Positive Real Estate Professionals

Living for tomorrow loses today. There really is no other way to say it any clearer. Whether it is being unsure, procrastination, or cold feet, it all leads to the same thing; putting off ’til tomorrow what can be done today. Whether it is purchasing a jacket that you have had your eye on, joining a real estate network, buying a new car, or buying a dream home, each of these can be a major decision. However, putting the decision off for another day can also be what causes you to lose out on the deal of a lifetime.

Now, before I go any further, let me state something clearly. When spending money in today’s economy, a buyer needs to be sure of what they are getting into. Some research is needed to make sure that it is a sound investment. With that said, you and only you can decide if it is the right investment for you. You can listen to 30 different people and you will probably get 30 different answers. You are going to be the only person that knows if it is right for you. Believe me when I say that you will know when the right one comes along. I always refer back to when I bought my home in Florida versus my home in Georgia. The home in Florida required one visit and just one house to know that I found the right one. The home in Georgia took 3 weekends and more than 60 homes to make up our mind. However, both times we knew we WERE going to buy and window shopping was not even an option.

So, let’s get back on track here. In the paragraph above, I mention window shopping. The reason for it is because that is what most people do. They have no intention of buying unless they come across the perfect buy. Frankly, I think you are wasting your time and the agent’s time. It is one thing if you are ready to buy and you just need something that will strike your fancy. But, on the other hand, if you are just a tire kicker, window shopper, or fence sitter, then why even engage an agent other than to gain information?

Just the other day I was watching HGTV and saw a potential home buyer that found the home of their dreams. However, instead of buying it, their comment was that they wanted to see if there was a better bargain out there. After looking for 12 more hours and not seeing anything better, they called it a day. The next morning the couple got up, had breakfast, talked it over and decided to call their Realtor®. To their surprise, the home they had really liked was already under contract. They wanted to know how this travesty could have happened. The Realtor® referred back to the conversation she had with them the previous day. To put it simply, she told them to live for today and not tomorrow. Some markets might be unstable, but when you find what you want, you buy it because it might not be here in another 24 hours.

In closing, there is not much for me to add to what she said. It is what it is. There is never a good reason for putting off ’til tomorrow what can be done today.

Many people who are buying homes today are young, first time buyers. Because of the enormous financial responsibility that buyers are taking on, it is important to do a bit of research into the different options that may be available. With the soft sellers’ market that many areas of the country have been experiencing over the past few years many Realtors®, builders, and sellers are offering more incentives to buyers. Keep in mind that there is no one single, monolithic market when it comes to real estate but thousands of local and hyperlocal markets that are as unique as snowflakes. With that said, one of the most common incentives offered to buyers is the home warranty.

Let me make clear that a buyer should not assume anything when it comes to the home buying process; this includes that a home warranty will be included as an incentive or that one is even available for purchase. Ask your Realtor® about the availability and cost of a home warranty. A home warranty is a service contract that is generally offered for purchase to a home buyer and covers the kinds of mechanical breakdowns that regular home insurance doesn’t. Many home warranties do have deductibles that the homeowner is responsible for paying on a per incident basis. The details of these contracts do vary but they generally cover the repair or replacement costs from normal wear and tear of electrical, plumbing, and heating systems as well as many major appliances. It is important to discuss with your Realtor® what is covered and what is excluded by the home warranty service contract; if you are still unsure consult an attorney. The duration of the home warranty coverage can vary so this is another important point to to be clarified. Additionally, many home warranties can be extended on an annual or multi-year basis for a fee so understanding whether your home warranty can be extended is also important.

There are some common complaints associated with some companies that offer home warranties so it is important to check with either your state’s regulatory agency or your state’s Attorney General’s Office (Click HERE for a complete list) for complaints and/or pending litigation. Some common complaints include the exclusion of pre-existing issues (many of which can be discovered by a thorough home inspection), many home warranty companies favor repair over replacement, and many home warranty companies retain control over who does the work. Of course you can always ask your Realtor® about the reputation and practices of various home warranty companies. Many Realtors® have first hand knowledge and experience with the various home warranty companies.

Your Realtor® can advise you on many of the pros and cons of a home warranty. If a home warranty is being offered as an incentive, be sure the premium is being paid in full for the term (length of time) of the agreement and that it is disclosed on the final escrow statement (HUD1). If a home warranty is not being offered as an incentive, it is ultimately the decision of the buyer to determine if the purchase of one is in their best interest.

I have seen the video below several times and it has always spoken to me the same way. Regardless what is happening on Main Street or Wall Street, if you are in the position to buy, then you are in a position of strength. This is true whether it is the housing market, the auto industry, the boating industry, or maybe the furniture market. However, the real question is how strong is your buyers strength? That is the question that I will try to help you answer in this article.

The first thing that you have to understand is the meaning of “buyers strength.” This is not something that you can look up in a dictionary or in a Wiki somewhere. Buyers strength is simply put, your ability to purchase in today’s market. Whether you have the liquid capital or access through a lender is the first and biggest difference in buyers strength. There are those that have and then there are those that have not but can get. The haves are in the best position of strength because the funds are readily available and the purchase is not contingent on financing. Frankly, there are way fewer of these buyers on today’s market than what I would like to see. My main feeling is that many buyers are waiting to see what is happening on the market. Personally, I think that is a huge mistake. Fence sitting is not the prescribed medicine for the ills in today’s economy. You can read Indecision is the graveyard of good intentions and Did you sit on the fence too long? Interest rates spike! for different points of views on this topic.

Now, let’s get back on track. For all of you buyers out there that do not have the readily available cash to purchase, here is how you can gage your own buyers strength prior to going to a lender. Yesterday I was contacted on one of the other sites that I write for by a fellow blogger. Her and her boyfriend are getting ready to buy a home and they have been looking for a mortgage calculator that would take into account their credit score when helping them calculate the amount that they can borrow. Well, quit looking folks because there is not one out there that will take into account the credit score when it comes to the amount that you can borrow. Credit scores drive the loan to value or how much of the purchase price that you can borrow. It also gives the lender a basic “qualification” point to start with. Also, in some cases, it might determine the amount you can borrow if you are exceeding the conforming loan amounts, but that is a horse of a different color.

When you are looking to qualify for a home, the first things that you want to take into account is how much money you make each month. How long have you been on your current job? And how long you have been in the same industry? Another thing that lenders will look at is how timely you have been paying your rent or mortgage over the last 12 to 24 months, depending on the lender. Also, the lender will take into account how you pay your current trade lines that are reporting on your credit report and how long they have been in existence. Once all of these facts are gathered, this will truly determine your “buyers strength.”

[youtube]http://www.youtube.com/watch?v=rQhhohPfLvg&feature=related[/youtube]

I read numerous economic and real estate related articles from the blogosphere everyday. I try to get a sampling of various articles so that I do not simply get homogeneous articles that are parrots of one another. I believe the best way to get information is from diverse sources. Networks such as Positive Real Estate Professionals provide many different viewpoints from real estate industry professionals.

Today there was some great news from builders around the country. The National Association of Home Builders in conjunction with Wells Fargo use a confidence index to gauge the current sales and give a six month projection of future sales. The NAHB / Wells Fargo Housing Market Index (HMI) first published in 1985, uses a ranking system with anything below 50 being indicative of poor conditions. Last year the HMI averaged 16 last yeat with much of that attributed to the early 2008 responses.  As you can see from the historical data below, the HMI is trending in a very positive direction.

The growth, as you can see, is not spiking as could be indicative of erroneous factors outside of builder confidence. Instead the growth is moderate and consistent. There is a further regional breakdown, Northeast, Midwest, South, and West, all of which show positive growth. Granted these four regions are not representative of the multitude of local and hyperlocal markets so confidence and actual statistics can vary.

NAHB Chief Economist David Crowe said of today’s report:

This is a very encouraging sign that we are at or near the bottom of the current housing depression. With the prime home buying season now underway, builders report that more buyers are responding to the pull of much-improved affordability measures, including low home prices, extremely favorable mortgage rates and the introduction of the $8,000 first-time home buyer tax credit. (source: National Association of Home Builders)

This news coupled with the stock market gains of last week demonstrate positive indications of renewed growth. I am also encouraged by all the posts I have been reading that indicate that Realtors are experiencing increased buyer interest and sales.

Today’s difficult economic reality has many people being vigilant on their spending habits. The following article from Danny Thornton is a great example of smart economizing and potentially costly economizing. I hope that it provides some good food for thought, especially if you are considering buying or selling your home.

Via Danny Thornton on The Mortgage And More Blog:

Over my years of service in the mortgage industry, I have always encountered people that are out to save a dime. Now, before you get the wrong impression, I do not think that saving money is a bad thing. However, when it means that you need to cut corners, I think it is the worst thing that you can do. When it comes to Real Estate transactions, it is best to not go it alone. Too many times I have been speaking to an applicant that is looking to acquire financing to buy a home and learn that they are doing it without a Realtor. In my opinion, this is about as silly as taking a shower without the soap. The water can help knock off most the dirt, but the funk is still going to be there.

Whether you are buying or selling a home, when you decide to take it on by yourself, it is even more difficult. Not only do you lose the expertise of the Realtor of today’s market, you also lose their expertise in marketing. That is just the two things that are on the surface. You lose much more than that when you really get past the surface. A Realtor can instruct you on things that you do not know about, such as the benefits of a particular neighborhood that you might want to check out. Ultimately, going into a selling or buying mode for Real Estate without the advice of a professional is as bad of an idea as it would be to go to Alaska in the middle of Winter with just a bathing suit.

Where most people go wrong with this thought is they typically do not know the ins and outs of the Real Estate Market. Leaving your Realtor on the shelf might cost you money in the end at the closing table. You are basically leaving your negotiator at home. Would you want to have take on a hostage situation without the backing of the best negotiator on the police force? I do not think so.

So, before you decide that you want to list that home on FSBO.com or any other site that leaves out the Realtor, think about what I said. You might save the money on the closing, but if you misprice your home or have trouble with negotiating, you could lose even more money than you are saving. Oh, and before I forget this most important fact; time is money. How much is your time worth?

With this being undeniably a buyer’s market there are a lot of properties for buyers to choose from; this also means that there are a lot of properties for Realtors to wade through to try to match buyer’s wants. This being the case there has been a conundrum in the past two years: why lenders who had agreed in principle to the terms of a short sale would diminish the likelihood of that sale occurring? What I am referring to is the unabashed insistence by many lenders that Realtors on both sides of the transaction take reduced commissions. Now many of you may wonder what the issue with this is; don’t all Realtors drive Mercedes and eat at swanky restaurants? This idea is not only wrong but it presumes that Realtors are heartless as they dine on caviar while their clients can barely afford hamburger helper. Keep in mind as you read the following article from Sandy Noll that the general commission on a sale is 6%. This 6% is then split 3% to the seller’s agent and 3% to the buyer’s agent. Sounds good right? Wait, both agents then have to split their 3% with the Broker/Owner of the real estate office they work for. This split can range from 70%-30% to 50%- 50%. So on that $100,000 dollar sale the total commission is $6,000. Split among the agents makes it $3,000 each and then taking a 70%-30% split (which is very generous on the part of the Broker/Owner) you get the agent making $2,100. While this may seem like a lot, both agents will have to pay out of pocket for all of the marketing of their listed properties and all the taxes. So my point with this big lead in is cutting the commissions of the Realtors not only may be counterproductive in the selling of short sales, it also directly affects the families of Realtors who work hard to provide for them.

Via Sandy Noll:

Score one for Realtors®! This is great news considering the number of short sales in our market and never knowing if you’ll be compensated for all your hard work and time spent!

Fannie Mae Announces Policy Prohibiting Lenders from Reducing Commissions Below 6% on Short Sales.
March 2, 2009 5pm

Every agent who has participated in a short sale transaction knows there may come a moment when the lender announces a reduction in the commission it will approve as a condition of accepting an offer. A great deal of angst circulates around this issue because, despite what the seller agreed to pay in the listing agreement and notwithstanding the advertised SOC, the transaction cannot close without the lender’s approval which is often a “take it or leave it” position. The buyer and seller want the transaction to close and agents do not want to be a road block to that outcome. Balanced against this is an agent’s and broker’s need to earn a reasonable income and justify their own expenses and liability incurred in a transaction. If lenders condition acceptance of short sale terms on agents’ willingness to accept a reduced commission, agents really have no power – except to decline to list or show short sale properties in the first place – a tragic result for everyone, including lenders.
Fannie Mae was made aware of this pattern and the adverse consequences of agents and brokers avoiding short sales. As a result, Fannie Mae announced a revised policy that took effect March 1. Now, “closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate.” This policy applies to Fannie Mae loans only and only to those loans where the borrower is in default. Nevertheless, it should give agents and brokers a degree of comfort in knowing that the agreed and earned commission will be paid on many short sale transactions. For a property secured by a Fannie Mae loan, where the seller is in default, the lender may no longer condition acceptance of buyer’s short sale offer on the agents’ and brokers’ agreement to reduce their commission below a total transaction commission of 6%.

The new Fannie Mae policy says the following:

Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.

Sandy Noll
Realtor
Keller Williams Realty Kirkland
425-890-0878
sandy@sandynoll.com
www.letsachieveyourgoals.com

http://positiverealestateprofessionals.com/washington/

Your Residential Real Estate Specialist

This is by far one of the best articles I have come across in a long time that really spells out the need for buyers to get a pre-qualification letter as a first step in finding the home that fits perfectly for their situation. In today’s market, when gas is expensive, realtor safety is always a concern, and setting realistic expectations for buyers is more important than ever,  it only makes sense to help buyers maximize their home search. Debbie goes into many of the reasons why this is important. Her article is not meant to discourage any qualified buyer. It is I believe meant to help both buyer and realtor to know what type of house they should be looking for. I am sure you will enjoy this article from one of the most successful realtors in Virginia.

Via Debbie Malone RE/MAX 1st Olympic:

Pre-qualification- When you prequalify for a mortgage, the lender calculates the approximate amount you’d be able to borrow, based on your current income and debt.

Simple right?

Then why don’t buyers understanding this is the first step in the home buying process? Not going through the Sunday Real Estate section and picking out pretty houses they want to see. And, why are agents moonlighting as tour directors? I do have better things to do with my time- really, I do. If you’re serious about buying a home get pre-qualified before you start viewing homes. Agents, if you’re opening doors for just anyone you need to stop.

So Deb, tell us how you really feel.

I received another call on one of my foreclosure listings. After answering several questions about the condition and size, I told the caller the usual info: sold as is, bank would not pay closing costs, they require a pre-qual to accompany all offers. The caller told me they had been looking at homes for several months and wanted to see this one. They aren’t working with an agent, great.

I asked which lender had pre-qualified her. “Oh, we haven’t been pre-qualified yet.” Let me understand this, you’ve been looking at homes, with an agent, and no one has pre-qualified you? NO. Well then, how would do you know the loan amount you’ll be approved for without speaking to a lender? “We’ll get pre-qualified before we make an offer. When can we see it?” Hold on…. I need to explain a few things first:

1. I don’t just run over to a listing and open the door for you. I meet with you at the office, get some information and then we set up the showing appointment.
   
2. I don’t show homes without you first meeting with a lender and producing a pre-qualification letter. (Thank you Judi for teaching me that early on in my career.)
   
3. Not keen on that? You are welcome to call any agent you would like. They’ll be able to get you into the home and I hope it works for you.
   

We all know pre-qualification is just the first step in the home buying process. And I’ve had committment from the loan officer only to received a call a week before closing telling me the loan’s been denied in underwriting. But, times aren’t so desperate that you’re going to run me ragged showing you houses you can’t afford. It’s not fair to a seller to set up an appointment and get their hopes up, then show their home to someone who cannot afford to buy it. I don’t work that way. Miffed? I’m sure there’s an agent out there ready to let you in, but it’s not me. Buh-Bye now.

From the Free Dictionary:

Prequalification. When you prequalify for a mortgage, the lender calculates the approximate amount you’d be able to borrow, based on your current income and debt.

Many lenders offer free mortgage calculators — sometimes called prequalification calculators — on their websites to help you estimate how large a mortgage you’d be approved for.

Since you don’t complete a mortgage application or provide financial details, prequalification is not a guarantee, and simply helps you determine how much you should plan to spend on a home. But before you’re approved for a mortgage, you’ll have to go through the mortgage application process, including a credit check, and provide financial documentation.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

It is true that there is a lot of volatility in the market and has been for some time. Along with this volatility comes a lot of completely baseless assumptions. One of the biggest misconceptions is that prospective buyers cannot get financed. This myth keeps a lot of qualified buyers from even applying. What is worse is that this is the best time for home buyers looking for a primary residence to actively pursue responsible home ownership. It is a buyer’s market with lots of available inventory and near historically low interest rates. The following post is from a respected Realtor in Washington state. I hope you find it as informative and as relevant as I did.