Archive for the ‘Buyer Reports’ Category
Lender Checklist: What You Need for a Mortgage
September 14th, 2009 | Author: Benjamin Harris
Here are some common items that a lender will typically ask for when applying for a mortgage.
- W-2 forms — or business tax return forms if you’re self-employed — for the last two or three years for every
person signing the loan.
- Copies of at least one pay stub for each person signing the loan.
- Account numbers of all your credit cards and the amounts for any outstanding balances.
- Copies of two to four months of bank or credit union statements for both checking and savings
accounts.
- Lender, loan number, and amount owed on other installment loans, such as student loans and
car loans.
- Addresses where you’ve lived for the last five to seven years, with names of landlords if
appropriate.
- Copies of brokerage account statements for two to four months, as well as a list of any other major assets of
value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
- Copies of your most recent 401(k) or other retirement account statement.
- Documentation to verify additional income, such as child support or a pension.
- Copies of personal tax forms for the last two to three years.
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Making an Offer on a Short Sale? What You Need to Know.
August 24th, 2009 | Author: Benjamin Harris
Are you looking to buy a new home? Are you thinking that now’s a great time to find bargains? Before you make an offer, it pays to know a little about the seller’s situation.
If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.
A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.
You’re a good candidate for a short-sale purchase if:
- You’re very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
- Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
- You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.
If you’re serious about purchasing a short-sale property, it’s important for you to have expert assistance. Here are some people you want to work with:
- Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
- A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)
- Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.
Some of the other risks faced by buyers of short-sale properties include:
- Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
- Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
- No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.
The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.
* Not all real estate practitioners are REALTORS®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS® and is bound by NAR’s strict code of ethics.
Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.
Housing Affordability Surges to Highest Level in 18 Years
May 20th, 2009 | Author: Benjamin Harris
RISMEDIA, May 20, 2009-Nationwide housing affordability jumped 10 percentage points during the first quarter of 2009 to its highest level since the series began 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI). The HOI showed that 72.5% of all new and existing homes sold in the first quarter of 2009 were affordable to families earning the national median income of $64,000, up from 62.4% during the previous quarter and up from 53.8% during the first quarter of 2008.Read the entire article at:
http://rismedia.com/2009-05-19/housing-affordability-surges-to-highest-level-in-18-years/
Determining Your Offer Price
February 19th, 2009 | Author: Benjamin Harris
When you prepare an offer to purchase a home, you already know the seller’s asking price, but what price are you going to offer and how do you come up with that figure?
Determining your offer price is a three-step process. First, your agent looks at recent sales of similar properties to come up with a price range. Then, your agent analyzes additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your “fair” price and come up with what you want to put in your offer.
Comparable Sales:
The first step in determining the price you are willing to offer is for your agent to look at the recent sales of similar homes. These are called “comparable sales.” Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase. Specifically, your agent needs to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size, and type of construction.
If the home you are interested in is part of a tract of homes, then you will most likely find some exact model matches to compare against one another.
There are three main sources of information on comparable sales, all of which are easily accessed by a real estate agent. It is somewhat more difficult for the general public to access this data, and in some cases impossible. Two of the most obvious information sources are the public record and the Multiple Listing Service.
Comparable Sales in the Public Record:
The most accessible source of information on comparable sales is the public record. When someone buys a home the property is deeded from the seller to the buyer. In most circumstances, this deed is recorded at the local county recorder’s office. They combine sales data with information already known about the property so they can assess property taxes correctly.
Provided there have been no additions to the property, the information available from the public record is usually correct regarding sales price, square footage, and numbers of rooms. This makes it easy to use the public record as a source of data for comparable sale information.
One problem with the public record is that it tends to run at least six to eight weeks behind. Add another four to six weeks for the typical escrow period and you can see the data is not current. The most current information is the most valuable.
Comparable Sales in the Multiple Listing Service:
Most of the public is aware that the Multiple Listing Service is a private resource where Realtors list properties available for sale. Recently, the public has been able to access some of that information on such sites as Realtor.com, PensacolaMLS.com, and others.
Once a property is sold and the transaction has closed, the selling price is posted to the listing in the Multiple Listing Service. Over time, it has become a huge database on past sales, containing much more information on individual homes than can be gleaned from the public record. This information is only available to real estate agents who are members of the local Multiple Listing Service.
Your agent will provide you with this data to help determine your offer price.
Comparable Sales – Pending Transactions:
The most valuable information would be the most current, of course. A sale last week has more validity in helping you determine a purchase price than a sale from six months ago. The problem is that there is no actual record of the sales price until the transaction is completed. The information is not available in the public record because no deed has yet been recorded.
Neither is the information available in the Multiple Listing Service. Once a property is under contract, it becomes a “pending sale”. Purchase price is not posted until it becomes a “closed sale.” This protects the seller in case the transaction falls apart and the property is placed back on the market. It would give an unfair advantage to future potential buyers if they already knew what price the seller had been willing to accept in the past.
Other Factors Influencing Your Offer Price:
Gathering and analyzing information from comparable sales helps to establish the range of prices you should consider when making an offer to buy a home. More weight should be given to the most recent sales, but even so, your agent will need to do a bit more analysis before setting upon a recommended price for you to offer. That is because there is a need to consider the condition of the property, improvements, the current market, and the circumstances behind the seller’s decision to sell.
How Property Condition Affects Your Offer:
Since you have toured the property you are interested in, you should know how it compares to the general neighborhood. All you have to do is put the home in one of three categories – average, above average, or below average.
When evaluating a home’s condition, there are a number of things you should consider. Structural condition is most important – items such as walls, ceilings, floors, doors and windows. Then paint, carpets, and floor coverings. Pay special attention to bathrooms and bedrooms and whether the plumbing and electricity work efficiently. Look at the fixtures, such as light switches, doorknobs, and drawer handles. The front and back yards should be in reasonably good shape.
The missing ingredient will be information on the condition of the homes from your agent’s comparable sales list. Provided you chose the right agent to represent you, they will have actually visited most of those homes and be able to provide key insights.
How Home Improvements Affect Your Offer Price:
Even when comparing exact model matches within a tract of homes, you should note whether the previous owners have made any substantial improvements. Cosmetic changes should be largely ignored, but major improvements should be taken into account. Most important would be room additions, especially bedrooms and bathrooms. Other items, like expensive floor tile or swimming pools should be taken into account, too, but should be discounted. A pool that costs $20,000 to install does not normally add $20,000 in value to the home. Rely on your agent to give you guidance in this area.
How Market Conditions Affect Your Offer Price:
A hot market is a “seller’s market.” During a seller’s market, properties can sell within a few days of being listed and there are often multiple offers. Sometimes homes even sell above the asking price. Though most buyer’s want to get a “deal” on a home, reducing your offer by even a few thousand dollars could mean that someone else will get the home you desire.
A slow market is a “buyer’s market. During a buyer’s market properties may languish on the market for some time and offers may be few and far between. Prices may even decline temporarily. Such a market would allow you to be more flexible in offering a lower price for the home. Even if your offered price is too low, the seller is likely to make some sort of counter-offer and you can begin negotiations in earnest.
More often than not, the market is simply “steady,” or in transition. When a market is steady, no real rules apply on whether you should make an offer on the high end of your range or the low end. You could find yourself in a situation with multiple offers on your desired house, or where no one has made an offer in weeks.
Transition markets are more difficult to define. If the economy slows unexpectedly, as it did in the early 1990′s and again in 2007-2008, people who buy on the high end of a seller’s market (like the late eighties and again in 2003-2005) could find their home loses value for several years. So far, no one has proven reliable in predicting when markets change or how good or bad the real estate market will become.
How Seller Motivation Affects Your Offer Price:
Truthfully, it is rather rare that a seller’s motivation will dramatically affect the price of a home, but it is often possible to save a few thousand dollars. The most common “motivated seller” is someone who has already bought his or her next home or is relocating to a new area. They will be under pressure to sell the home quickly or face the prospect of making two mortgage payments at the same time. Since that can drain a bank account quickly, most sellers want to avoid such a situation and may be willing to give up a few thousand dollars to avoid the possibility.
There are also family crises that can motivate a seller to make a quick deal. However, when you see a real estate ad that mentions “divorce,” “motivated seller,” “relocation,” or something to that affect, beware. Although the facts may be true, that does not necessarily mean the seller is motivated to make a quick and costly sale. Most likely, the ad is more designed to generate phone calls and leads rather than sell the home.
However, there are times when a seller is truly distressed, willing to make a quick sale and sacrifice thousands of dollars. With the seller’s permission, the listing agent will post this information along with the listing in the Multiple Listing Service. They may also inform other agents during office and association marketing sessions or by flyers sent to other real estate offices. Provided this information has been made generally available to Realtors, your agent should know when a seller is truly motivated and when it is just “puff” designed to elicit interest in a property.
The exception is when an agent is selling a home they have listed themselves or selling a home that was listed by another agent from their own company. In such a situation, the agent may be acting as an agent for the seller, or as a “transaction broker,” providing limited representation to both you and the seller. In such a situation, they cannot legally provide you with information that would give you an advantage over the seller.
The Final Decision on Your Offer Price:
Comparable sales information helps you to determine a base price range for a particular home. Adding in the various factors like property condition, improvements, market conditions, and seller motivation help determine whether a “fair” price would be at the upper limit of that range or the lower limit. Perhaps you will feel a fair price is outside of that price range.
The “fair” price should be approximately what you are willing to agree on at the end of negotiations with the seller. The price you put in your offer to begin negotiations is totally up to you and depends on your negotiating style. Most buyers start off somewhat lower than the price they eventually want to pay.
Although your agent may provide advice and guidance, you are the one who makes the decision. The price you put in the offer is totally up to you.
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Homeowner’s Insurance
February 19th, 2009 | Author: Benjamin Harris
Homeowner’s insurance is mandatory. When you purchase a home, your mortgage lender won’t allow you to close the purchase until you’ve demonstrated that you have proper homeowners insurance. Lenders usually insist that you pay the first year’s premium on said insurance policy at the time of the closing.
When you buy a home, you should want to protect your investment in the property (as well as cover the not-so-inconsequential cost of replacing your personal property, if it is ever damaged or stolen). Your clothing, furniture, kitchen appliances, and other valuables can cost a lot to replace.
You should shop for insurance ahead of time. Get quotes on insuring properties as you evaluate them or ask current owners what they pay for their coverage. If you overlook insurance costs until after you’ve agreed to buy a property, you could be in for a rude awakening.
When shopping for insurance, explain to the insurance agent what type and cost of properties you are looking at and where they are (zip codes). They should be able to give you a ballpark monthly cost estimate for insurance. Calling insurance agents now will also enable you to begin to evaluate which insurers offer the service and coverage you desire when the time comes to actually buy your home.
To help minimize the cost, you should buy the most comprehensive coverage that you can and take the highest deductible that you can afford.
Distinguishing fixed from adjustables rates
February 19th, 2009 | Author: Benjamin Harris
Like some other financial and investment products, many different mortgage options are available for your choosing. Two fundamentally different types of mortgages exist, and they differ in terms of how their interest rate is determined: fixed-rate mortgages and adjustable-rate mortgages.
Distinguishing fixed from adjustables
Before adjustable-rate mortgages came into being, only fixed-rate mortgages existed. Usually issued for 15 or 30-year periods, fixed-rate mortgages have interest rates that are fixed during the entire life of the loan.
With a fixed-rate mortgage, your monthly mortgage payment amount does not change. No surprises, no uncertainty.
Adjustable-rate mortgages (ARMs for short) have an interest rate that varies. The interest rate on an ARM typically adjusts every six to twelve months, but it may change as frequently as every month.
The interest rate on an ARM is primarily determined by what’s happening overall to interest rates. When interest rates are generally on the rise, odds are that your ARM will experience increasing rates, thus increasing the size of your mortgage payment. Conversely, when interest rates fall, ARM interest rates and payments generally fall.
Mortgage Payments
February 19th, 2009 | Author: Benjamin Harris
Mortgages undoubtedly constitute the biggest component of the total cost of owning a home. A mortgage is nothing more than a loan you take out to buy a home. A mortgage allows you to purchase a $150,000 home even though you yourself have far less money than that to put towards the purchase. With few exceptions, mortgage loans in the U.S. are typically repaid over a 15- or 30-year time span. Almost all mortgages require monthly payments.
How a mortgage works
Suppose that you are purchasing a $150,000 home and that you have diligently saved a 20 percent ($30,000 in this example) down payment. Thus, you are in the market for a $120,000 mortgage loan.
You sit down with a mortgage lender who asks you to complete a volume of paperwork. There are literally hundreds of mortgage permutations and options.
Imagine, for a moment, a simple world where the mortgage lender offers you only two mortgage options: a 15-year fixed-rate mortgage and a 30-year fixed-rate mortgage (fixed-rate simply means that the interest rate on the loan stays fixed and level over the life of the loan). Here’s what your monthly payment would be under each mortgage option:
$120,000, 15-year mortgage @ 7.00 percent = $1,079 per month
$120,000, 30-year mortgage @ 7.25 percent = $ 819 per month
The interest rate is typically a little bit lower on a 15-year mortgage versus a 30-year mortgage because shorter-term loans are a little less risky for lenders. Note how much higher the monthly payment is on the 15-year mortgage than it is on the 30-year mortgage. Your payments must be higher for the 15-year mortgage because you’re paying off the same size loan 15 years faster.
Total cost of a loan
But don’t let the higher monthly payments on the 15-year loan cause you to forget that, at the end of 15 years, your mortgage payments disappear; whereas, with the 30-year mortgage, you still have 15 more years worth of monthly payments to go. So, although you do have a higher required monthly payment with the 15-year mortgage, check out the difference in the total payments and interest on the two mortgage options:
A 15-year mortgage equals $194,147 in total payments and $74,147 in total interest
A 30-year mortgage equals $294,700 in total payments and $174,700 in total interest
It shouldn’t come as a great surprise that (with a decent-sized mortgage loan like this one) you end up paying more additional interest. The 30-year loan is not necessarily inferior, for example, if its lower payments better allow you to accomplish other important financial goals, such as saving in a tax-deductible retirement account.
Mortgage 101
February 19th, 2009 | Author: Benjamin Harris
Let’s start with the basics. What is a mortgage? A mortgage is nothing more than a loan that you obtain to close the gap between the cash you have for a down payment and the purchase price of the home that you’re buying. Homes in your area may cost $70,000, $170,000, or $770,000. No matter — most people don’t have that kind of spare cash.
Mortgages typically require monthly payments to repay your debt. The mortgage payments are comprised of interest, which is what the lender charges for use of the money you borrowed, and principal, which is repayment of the original amount borrowed.
Learning how to select a mortgage to meet your needs ensures that you’ll be a happy homeowner for years to come. You also need to understand how to get a good deal when shopping around for a mortgage because your mortgage is typically the biggest monthly expense of homeownership (and perhaps of your entire household budget). Paying more in total interest charges over the life of your mortgage than you originally paid for your humble abode itself is not unusual.
Suppose that you borrow $144,000 (and contribute $36,000 from your savings as the down payment) for the purchase of your $180,000 dream palace. If you borrow that $144,000 with a 30-year fixed-rate mortgage at 7 percent, you end up paying a whopping $200,892 in interest charges alone over the life of your loan. That $200,892 is not only a great deal of interest — it’s also more than the purchase price of the home or the loan amount you originally borrowed!
So that you don’t spend any more than you need to on your mortgage, and so that you get the mortgage that best meets your needs, the time has come to get on with the task of understanding the mortgage options out there.
Post-Closing
February 18th, 2009 | Author: Benjamin Harris
Congratulations on the purchase of your new home! Now that you have taken ownership of the property you will need to have your local services such as electricity, cable, and phone set up. Also, you should already be aware of the expenses that are typically associated with owning a home. Neighborhood Association fees, landscaping costs, and annual taxes should be budgeted for throughout the year to keep from getting into a financial bind.
As your agent, I can save you time and money by helping you coordinate the set-up of these local services. I already know who the local vendors are for such services as water and electricity, as well as others, so I can help provide you with a list of contacts.
Closing
February 18th, 2009 | Author: Benjamin Harris
Closing is where ownership of the home is legally transferred from the seller to the buyer. It is a formal meeting in which most parties involved in the buying/selling process will attend. Closing procedures are usually held at the title company’s office or lawyer’s office. Your closing officer coordinates the document signing and the collection and disbursement of funds.
In order for the closing to go smoothly, each party involved should bring the necessary documentation and be prepared to pay any related fees (closing costs). There may be more than one form of acceptable payment for your closing costs so ask the closing officer which form of payment will be required and to whom it should be paid.
Sellers sometimes pay for a portion or all of the closing costs, depending on local market conditions, terms of the purchase contract, and the seller’s cash and timing considerations. Any such concessions should be acknowledged in writing. Most lenders will allow a credit from the seller to the buyer for the non-recurring closing costs. However, they usually won’t allow a credit that reduces the amount of the buyer’s down payment or any of the buyer’s recurring costs, such as expenses for fire insurance premiums, Private Mortgage Insurance (PMI), or property taxes.
As your agent, I can save you time and money by being present at the closing, reading the documents on your behalf and answering any questions or helping to resolve any issues that may come up. I will also be available to manage any last minute or unexpected details that come up.
