Why hire a Realtor?

O.K.

I’m continuously baffled as to why a buyer would NOT hire a Realtor to help them buy a house.  Every week there are examples of people that really need to work with a professional and stories about people that did work with a Realtor and are soooo glad they did.

This weeks hurrah:  in reviewing settlement statement (which we do at least 2 days prior to closing) we noticed that the bank was requiring them to pay money up front for the MIP (mortgage insurance premium).  The house had appraised higher than the purchase price and the house was being insured for that appraised value.  The difference in this amount plus the money they were paying for upfront MIP was MORE than 20% .  If they were to take the upfront MIP and put it toward the purchase price they would never have to pay MIP.     It’s a good thing they were working with an experienced Realtor.  If they hadn’t they would have paid thousands of dollars toward MIP that was not even needed.

This weeks grrrr:  buyer is just going to open houses looking for a house.  she WON’T work with a Realtor.   Through various conversations with her i have educated her but only on items that have come up in conversation.  Unfortunately, there is still a LOT she does not know.  AND she is looking at homes that don’t fit her price range (most open house ads do not list the price of the house).  She does not understand the lending process, she almost went to an auction to bid on a property and didn’t know she had to pre-register (or anything else about auctions), and i could go on and on.  I cannot imagine the disappointment she is going to endure by making uneducated choices.  I’m also very worried that she is going to be taken advantage of.  The worst part of all is that BUYERS DO NOT PAY FOR A REALTOR’S SERVICES!!!  generally the company that has the house listed shares their commission with the buyers agent (it’s called co-operating )

It’s like finding a lost puppy that has a collar on.   you try to get it to come to you so you can help and call it’s owners.  but it won’t come to you.   after an hour of trying you leave it, know it’s going to be left out in the cold, no shelter, love, or food for the night.   and all you wanted to do was help.  poor puppy.  I hope it makes it home safe and unscathed.

Getting married and need down payment for home purchase?

The Washington Post published an article today that is really better suited for spring but is a good article none-the-less.

The gist of it is that if you are getting married and are hoping to get cash gifts so you have enough down payment on the purchase of a home, you can do so without the dreaded ‘no no’ of asking for cash.  You can give the wire transfer or deposit information for your home purchase bank account…  a special account you set up specifically for people to send gift money to.  Please read the article as there are some details you will want to make sure to follow.

For those of you in South Central Wisconsin, give me a call if you are interested in doing this.  Note that not all loan programs will allow gift funds so it’s important for you to really understand your loan.  Also, the loan type may dictate the condition or type of home you can purchase.  You want to work with a lender that will explain the right details to you and an experienced Realtor that knows what they are doing.

LINK TO WEDDING REGISTRY CASH FOR HOME PURCHASE ARTICLE

Take care,

Susan

3 years after the crash

It is now about 3 years after the real estate market crash.  Many things have happened since then (ex: crappy jobs market and our country’s leadership in a downward spiral).  Not only is the foreclosure rate still very high (which i expected and believe will continue for at least another 2 years) but, with the continuation of high unemployment rate, the salary base of most new jobs being less than they were 10 years ago, and the remaining uncertainty of lay offs or downsizing, the real estate market is still bad.

Yes, houses are selling.  Yes, people are buying.

I’m not going to talk about house values/prices increasing or decreasing because it varies depending on community and the price range (ex:  the higher priced home values are pretty much holding steady but the lower priced homes seem to be decreasing slightly… mostly because this is the main price range of the foreclosure homes).

Buyers are still leery.  Those that have jobs are worried what would happen if they lost their job.  The bank are still making it incredibly difficult to get loans (Bank of America cleverly covered up the closing of their mortgage lending doors with the $6 a month increase in debit card fees…. did you know they abruptly stopped mortgage lending a couple weeks ago?)

But, buyers can get GREAT deals!!!   This is one of the negatives for sellers.  Because there are so many foreclosures and homes selling for well under market value, sellers are dealing with the reality of “low ball” offers.

We are moving into the holiday and winter season (which is historically slow) but i have not yet seen a slow down in buyer traffic.  This is good news for everyone.

The news tells us the market is horrible one day and the next they say that it’s in an upturn.  The data they feed off of varies and is generally nationally driven.  Each local market is going to be different.  Contact your local Realtor (which is me if you are in Dane or Dodge County WI) to find out what your local market is doing.

So, that is just a quick update.  Please note that my viewpoints are just that…. it is what I see in my local marketplace and are based on my experience.

Have a great day!

Susan

Personal Update

After a brief blogging hiatus and a move 1/2 way across the country, I am back.  I originally had plans to move back to my home state of Wisconsin for family reasons but with the real estate market the way it was I decided to move sooner rather than later.

So, earlier this year I packed up 20+ years of life in beautiful bustling Maryland and moved to Madison, WI.  Beautiful in it’s own right but a lot slower paced.  I am now enjoying reconnecting with family and friends and learning the ‘personality’ of buyers and sellers in the mid-west (which is quite different than the east coast).

This is a great new adventure for me and I am incredibly excited about my future here in WI.

quick blurb on 1 year after crash

I was watching GMA this morning and they did a 2 minute blurb on where we are 1 year after the crash started.  They had experts to represent 3 areas:  stocks/growing your money, housing, and the job market.

The summary is that in each of these areas the experts say we are in recovery.

The unemployment rate apparently lags the recession so, last year we were at 6.2% and now we are at 9.7%.  The number of unemployed has decreased significantly in the last few months.

The stock market is down 16% from 1 year ago but, according to the chart they showed, the market was down by over 30% a few months ago and it continues to get closer to where it was a year ago with each passing month.

The housing market report said that existing home prices are down 15.1% from last year at this time.  We are in recovery mode and the decline has slowed significantly and they said that in 1 year from now it will be VERY clear that the market is better.

Again, this was a 2 minute segment that they did.  I didn’t have a chance to get the experts names down.  All of these reports, of course, were national. 

The housing market report was, again, reassurance that the bottom did indeed hit a few months ago.  Especially the real estate market here in Maryland where we weren’t hit as hard as real estate in other states and Maryland continue to be a very transient area. 

If you or anyone you know is looking to buy or sell in Maryland please let them know about me…. one of the most trusted Real Estate Resources in Maryland.

Susan Rahn

Home Sales are Up AGAIN!

This was a great article in the LA Times…   http://bit.ly/18MHjB

Is the economy healthy?

This article was Yahoo IM’s pop up today.  It caught my eye and proved worthy of reading.  It definitley seems positive.    http://news.yahoo.com/s/ap/20090825/ap_on_bi_ge/us_economy

It seems to me that about every 4 days or so the media changes their stance on where the economy sits.  So, we should be seeing more headlines by this weekend that say the economy is getting worse

Are there any psychics out there?

Every day there are new articles published on various high profile web sites claiming to be able to predict the future of real estate.   Reading them actually gives me a headache and i find myself debating outloud in my living room with these articles.  

Experts say the market has bottomed out one day, the next day they say prices will continue to decline.   They predict the market getting better by mid 2010 then they say late 2012.   It goes back and forth almost daily and their reasoning they use  and the experts they get their information from changes daily as well.   I haven’t been posting real estate ‘news’ becuase it’s not really news.

I know the past trends, how there were more homes that came on the market than what were sold in the last 30 days in my area.   that there are more homes under contract now than there have been in the last many months.. in my area.

I think anyone that tries to predict the nations Real Estate future timeline is asking for debate and trouble.   This is just my opinion.   I’m not sure the people who write and publish these articles understand what type of confusion they really create in the marketplace.  They are a lot of the reason there are soooo many buyers that are just not sure about buying.   If they would just stop publishing speculation and publish the stats the buyers may get out there and buy and we’d all be better off.

Thanks for letting me vent

Extension for Homebuyer Tax Credit?

On August 10th the National Association of Home Builders called on Congress to extend the Homebuyer Tax Credit.  The summary is they have asked for the Homebuyer Tax Credit to be extended thru November 30, 2010 AND to include all purchases of primary residences, not just first time homebuyers.

They are also calling for correction to the faulty appraisal, improving housing credit conditions.

I’m all for this.  Maybe not extending it for so long but I’d love to see them open it up to pricipal residence buyers.

You can read the entire article here .

Understanding Short Sales

There is a great article on MSN’s website about buying a short sale property.  I’m including the link here and reproducing it below (as they do change their sites so this link may be no good shortly)

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/how-to-buy-from-sinking-homeowners.aspx

There are few active buyers in the real-estate market these days, but every one of them seems to be looking to buy a foreclosure or a short sale.

Foreclosure is a fairly well-understood process, but as “short-sale” signs sprout like weeds, you may wonder what they’re all about.

When a lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner, it’s called a short sale. The lender forgives the remaining balance of the loan.

Everyone loses — a little

Short sales are a mixed bag for the buyer, the seller and the lender.  

If you’re a seller, a short sale is likely to damage your credit, but not as badly as a foreclosure. You’ll also walk away from your home without a penny from the deal, possibly making it difficult for you to find another place to live.

The buyer will get the property at a reduced price, but in all likelihood it will have its share of problems (think fixer-upper), and the new owner will need to go through considerable red tape to make the deal happen.

The lender will take a financial loss but perhaps not as large as it would have if it had foreclosed on the property.

Further, there are two situations in which an attempt at a short sale is almost certain to fail:  

• No default on loan. Lenders almost never will accept short-sale offers or requests for short sales until the borrower is far behind in payments and a notice of default has been issued.
•  Bankruptcy. If the seller has filed for bankruptcy, forget it. Few, if any, lenders will consider a short sale when the seller has filed for bankruptcy because negotiating a short sale is considered a collection activity, and collection activities are prohibited in bankruptcies.

Can it work for you?

Buying a home in a short sale can be a hassle, so why should you consider it? Mainly, it boils down to the bottom line. You can get the property for a substantial discount. Because the lender is eager to get back as much of the money it lent out as it can, you may also get favorable financing terms.

Because sellers play an active role in the short-sale process, you will have their cooperation (and most likely won’t need to evict them upon taking possession of the home). This is not always the case with a property that has gone through foreclosure.

You may have become aware of the distressed situation on a property through an agent, a for-sale-by-owner ad or word of mouth, but this is not a do-it-yourself project. A short sale is one real-estate deal where you really need help from an experienced agent or attorney. Not all real-estate agents know how to handle a short sale, so make sure you consult with one who can demonstrate special training or a good track record with short sales.

Why lenders (might) agree

It might seem counterintuitive for a lender to go along with a short sale. After all, a lender is legally entitled to pursue the full balance of the loan. When a homeowner falls behind on payments, the lender can (and often does) hold the borrower responsible for every penny owed.  

And yet more and more lenders are willing to consider approving short sales. In a January survey of senior loan officers conducted by the Federal Reserve Board, more than 65% of those surveyed said they anticipated short sales to be among significant loss-mitigation steps for 2008.

Lenders are painfully aware of just how bad the foreclosure crisis is. They know the cold reality is that a large number of struggling borrowers will end up losing their homes and often see the sense in accepting the inevitable and trying to minimize their losses. Yet some lenders seem to remain in denial.

“Some of them are being tougher right now than they have a right to be,” says Richard Geller of MortgageReliefFormula.com. “I wonder if they expect a big bailout somehow. I expect lenders to get a lot more desperate later in 2008.”

Foreclosure is an expensive and time-consuming process for a lender. By agreeing to a short sale, the lender wraps up its little mess quickly and perhaps with a smaller loss than in a foreclosure.

Remember that after foreclosing the lender owns the home and has to maintain it, insure it and pay taxes on it. So instead of receiving payments each month, the lender is now forking out money every month. Plus, short sales help the lender look good on paper — the property never gets listed as an actual foreclosure, which helps the lender’s numbers. Lenders often see short sales as the lesser of two evils — if the numbers make sense for them.

10 steps to follow

1. Identify potential short sales.

Locate properties in your area in danger of foreclosure. You can use an online database, search courthouse listings and legal ads or tap an experienced real-estate agent as a buyer’s agent.

First, try to determine how much is owed on the house in relation to its approximate value. If the amount owed seems high, the property is a good candidate because it indicates that the seller might have trouble selling it for enough to satisfy the loan. Pass on those in which the owner has a lot of equity in the home; the lender likely would prefer to foreclose and resell nearer the market price.

2. View the property.

Gauge its condition and come up with a rough estimate of how much it’s going to take to repair or renovate. If it needs work, many “normal” buyers won’t consider it, which is good for you.

3. Do your research.

What is the property worth? What’s the profit potential? If you’re an investor or even a homeowner planning to live in the home a short time, you’ll want to profit from the deal.

4. Find all liens and mortgages.

Ask the seller or his agent what liens are on the property and which lender is the primary lien holder.

5. Figure out the financing.

This is critical. You have to know how you’re going to pay for the property. If you’re a good credit risk, the existing lender may be willing to give you a loan. Because the lender already may have a lot of your information in the short-sale paperwork, it may be able to expedite the loan application process.

It’s important to understand that in a short sale you have to have the ability to move quickly. Once an agreement is worked out, it is common for the lender to require closing in as few as 20 days. That’s too late to start shopping for a mortgage.

6. Contact the lender. 

You or your agent should speak with the loss-mitigation department (or perhaps the resource-recovery department) rather than the collection or customer-service department, which is interested only in recouping past-due loan payments.

Finding the decision maker can be one of the biggest initial challenges. You will first need to have the homeowner complete and sign (notarization is usually required) an authorization letter, which gives the lender permission to discuss the mortgage situation with you.

7. Complete the lender’s short-sale application, if there is one.

Many lenders have an application specifically for a short-sale request.

8. Assemble the proposal.

The proposal generally consists of a package of materials, including the application and authorization letter, plus:

• A purchase and sale contract — signed by you and the seller — to buy the property for a specified price. The lender is not going to entertain tentative offers. You’re not going to get the chance to ask the bank, “Would you take X number of dollars?” In most cases this also means posting a sizable amount of money to demonstrate your desire and ability to go through with the transaction if it is accepted. If you can’t make a sizable down payment, the lender has no reason to believe you can do any better than the last owner. It’s also very important to the buyer that the contract be contingent upon all lenders approving the short sale in writing.  
• A hardship letter. It’s important to remember that a lender will not even discuss a short sale until the homeowner has fallen behind on payments — usually 90 days. The lender must be convinced taking a smaller loss now is better than a bigger loss later. To make that case, start with a letter written by the seller giving an overview of the seller’s desperate situation. The lender must recognize the seller’s inability to pay the loan — immediately and in the foreseeable future — and that the situation is irreversible. The seller should supply as much evidence and documentation as possible, such as divorce papers, evidence of job loss, delinquent accounts, utility shutoff notices, car repossession paperwork, the last two years’ tax returns, recent pay stubs and recent bank statements. If the lender thinks the seller has money or assets stashed away, it will never go along with a short sale.
• A statement of the property’s value. This can be an appraisal or a broker’s price opinion. The lower the estimate of the property’s current market value, the better it will be for you. You want to show the lender that the seller would not be able to get enough for the home via a normal sale to satisfy the loan. Compile a list of all the negatives and problems of the home that negatively affect the value and make it undesirable to the average buyer and tougher for the lender to resell. If the lender realizes the property will bring it nothing but headaches, it will be more likely to OK a short sale. MortgageReliefFormula.com’s Geller, who has participated in hundreds of short sales, says this step is critical and advises taking it before the lender does a valuation. “There are ethical and legitimate ways to get a low valuation, and if you show this to the lender to start with, your offer won’t look so low,” he says. Geller adds the offer to the lender can be below the amount of valuation. “The offer can be 85% in areas that are slow but not terribly distressed and as low as 50% in really distressed areas.”
• A detailed report of the costs and liabilities. You want to show the lender it would be much better off letting you take the property off its hands. If you can convince the lender the home is a money pit, all the better. Take photos of any damage and get estimates of the repair costs. Note: This is also a good opportunity for you to take an honest look at the property and decide if you are willing and able to invest the time and money required to fix it up. Remember: A short sale is always an as-is sale. The lender is not going to pay for or otherwise be responsible for any repairs. But if the lender forecloses, there’s a good chance it will be forced to make repairs just to get the house resold.
• A settlement statement. This statement (which can be prepared by a closing agent or real-estate lawyer) outlines the purchase price, the closing costs and any other costs or fees involved in the transfer of the property. Often referred to as a net sheet, the information can be entered onto a HUD-1 Settlement Statement to show the final, negative result at closing.

9. Negotiate.

It’s not uncommon for the lender to reject your offer or to come back with a counteroffer. As with any real-estate transaction, you should figure out beforehand what your absolute highest limit is and not be afraid to walk away if the lender won’t meet your figure.

10. Seal the deal.

Once you’ve reached an agreement that all three parties (you, the seller and the lender) are OK with, get everything in writing and officially recorded. Make sure the seller understands all the terms of the deal. Next comes the closing, then the property is yours.

More important details

Title search: The entire process gets far more complicated and uncertain if there is more than one lender involved. Second or junior lenders often are the ones absorbing most of the loss. If there is a second mortgage or a home-equity line of credit, you’ll need approval from all lenders involved. In addition, you may find your mortgage loan was sold to another entity in a process called securitization, and therefore you also need approval from that company.

Be sure to do a title search, and verify the lien position of the lender you plan to contact. Pursue short sales only with the primary lien holder. Making a deal with a junior lien holder is a waste of time, as you will still be on the hook to the primary lien holder for whatever is owed to it.

Tax break: The Mortgage Forgiveness Debt Relief Act of 2007 gave short sellers a big tax break by changing the way the forgiven amount is viewed for tax purposes. Before passage of the act, that amount was considered as income for the seller and was subject to tax. However, the new law removed that tax liability.

Timing: While you negotiate with the lender, the clock keeps ticking. Do everything you can to get the lender to move quickly. Many short sales fall apart because the lender moves too slowly and fails to complete the deal before the property goes to auction.

Credit: Some buyers have successfully negotiated with lenders to minimize damage to sellers’ credit ratings. The lender has no obligation to agree to this, but if you can persuade it not to report the short sale as a black mark on the seller’s record (and put this in writing as part of the deal), it will give the seller a big head start in rebuilding his or her financial life.

Typically, the loan will show up on a credit report as “paid,” but it will carry a notation that says something like “settled for less than originally owed.” That is more favorable than a foreclosure but still negative.

This story was reported and written by Bobbi Dempsey for Bankrate.com.