BraySpace

So you have an accepted offer.  Either on the home you’re selling, or the home you’re buying.  You’re almost done, but don’t be surprised with a few surprises.

Although the hardest part is over, here are a few things that may come up.  It’s better to be ready for them than it is to be surprised by them:

Problems SELLER may have with BUYER:

• Loan falls through
• Changes in credit report from time of application to time of closing
• Buyer loses their job
• Gift donor for down-payment changes their mind
• Interest rates increase and buyer hasn’t locked-in yet
• Buyer switches jobs while in escrow
• Family members influence change of mind/heart of the buyer’s decision
•  Buyer spends their down-payment before closing (dumb I know, but it’s happened)

Problems BUYER may have with the SELLER:

• Sellers lose motivation to sell (no longer transferring, reconciles marriage)
• Cannot find a suitable replacement property
• Will not allow inspectors or appraisers in home (usually due to grumpy-ness)
• Removes items from the property that the buyer thought was staying
• Unable to clear liens or tax assessments on the property
• Did not complete repairs asked for during the negotiations
• Sellers home goes into foreclosure during escrow
• Final inspection on home does not meet buyer’s satisfaction
• Seller does not show up to closing

*Keep in mind that most of these will not happen to you.  Also keep in mind that they are on this list because they have happened before.

Never Fear, FHA 203K is here!

Did you find that “fixer-upper” but not really know how to “fix” things up?

Highlights of the Program:

• Get a government loan that covers the purchase price of the home as well as extra money for the hired contractors to “fix-er up”
• Can be used to purchase a new home, or refinancing and update your current one
• Rates are higher than traditional FHA loans or conventional loans (4.75% as of 1/10/11) but still historically good.  Typically, plan on .5% to .75% increase on the interest rate for this loan
• Require licensed and insured contractors, so you know the work will get done right
• Allows you to move into a nice home for a good price.  Rather than a crappy home for a good price.

For more information on this loan, go to the source directly. CLICK HERE

Minneapolis StarTribune Reports:

According to Jim Buchta of the Minneapolis Star Tribune, and licensed real estate agents across the Twin Cities, multiple offers are happening more often than you may think.

Finally!  An article in the local media that portrays a positive outlook on the residential real estate market. Yesterday, the story broke that more and more homes are going into multiple offers.  Especially in the price ranges under $300k.

I have been telling my prospective buyer clients for over a year that they need to be prepared for a situation where they might pay close to, or more than asking price for a home.  More often than not, if you like it, someone else likes it too.  This leads to a bidding war.  Seller’s dream!

Most buyers in this market think they have two things:  Time to decide, and tons of homes to pick from.  In some cases, they do.  But in my experience, there are more buyers out there and less desirable homes than you think.  One third of all homes on the market are bank-owned right now.  Although they are typically the best price, they are often times a project that not too many buyers want or have the experience to deal with.  So take one third of the market away and you have a pretty normal supply.

So what can you do to avoid this issue?

If you are at the point that you’re looking at homes with your real estate agent (why aren’t you using me?!), then you better be ready to write an offer.  The first mistake buyers make is going out “just to look.”  Well, sure enough with the deals out there, you are going to find at least one home that you “want.”  If you’re not ready, i.e. you haven’t been pre-approved, then kiss that home goodbye.  The best houses don’t last.  Or, “the good one’s sell,” you’ll hear many-a-realtor say.

Also, if you are 100% ready to make an offer when you find the right home, MAKE THE OFFER!  Just because you write an offer doesn’t mean you’re going to end up living in that house.  You still have to get through the inspection, appraisal, mortgage underwriting, and a number of other steps.  But, and it’s a BIG “but,” you can’t start the process of buying the home unless you get pen on the paper and write an offer.  There is an old saying in real estate that I have found to be true for some buyers enough times to make me cry; “While you’re sleeping on it, someone else will be sleeping in it.”  Meaning, while you’re thinking about it, someone else started thinking about it two days ago and now they beat you.

So, be prepared for multiple offers when you get into the buying-game.  It could happen to you.  Especially if you fall in love with the best house on the block.  Despite what you might think and what the media is telling you, you’re not the only buyer out there.

What is the true value of a pre-approval letter?

A lot of people make a blunder in their home search by first finding homes that they truly like, and then seeing if they can afford it.  However, the best way and most correct way to start your home buying process is to determine how much you can afford.  How do you do that? —–You have to start by selecting and meeting with a loan officer to go through the pre-approval process.

A pre-approval letter is worth its weight in gold.  When you first meet or speak with a loan officer, they will review your income and assets and weigh that against your monthly obligations, or debt.  This, along with your credit score found by using your social security number will give you great insight into what you can afford in a home.

When you start shopping for a home, understanding what you can afford sets you up for a smooth experience and a high level of success.  It helps not only you focus on what you should be looking at, but helps your real estate agent look for homes that will give you the biggest bang for your buck.

Pre-qualification vs. Pre-approval

Although they sound similar, these two terms are very different.  Although a pre-qualification letter can be important and used as leverage, it is the “light” version of the two.  A pre-qualification looks at basic information and a lender can pre-qualify you based on the fact that you are telling the truth on your mortgage application.  Basically, when you are pre-qualified, the lender is saying that in his or her best estimate, the transaction would “most likely” close with the information you provided them with.

A pre-approval goes much deeper.  It is the more solid choice for a seller to negotiate with because this states that the lender has verified debt and income rations with banks and collectors.  They also have documents that support your claim of assets and liquid money.  Think of a pre-qualification as a “best educated guess” of what you can afford and a pre-approval as you should most definitely get approved for the loan pending no mis-fortunes such as the loss of a job.

The Bottom Line

In a real estate market like the one we are currently in, sellers are weary to sign a purchase agreement with a buyer that isn’t pre-approved.  Years ago, when lending standards were much more lenient, seller’s would not be nearly as hesitant to do so.  With a pre-approval letter, a seller can have confidence that an offer you make is one they feel good about.  It’s peace of mind and it’s hard to put a price-tag on that.

*Tip from the pros: Never submit a pre-approval letter with an offer that has a dollar amount on it.  Instead, have your lender write something like “Mr. and Mrs. buyer are approved to purchase 1234 Maple St.”  This way, the seller doesn’t know how much room you have to negotiate upwards, but they do know you are pre-approved to buy their home.

Have falling rates finally started going up again?

Short answer:  Yes.

What seems like months now, rates have been dropping more and more to a point where all of us in the “biz” have had to pick our jaws up off the floor more than a couple of times.  ”Can they keep getting lower?” we would say.  We were screaming “Buy NOW!” to our potential clients.  Today, we may be saying “I told you so” because rates finally started their incline last week.

Rates got to as low as 4.0% in October and early November.  Music to any buyer’s ears…or seller’s ears looking for those buyers for that matter.  But by the middle of last week, rates were flirting with 4.5% for the first time in a long time.

According to Bob Strandell of Bell Mortgage in Minnetonka, MN, “a sharp sell-off in the bond market moved 30 yr fixed rates to 4.375% and 4.50%.”  Things settle down a little at the end of the week but rates are still nearly a quarter of a percent higher than they were just a few weeks ago.

Looking ahead, Bob claims that Uncle Sam will be in the credit markets Monday through Wednesday of this week conducting a $96 billion, three-part auction featuring 2-, 5- and 7-year notes.  All three offerings will likely be well bid.  If so, these events will not likely influence the direction of mortgage interest rates one way or the other.

The economic calendar will feature revised Q3 Gross Domestic Product figures on Tuesday.  The Existing Home Sales and New Home Sales data will appear at 10:00 a.m. ET on Tuesday and Wednesday respectively.  This battery of macro-economic data is individually and collectively expected to be mortgage market neutral.

If you were waiting for rock-bottom in the interest rate category for your chance to capitalize, you may have just missed it.

Like grand-pappy always said, “you’d better get it while the gettin’s good.”

Tell all your Veteran friends.  It’s not too late!

• If you’re a U.S. veteran or currently serve in the military, you are still eligible for the $8,000 first time home-buyer tax credit and the $6,500 move-up buyer tax credit.
• You must have a purchase agreement in writing by April 20th of 2011
• You must close on the home by June 30th of 2011

For even more detail to find out if you’re eligible, click here.

The Week of Lists Continues With:

What Are 6 Top Reasons to Use a Real Estate Professional?

In today’s real estate world, let’s face it, sellers are trying all kinds of cost-cutting ideas when selling their homes.  While there are some great ways to improve your investment and increase your chances of selling your home, trying to do it yourself is not one of them.  Although you will pay a real estate professional a commission to do the job, you may sleep easier at night knowing that the job will get done right.

Here are the top 6 reasons to use a real estate professional in this dynamic market (as summarized from KCM blog):

6.) Pricing is Difficult: Five or six years ago, one may have had a better argument for not hiring a real estate professional when selling their home.  After-all, with the demand for housing so high in the early 2000′s, all a seller really had to do was get the word out there that they were thinking of selling, and the home would be in escrow.  Sometimes, the sign may not have even made it to the yard yet.  Now, things are different.  Marketing, condition of the home, and price are the 3 main factors that lead to a successful sale, but pricing may be most important.  A real estate professional can help you accurately price your home from the perspective of the market they work in everyday.  You may think your house is “all that and a bag of potato chips,” and it may in fact be that, but do you know what the average buyer is paying for chips these days?  And how long those chips sit on the shelf before they are purchased?

5.) Negotiating is Crucial: According to the Minneapolis Area Association of Realtors, the average sales price compared to original list price in the 13 county metro area right now is 92.7%.  By doing things yourself, the percentage you receive may greatly diminish.  Real estate professionals take great pride in their ability to negotiate and if they are serious about what they do at all, they practice it and take education courses on doing it.  That may be the difference between an offer of $212k or $237k on your $250k home.  What would you do with the extra 10%?

4.) Mortgages are Key: Question for you.  Are pre-approvals a must when negotiating an offer?  No.  But it is ill-advised to deal with a buyer that doesn’t have one.  Taking your house off the market while waiting for a buyer to get pre-approved is death for a listing.  Missing any market time what-so-ever is bad.  A real estate professional is going to know what questions to ask a buyer(s)’ agent and/or mortgage professional to make sure that the home actually closes when it’s supposed to and that your money is at the table.

3.) Your Family’s Safety: The National Association of Realtors goes to great lengths to make sure that REALTORS know how to set up showings and make sure that the person showing the home is qualified to do so.  They have to provide a personal account number and identify their office in order to view the home.  GE even came out with electronic key lock-boxes so that an agent can determine who was in the home if something were to have gone wrong during the showing.  Someone calling off your “For Sale by Owner” sign might just want to come in and see it.  We’re not suggesting that anything bad will happen, but why take the risk?

2.) You Have Better Things to Do: Selling a home is a full-time career. KCM blog states that “Learning the necessary disclosures, coordinating the dates of your closings, dealing with a challenge regarding your appraisal and re-negotiating the offer after an engineer’s report are just a few of the concerns you may face. You would probably be better of spending that time with the items important to you and your family and leaving the challenges to your agent.”

1.)  Exposure:  Your real estate professional will get you maximum exposure of your home to potential purchasers.  While doing it yourself on a couple of websites is better than nothing, most pros will be able to get your home on thousands with a few clicks.  Since most of the professionals have accounts on regional and national MLS websites, a lot of other website companies that advertise homes get their info from MLS.  Realtor.com, Zillow.com and Trulia.com are just a few of those.  (Craigslist is not…FYI)  Do you think McDonald’s would be where it is today if all it did was trust that people would find their signs?  True, the golden arches are recognizable, but I would argue that their countless TV ads had something to do with that.  Same goes for your house.  97% of buyers last year viewed homes online before they purchased one.  I think that stat means it’s important to be on the web.

Take a look at these 5 factors that decide your credit score

First off, what is a “credit score?”

According to Bob Strandell of Bell Mortgage, “Your credit score is a three digit number that typically ranges from 350 to 850. The credit score is an estimation of a consumer’s willingness and ability to repay debt based on previous behavior. Creditors typically assign grades to credit scores and use these grades to determine interest rates and loan features.”

So what are the 5 factors that influence my score?

1. History: Whether you have a good record of paying on time.
2. Debt: How much you owe to various collectors.
3. Longevity: The length of your credit history.  Typically, the longer your history is the better score you have.
4. Risk:  New credit is considered more risky, even if you pay promptly.
5. Type of Credit: It is usually better to have multiple kinds of credit.  (Sometimes these are called “credit lines”).  These might include, but are not limited to car loans, student loans, credit cards, previous mortgage, business loans, etc.

For more information on credit score or home financing options, click HERE.