Quick response times are the order of the day. The advent of texting and mobile emailing has put the expectation of five minutes or less turn around time between question and answer. There are still a few old school real estate professional that think they are doing fine if they get back to an inquiry from a customer or client in 24 hours. Unfortunately their business will shrink exponentially. With basic cell phone, Blackberry and touch screen phone technology there is no reason why someone should not expect, under most circumstances to get a quick response (five minutes or less) to a question. This brings the obvious question: Why would you work with a realtor who did not possess a Blackberry or touch screen phone with a data plan? This technology is fundamental to operating in a professional manner in the world of real estate. Even if you do not use these devices personally as a client or customer, it is essential that your agent has the capability. This way they can communicate more effectively with cooperating agents, insurance companies, inspectors, surveyors, title companies and attorney’s to assure you are getting the most prompt and highest quality service. Quick and effective communication can mean the difference between a successful transaction and a deal that crashes like a deck of cards.
Remember to inquire whether your real estate professional utilizes mobile emailing and texting. Even if you are a technophobe and dislike the ever-changing world of new devices you will regret using a realtor who is not up on the latest trends.
Friday, August 20, 2010
Tuesday, August 3, 2010
Low Balling - The Art of the Offer
It is a buyer's market without a doubt but does that mean you can throw an offer in of 50% of list price? Quite frankly, you may as well play the lottery. You have about the same odds for success. Most buyers are feeling beaten up enough with the state of the economy and the general doom and gloom they are hearing from the news everyday. They are in no mood to be slapped in the face with an insulting offer. In general, if you are truly interested in the property you will end up shooting yourself in the foot by shooting a low offer. The sellers will feel combative and will be less likely to settle without a fight. This means that in general you will end up paying more by low balling. You should ask your agent what is the lowest reasonable offer percentage. In the market I work in, the Vero Beach area, an offer in the 90% range will generally not insult the seller. This is relative to whether are not the property is priced realistically and to how motivated the sellers are to sell their property. It can be acceptable to submit recent comparable sales to justify your offer. When this is done it is advisable to have a polite and respectful cover letter written.
Now, low balling a bank owned foreclosure is not likely to offend anyone but you are just as unlikely to be successful. The bank usually orders three independent BPO's (broker's price opinions) before listing so they are aware of the value of the house. In addition, you and I (and our grandchildren) have bailed out the banks. They are not desperate. They could and still can basically borrow money from the Federal Reserve at 0% interest and charge 15% to 30% on credit cards. Don't think they are on their knees. Some investors that have bought foreclosures in the past are unaware of the new frontier. In the not so distant past real estate went up an average of 10% per year. If a bank foreclosed on a property that the owner held for 5 years, put 10% down and paid a small amount of principal off, the bank has a great chance of getting their principal back plus a bit more. Take the above example at a 100,000 purchase price: after 5 full years the house would be worth 161,000. The house could sell at a 40% discount and the bank would still make out okay. Today, due to the economic malaise, banks are taking a huge hit on the principal they loaned out. I think you are getting the idea. Banks do not accept low ball offers in the large majority of cases. If the property is a real dive and it has been listed for months you stand a chance but then you are getting what you paid for - a crappy home.
Remember to do your research and ask for professional advice before you make an offer. Extremely low offers are typically unproductive. Stick to realistic offers.
Barry Trammell, Realtor, ePRO
Coastal Signature Properties, LLC
vaflav@comcast.net
772-360-8572
Now, low balling a bank owned foreclosure is not likely to offend anyone but you are just as unlikely to be successful. The bank usually orders three independent BPO's (broker's price opinions) before listing so they are aware of the value of the house. In addition, you and I (and our grandchildren) have bailed out the banks. They are not desperate. They could and still can basically borrow money from the Federal Reserve at 0% interest and charge 15% to 30% on credit cards. Don't think they are on their knees. Some investors that have bought foreclosures in the past are unaware of the new frontier. In the not so distant past real estate went up an average of 10% per year. If a bank foreclosed on a property that the owner held for 5 years, put 10% down and paid a small amount of principal off, the bank has a great chance of getting their principal back plus a bit more. Take the above example at a 100,000 purchase price: after 5 full years the house would be worth 161,000. The house could sell at a 40% discount and the bank would still make out okay. Today, due to the economic malaise, banks are taking a huge hit on the principal they loaned out. I think you are getting the idea. Banks do not accept low ball offers in the large majority of cases. If the property is a real dive and it has been listed for months you stand a chance but then you are getting what you paid for - a crappy home.
Remember to do your research and ask for professional advice before you make an offer. Extremely low offers are typically unproductive. Stick to realistic offers.
Barry Trammell, Realtor, ePRO
Coastal Signature Properties, LLC
vaflav@comcast.net
772-360-8572
Monday, July 26, 2010
Short Sale Paradox
By now most of you have hear about short sales and have at least a basic idea of what they are about. For those of you who have not been brought up to speed on these types of sales here is a primer: First of all, the “short” in short sale is paradoxical. Short sales are a very long process. The “short” refers to the bank that holds the mortgage agreeing to take less than the full amount of the loan. In other words, the house is worth less than the loan amount and the only way to sell the house with a clear title is to get the bank to accept a “short” pay off. The term “third party approval” is also associated with this type of transaction and it refers to the fact that after the buyer and seller fully execute a contract for purchase and sale of the property, the bank must agree (approve) to the terms of the contract. An important point to get is that the bank getting the short pay off is not “party” to the contract but a “contingency” on the contract. The sale is contingent upon the “third party approval” of the bank.
Now, let’s get down to brass tacks. What does the seller have to do to get their lender to agree to a short sale? Some banks will not even talk to you about short selling your property unless you are at least several months behind on your mortgage payments. Once they agree to talk to you about a short sale you have to provide a hardship letter which states some reasonable explanation as to why you are having trouble paying your mortgage. You have to provide tax returns and bank statements. The bank will require that you fill out a form typically listing assets and liabilities so they can determine your financial situation. Clearly, since this is a complicated process you will want to contact a qualified realtor to help you short sell your home.
Why do buyers attempt to purchase short sale properties? There are several reasons: Since these sales are sometimes referred to as “pre-foreclosures” (we will discuss this term below) many buyers believe they will get a good deal. Also, in some market areas and neighborhoods there are so many short sales that the only way a buyer can get a property that they want is to buy a short sale home.
Why do home owners want to short sell their house? The answer is that short selling a house will have a much smaller impact on your credit score than being foreclosed on. Sellers need to be aware that banks are frequently going after deficiency judgments. Once they get a judgment against you they can place a lean on assets and garnish wages and bank accounts until they receive a full pay off of the judgment amount.
What is in it for the lending bank? Many of these properties are in some stage of foreclosure which is why we have the term “pre-foreclosure”. The bank will typically net more by selling the property in a short sale than as a foreclosure. The process of foreclosing on a home is expensive and foreclosure properties sell at a steep discount.
This takes us back to the perplexing paradox in terms: why do short sales take so long? This is a difficult question to answer. Since banks get more money in less time with a short sale as opposed to a foreclosure, you would think that they would bend over backwards to make them happen. Banks understand the time value of money and they certainly like more money, right? I can’t help but, at this juncture, take a shot at the banks. They were the ones that were lending to people with bad credit or with no income verification, remember? They were the ones who would lend nearly a million dollars to someone with only 70,000 in income. They were the ones who swore up and down that they had to pay gigantic, guaranteed bonus to the fools that bankrupted their companies and wrecked the world economy. Why should we expect them to make an intelligent decision? Well, enough of my venting. Short sales were very rare before the big banks wrecked the economy so they were not prepared to deal with the process in such great volume. They should develop a more efficient system and hire more people to deal with their short sale but it does not seem to be happening. Another factor that makes short sales complicated is the fact that many lenders that made the original loan are only servicing the loans now. They sold the loans to Fannie Mae, Freddie Mac, Deutche Bank or some other institution and have to get them to approve of the sale. This adds another layer of communication, confusion and delay to the process.
There is no doubt that short sales are a difficult, frustrating and confusing transaction but they will be around for the next several years so it helps to learn about them.
Barry Trammell, Realtor, ePRO
Coastal Signature Properties, LLC
vaflav@comcast.net
772-360-8572
www.BarrySellsVeroHomes.com
Now, let’s get down to brass tacks. What does the seller have to do to get their lender to agree to a short sale? Some banks will not even talk to you about short selling your property unless you are at least several months behind on your mortgage payments. Once they agree to talk to you about a short sale you have to provide a hardship letter which states some reasonable explanation as to why you are having trouble paying your mortgage. You have to provide tax returns and bank statements. The bank will require that you fill out a form typically listing assets and liabilities so they can determine your financial situation. Clearly, since this is a complicated process you will want to contact a qualified realtor to help you short sell your home.
Why do buyers attempt to purchase short sale properties? There are several reasons: Since these sales are sometimes referred to as “pre-foreclosures” (we will discuss this term below) many buyers believe they will get a good deal. Also, in some market areas and neighborhoods there are so many short sales that the only way a buyer can get a property that they want is to buy a short sale home.
Why do home owners want to short sell their house? The answer is that short selling a house will have a much smaller impact on your credit score than being foreclosed on. Sellers need to be aware that banks are frequently going after deficiency judgments. Once they get a judgment against you they can place a lean on assets and garnish wages and bank accounts until they receive a full pay off of the judgment amount.
What is in it for the lending bank? Many of these properties are in some stage of foreclosure which is why we have the term “pre-foreclosure”. The bank will typically net more by selling the property in a short sale than as a foreclosure. The process of foreclosing on a home is expensive and foreclosure properties sell at a steep discount.
This takes us back to the perplexing paradox in terms: why do short sales take so long? This is a difficult question to answer. Since banks get more money in less time with a short sale as opposed to a foreclosure, you would think that they would bend over backwards to make them happen. Banks understand the time value of money and they certainly like more money, right? I can’t help but, at this juncture, take a shot at the banks. They were the ones that were lending to people with bad credit or with no income verification, remember? They were the ones who would lend nearly a million dollars to someone with only 70,000 in income. They were the ones who swore up and down that they had to pay gigantic, guaranteed bonus to the fools that bankrupted their companies and wrecked the world economy. Why should we expect them to make an intelligent decision? Well, enough of my venting. Short sales were very rare before the big banks wrecked the economy so they were not prepared to deal with the process in such great volume. They should develop a more efficient system and hire more people to deal with their short sale but it does not seem to be happening. Another factor that makes short sales complicated is the fact that many lenders that made the original loan are only servicing the loans now. They sold the loans to Fannie Mae, Freddie Mac, Deutche Bank or some other institution and have to get them to approve of the sale. This adds another layer of communication, confusion and delay to the process.
There is no doubt that short sales are a difficult, frustrating and confusing transaction but they will be around for the next several years so it helps to learn about them.
Barry Trammell, Realtor, ePRO
Coastal Signature Properties, LLC
vaflav@comcast.net
772-360-8572
www.BarrySellsVeroHomes.com
Thursday, July 15, 2010
Closing – Common Costs for Buyers
While most people understand that buying a home is not as simple as paying an agreed price and taking the keys many do not know or remember common buyer's closing costs. Much of the closing costs associated with buying a home have to do with mortgage financing so you cash buyers can ignore many of these items.
The largest item is likely to be your down payment. Except for VA Loans, 0% down loans are a thing of the past. Unless you have served in the U.S. Armed Forces you will likely have to bring at least 3.5% (FHA financing) of the purchase price to the table. Loan origination fees are another item. What is that you say? This is the
money paid to the hard working individuals who process your loan. Points or loan discount fees can throw people for a loop. A loan officer will sometimes offer you the chance to buy down your interest rate. A "point" equals 1% of your loan. So, 2 points on a 100k loan would be $2,000. If you pay those 2 points at the closing table you will be offered a lower interest rate. You will only be borrowing 98k so it is a bit of a trick. You could potentially save money over the life of the loan but it require a bit of complicated math to find out.
Your lender will order an appraisal (through a 3rd party provider due to new laws) which you will be charged for as well as calling for a survey. The cost for these items in the Vero Beach area is typically $500 for the former and $300 for the latter.
Property taxes and insurance will have to be paid at closing and these two costs are typically prorated since it is unlikely that you will be purchasing the house on the last day of the insurance policy and tax assessment period. You will also have to provide a new homeowner's insurance policy and pay the full annual premium. The buyer pays to record the note and the mortgage in the public records and also pays a title insurance premium to protect the lender against possible defects in the title. PMI or Private Mortgage Insurance protects lenders from riskier low down payment loan and FHA financing require the buyer to pay into an insurance fund.
Home and Pest Inspections will be a cost most buyers are glad to pay to learn of possible major defects. Add to this notary fees, courier fees and credit report fees and you just about have every cost that can be thrown at you. There may be one or two that I have forgotten but this, I hope gives you a pretty good idea what to expect.
Barry Trammell
Coastal Signature Properties, LLC
vaflav@comcast.net
772-360-8572
The largest item is likely to be your down payment. Except for VA Loans, 0% down loans are a thing of the past. Unless you have served in the U.S. Armed Forces you will likely have to bring at least 3.5% (FHA financing) of the purchase price to the table. Loan origination fees are another item. What is that you say? This is the
money paid to the hard working individuals who process your loan. Points or loan discount fees can throw people for a loop. A loan officer will sometimes offer you the chance to buy down your interest rate. A "point" equals 1% of your loan. So, 2 points on a 100k loan would be $2,000. If you pay those 2 points at the closing table you will be offered a lower interest rate. You will only be borrowing 98k so it is a bit of a trick. You could potentially save money over the life of the loan but it require a bit of complicated math to find out.
Your lender will order an appraisal (through a 3rd party provider due to new laws) which you will be charged for as well as calling for a survey. The cost for these items in the Vero Beach area is typically $500 for the former and $300 for the latter.
Property taxes and insurance will have to be paid at closing and these two costs are typically prorated since it is unlikely that you will be purchasing the house on the last day of the insurance policy and tax assessment period. You will also have to provide a new homeowner's insurance policy and pay the full annual premium. The buyer pays to record the note and the mortgage in the public records and also pays a title insurance premium to protect the lender against possible defects in the title. PMI or Private Mortgage Insurance protects lenders from riskier low down payment loan and FHA financing require the buyer to pay into an insurance fund.
Home and Pest Inspections will be a cost most buyers are glad to pay to learn of possible major defects. Add to this notary fees, courier fees and credit report fees and you just about have every cost that can be thrown at you. There may be one or two that I have forgotten but this, I hope gives you a pretty good idea what to expect.
Barry Trammell
Coastal Signature Properties, LLC
vaflav@comcast.net
772-360-8572
Thursday, July 8, 2010
First Time Buyer Mistakes
Since buying a home is the biggest investment most people will make, mistakes can be costly. It is wise to do your homework and make smart decisions. Below are some pointers.
Shop lenders. Compare interest rates of course but also closing costs such as points, origination fees, etc.,.Ask how long your loan officer has been in the business and if they can provide referrals. Once you find the lender you will use get a pre-approval letter and make sure you have sufficient funds to put in escrow and to close.
If you see a house that you want and it looks like a great deal you must move quickly. Remember, you are not the only person looking to buy a house. When great deals come along you will not be the only person to notice. Don’t just find houses online or by driving neighborhoods and call on the sign or ad. Find an agent to work for you as the buyer. The agent working for the seller is trying to get the best price for their client. That is what the seller hires them to do. Again, ask for references. When you speak to the references ask them if the agent would return calls, emails or text messages promptly, work more than just a 9 to 5 day, work weekends, negotiate aggressively, kept them updated regularly after the contract was signed, came to the closing table and followed up after the sale.
You must make your offer enticing. Two basic ways are putting more than the customary amount down in escrow. In today’s market, for your average home, buyers typically put $1,000 down in escrow. By putting 2,000 to 5,000 down you are more likely to get you offer accepted and you could end up saving thousands on your contract price. Closing quickly is also important to most sellers. If you can close in 30 days or less your offer looks stronger. Other things such as trying to limit contingencies and not haggling over little things such as appliances and small repairs will give your offer a competitive edge.
Lastly, remember that your first home will likely not be your last. Most first time buyers sell their house and upgrade after 4 years. For this reason you must make resale value a high priority in your criteria.
I hope you find these tips useful. Happy house shopping!!
Shop lenders. Compare interest rates of course but also closing costs such as points, origination fees, etc.,.Ask how long your loan officer has been in the business and if they can provide referrals. Once you find the lender you will use get a pre-approval letter and make sure you have sufficient funds to put in escrow and to close.
If you see a house that you want and it looks like a great deal you must move quickly. Remember, you are not the only person looking to buy a house. When great deals come along you will not be the only person to notice. Don’t just find houses online or by driving neighborhoods and call on the sign or ad. Find an agent to work for you as the buyer. The agent working for the seller is trying to get the best price for their client. That is what the seller hires them to do. Again, ask for references. When you speak to the references ask them if the agent would return calls, emails or text messages promptly, work more than just a 9 to 5 day, work weekends, negotiate aggressively, kept them updated regularly after the contract was signed, came to the closing table and followed up after the sale.
You must make your offer enticing. Two basic ways are putting more than the customary amount down in escrow. In today’s market, for your average home, buyers typically put $1,000 down in escrow. By putting 2,000 to 5,000 down you are more likely to get you offer accepted and you could end up saving thousands on your contract price. Closing quickly is also important to most sellers. If you can close in 30 days or less your offer looks stronger. Other things such as trying to limit contingencies and not haggling over little things such as appliances and small repairs will give your offer a competitive edge.
Lastly, remember that your first home will likely not be your last. Most first time buyers sell their house and upgrade after 4 years. For this reason you must make resale value a high priority in your criteria.
I hope you find these tips useful. Happy house shopping!!
Saturday, July 3, 2010
Why buy a home?
If you don't own a home hopefully I will help you make the wise decision to make the best investment the average person makes in their life time. If you already own a home maybe I will help show you just how smart you are. Now I must mention the caveat that there have been three times when purchasing a home, in hindsight, was not the best move: right before the Great Depression, the early 1980's and from around 2003 to 2007. With that said now is a great time to purchase a home and even if you did not purchase at the best time many of the positive attributes still apply.
Current tax codes allow home owners to deduct mortgage interest and property taxes from their federal income taxes. This obviously gives owners an advantage that renters do not enjoy as rent is not a tax deduction. Another financial plus is the fact that mortgage payments build equity. Rent just keeps a roof over your head. Actually, equity building mortgage payments are a sort of savings plan. Even if home prices barely increase when you sell your home you will get back the money you put against the principal of your loan.
Property prices are starting to rise in most areas. The increases are generally very modest but it brings us to the point of appreciation. Again, due to the recent economic upheaval, I have to approach this subject delicately but the fact that real estate prices in all but 6 or 7 years have increased since World War II means that you can usually count on price appreciation when you buy a home. Prices here in the Vero Beach area for very recently built homes are sometimes below the costs a builder would pay to buy a lot and put a house up. Those who purchase now will certainly experience appreciation.
We Americans all love freedom and when you own a home you have more freedom to do what you want with it. If you want to paint, take out a wall, add french doors or take out a tree you can do it. As well as freedom home ownership provides you with predictability and stability. Staying in one place is a great comfort when raising a family, retiring or just getting started on a career. It is also a comforting to know that your mortgage payments will remain constant (provided that you have a fixed rate loan). Property insurance and taxes will likely increase over time but the increases are still more predictable than rental rates.
All being told, home ownership is a wise choice.
Barry Trammell, Realtor, ePRO
Coastal Signature Properties, LLC
772-360-8572
vaflav@comcast.net
Current tax codes allow home owners to deduct mortgage interest and property taxes from their federal income taxes. This obviously gives owners an advantage that renters do not enjoy as rent is not a tax deduction. Another financial plus is the fact that mortgage payments build equity. Rent just keeps a roof over your head. Actually, equity building mortgage payments are a sort of savings plan. Even if home prices barely increase when you sell your home you will get back the money you put against the principal of your loan.
Property prices are starting to rise in most areas. The increases are generally very modest but it brings us to the point of appreciation. Again, due to the recent economic upheaval, I have to approach this subject delicately but the fact that real estate prices in all but 6 or 7 years have increased since World War II means that you can usually count on price appreciation when you buy a home. Prices here in the Vero Beach area for very recently built homes are sometimes below the costs a builder would pay to buy a lot and put a house up. Those who purchase now will certainly experience appreciation.
We Americans all love freedom and when you own a home you have more freedom to do what you want with it. If you want to paint, take out a wall, add french doors or take out a tree you can do it. As well as freedom home ownership provides you with predictability and stability. Staying in one place is a great comfort when raising a family, retiring or just getting started on a career. It is also a comforting to know that your mortgage payments will remain constant (provided that you have a fixed rate loan). Property insurance and taxes will likely increase over time but the increases are still more predictable than rental rates.
All being told, home ownership is a wise choice.
Barry Trammell, Realtor, ePRO
Coastal Signature Properties, LLC
772-360-8572
vaflav@comcast.net
Tuesday, June 29, 2010
Home Inspections
Hiring a home inspector is an essential part of buying a home. In some states they are licensed but in Florida they currently are not so it is essential to review their qualifications. I feel it is important to work with someone who has actually worked in construction. There are many general contractors that will do home inspections and the insider knowledge they bring is invaluable. Even if you are working with a well qualified inspector you will want to check references and see a copy of their errors and ommissions insurance. One of the experiences I have had when working with a less than stellar inspector was watching him go straight to the dishwasher, turn it on and then proceed to rush through the inspection so that when the wash cycle was complete, he could check for leaks and then say he was finished. The time it takes a dishwasher to run a cycle is not enough time for a thorough inspection. Be sure to ask how long they will be onsite. Also ask what will be covered under the inspection. The roof, insulation, attic, electrical and plumbing systems, a/c and heating system, appliances, foundation, pool/hot tub (if they exist), irrigation/sprinklers and the septic system (if it exists) are items that should be checked. The inspector should also be able to do a basic pest inspection. You may want to hire a pest control company to do a more complete pest inspection for your peace of mind.
Timelines are critical as your typical inspection period is ten days. The inspector should be able to meet you within 48 hours after you call them. After the inspection is complete you should have a copy of the inspection report in your hands within 24 hours.
The jist is that home inspections can save you a lot of money and heart ache and it is essential that you do it right.
Barry Trammell, Realtor, ePRO
Coastal Signature Properties
772-360-8572
vaflav@comcast.net
Timelines are critical as your typical inspection period is ten days. The inspector should be able to meet you within 48 hours after you call them. After the inspection is complete you should have a copy of the inspection report in your hands within 24 hours.
The jist is that home inspections can save you a lot of money and heart ache and it is essential that you do it right.
Barry Trammell, Realtor, ePRO
Coastal Signature Properties
772-360-8572
vaflav@comcast.net
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