Friday, May 31, 2013

Common Land Mines for First-time Home Buyers

1. Obvious as this may sound, the house isn't yours until escrow closes. That means don't buy any furniture--even baby furniture if you're expecting. Don't buy a fridge. Don't buy a widescreen TV. Stay away from IKEA and places like that which have cool stuff for a house. Don't buy anything.

Why? Two reasons. First, there's many a slip 'twixt the lip and the cup. Your deal may fail for reasons no one can fathom, and you'll have a lot of stuff you either don't need, don't have a place for, or both. Second, you risk screwing up your debt to income ratios if you run up your credit cards, and your mortgage underwriter could nix your loan. I've had this happen.

2. It's about a lot more than the mortgage payment. Too often, buyers equate the monthly payment with a rent payment and figure that not only is it a wash, but it goes into equity and not into a landlord's pocket. There's more to it than that.

Besides the monthly payment, you'll have property taxes, hazard insurance and, usually, homeowners' association dues. Guess what? They don't go down. They go the other way. It makes the monthly holding cost more than people often consider when they buy their first home. A home is a pretty long-term commitment, and you'd be well-advised to plan on staying there five years. If you can't, consider renting.

3. If you live in a townhome or condo, your monthly association fees will cover all or most of the building maintenance. While you might hate writing that check every month, you'd hate it more if you didn't pay anything and the association levied a fat special assessment every time something had to be paid. Instead, associations calculate what major ticket items will cost, adjust for inflation, and collect a little bit at a time. Then, when that $50,000 re-paint job or $75,000 roof repair happens, the money is in the bank.

Suggestion if you own a detached home: Find out what major repairs will cost and when they'll need to be done, and set up a savings account, contributing to it every month.

4. Don't use up all your cash for the down payment.

5. Get pre-approved--not just pre-qualified--for a mortgage loan before you look at a single house."Pre-qualified" means a lender or mortgage broker has looked at your overall financial picture and come up with a possible loan amount based on what you've told him or her. It's also free.

"Pre-approved" means you've filled out an application and paid the fee, turned over pay stubs and other documents, had your credit report retrieved and analyzed and the like. The lender will give you a fairly precise loan amount and interest rate and you'll be ready to rock as soon as you find the home you want. This step can be time-consuming, but it's really worth it. When I was a listing agent, I hated getting offers with only a lender's pre-approval attached. They don't mean much, really, and when it's a competitive market for buyers, you need to give yourself every advantage.

Thursday, May 30, 2013

How to Know if You Should Buy a House: Is Now a Good Time?

"It was the best of times, it was the worst of times." So begins Dickens' A Tale of Two Cities. The point I'm making is that one can always argue that any particular moment is a good time to buy, or a bad time to buy, and have plenty of data to support the argument.

If you can time a market perfectly, quit fooling around with the house hunter's gig and go get a job on Wall Street. But it's not really all about timing the elusive housing market, is it? That's because it's not really a market. With a true market, you can cover upside and downside.

Take stocks. Pick a half dozen or so that you like. When they go up, sell a little bit. When they go down, buy a little bit. You may not make a killing, but you've covered upside and downside and your investment will increase over time. You can't do the same with a house.

Calling the purchase of a home "the American Dream" is a stretch, but the reasons for home ownership are probably more non-rational than rational. The rational: The day you close on a home, you're likely to be underwater. If you had to sell right away, you'd probably lose money. If that's all anyone thought about, no one would ever buy a home.

The non-rational: The home is yours. No one can evict you if you paint a wall purple. A back yard for the kids and the dog. A raised vegetable garden. Decor that reflects your personality. A place to share memories with friends and family. A refuge.

So, how do you know if now is a good time to buy?

You just do.

Wednesday, May 29, 2013

Why is the APR (Annual Percentage Rate) on My Loan Higher Than the Interest Rate?

You're sitting at the table in the escrow company's conference room ready to sign papers. Your real estate broker is there (usually), along with your mortgage broker (maybe sometimes) and the closing officer, who presents you with a stack of papers to sign. Among the first is a mortgage loan disclosure statement showing your interest rate at 5% and your Annual Percentage Rate (APR) at 5.13%. What's that all about, you ask.

It's difficult to explain, but in a nutshell, the APR reflects what you're paying off over the life of the loan, not just the amount you borrowed for the house. The amount you're paying off includes the amount you borrowed, plus all the closing costs. Closing costs include points and loan fees, appraisal costs, recording fees, and other charges. These usually run 1% to 3% of the loan amount.

Say your loan amount is $250,000 for the house. Lender points, appraisal charges and other fees included in closing costs are $6,250. Unless you pay those charges up front, you'll actually be borrowing $256,250, and the payment will be slightly higher than if the loan amount was a flat $250,000.

The calculation for APR is kind of complicated, but it figures out what the rate would have been for a loan with the new monthly payment amount, that is, the payment amount which includes closing costs. It's usually higher than the interest rate.

Is that clear as mud? This Zillow blog explains it in more detail.

What's the point, you say? It's a heightened Truth-in-lending legal requirement intended to disclose actual costs to the buyer. Sometimes, it can be useful to compare loans which might have different interest rates to see what their APRs are. A higher interest rate loan may actually cost the borrower less overall than the lower rate loan.

The flaw, though, is that the costs are calculated for the life of the loan. Know anyone who stayed in the same home for thirty years? Okay, there are a few, but you get the point, probably. Most people don't stay in the same house for the life of the loan, and even if they do, they usually refinance.

Still, it's a useful exercise to go through with your mortgage broker or lender, because you really can save a little dough. And if you don't have a lot of extra cash laying around, it's good to understand all this, to a degree, so you can make a good decision on how to use the cash you have available.

Tuesday, May 28, 2013

Residential Appraisals Need to Change--or Go

Appraisals may not be the make-or-brake on a buyer's home loan, and they may not be the central factor in how the real estate market is performing. But they certainly grease the skids, and in my view, we need to come up with another way of doing things.

Here is the National Residential Appraisers Institute's (and Fannie Mae's) definition of market value: "The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus." Read the entire definition here.

That being the case, why do so many transactions in today's recovering market fall apart because of appraisals? And why, during the bubble years, did appraisals support the loan applications with their absurd values?

When I was first licensed in 2006, I performed a competitive market analysis for a homeowner. Lots of nearby comps were available, so it was pretty easy. I came up with a price range whose upper limit was $375,000. The owner was, to say the least, displeased. She'd recently refinanced her home with a pick-a-payment loan, where borrowers pay whatever they want. The lender's appraiser had come up with a value of $525,000.

I looked at his comparable sales, and they were all out of area. The homeowner's house, while well-located, was old and in poor condition, with the garage roof nearly caving in. Yet one or two of the comps the appraiser had used were brand new homes. You'll have to take this on faith, but this kind of situation was not uncommon.

I recently bought a home in Denver Metro for $310,000. The appraisal came in at $267,000. I'd done my own comps (which you can do with sites like Redfin) and felt the comps supported a $300,000 price--making us overpaying by $10,000--but we accepted that because of the tight market. But an appraised value of $267,000? What planet was this guy on?

The very first page of his (or any) report noted normal market conditions--no undersupply of homes, a normal ratio of buyers and sellers, normal market time and so on. Again, I wondered what this guy was doing. It was anything BUT a normal market. Homes were selling so quickly and with multiple offers that many local Realtors weren't even listing the homes, because either they or someone in their office had buyers in the wings. To call this a normal market was nuts.

Not only had I done extensive BPO (Broker Price Opinion) work for several lenders, but I'd also analyzed appraisals for them. If you fill out the lender forms and check anything other than "normal market conditions" boxes, it will not only increase the work you have to do, but the work will be more difficult. Anything you say about market conditions not being normal has to be researched and justified with pretty hard data.

I wouldn't say the problem is all due to lazy appraisers, but some of it is. An even greater problem, though, is that appraisers are always stuck in last year' market. Buyers are making what they think are offers without "undue stimulus" all over the place. Most brokers I know counsel buyers not to overpay, and likewise counsel sellers to go for the highest price possible. When a buyer and seller agree on a price under these conditions, isn't the agreed-on price, by definition, market value?

My own experience is typical, and I'm hearing from my former colleagues over and over about how appraisals are impacting transactions

When the appraiser's report comes in low, no one is served. Not the buyer, not the seller and not the lender. The house I just bought will now show up as a recent comp for some new buyer's appraisal. What does that mean? Will the appraiser note on the report that my comp doesn't count because I overpaid? Will the comps used for my appraisal no longer be valid? 

And if those are so, and they are, what is the intrinsic value of a comparable sale anyway?

Out-of-area appraisers add to the problem. Micro markets are as unique as people and need adjusting for hyper-local conditions. As part of the financial reforms governing mortgage loans, lenders use an Appraisal Management Company (AMC), who in turn selects the appraiser (and takes a hefty cut of the appraiser's fee). But your chances of getting an out-of-market appraiser is pretty high.

It's the lenders' money, so they can do whatever they want. In my view, however, they need to come up with a new way of valuing property. The above examples are typical for both boom markets and recovering markets, and any real estate broker you ask will have many similar war stories.

My first experience with real estate appraisers and appraisals occurred early on, in the late 1970s. It was with appraisers holding the MAI (Member Appraisal Institute) designation, a status held by a select few who do commercial appraisals. These guys and gals all have business degrees and are sometimes MBA's. They are, for the most part, very, very good and have an enormous range of metrics at their disposal for use in deriving market value.

Most residential appraisers hold the SRA (Senior Residential Appraiser) designation if they hold any at all. As with so many others in real estate (brokers, property managers, etc.), these initials after one's name don't mean anything to lay people. Check them out the Appraisal Institute's website.

I've discussed the situation with several appraisers over the years, and you know what? They agree, for the most part. They don't like being labeled "deal killers," and they often decry the limitations placed on them. They don't have much use for some of their colleagues and most of them feel the AMC system moved things a step backwards.

The residential appraisal system, designed for the market of the 1980s, is broken, and it needs to be fixed or dumped.

Friday, May 24, 2013

Should You Really Get a Home Inspection?

I have real problems with home inspectors and appraisers. Today, I'll pick on home inspectors.

First, to answer the question in the title: Yes. The issue is who does the inspecting.

In Nevada and California, we always found a contractor to look at homes before we bought them, even though home inspections weren't done in the day. Often, a pest and dry rot inspection was good enough. A pest and dry rot inspector really finds a lot of stuff. For example, he won't just find dry rot (if any), but will point out the water leak that caused it.

But the process has become more formal. In Oregon, it's very tightly regulated. Inspectors have to obtain a specialty contractor's license to conduct repairs.

The tight regulation has the effect of making inspectors wary of going beyond a narrow purview. They can point out leaky plumbing, failing siding and unserviced furnaces, for example, but they can't talk about water intrusion. They can say something like "an unserviced furnace this old might fail anytime," but they can't say "mitred window trim often leads to water intrusion." The damage would be latent and beyond the scope of their license.

Which can scare the crap out of a buyer, especially a first-timer. The statement on the furnace may be technically true, but the implied information that the buyer may have to buy a new heating system is, well, off-putting.

In Colorado, home inspectors are not licensed. We recently had one, where the inspectors pointed out a lack of winter housing for the whole-house fan, as well as mold in the crawl space. Accompanying their report was a bid to remediate both. The obvious conflict didn't sit well.

What it gets down to, regulated or not, is (a) who does the inspecting, and (b) what is the value of the information. We also had our un-serviced 1992-era furnace inspected, for example, and the guy, an Xcel inspector, just told us to service it and definitely not replace it because a higher-efficiency furnace would not pay for itself. That was useful.

The best home inspection I ever saw was a friend and client whose father was an architect.  He didn't care so much whether or not the dishwasher worked, but he cared a lot about, and located, all areas of possible building system failure and assessed their likelihood. 

The worst inspection I ever had was a father-son team in Portland. My buyers were getting an FHA loan, and the two bumbling inspectors failed to note exposed wiring and too-wide railing spacing on the deck, either of which would have disqualified the home for FHA if not repaired prior to close. I had to point the issues out, which was something my Remax bosses frowned upon (we weren't licensed for building issues and the E & O insurance may not have covered things).

What you want from a home inspection is not just information, but information evaluated and made useful. For example, if the inspection notes the ceiling insulation encroaches the venting, how important is that? Is it a bigger deal than, say, the bathroom fans not extending to an attic vent?  Or, say a repair is completed and you've called for a reinspection. Will the inspector say,"That's not how it's supposed to be done," or "That's not the best way to do it, but it will last another twenty years."

If possible, get an inspector who has worked in the trades. While it may be unfair to paint everyone with a broad brush, I had better experiences with inspectors who weren't franchises.  A huge metric of the home inspection process is lawsuit avoidance, both from the real estate broker and the inspector. With franchises, another risk control layer gets added. Litigation avoidance trumps information.

Again, get the home inspection. Get more than one referral from more than one person. Tell the inspector what you want, namely, information prioritized. Find out if he/she is familiar with FHA and other lender concerns.

Thursday, May 23, 2013

What a Trust Deed Is and Why You Should Care

When you obtain a loan to buy a home, you'll likely sign a Promissory Note and Deed of Trust. Parenthetically, this particular loan instrument is commonly called a mortgage; technically, it's not. A true mortgage differs significantly from a note and trust deed and is used in some parts of the country to purchase real property. See this link to learn the difference.

But let's not quibble and get off topic. A lot more people use a note and trust deed, also called a deed of trust, to buy a house. The promissory note part is pretty straightforward: It's a promise to pay a certain amount over a certain term at a certain interest rate.

The trust deed attached to the promissory note is an agreement between the person borrowing the money and the lender to transfer the borrower's interest in the property to a third party, called the Trustee. The effect of this transfer is to secure payment of the loan with the property. You, the borrower, will have what's called equitable title.

In effect, you have two agreements with your lender. The note is the promise to pay. With the trust deed you agree to secure payment by giving the trustee an interest in your property. More on this below--it's kind of important.

But the trust deed agreement also has other elements describing how the note is paid. An example is an Acceleration Clause, where the entire note becomes immediately due under certain circumstances. These could be sale of the home, default on payment of the note or refinancing the home.

Why sale of the home? Because sometimes, people attempt to sell the home and allow the new buyer to take over payments. Lenders don't like that.

But trust deeds could also have an Assumption Clause. Most don't. However, FHA loans are assumable if the new buyer is qualified. This is important, because you may want to sell your home in a few years when prevailing interest rates are likely to be higher than now. If your home has an assumable 4% FHA loan, it might be attractive to a prospective buyer if market interest rates are 7%.

Interest rate adjustment clauses are also not uncommon in trust deeds. The
point here: Read the trust deed provisions. They could very well have stuff neither your lender, real estate broker, mortgage broker or anyone else told you about. Get legal advice if anything isn't clear. Don't forget--some lawyer prepared the thing!

Here's the "more on this below" part: The trust deed is what makes foreclosure work. You don't pay, the lender notifies the trustee, and the trustee, who has an interest in the property, begins the foreclosure process to take back the property and give it to the lender. No judge is necessary, which is why it's called a Non-judicial foreclosure.

Your lender, however can bypass the process and sue to collect under the Promissory Note. In this scenario--a Judicial Foreclosure--the lender goes to court and asks the judge to enforce the note payment. Judicial foreclosures are more expensive and take a long time. Moreover, some states have a Right of Redemption, which can cloud the title for the redemption period.

Again, read the provisions of the Deed of Trust, and seek professional advice if anything is unclear.

Wednesday, May 22, 2013

What is Title? What Is Escrow?

Title is the right of ownership in real property, evidenced by a deed or some other legal certificate. If you have title to a property, you own the property.

This concept sounds simple, but it's not. "Title" refers to a so-called "bundle of rights," some of which you may not have when you take ownership. In many parts of the West, for example, homeowners may discover that someone else owns the mineral rights to their new home. Someone else may own the water rights. These rights are examples of sticks, if you will, in the bundle of rights that comes with title.

Easements and other deed restrictions owned by other entities are quite common. Power companies have utility easements over most urban and suburban properties. Homeowner Association (HOA) covenants are deed restrictions on individual properties allowing the HOA certain controls. State and local property tax liens supersede all others.

Among the most time-honored features of real estate law is with the recordation of deeds and any lien, easement or other restriction on the deed. Say the seller had some work done and didn't pay the contractor. If the contractor recorded a contractor's lien, he'll get paid from the proceeds of your transaction.

But say the seller also had a home equity loan whose lender recorded a second trust deed (a lien) before the contractor did, and there wasn't enough money to pay the contractor. He'd get stuck, because the second lender's recordation happened before his and was therefore senior (see more below if you're interested).

When you buy a home, the seller should provide you with a title insurance policy. You, in turn, will have to provide your mortgage lender with a different one (see more below if you're interested). The title officer will research the chain of title on the property you're buying and will show all the title exceptions, even the cleared ones, on the title report. The insurance policy will pay any claimant not shown who has a valid claim.

Read the title report. Besides the exceptions noted above, there could be court judgments, including unpaid child support payments, easements not immediately obvious (maybe your neighbor to the rear has the right to cross your property), and the like. The title insurance you pay for will insure against any claims not shown on the title report. The seller should clear any exceptions before escrow closes

Which leads us to escrow. What is it? Escrow is the process through which all contractual terms between buyer and seller are deemed complete, and the deed transfers to the buyer and the funds to the seller. Your real estate broker, if you're using one, and your lender will frequently refer to "Close of Escrow," which is essential the close of the transaction.

The escrow officer will prepare a set of Escrow Instructions, which say what the buyer will do, the seller will do, and who gets what. The Escrow Instructions supersede the sales agreement, so read them carefully. Anyone who gets anything out of the transaction--buyer, seller, lender, broker (for a sales commission), lienholders, etc.--have an interest in these.

Escrow fees are generally set by law and don't vary from company to company. Usually, one of the brokers in the transaction will recommend an escrow officer, but buyer and seller can use whomever they wish. The escrow officer will prepare both an Estimated Closing Statement and a Final Settlement Statement, often called a HUD 1, when all the details are determined.

In Nevada, Oregon and California, the escrow officer and title officer, in my experience, were  the same person, with title companies also being escrow companies. Colorado is not an escrow state, but some title companies offer the service. An escrow officer is truly a disinterested, objective third party and will not advocate for either buyer or seller.

Okay, so here's the "see below if you're interested" stuff.

Regarding seniority of recording deeds: In the so-called "robo-signing" scandals, lenders routinely sold the loans they'd just issued to someone else, who would resell it and so on. Recording new owners became cumbersome, so the lenders came up with an entity called MERS (Mortgage Electronic Registration System). MERS would become the nominal owner of the mortgage no matter who the actual holder was or who had servicing rights. But when the foreclosure crisis hit full swing, some borrowers, and their attorneys, claimed that the foreclosing lender had no right to do so, since MERS was the recorded owner. This issue has not been fully decided.

Regarding title policies: In general a seller will provide the buyer with a CLTA (California Land Title Association) policy, whereas the lender will require the borrower to buy a more expensive ALTA (American Land Title Association) policy, which covers more exceptions. I've never understood why.

More errata: Maybe the most common easement few know or think about is the maintenance easement between detached homes. In the states where I worked, it's usually five feet, and you can't do stuff like install an air conditioning unit and concrete pad over this easement. The easement is there so both you and your neighbor can have access to maintain your houses. When the zero-lot-line home I live in now was built, the city's code didn't address the issue, but the HOA documents did. We have a three-foot easement the HOA is supposed to enforce, but it won't, and our neighbor is encroaching.

Tuesday, May 21, 2013

What Do "Closing Date" and Possession" Mean?

I found myself with a bit of extra time today and thought I'd get in some more defining of real estate terminology. Two that often cause confusion are "closing date" and "possession."

The Closing Date in a real estate sales transaction is the day that the sale is recorded.The seller gets the money and the buyer gets the deed, usually in a process called "escrow." I'll define "escrow" in a later post. Not all states have it, even though real estate transactions undergo a similar process.

A sales contract has to have a definite closing date. If the contract says, "closing to be determined by the parties," it's not a binding contract. That doesn't mean the date can't be changed. However, both buyer and seller must agree to the change. In my experience, closing date change addenda are common. The usual reason is that the lender didn't get documents to the closing company, or needed more documents from the buyer, seller or even broker.

But the date the purchase closes isn't necessarily the date the buyer takes possession of the home. Sometimes it is. But often, it is not. Why?

Maybe the closing date is a Friday, and the seller wants the following weekend to move out. In that case, while the closing date is Friday, the possession date would be the following Monday.

In my experience, it's customary for the seller to pay a daily rent of 1/30 of the monthly Principal, Interest, Taxes and Insurance (PITI) the buyer will be paying as a result of a new mortgage loan and the taxes and hazard insurance he or she now owes. In the instance above, the seller staying over the weekend would pay the buyer two days' rent.

Sometimes, a seller wants to remain in the property for a period of time, and sometimes, a buyer prefers not to take possession for whatever reason. Say she's stationed overseas and won't need the home for a month or so. In that case, the seller usually pays a monthly rent.

Caution: If a seller remains in the home for more than thirty days and the buyer does not take possession, the rental period could fall under the state's Landlord-tenant statutes, which have a whole different set of rules regarding rent payment, holdover, eviction, etc. This area is another one where a lawyer's advice would be quite useful.

What Is Earnest Money?

Residential real estate has a language all its own. Escrow, title, trust deed, contingency and so on are clearly English, but to many people who want to buy or sell a home--particularly first time buyers--these terms might as well be Sanskrit. Moreover, everyone involved in the transaction from broker to lender to title officer tosses these words around like peanut vendors at the ballpark. 

Any of these people would be pleased to define the terms, but all too often, the lay person is uncomfortable asking. And once defined, the term has no meaningful context. The Rookies Guide will try to define and explain these terms. This post is about earnest money.

Earnest money is an amount of money a buyer attaches to her sales offer, usually by check. How much? It depends on the market customs. In Oregon, I used one percent of the purchase price as a guide (in Nevada and California, it was a bit higher). An offer on a $300,000 home would therefore have an earnest money check attached for $3,000.

If I represented the seller, I would try to get a higher amount. If the buyer was my client, I'd push for a lower amount, unless there were competing offers. Earnest money is supposed to show how "earnest" a buyer is, and in a competitive environment, offers with higher earnest money checks attached get more serious consideration.

On the other hand, many first-time buyers don't have a lot of spare cash laying around, and coming up with $500 or $1,000 on an entry-level home, especially with closing costs and home inspections, is a stretch. Once again, local markets will dictate the amount.

What happens to your earnest money if the transaction goes through? It applies against the total amount due at closing in some way. Let's say your offer of $250,000 was accepted, and your earnest money check was for $2,000. You've qualified for an FHA loan of $241,250 with $8,750 down. Other closing costs will run $4,800.That means you'll owe $13,550. The earnest money can be credited against this, meaning you'll have to tender a cashier's check for $11,550. You could also get a slightly lower mortgage, which I wouldn't advise. There are also other scenarios for earnest money application, but you get the drift.

What happens to the earnest money if the transaction doesn't go through? This area is where things get complicated. That sales agreement you signed when making the offer is, in reality, more of a description of what happens to the earnest money more than it is a purchase offer. In California, my attorney referred to MLS (Multiple Listing Service) Residential Real Estate Agreements as "deposit receipts."

A buyer who meets his or her obligations will get back the earnest money if the deal falls through. Deals fall through for as many reasons as there are people, but usually it's because of a repair issue or failure for buyer and seller to agree on issues that transpire, such as closing date, possession, etc. Sometimes, the buyer's loan doesn't get approved. These are all contingencies in the agreement.

But buyers need to know their earnest money is at risk. If the Agreement says the buyer will obtain financing and the buyer neglects to do so within the described time frame, the buyer could forfeit his earnest money. The same is true if the buyer gets cold feet and backs out at the last minute.

Most MLS-form sales agreements go to a great deal of trouble spelling out who gets the earnest money in the case of a dispute and generally calls for mediation or arbitration. It's important for buyers (and sellers) to understand this element.

Generations of MLS lawyers have put thousands of hours into these provisions. These attorneys represent the local Realtor associations, not the buyers and sellers. Parties to a sales agreement need to understand these provisions.

What if a seller backs out? Usually, the buyer gets her earnest money back. Can earnest money be non-refundable? Yes, but it usually takes a special addendum to the agreement, signed by both parties, for this to occur.

To sum up, earnest money is intended to demonstrate a buyer's seriousness. Most MLS Sales Agreements are more about the earnest money disposition than they are buying the house. Earnest money is at risk. This blog in no way is meant to offer legal advice, and I very much encourage a buyer or seller to get an attorney's advice.

Monday, May 20, 2013

Is Now a Good Time to Buy?

When I was still a licensed real estate broker, I hated the question, "Is now a good time to buy a house?" Why? Because of the nature of real estate brokers. Too many of them are house hawkers and not house sales persons.

The whole real estate scene made me really, really nervous when I received my broker's license in 2006. I'd been away from the market for a while and was amazed--no, stunned--at the mortgage products available and the way everyone in the business was pushing home buying. From banker to broker, from Wall Street to Main Street, it was a can't-lose proposition.

Real estate brokers in particular pushed and pressured buyers in myriad ways. One of my favorites was making sure buyers got the message on home inspections: "We always recommend a home inspection, but you need to know that there are many buyers out there  competing with you who will waive this right." Another one was, "Prices are going through the roof, and if you want your offer accepted, you need to pay $10,000 over the asking price." These are just two examples.

Come 2008, and that same broker who pressured a buyer to pay $300,000 for that three-bedroom cutie was now telling the same person with the same home to short sell it for $240,000.

To be fair, brokers were responding to market realities. At the same time, wittingly or unwittingly, they were helping create that reality. And this phenomena underscores the problem in a prospective buyer asking a real estate broker if "now is a good time to buy a house." The answer will almost always be yes.

Why: It's mostly because the broker doesn't get paid until the transaction closes. When  home sells, the listing agent and the buyers' agent split the commission. No close, no dough. It's natural, then, that a real estate broker will look out for his or her self-interest.

So, how do you know if it's a good time to buy? My advice to prospective buyers is to separate the emotional part of home buying from the arithmetic part. The arithmetic is relatively easy--just get market data on the neighborhoods you're interested in. My choice is Redfin, but Zillow, Trulia and other popular sites can help. Caveat: I'm finding Zillow's "zestimates" unreliable.

You can also ask a real estate broker (one should give you the information at no charge, but expect to be working with her or him). And there's always a risk that the broker will filter the information.

As for the emotional part--that's just something people need to deal with as best as they can. Buyers need to really think through the emotional part and compartmentalize it, or the sales process will take advantage of them. For example, if you've been looking at homes for months, getting beat out, getting worn out, and finally have an accepted offer on a home, would you overlook a construction defect discovered two weeks before the deal closes and you've already given your thirty-day notice to your landlord?

In general, though: Is now a good time to buy a home?

If your goal is to sock your money into a house with the expectation that you'll get your money back, or even make a little bit, when you sell, then probably not, at least in most markets. Certain niche and micro-markets defy this statement. And no one knows what the international, national and local economies will be like in five, let alone ten, years from now.

But the real estate market is Baby Boomer driven. Boomers were a generation of families wanting the traditional suburban home, and they could always sell to someone. Right now, if you buy a three-bedroom home in one of many suburbs sprawling throughout any city in the U.S., you have to ask yourself who you will sell it to. Boomers are opting for smaller homes and are even looking assisted living joints in the eye. Family formation and other demographics are against a profitable sale.

You'll need to look at your personal circumstances, your local market and--most of all--your reasons for wanting to own a home. Using the ideas listed above, you can take control of your situation and determine your own answers.

And if you do end up buying a home, you'll be perfectly happy and probably come out just fine, as long as you keep your expectations realistic.