOTIVATED SELLER” headline. “In this marketplace, you have to find a way to differentiate, to get someone’s attention, ” says the seller. It works for us.

The tough-sell market and tough-requirement lenders have sent a lot of sellers and buyers scurrying to creative financing. The most prevalent innovation birthed in the bust is the trade-a my-house-for-your-house deal that’s found an appreciative audience in the Park Cities and Preston Hollow.

Stripped down to the basics, it works like this: say you’ve got an $800, 000 house in Preston Hollow that you can’t make the payments on and can’t unload to save your life. What you need is a buyer with a nice $200, 000 spread in the suburbs who’s looking to move up, but can’t until his present house sells. So you trade, making up the price difference with cash or a loan. You can either move in, lease, or resell-either way easing your debt considerably-and he’s free to move to the house of his dreams. Trades work equally well with builders who are still trying to unload those exorbitant spec houses they built at the tail end of the boom years.

Making a trade work is not easy, but if anybody can do it, Allie Beth Allman can. The proof: her realty company posted a sales , volume of nearly $100 million last year by ’ working in the Park Cities and Preston Hollow and by knowing how to work trades. Her formula for success: first, there must be at least a 25 percent price spread between the properties. Both buyer and seller must be able to move into a different bracket in the marketplace. Second, both parties have to be realistic on pricing, accepting current market value without grumbling. After you’ve worked out the details and agreed on all the fine print, you’ll be looking at two separate contracts with simultaneous closings.

Another bizarre trading option fit’s be-1 coming a virtual Trade Days), used by realtor Pam Freeman, is a trade bank. Say you’re a buyer with no ready cash but access to lots of neat stuff-raw land, wholesale computer equipment, etc. You dump your products into a trade bank (Freeman uses AmeriTrade Banc Corporation) and you’re credited with a certain amount of trade dollars. You then offer those dollars to an amenable seller in lieu of a cash down payment, and he’s free to spend them on anything in the trade bank. It’s weird, but it works.

Since interest rates arc so low, most buyers are still going to conventional sources for loans. But, in case you get a live offer from a buyer whose back is against the wall, here’s a primer on how you as seller can help.

With straightforward owner financing, you basically agree to sell your house in installments, retaining outright ownership. Everybody benefits if you set an interest rate that’s above what you’d earn on a CD, but below what the buyer would pay at a mortgage company. Of course, if the buyer defaults, you’re stuck with the house, and you have to start the selling process all over again. To discourage defaulting, ask the buyer for a substantial down payment-at least 20 percent.

With a lease purchase, you rent out the house, and a certain amount of the buyer’s monthly payment goes toward a down payment. When that amount is reached, you negotiate a regular mortgage. With a lease purchase option, usually confused with the above, the buyer signs a lease with an option to buy in the future at an already-agreed-upon price. With either lease option, you run the risk that the buyer will decide not to go through with the deal, and you’ll be stuck with the house back on the market.

Before you cut any kind of a deal yourself, go over the details with a real estate lawyer. Your realtor can help you check out potential buyers by supplying you with loan applications and other necessary forms and running a credit check. And don’t feel shy about asking for copies of tax returns to verify a buyer’s income.

The High Cost of Leaving



How bad is it? So bad that Dallas now has its ow branch of Hometenders of America, a company that babysits your house between the time you vacate it and the time it sells.

The company’s pitch to homeowners who are forced to sell-say you’re transferred or you can’t make the payments anymore on that buydown loan you got back in ’83-is that you won’t have to pay vacancy insurance, plus some nice young couple will move in and keep the yard mowed while your house is on the market.

Haven’t heard of vacancy insurance? After a house has been sitting empty for two months, vacancy coverage is required, anywhere from $1. 60 to $3. 60 per $100 of value for six months. That becomes an extra $2, 400 to $5, 400 for insurance on a $150, 000 house. And that’s for only six months, in a market where some houses have been known to linger in the listings for more than a year.

“Without somebody being in the home, it makes it virtually impossible for the homeowner to keep up. Insurance costs can be more than house payments, ” says Hometenders vice-president Billy Jack Noles. But, if you have one of Noles’s housesitters move in (he stresses that they’re all “responsible people”), those extra insurance costs are nil, your windows are safe from vandals, and-most importantly- your house remains in showable condition while it’s on the market.

Hometenders pay about $200 a month in rent and perform minor household repairs and yardwork. They run the air conditioning in June, so potential buyers can tour an actual house rather than a giant oven. And they’re prepared to move out on short notice when (if) your house sells.

Hometenders of America began seven years ago in the state of Washington, when mssive layoffs at Boeing put thousands of homes on the market, topped !with high foreclosure and vacancy rates. The Dallas branch started up last November and now has people placed In ten houses scattered around Dallas County. All are valued at more than $l00, 000, and most have been on the market for about a year. And no, none of them have sold yet.

Since the business is still young, Hometfenders has been dealing solely with owners forced to relocate out of Dallas “I haven’t really gone after repossession homes, ” says Noles. “I wouldn’t be able to handle all of them if I got them “

The Appraiser: Power Broker For the Eighties

It isn’t the realtor who holds all the cards these days. It’s the appraiser, the guardian of your property value, the man come to tell you sorry, your house just ain’t worth what you paid for it. The appraiser has you and your property value by the… throat, and you’re wondering exactly how you arrived at this position.

An appraiser’s methods are really quite simple. After checking out and measuring your house, an appraiser finds three houses of comparable size in the same neighborhood, preferably in the same elementary school system, that have sold within the past six months. Those sales prices then determine the worth of your house.

But the down market has thrown some real kinks into the working methods of appraisers. For starters, a lot of homeowners who have sold big-ticket houses are not disclosing final sales prices-say they’re embarrassed or they’re hiding from the IRS-which means those houses aren’t available for use as comparables. Appraisers also don’t like to use foreclosures as comparables, but in some neighborhoods that’s all there is to choose from.

Most appraisers are hired directly by mortgage companies, banks, and S&Ls, or you can hire one yourself for about $250 (more for a high-dollar house, since it takes more time to find comparable sales), If you’re desperate and want to find a shady character who might up your value on the sly, no problem. All you need in this state to appraise property is a broker’s license, so there are plenty of nonaffiliated appraisers in Dallas. As appraiser Don Stovall delicately puts it, “There are a lot of people out there doing appraisals who are not affiliated with those who operate under a strong code of ethics. They outnumber us four to one. “

The easiest way to get an inflated appraisal is to hire someone who’s not familiar with your area, and therefore more likely to cross into more expensive neighborhoods for comparables without realizing it. Be warned, though, that it’s getting tougher and tougher to get away with an iffy appraisal. In fact, regulations are stiffer for appraisers nationwide because of malpractice in Dallas’s I-30 condo scandal, where appraised property values seemed to rise by the hour. Such abuses of the system mean the Society of Real Estate Appraisers and the American Institute of Real Estate Appraisers are coming down hard, reviewing and questioning members’ appraisals. The FSLIC, Fannie Mae, and other out-of-state investors are also requiring more careful appraisals, since so many Texas institutions have been burned by bad real estate loans.

There’s No Place Like Homestead

Texas has always been known as the debtor’s state, ever since we opened up Texan territory to those young men heading West and leaving their financial obligations behind. The Texas homestead and exemption laws still provide refuge, but they are not as roomy as they once were.

Reriember the old Rolls-Royce trick? Since the exemption laws allowed a debtor to keep a vehicle, a debtor about to file for bankruptcy could buy a Rolls and then protect it under the exemption provisions. Not any more. In 1973, the law changed. You can still protect your home, one acre, and all of the improvements’(within city limits) or your home and l00 acres for an individual or 200 acres for a family (outside city limits), but personal property is now limited to $15, 000-total-for an individual.

Hofwever, some more recent changes have ’added extra shelter to the homestead) laws. Since September 1 of last year, IRS-approved retirement plans are considered separate from the $15, 000 individual personal property limitation. Of course, you can still protect additions to your homestead-but only if you pay cash for them. If you take out a loan to put in a poolhouse, it’s not protected from the mortgage company.

Also, says Ken Townsend, a managing partner of Kenneth Leventhal & Company in Dallas, converting assets into a homestead can upset lenders. Kenneth Leventhal & Company is a leader in the field of nonjudicial debt restructuring- they’re the guys who try to keep debtors out of bankruptcy court. Tbwnsend says lenders may find the idea of borrowers sequestering money in their homestead repugnant, and therefore might make the rest of the debt restructuring more difficult. Borrowers and lenders must arrive at the least distasteful alternatives for all concerned. Keep that in mind when you’re eyeing that huge new home as a way to shelter some bucks.

-Sally Giddens

The Mortgage Maze

They call it a buyer’s market, but the real irony is that, in this economy, qualifying for a home loan is as difficult as serving papers to Walker Railey. Mortgage insurance companies get extremely skittish when you mention Texas, and underwriting guidelines for loans have gotten stiffer and stiffen

For most of ’87, you simply could not get a 95 percent loan (with only 5 percent down) in this market. Private lenders just stopped offering them; it became too difficult to obtain insurance as more and more people defaulted on. 95 percent loans.

But things are looking up. A few lenders are offering 95 percent loans again-but you’ve got to have a spotlessly clean credit history to qualify. Details as seemingly minor as one late payment on a previous mortgage can screw things up.

Besides that flawless credit history, you must also have been in the same line of work for at least two years, and on your current job at least eight months. The mortgage payment can’t take up more than 25 percent of your gross monthly income, and you’ve got to have four months’ worth of payments stashed in a bank account somewhere. (Three years ago the requirements were 28 percent of your income and two months of cash reserves. ) Also, the amount a seller can contribute to closing costs has been dropped from 6 percent to 3 percent of the sales price.

Requirements for a 90 percent loan (which has become the loan for the lean years) have tightened up as well. You need the same type of job security, but mortgage payments can account for 28 percent of your income, and you only need three months of reserves. Seller contributions have been cut from 9 percent to 6 percent.

On any type of loan, applicants will be lost in a blizzard of paperwork. Whereas in the past, a signed letter from your employer would convince any loan officer of your gainful employment, today you might have to produce W-2s and pay stubs. Basically, all lenders are going to have to verify employment; bank balances and/or stocks and securities holdings; previous mortgages; any other installment loans; and any revolving charge accounts (except for gas cards or American Express). If you’re self-employed, expect to provide complete personal and business tax returns for the previous two years, plus a current profit and loss statement and/or balance sheet on the company.

These days, as salaries keep shrinking and mortgage payments don’t, FHA loans-some of the most flexible, affordable loans on the market-are coming into vogue.

Donald Babers, manager of the Dallas branch of HUD, estimates that federal home loans-FHA and a small number of VA loans-have grown steadily to take up around 40 percent of the local market. The reason? Babers thinks it’s the loans’ built-in appeal to an ever-growing pool of moderate- and lower-income buyers.

In a nutshell, the Federal Housing Administration doesn’t actually make loans. It just insures them, sort of like the FDIC does for banks. FHA loans are actually made on the private lending market, just like conventionals. The big difference is, while down payments on conventionals hover around 10 percent, down payments on FHA loans are only around 3 to 5 percent. FHA loans arc also fully assumable, meaning a buyer can take over the mortgage at the original interest rate.

The FHA was founded in 1934, and the program has managed to carry that New Deal ideal of the American Dream into the Eighties. An FHA loan can make it easier to buy a house-and to stay in it even if you run into trouble with the payments.

Say you’re laid off, or you’re real sick, so that; through no real fault of your own, you can’t keep up your mortgage. The FHA actually assures you of a sympathetic ear through its Assignment Program. The free service is offered through HUD-approved counseling agencies-here, the Dallas Urban League-that help you come up with an alternative payment schedule. The counseling agency then serves as middleman between you and the private lender-and Babers says HUD’s involvement means mortgagors are much more inclined to be flexible.

The FHA also runs independent appraisals for each of its loans, so you can’t gouge or be gouged on property value. (HUD used to have an in-house staff of appraisers, but now rotates out contracts to “fee appraisers” and simply reviews their work. ) HUD recently undertook some major housekeeping on guidelines, which means fairly substantive changes for government loans took effect in March. For starters, the maximum amount of an FHA loan was raised from $90, 000 to $92, 350.