The American Homeowners Grassroots Alliance believes that financial services firms caused the problems we now face. Financially naïve, irresponsible, and crooked borrowers have always existed. Effective loan underwriting is necessary to protect the stockholders of financial services firms, the economy, and many consumers from themselves. Until recent years mortgage lenders practiced responsible underwriting. It was their abandonment of sound underwriting practices that caused the problem.

The existing $8,000 first time buyers federal tax credit on home purchases seems to be stimulating home sales according to many anecdotal reports. The tax credit has been used by an estimated 1.4 million home buyers, but there is no hard data measuring how many of those purchases would not have occurred without the credit. Regardless of its real impact, home prices continue to drop and foreclosures continue to increase in many parts of the country. The current tax credit may need to be expanded in order to put the brakes on further drops in home values.

Senator Johnny Isakson (R – GA) has proposed legislation (S. 1230) that would raise the tax credit cap to $15,000, make it available to all home buyers, and eliminate the $75,000/individual and $150,000/couple income eligibility caps on the existing tax credit. Like the existing credit, the credit rate would be 10% of the home’s cost. It would become effective for one year on the date of enactment, effectively extending the existing tax credit beyond its November 30, 2009 expiration. Senator Isakson had successfully sponsored a similar amendment to the Senate economic stimulus package earlier this year, but it was dropped in negotiations with House conferees.

Senate Banking Committee Chairman Chris Dodd (D-CT) was among the nine sponsors of the measure. While Senator Dodd is influential on housing matters, the legislation must go before the Senate Finance Committee for consideration. Hearings on the measure have not been scheduled.

“We support this important legislation,” said American Homeowners Grassroots Alliance (AHGA) President Bruce Hahn. “We need to staunch the bleeding of home values in order to stave off even more foreclosures and more risks to the economy. The numerous actions by Congress and the Administration to date have been well intended, but even though several have been helpful they haven’t been enough.”

One example is the Administration's $75 billion Making Home Affordable program to reduce foreclosures. While the plan has resulted in 190,000 mortgage modification offers, many of the offers were not sufficient enough to make the homes affordable, and lenders have either begun or proceeded in foreclosure s against more than 1 million homes. It is a well conceived program, albeit overly generous to mortgage lenders who receive taxpayer subsidies to modify loans that the lenders should be modifying to protect their stockholders equity anyway. “There is nothing wrong with this program,” noted AHGA’s Hahn, “except that many incompetent lenders are causing backlogs and delays, and other lenders appear to be avoiding participation purposely because they either believe they’ll get a bigger public bailout if they hold out longer or a quick return to double digit home appreciation will yield them a better return. We give the Administration credit for trying, and hope President Obama will continue his support for potentially effective solutions to the housing crisis such as this one.

AHGA is the first consumer organization to endorse S. 1230, and has urged Senate Finance Committee Chairman Max Baucus to hold hearings on the legislation.

AHGA believes the measure is also necessary because the existing first time buyers’ tax credit is less effective in more expensive markets where starter homes cost more than $80,000. In addition, many existing homeowners have lost so much money in home equity and/or their investments that they will be unable to move up to a nicer home when they sell without the tax credit. An estimated 9 million homeowners are still at risk of foreclosure, and by bolstering home values this measure will help them as well. Home buyers should be allowed to get this credit in advance, applying the credit towards the down payment and closing costs. The FHA allows the existing credit to be used for those purposes in rules issued in May, 2009.

States have also offered tax credits and other incentives to help revive their floundering housing markets. Although California has had to cut services and dismiss workers because of the state's $21 billion budget deficit, California legislators have introduced bills to increase the limits for the state’s $10,000 new home tax-credit program as well as to extend the duration of the credit for a year or more.

BLUE GRASS, Va.—“Value” is a word that everyone uses, but what does it mean and how is it measured? What makes some real estate valuable and some not?

What makes land, in particular, valuable to buyers? This question has more than one answer, and “location, location, location” is often in the chorus, not the spotlight.

Start with the idea of a merchantable asset, which is something that someone in his right mind will pay you a fair price for right now. (More technical definitions are available but don’t add anything useful.)

Some buyers look for -- and value -- properties that contain one or more merchantable assets that can be sold quickly to reduce the purchase cost. These might include an unwanted extra house, back acreage or mature timber ready to harvest. The buyer’s objective is to keep a core piece of the property and pay for as much of it as possible by selling unwanted, peripheral assets.

Retained assets that add value in a buyer’s calculation are items that can be leased (pasture and crop land, storage space, hunting rights, trails for horseback riding), rented (vacation homes, equipment), producing something for sale (crops) or used immediately by the new owner (house, outbuildings).

Property with all environmental rights retained and conveying should be considered a financial asset if it lends itself to a conservation easement. Property that bears a conservation easement should be discounted in value, because one or more important uses have been severed or limited.

The value of property adjacent to property with a conservation easement usually rises owing to the adjoining restrictions on development.

Most buyers value assets that are tangible keepers--a useable house, well-maintained fences, functioning utilities and other infrastructure. Specialized buyers will value specialized keeper assets, such as a year-round trout stream in the front yard or a developed horse operation.

Less tangible assets but no less important are “things” like compatible neighbors, quiet, privacy, an absence of boundary disputes and proximity to whatever most people like to be close to and away from what most people want to be out of sight, sound and smell.

Developers of rural land usually add value by packaging lots with natural and man-made amenities, such as recreational water (lake, river, stream), views, woods, clubhouse, trails and an appropriate level of infrastructure.

Buyers should pay more for land whose various assets can be used compatibly and simultaneously. Where using one asset precludes using others, value usually falls. A forest with an endangered species in residence is a high environmental asset, which, however, is likely to prohibit many other uses such as farming, timbering, road building and construction.

The more diverse a property’s assets and the more ways property can be used and enjoyed, the more market value and marketability it has, at least in my experience.

One buyer I know appraises property using what he calls, “opportunity analysis.”

As an investor, he values parcels that provide the most opportunities to do the most number of different activities, from making money to kicking back in a pretty spot and watching the breeze blow through the leaves.

Since assets can appreciate, depreciate and change over time, their future values need to be considered when figuring their current worth. The commercial value of many woodland tracts will increase as trees add girth and height, but overgrazed, eroding hillside pasture will deteriorate into a bigger economic and aesthetic liability. A good fishing stream can become polluted, turning an asset into a liability.

Property acquires value in terms of how it fits with a buyer’s multiple needs and wants. And the more “as is” the fit -- that is, no additional investment required -- the stronger the property’s appeal. When property meets the needs and wants of many buyers, particularly “as is,” its value rises as does its marketability.

Property has no value to a buyer whose needs it doesn’t fit, though it may be very valuable to a different buyer.

It’s generally more cost efficient to buy an existing asset (assuming it’s in good shape and does what you want it to do) than build it from scratch. I would value a 50-acre tract with a nice home site and view that’s accessed by a well-constructed mile-long road much higher than a comparable 50 acres with a marginally nicer home site and marginally nicer view that requires the construction of a one-mile road. When I was younger, I was more taken with views; at 63, I balance long views against the short view of the balance in my check book.

I’ve often seen buyers take their eyes off the ball. They develop a smart, reasonable set of search criteria, and then discard it when, for example, they’re shown a mint-julep house with two-story white columns on property that does not fit their needs. They saddle up on a runaway team of impulse and emotion.

It’s often easy to assume that all buyers value property in the same way. While many do, others don’t. Most buyers might pay a high price for a lake-front house that features a water view and private dock, but some won’t touch it owing to boat noise and lack of privacy, preferring instead an interior lot with water privileges. A timber investor would value 100 acres of scrub woods at no more than $500 an acre while a protectionist who plans to put a do-nothing-ever conservation easement on it and use it exclusively for bird habitat might pay $1,000.

Infrastructure in place -- roads, water, sewerage, phone, electricity, high-speed Internet, cell service and so on -- has more monetary value than it’s usually accorded. When infrastructure is done conscientiously, it makes everything else easier.

Calmness on a property’s periphery and in the general vicinity is worth paying for. Sellers rarely disclose nuisance, trespass and annoyance, which are often not obvious to a visiting buyer. Peace and quiet is worth a lot over time, though it may not be monetized by either seller or buyer.

Large acreages are subject to the same boundary disturbances as small ones. Buying peace and quiet is the value that buyers seek; don’t assume that buying bigger automatically inoculates you from commotion.

If a buyer is looking for an investment property or second home in the country, less travel time is a factor that translates into a willingness to pay a higher price. A closer place will be used more frequently and taken better care of than one more distant. Weekend use maxes out at three to four hours one-way driving for most of us.

Buyers discount the value of assets that are burdened with negatives, those running with an individual asset or with the property as a whole. A charming old house in bad shape is worth less to someone in his right mind than the same house in good shape; I know this opinion is considered a minority view in some circles. A nice place that’s too hot, too inaccessible or too near a zone of repugnance deserves to sell for less.

Too often, value is found in the fluttering heart of the beholder. A sharp pencil is useful in bringing a buyer with the pitty-pats back to his senses, even if it’s only applied to paper.