Up-to-the Minute Marketing: Help Buyers Afford More

News you can actually use: An all-new guest column at REALTOR® Magazine Online not only keeps you up to speed with real estate industry trends, but shows you how to use these trends to make more money.

May 1, 2003

Making Private Mortgage Insurance Less Burdensome

As you probably know only too well, lenders usually require costly private mortgage insurance if buyers are not putting at least 20 percent down on a conventional mortgage loan. That additional cost makes it more difficult for buyers to qualify for financing and can result in a clients buying a lower-priced home.

Now there’s new legislation in the works that would make those premium payments more bearable. The bill (H.R. 1336) would allow homeowners to deduct the all or part of the premium for mortgage insurance or any mortgage guaranty program from their taxes. To qualify for the full deduction, a family of four would need to earn $100,000 or less; they would lose 10 percent of the deduction for every $1,000 they earn over that amount. Married couples and singles would receive the full deduction if they earn $50,000 or less and lose 10 percent of the deduction for every $500 earned over that amount. The bill is endorsed by more than 20 consumer and housing groups and has a high likelihood of passage according to HUD.

If the proposed legislation is approved, HUD estimates that it will save a substantial sum of money for about 10 million homeowners. And it would make purchasing and owning a home more affordable for as many as 100,000 families, according to a study sponsored by the mortgage industry. The greatest beneficiaries of such a change would be young, first-time homebuyers. This is the home buyer segment that most frequently needs private mortgage insurance to make up for their lack of sizable downpayments.

Marketing Mileage: Let consumers in your marketing area know about this program and how it can increase the amount of home they can afford. Check your prospect files for customers who might be close to affording a home but are not quite there yet to see if this extra deduction could make the difference, then contact them.

Lowering Home Prices by Taking Out the Land

As skyrocketing land prices in many areas pose an increased threat to affordability, creative nonprofits are finding ways to lower prices with community land trusts. Under this type of arrangement, homes are owned by their residents, but the land on which they’re situated is owned by the trust for the benefit of the community and leased to homeowners at a low rate on a long-term lease. By taking the cost of land out of the purchase price, consumers can buy a home for a much lower investment than would be otherwise possible.

The CLT concept was conceived in the 1960s by the Institute for Community Economics as a creative way to encourage affordable homeownership, while controlling land space and other resources. Currently, there are just over 6,000 housing units within CLTs located in 31 states, according to a report from the Institute for Community Economics. And the numbers continue to grow.

CLTs have been established in different kinds of communities, with projects tailored to a community’s needs. In some cases, a CLT will acquire vacant land and arrange for the development of housing or other structures, often as a joint venture with a local developer-builder. In other cases, a CLT will purchase land and buildings together, then resell only the structures.

Buildings on CLT land can be resold by owners to other buyers who qualify under the CLT’s guidelines. Home owners receive a profit on the increased value of the home (but not the land). Real estate brokers can generally represent buyers and/or sellers of these homes.

Marketing Mileage: Get involved with a CLT in your community—or start one. Let your farm area know, via advertising, publicity, direct mail, and calls, that you are knowledgeable in this special area and can professionally serve buyers and sellers of homes within trusts. For more information on community land trusts, call your local housing agencies or contact the Institute for Community Economics, Inc. in Springfield, Mass (e-mail: ta@iceclt.org), or the CLT Network in Silver Spring, Maryland (e-mail: cltnetwork@iceclt.org).

Giving Brides the Gift of Home Ownership

As wedding season approaches, an increasing number of engaged couples are using an innovative method to help them purchase a home of their own to begin their married lives. The plan, structured originally by the Federal Housing Administration (FHA), is often titled a “Bridal Registry Account.” It allows engaged couples to open a savings account with a bank or other mortgage lender. Family members and friends can then deposit their cash wedding gifts directly into the special interest-bearing account.

It works just like registering at a department store for wedding gifts. Now, instead of getting six toasters, newlyweds can receive a head start in saving for a down payment on a home of their own.

Marketing Mileage: Work with a lender in your area that already has a registry program or solicit a local bank to set up and promote a bridal registry savings account. Prepare a printed piece and Web site copy, including a clear description of the program. Then promote it to couples announcing their engagement in your local newspaper. Other sources of prospects can be obtained from wedding planners and shops that sell wedding gowns. Make the program easy to use by creating an information sheet to be sent to selected relatives and friends, along with “gift cards” that reflect the gift-giver’s name for the purpose of documenting the gift.

Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends, titled “Open House.” For many years he has also operated a PR/marketing agency – The Woodard Agency, Communications – specializing in real estate-related accounts

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