Thursday, September 4, 2008
Buy “As Is” Without Regret
Dear Sue
I heard that the homes being offered for sale “as is” are the best deals. I have been watching the foreclosures and they are all listed “as is.” I would really like to make an offer but I am afraid of being stuck with costly repairs that I can’t handle.
I have heard stories about these “as is” properties being completely stripped of electrical, plumbing, appliances…everything. I have also heard that properties that appear perfectly fine have problems that show up later.
How can I take advantage of these good deals and not end up with something I regret?
Wary Walt
Dear Walt
Many people are under the impression that homes being sold “as is” can’t be inspected. And if they are inspected, they think that they are stuck with the problems they find.
Not true! If you find a property that you like, make an offer subject to inspections and investigations. Allow plenty of time for a pest report and a thorough professional home inspection. Check the status of the property with the building, planning and environmental health departments. Most inspection periods are 17 days. If you discover something that isn’t working, have a licensed contractor give you a written repair estimate. Attach the estimate to an addendum requesting a credit or reduction in sales price by the amount of the estimate.
Keep in mind that the seller is not obligated to give you a credit. If you are not satisfied with the inspections and the seller refuses to give you a credit you can cancel the escrow without penalty as long as you do it within your inspection period.
If the seller refuses to allow inspections, go on to the next property. A seller that won’t allow inspections spells trouble!
If you find an “as-is” property that requires extensive repairs and/or remodeling make your offer subject to a construction or rehab loan. The total amount financed will include the purchase price and the cost of rehab. You will finance the repairs along with the purchase price over 15 or 30 years.
A reputable real estate agent will assist you with determining the market value. They will also provide names of licensed contractors and lending sources. They are also experts at managing the transaction.
Understanding that “as-is” doesn’t mean forgoing inspections and being stuck with a can of worms is a matter of Good Home $$s and Sense.
I heard that the homes being offered for sale “as is” are the best deals. I have been watching the foreclosures and they are all listed “as is.” I would really like to make an offer but I am afraid of being stuck with costly repairs that I can’t handle.
I have heard stories about these “as is” properties being completely stripped of electrical, plumbing, appliances…everything. I have also heard that properties that appear perfectly fine have problems that show up later.
How can I take advantage of these good deals and not end up with something I regret?
Wary Walt
Dear Walt
Many people are under the impression that homes being sold “as is” can’t be inspected. And if they are inspected, they think that they are stuck with the problems they find.
Not true! If you find a property that you like, make an offer subject to inspections and investigations. Allow plenty of time for a pest report and a thorough professional home inspection. Check the status of the property with the building, planning and environmental health departments. Most inspection periods are 17 days. If you discover something that isn’t working, have a licensed contractor give you a written repair estimate. Attach the estimate to an addendum requesting a credit or reduction in sales price by the amount of the estimate.
Keep in mind that the seller is not obligated to give you a credit. If you are not satisfied with the inspections and the seller refuses to give you a credit you can cancel the escrow without penalty as long as you do it within your inspection period.
If the seller refuses to allow inspections, go on to the next property. A seller that won’t allow inspections spells trouble!
If you find an “as-is” property that requires extensive repairs and/or remodeling make your offer subject to a construction or rehab loan. The total amount financed will include the purchase price and the cost of rehab. You will finance the repairs along with the purchase price over 15 or 30 years.
A reputable real estate agent will assist you with determining the market value. They will also provide names of licensed contractors and lending sources. They are also experts at managing the transaction.
Understanding that “as-is” doesn’t mean forgoing inspections and being stuck with a can of worms is a matter of Good Home $$s and Sense.
Wednesday, August 20, 2008
Price Home Right the First Time
Dear Sue
My real estate agent keeps suggesting that I lower the price of my home. I know that my price may be a little high but I think if a buyer really wants my home he will make an offer. I need room to negotiate.
My friends agree with me. My best friend just sold his house. He said he priced his home a little high but he ended up getting what he wanted.
I think it is just common sense and good negotiating strategy to price your property higher than your bottom line.
What do you think, Sue?
Savvy Sam
Dear Sam
There are different strategies for different markets. When markets are trending down, over pricing can be disastrous. Thinking that one should price their home above the market in order to have negotiating room is a mistake. If one prices their home too high in a declining market the price that a willing buyer is willing to pay sinks lower and lower.
Consider the following statistics furnished by the Placer County Association of Realtors.
There were 2195 home sales in Placer County in the last six months. 1011 of those sales were on the market for 30 days or less. That is over 46%! Those sales received 99% of their asking price. In other words, the sale price was reduced by 1% of the asking price.
There were 385 Properties sold within 31 to 60 days. Those properties sold at 96.5% of the asking price or 4.5% less.
241 properties sold in 61 to 90 days. Those sold within 95.9% or almost 6% less than the asking price.
190 properties sold within 91 to 120 days for 94.2% of the asking price. Or over 6% less.
368 properties on the market for 120 or more days sold at 93.72% of asking price or 6.25% less.
While there are always exceptions, I cannot stress enough the importance of pricing your property to sell when it’s first put on the market. As the statistics show, the longer time on the market equals the less money one ultimately receives.
The primary reason is that distressed property sales have dominated the market driving prices downward. Placer County real estate is currently losing about 2% per month in value. While sales may be up prices are down.
Buyers rule. Placer County presently has approximately 2300 properties available for sale. Buyers are not making quick decisions because they have several choices and they fear that they may pay too much.
Buyers that are looking are always watching for new listings. That is why all new listings have the most showings in the first three weeks. Once that “golden window” is closed sellers have to rely on new buyers coming into the market noticing a listing for the first time. Buyers love to say, “It just came on the market and I was so lucky to see it first!” Not, “Oh boy, I was so lucky to find it. It was on the market for 100 days!”
Pricing your home to sell is a matter of good Home $$s and Sense.
My real estate agent keeps suggesting that I lower the price of my home. I know that my price may be a little high but I think if a buyer really wants my home he will make an offer. I need room to negotiate.
My friends agree with me. My best friend just sold his house. He said he priced his home a little high but he ended up getting what he wanted.
I think it is just common sense and good negotiating strategy to price your property higher than your bottom line.
What do you think, Sue?
Savvy Sam
Dear Sam
There are different strategies for different markets. When markets are trending down, over pricing can be disastrous. Thinking that one should price their home above the market in order to have negotiating room is a mistake. If one prices their home too high in a declining market the price that a willing buyer is willing to pay sinks lower and lower.
Consider the following statistics furnished by the Placer County Association of Realtors.
There were 2195 home sales in Placer County in the last six months. 1011 of those sales were on the market for 30 days or less. That is over 46%! Those sales received 99% of their asking price. In other words, the sale price was reduced by 1% of the asking price.
There were 385 Properties sold within 31 to 60 days. Those properties sold at 96.5% of the asking price or 4.5% less.
241 properties sold in 61 to 90 days. Those sold within 95.9% or almost 6% less than the asking price.
190 properties sold within 91 to 120 days for 94.2% of the asking price. Or over 6% less.
368 properties on the market for 120 or more days sold at 93.72% of asking price or 6.25% less.
While there are always exceptions, I cannot stress enough the importance of pricing your property to sell when it’s first put on the market. As the statistics show, the longer time on the market equals the less money one ultimately receives.
The primary reason is that distressed property sales have dominated the market driving prices downward. Placer County real estate is currently losing about 2% per month in value. While sales may be up prices are down.
Buyers rule. Placer County presently has approximately 2300 properties available for sale. Buyers are not making quick decisions because they have several choices and they fear that they may pay too much.
Buyers that are looking are always watching for new listings. That is why all new listings have the most showings in the first three weeks. Once that “golden window” is closed sellers have to rely on new buyers coming into the market noticing a listing for the first time. Buyers love to say, “It just came on the market and I was so lucky to see it first!” Not, “Oh boy, I was so lucky to find it. It was on the market for 100 days!”
Pricing your home to sell is a matter of good Home $$s and Sense.
Labels: Auburn, auburn real estate, seehometown, seesue, sue thompson
Wednesday, August 13, 2008
An Old Pro’s Market Perspective
Dear Sue
Everyone is talking like this is the worst real estate market we have ever seen. Some even liken it to the Great Depression of the 1930s.
Having lived through the Depression as a boy, I can tell you it is not even close. During the Great Depression 40% of US banks failed. Depositors lost everything. There was no such thing as a federally backed deposit. Investors jumped out of windows. Farms and factory’s went bankrupt. Unemployment was at a staggering 25% in 1933. It is 5.5% today. Shantytowns and breadlines were everywhere.
I remember the men down on their luck coming to our back door for food. My mother fed the poor men we all called “hobo’s”. We all knew in those times that anybody could be begging for food.
We have experienced REO markets during every real estate cycle, approximately every ten years. Good businessmen plan around downturns because they know they are inevitable. Conservative homebuyers live below their means and plan for down turns as well.
Back in one of the “other” downturns, many cycles ago, I was working for builder George Holstein in Southern California. I was in charge of marketing. We had been selling homes at the Eastmont tract in Orange on a land contract. (You experienced agents know what a land contract is.) I think we were asking for $95 “to move right in!” The contract was for 3 years at which time the buyers would be required to get the necessary bank financing and pay Mr. Holstein off. The contracts just covered the loan payments that Holstein had with the bank. His goal was to just cover his carrying costs. He figured that he would get some of the homes back on the “drop dead date” (due date) in about three years when the original land contracts were up.
Three years later the folks who couldn’t come up with the financing started moving out. Some of the homes were in terrible shape but as history repeats, they were worth much more than the original price. As planned, Mr. Holstein cleaned them up and resold them at a profit.
During the period of the many move-outs, we ran ads for “Mr. REO.” We didn’t have a sales office so we borrowed a little RV trailer from our sign painter. We had him paint the trailer bright yellow and parked it on a side street close to the project.
Our ads directed people there. It was staffed by an old real estate agent named Rollie Jones, AKA Mr. REO. It was working well until one night the Orange police took the trailer and impounded it in their yard. The trailer contained MR REO’s sales contracts and paperwork. We got it out and continued the Mr. REO campaign but without the yellow trailer.
You buyers out there need to get off the fence. Interest rates are starting to creep up from 5.5% to almost 7% in the last year. Every percentage point is worth a good $100 more per month on $100,000. Get online and check out the rent vs. mortgage comparison charts. They should be easy to find.
Markets go up and markets go down. When they are on their way up people think it will never stop. When they are going down people think it will never stop. But it will. It always does.
Three years from now this market will be looked upon as a fun and challenging time!
Sign me
Mr. Seen It All
Sue says, "Listening to the Old Pro is a matter of Good Home $$s and Sense!"
Everyone is talking like this is the worst real estate market we have ever seen. Some even liken it to the Great Depression of the 1930s.
Having lived through the Depression as a boy, I can tell you it is not even close. During the Great Depression 40% of US banks failed. Depositors lost everything. There was no such thing as a federally backed deposit. Investors jumped out of windows. Farms and factory’s went bankrupt. Unemployment was at a staggering 25% in 1933. It is 5.5% today. Shantytowns and breadlines were everywhere.
I remember the men down on their luck coming to our back door for food. My mother fed the poor men we all called “hobo’s”. We all knew in those times that anybody could be begging for food.
We have experienced REO markets during every real estate cycle, approximately every ten years. Good businessmen plan around downturns because they know they are inevitable. Conservative homebuyers live below their means and plan for down turns as well.
Back in one of the “other” downturns, many cycles ago, I was working for builder George Holstein in Southern California. I was in charge of marketing. We had been selling homes at the Eastmont tract in Orange on a land contract. (You experienced agents know what a land contract is.) I think we were asking for $95 “to move right in!” The contract was for 3 years at which time the buyers would be required to get the necessary bank financing and pay Mr. Holstein off. The contracts just covered the loan payments that Holstein had with the bank. His goal was to just cover his carrying costs. He figured that he would get some of the homes back on the “drop dead date” (due date) in about three years when the original land contracts were up.
Three years later the folks who couldn’t come up with the financing started moving out. Some of the homes were in terrible shape but as history repeats, they were worth much more than the original price. As planned, Mr. Holstein cleaned them up and resold them at a profit.
During the period of the many move-outs, we ran ads for “Mr. REO.” We didn’t have a sales office so we borrowed a little RV trailer from our sign painter. We had him paint the trailer bright yellow and parked it on a side street close to the project.
Our ads directed people there. It was staffed by an old real estate agent named Rollie Jones, AKA Mr. REO. It was working well until one night the Orange police took the trailer and impounded it in their yard. The trailer contained MR REO’s sales contracts and paperwork. We got it out and continued the Mr. REO campaign but without the yellow trailer.
You buyers out there need to get off the fence. Interest rates are starting to creep up from 5.5% to almost 7% in the last year. Every percentage point is worth a good $100 more per month on $100,000. Get online and check out the rent vs. mortgage comparison charts. They should be easy to find.
Markets go up and markets go down. When they are on their way up people think it will never stop. When they are going down people think it will never stop. But it will. It always does.
Three years from now this market will be looked upon as a fun and challenging time!
Sign me
Mr. Seen It All
Sue says, "Listening to the Old Pro is a matter of Good Home $$s and Sense!"
Thursday, August 7, 2008
Ask Miss Real Estate Manners
Dear Sue
We have sold several homes. Our least favorite part about having our home for sale is the inconvenience and disruption in our lives.
We hate going to all of the trouble of getting our house ready for a showing, only to have the agent not show up with their prospective buyer.
When we had our old house on the market in Southern California we would get home late and not find any business cards even though we knew that someone had been in our home. It was a very creepy feeling. One time we even found our back door unlocked.
Is this lack of consideration common or is this experience unique to us? Is there a way to prevent these kinds of things from happening to us again?
Dreading Dana
Dear Dana,
I was a guest speaker on a panel for the Women’s Council of Realtors at the Placer County Association of Realtors yesterday and realtor courtesy was a hot topic.
Everyone agreed that the lack of manners between agents and clients was an issue in our industry and agents needed to be more conscious of social grace, respect and courtesy.
When you put your house on the market discuss your concerns with your agent. Let your agent know what you expect in the way of courtesy and etiquette.
Some real estate agents are so focused on the buyer that it appears that they forget about the needs of the seller’s. When showing properties, agents could request a block of time. Asking for a specific time is often unrealistic. For example a morning block of time may be from 9AM to noon. The afternoon block could be from 1 to 4. The key is that the client’s expectations are managed thereby reducing frustration and disappointment.
It is important to realize that it is impossible to predict what a buyer is going to want or do. He may want to alter the “showing” course. Selling is a process, not a series of appointments.
When an agent drives up to a home with a buyer, the buyer knows immediately that they are or are not interested in seeing it. If a buyer is not interested in seeing the property I think it is important that the buyer’s agent leaves a note on the door and follows up with a phone call.
It may be that the first house on the showing tour list is the one the buyer wants and they don’t want to see any other homes. It is the agent’s obligation to call the seller’s that are expecting them and explain the situation. The seller may not like hearing it but he will certainly respect and appreciate the courtesy.
There are no professional training classes for how to show a home. Because there isn’t maybe the seller’s need to formulate their own written guidelines or special instructions such as, please remove shoes or leave the thermostat at 80 degrees. Please lock all doors except laundry room. Please turn off all the lights. Don’t let the cat out. Backyard dog is friendly (or not!)
Make nice cards and place them in appropriate locations through out ones home. Make them fun if possible. For example; Please remove your shoes while doing your tours…this carpet that you’re walking on may soon be yours………………………….
Simple courtesy is a matter of good home dollars and sense.
We have sold several homes. Our least favorite part about having our home for sale is the inconvenience and disruption in our lives.
We hate going to all of the trouble of getting our house ready for a showing, only to have the agent not show up with their prospective buyer.
When we had our old house on the market in Southern California we would get home late and not find any business cards even though we knew that someone had been in our home. It was a very creepy feeling. One time we even found our back door unlocked.
Is this lack of consideration common or is this experience unique to us? Is there a way to prevent these kinds of things from happening to us again?
Dreading Dana
Dear Dana,
I was a guest speaker on a panel for the Women’s Council of Realtors at the Placer County Association of Realtors yesterday and realtor courtesy was a hot topic.
Everyone agreed that the lack of manners between agents and clients was an issue in our industry and agents needed to be more conscious of social grace, respect and courtesy.
When you put your house on the market discuss your concerns with your agent. Let your agent know what you expect in the way of courtesy and etiquette.
Some real estate agents are so focused on the buyer that it appears that they forget about the needs of the seller’s. When showing properties, agents could request a block of time. Asking for a specific time is often unrealistic. For example a morning block of time may be from 9AM to noon. The afternoon block could be from 1 to 4. The key is that the client’s expectations are managed thereby reducing frustration and disappointment.
It is important to realize that it is impossible to predict what a buyer is going to want or do. He may want to alter the “showing” course. Selling is a process, not a series of appointments.
When an agent drives up to a home with a buyer, the buyer knows immediately that they are or are not interested in seeing it. If a buyer is not interested in seeing the property I think it is important that the buyer’s agent leaves a note on the door and follows up with a phone call.
It may be that the first house on the showing tour list is the one the buyer wants and they don’t want to see any other homes. It is the agent’s obligation to call the seller’s that are expecting them and explain the situation. The seller may not like hearing it but he will certainly respect and appreciate the courtesy.
There are no professional training classes for how to show a home. Because there isn’t maybe the seller’s need to formulate their own written guidelines or special instructions such as, please remove shoes or leave the thermostat at 80 degrees. Please lock all doors except laundry room. Please turn off all the lights. Don’t let the cat out. Backyard dog is friendly (or not!)
Make nice cards and place them in appropriate locations through out ones home. Make them fun if possible. For example; Please remove your shoes while doing your tours…this carpet that you’re walking on may soon be yours………………………….
Simple courtesy is a matter of good home dollars and sense.
Labels: auburn real estate, hometown realtors, seehometown, sue thompson
Wednesday, July 30, 2008
Think Outside the Lock Box!
Dear Sue,
My wife and I bought our home about four years ago. Since home values have dropped we now owe more than our home is worth.
I know this is strange but we would like to trade houses with our neighbor who lives just a couple of blocks away. He wants our home and we want his. We like his floor plan a lot better than ours. He has the extra garage we need and we have one too many bedrooms. Our neighbor bought his home around the same time we did and he put about the same amount down.
Neither of us has any equity so I guess we would be trading debt. Is there any way we can trade houses? If so, how would we go about doing it?
Thanks for your help!
Trading Tom
Dear Tom,
Wow! The concept of trading debt is a new one. I believe that it can be done.
My suggestion would be to start with your respective lenders. Each lender would require that each of you qualify for each other’s loan. You will be required to go through a formal loan assumption process. That means providing two years of tax returns, w2’s for income and proof of employment and current credit reports.
If each of you qualifies it should be a no brainer. Very creative of you!
With the current foreclosures, short sales and tight money, it is very important to be creative. Realtor’s need to think outside of the “lock box” in order to assist home buyers and sellers in this market. Utilizing available lending programs is not enough.
Trades are a great way to move up or on. If there is equity to work with, seller financing is a great option. This is when the home seller becomes the bank. The home buyer makes the down payment to the seller and the seller carries back the balance on a note at mutually agreed upon terms.
Home buyers looking for money, now have fewer options since down payment assistance programs are becoming virtually non-existent. Gifts from family members or early inheritance money should be a consideration. Some parents or grandparents would love to see their children or grandchildren enjoy their inheritance while they are still alive.
IRA’s are a good source for a down payment. Either through borrowing or the once in a life time penalty free $10,000.00 withdrawal that the IRS allows.
Self directed IRA’s are an often overlooked source for buying real estate. A qualified self directed plan will allow one to buy out right or finance the purchase with 30% down as long as the loan is a non recourse loan. A non-recourse loan is one where the lenders only recourse for non-payment is foreclosure.
Sell stuff. I have a client that is selling a horse trailer, horses and tractor to come up with a sizable down payment. Turn your stuff into an asset!
Equity share. Find a partner that will help with the down payment. Put them on title for an agreed upon percentage of the profits or losses after a specified period of time. The longer the time period the greater the chances of making a profit.
Credit unions are an affordable source for all kinds of loans including home loans. The credit union interest rates are often better than bank rates. It will pay to shop a local credit union.
Lease option or lease purchases are another possibility. This is where the home buyer leases the property for a set period of time. The time period is usually 1 to 2 years. A portion of the rent is often credited towards the purchase price. When it comes time to exercise the option to purchase the buyer/tenant gets a loan and buys the property.
I am sure there are other ways to finance a new home. I look forward to hearing from my readers about alternative forms of financing that they may have come up with.
In today’s tight money market thinking outside the “lock box” is a matter of good home dollars and sense.
My wife and I bought our home about four years ago. Since home values have dropped we now owe more than our home is worth.
I know this is strange but we would like to trade houses with our neighbor who lives just a couple of blocks away. He wants our home and we want his. We like his floor plan a lot better than ours. He has the extra garage we need and we have one too many bedrooms. Our neighbor bought his home around the same time we did and he put about the same amount down.
Neither of us has any equity so I guess we would be trading debt. Is there any way we can trade houses? If so, how would we go about doing it?
Thanks for your help!
Trading Tom
Dear Tom,
Wow! The concept of trading debt is a new one. I believe that it can be done.
My suggestion would be to start with your respective lenders. Each lender would require that each of you qualify for each other’s loan. You will be required to go through a formal loan assumption process. That means providing two years of tax returns, w2’s for income and proof of employment and current credit reports.
If each of you qualifies it should be a no brainer. Very creative of you!
With the current foreclosures, short sales and tight money, it is very important to be creative. Realtor’s need to think outside of the “lock box” in order to assist home buyers and sellers in this market. Utilizing available lending programs is not enough.
Trades are a great way to move up or on. If there is equity to work with, seller financing is a great option. This is when the home seller becomes the bank. The home buyer makes the down payment to the seller and the seller carries back the balance on a note at mutually agreed upon terms.
Home buyers looking for money, now have fewer options since down payment assistance programs are becoming virtually non-existent. Gifts from family members or early inheritance money should be a consideration. Some parents or grandparents would love to see their children or grandchildren enjoy their inheritance while they are still alive.
IRA’s are a good source for a down payment. Either through borrowing or the once in a life time penalty free $10,000.00 withdrawal that the IRS allows.
Self directed IRA’s are an often overlooked source for buying real estate. A qualified self directed plan will allow one to buy out right or finance the purchase with 30% down as long as the loan is a non recourse loan. A non-recourse loan is one where the lenders only recourse for non-payment is foreclosure.
Sell stuff. I have a client that is selling a horse trailer, horses and tractor to come up with a sizable down payment. Turn your stuff into an asset!
Equity share. Find a partner that will help with the down payment. Put them on title for an agreed upon percentage of the profits or losses after a specified period of time. The longer the time period the greater the chances of making a profit.
Credit unions are an affordable source for all kinds of loans including home loans. The credit union interest rates are often better than bank rates. It will pay to shop a local credit union.
Lease option or lease purchases are another possibility. This is where the home buyer leases the property for a set period of time. The time period is usually 1 to 2 years. A portion of the rent is often credited towards the purchase price. When it comes time to exercise the option to purchase the buyer/tenant gets a loan and buys the property.
I am sure there are other ways to finance a new home. I look forward to hearing from my readers about alternative forms of financing that they may have come up with.
In today’s tight money market thinking outside the “lock box” is a matter of good home dollars and sense.
Wednesday, July 23, 2008
Should I Wait?
Dear Sue
I want to buy a house. I have been waiting until the anticipated wave of foreclosures in July and August bring the real estate prices down even more.
It seems like the foreclosure news has been replaced by news of bank failures. The so-called “credit crisis.”
I know that foreclosures bring the prices down but how does the credit crisis affect my buying decision? Should I wait until the banks are more stable?
Anxious and confused
As we all know supply and demand controls price. Higher supply with little demand equals low price. High demand with low supply equals high price.
When one thinks about real estate in terms of supply and demand, the supply is the available housing inventory and the demand is the number of buyers in the market. Up to this point, few have considered that financing is the fuel for the market. Today’s credit crisis is simply a reduction in the money supply. The harder money is to obtain, the more expensive it is going to become.
Just as the high gasoline prices are causing consumers to turn to alternative fuel sources such as electric, hydrogen and bio fuels, homebuyers are going to need to look at alternative and creative sources of financing.
Recently, money suppliers Wachovia and Washington Mutual, have reported multibillion-dollar losses and have discontinued mortgage lending. To put it in perspective, they are in the “big five” in terms of size.
There is also a bill that threatens down payment assistance programs. According to FHA estimates, forty percent of FHA loan volume involves down payment assistance of some kind. The forty percent estimate means that 300,000 working class families will be locked out of home ownership. Communities across America will take the brunt of an estimated $50 billion in lost real estate sales.
I believe that anyone considering a home purchase should do it now before money becomes too expensive. If credit continues to be in short supply the cost to borrow will go up!
Buying while affordable money is available is a matter of good Home $$s and Sense.
I want to buy a house. I have been waiting until the anticipated wave of foreclosures in July and August bring the real estate prices down even more.
It seems like the foreclosure news has been replaced by news of bank failures. The so-called “credit crisis.”
I know that foreclosures bring the prices down but how does the credit crisis affect my buying decision? Should I wait until the banks are more stable?
Anxious and confused
As we all know supply and demand controls price. Higher supply with little demand equals low price. High demand with low supply equals high price.
When one thinks about real estate in terms of supply and demand, the supply is the available housing inventory and the demand is the number of buyers in the market. Up to this point, few have considered that financing is the fuel for the market. Today’s credit crisis is simply a reduction in the money supply. The harder money is to obtain, the more expensive it is going to become.
Just as the high gasoline prices are causing consumers to turn to alternative fuel sources such as electric, hydrogen and bio fuels, homebuyers are going to need to look at alternative and creative sources of financing.
Recently, money suppliers Wachovia and Washington Mutual, have reported multibillion-dollar losses and have discontinued mortgage lending. To put it in perspective, they are in the “big five” in terms of size.
There is also a bill that threatens down payment assistance programs. According to FHA estimates, forty percent of FHA loan volume involves down payment assistance of some kind. The forty percent estimate means that 300,000 working class families will be locked out of home ownership. Communities across America will take the brunt of an estimated $50 billion in lost real estate sales.
I believe that anyone considering a home purchase should do it now before money becomes too expensive. If credit continues to be in short supply the cost to borrow will go up!
Buying while affordable money is available is a matter of good Home $$s and Sense.
Now I Need a Short Sale!
Dear Sue
I read your article last week about the poor lady’s “bad upside down loan.” I am in a similar situation. I think I had better consider a short sale. I would like to know how to get started.
I admit that I am in this mess because I signed a bogus loan application reporting more income than I really had. Because I was able to get a loan that I didn’t qualify for, I thought my loan officer was an angel. I should have known better! Today with payments more than I can afford, I think my loan officer was the devil incarnate!
How could the country have gotten in this mess and what can I do about getting a short sale now?
Sad Sam
Dear Sam
A little over ten years ago the mortgage industry came out with “designer loans.” One of those loans was a 125% loan to value. Yes, the lender would make a 100% loan and pay the borrower an additional 25% of the property’s value as an incentive. As far-fetched as my thoughts seemed at the time, I thought it was a plot to have the government own a good part of our nation’s real estate.
Today that doesn’t seem so far out. The current government involvement with the mortgage giants, Fanny Mae and Freddie Mac, along with a measure, if passed, will get taxpayers involved in the mortgage business whether we like it or not. The extent of the government’s involvement is yet to be seen.
You ask what caused all this? I believe that lack of regulation and supervision in the mortgage industry, non-disclosure, greed and fraud are the culprits in this debacle.
This won't make me popular, but it is also my opinion that allowing the same person who sells the property to lend on the property is bad news. The realtor and the lender should never be one and the same. Unless there is owner financing I believe it is a conflict of interest.
I also want people to know that everything happening right now is the “lagging edge” not the “leading edge” of the mortgage fallout. The banks are experiencing the late consequences of all the bad loans.
I also believe that our situation is compounded by fear. If we don’t panic we will soon come to another equilibrium. At this moment it is more of a confidence crisis than a financial one.
If you want to start the short sale process, it is important to know that the requirements differ from lender to lender. New rules are being written as we speak. The first step is to engage a real estate agent experienced in short sales. Next, contact the loss mitigation department of your bank. That would be the person or entity that sends you your mortgage statements. You will be required to complete a “work out” or short sale package.
The package includes a request for a hardship letter, financial statements and a list of all of your expenses. They will also want W-2’s, two paycheck stubs and your previous month’s bank statement. You will also be required to give written authorization to the lender to speak with your agent.
The bank will then request a “BPO” (broker price opinion) that estimates the value of the property. The BPO’s are done by impartial Realtors or appraisers who are an “arm’s length” away from the transaction.
The package, after being assembled, is taken to a review committee where it is approved or disapproved.
Your agent and lender will guide you through the process once you have made contact. It sounds like in your case that a short sale is a matter of good Home $$s and Sense.
I read your article last week about the poor lady’s “bad upside down loan.” I am in a similar situation. I think I had better consider a short sale. I would like to know how to get started.
I admit that I am in this mess because I signed a bogus loan application reporting more income than I really had. Because I was able to get a loan that I didn’t qualify for, I thought my loan officer was an angel. I should have known better! Today with payments more than I can afford, I think my loan officer was the devil incarnate!
How could the country have gotten in this mess and what can I do about getting a short sale now?
Sad Sam
Dear Sam
A little over ten years ago the mortgage industry came out with “designer loans.” One of those loans was a 125% loan to value. Yes, the lender would make a 100% loan and pay the borrower an additional 25% of the property’s value as an incentive. As far-fetched as my thoughts seemed at the time, I thought it was a plot to have the government own a good part of our nation’s real estate.
Today that doesn’t seem so far out. The current government involvement with the mortgage giants, Fanny Mae and Freddie Mac, along with a measure, if passed, will get taxpayers involved in the mortgage business whether we like it or not. The extent of the government’s involvement is yet to be seen.
You ask what caused all this? I believe that lack of regulation and supervision in the mortgage industry, non-disclosure, greed and fraud are the culprits in this debacle.
This won't make me popular, but it is also my opinion that allowing the same person who sells the property to lend on the property is bad news. The realtor and the lender should never be one and the same. Unless there is owner financing I believe it is a conflict of interest.
I also want people to know that everything happening right now is the “lagging edge” not the “leading edge” of the mortgage fallout. The banks are experiencing the late consequences of all the bad loans.
I also believe that our situation is compounded by fear. If we don’t panic we will soon come to another equilibrium. At this moment it is more of a confidence crisis than a financial one.
If you want to start the short sale process, it is important to know that the requirements differ from lender to lender. New rules are being written as we speak. The first step is to engage a real estate agent experienced in short sales. Next, contact the loss mitigation department of your bank. That would be the person or entity that sends you your mortgage statements. You will be required to complete a “work out” or short sale package.
The package includes a request for a hardship letter, financial statements and a list of all of your expenses. They will also want W-2’s, two paycheck stubs and your previous month’s bank statement. You will also be required to give written authorization to the lender to speak with your agent.
The bank will then request a “BPO” (broker price opinion) that estimates the value of the property. The BPO’s are done by impartial Realtors or appraisers who are an “arm’s length” away from the transaction.
The package, after being assembled, is taken to a review committee where it is approved or disapproved.
Your agent and lender will guide you through the process once you have made contact. It sounds like in your case that a short sale is a matter of good Home $$s and Sense.
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