Baby, I’m Back!

I have been absent from this site for a while.  But I plan to start writing again weekly.  There is so much that needs to be said about Real Estate.  I think the market saw the MOST change in the 9 years I have been a realtor just last year.  I have a feeling that those changes are not over yet. 

2009 was extremely busy.  Jolynn and I sold the most houses of any year we have been selling houses.  And to top it all off I had a baby in November of 2009.  My sweet little baby girl.  But I am back at work now and playing catch up on all that I have missed.  Thank goodness for my Real Estate partner Jolynn!  She is wonderful and helps me juggle life and work at the same time.

I am falling behind on my website.  Life and work has gotten a little busy.   We have had houses listed and sold in the meantime.  However, we currently have SIX houses for sale! 

They currently range in price from $350K to $120K.  Hopefully when I get back in town (I’m on vacation) I can write about them. 

Jolynn is holding down the fort but I was swamped the week before I left.  I know this week has been just as busy.  Hopefully I will find time to post a couple articles while I am out of town.  The biggest thing to talk about is appraisals!  Government and their changes are affecting us once more.  I hope to update everyone soon!

Real Estate is really seeing a change.  It has been overwhelming these past few months just trying to keep up with everything that is going on.  Texas (at least my area: North Tarrant, South Denton) is no longer seeing a buyers market in the smaller houses (under $150K).  There are just too many buyers.  These buyers are trying to take advantage of the first time home buyer tax credit.  In the past few months my partner and I have worked with numerous buyers in this price range.  They are consistently competing with multiple offers.  The good homes are going fast.  It has been a very hard market to understand.  While the foreclosures and short sales are very heavily on the market they are not going as cheaply as expected (and are taking months just to get a response due to the number of multiples they are competing against - we have one that is approaching three months of waiting on a short sale just to hear if the bank took their bid or one of the five offers they were competing with).   And as a Real Estate Agent this has also been a challenge to educate these new home buyers into understanding the current market conditions.  Since everyone thinks it is a buyers market (and it was, but unfortunately in this price range that has changed).  And everyone thinks the banks are anxious to sell (they might be but take months to do it - this is becoming the norm and not the exception).

Not only is the market itself going through a transition but so is the banking industry.  And even though many of our buyers have come in with pre-approval letters they have met problems in getting a loan to make it to closing.  Mortgage companies are taking about 45 days to close if the buyer has no problems but with problems it could take much longer (we currently have a closing that is approaching over 2 months to get to closing due to mortgage delays). 

Real Estate agents are also going through a transition.  There are less agents out there.  Numerous offices have closed.  And there are fewer homes being sold.  The sellers agent is having a harder time making money to survive.  Buyers agents are also working three times as hard to get an offer to closing.  Leases are hot but for an agent they can cost more out of pocket than the agent often makes.  And trying to stay educated on all the changes and possibilities a seller or buyer can run into has become difficult.  Every short sale is different, and every foreclosure is different.  The banks often have their own forms and their own set of rules.  And trying to decide who is capable in buying a house whether you represent the buyer or seller has become a big challenge.  Numerous houses are sitting on the market and to get them sold it is taking a strong marketing plan (not just a price reduction as numerous agents tend to think). Just putting a house in the MLS is not enough.  Agents really need to think outside the box to get houses sold.

I continue to expect more changes to come as this year continues.  If nothing else it has not been a boring year.  Transition may not be fun but at least it keep us on our toes!

I am having a hard time believing the deals to be found.  Everyone wants one.  And if the buyers are not getting one they are going somewhere else. 

Because my partner and I hate to see our sellers take a hit we are recommending they not list at this time.  The exception to this is sellers who have enough equity or their area is holding enough value to sell without taking a loss.   Most sellers are listening to us.  It feels so weird to have had only two listings so far this year (and to have turned so many down).  Those that need to sell seem to be giving their homes away.  Most sellers don’t have the equity or their area is just not holding the value.   The buyers all know this is a buyers market. 

However if you are a buyer this is a great time to buy.  In our area the mid size homes area taking about 20K off the prices.  And the larger homes around 50K.    First time homebuyers can also find great deals.  The first time home buyer tax credit can give you up to $8000 back in 2010 (or 10% whichever is less).  That incentive makes me wish I was buying a first time home.  Free money and great deals are enough to make me jealous.   

Buyers will need to come up with 3 1/2 % down for their mortgage.  The rates are wonderful whether you plan to buy or refinance this is definitely the time.   So be sure to take advantage of what is out there if you can!

SOME OF THIS INFORMATION HAS CHANGED!  PLEASE CONTACT ME FOR MORE DETAILS!

A short sale is not a foreclosure. And the process for a short sale is different than a foreclosure. 

Short sales are still owned by the seller and NOT the bank.  However, most short sales are at least 90 days behind in house payments.  So the seller hopes the bank will agree to let them sell it at a loss with no money owed at closing (or in the future).

The bank is NOT obligated to work with a buyer and seller to see that the house is sold.  Most sellers do not have enough equity so the bank is usually taking a loss.  Making their motivation even less.

The bank could foreclose at any moment.  There are no grantees.

Here are some steps to help your seller and you get through the process:

1. Talk to your broker.  Make sure your commission is negotiable.  Most banks will try to reduce your commission know up front what you can do.
2. Know how close the seller is to being foreclosed on (tell the seller to save the notices).  You need to have an idea of a time frame that you have to get the house sold.
3. Advertise it in the Multiple Listing Service as a short sale. 
4. Know the rough outstanding balance. 
5. Find out how many banks you are dealing with (if they have two loans).
6. Contact the bank(s) to find out who is the loss mitigation supervisor assigned to the seller’s loan.  Side tip:  Be VERY nice to these people.  They have a pile of short sales on their desk.  Being rude or upset is not going to help your seller. 
7. Get title work up front (in title states) before you get a contract.  This will help speed up the process. 
8. When the offer arrives, protect your seller.  Get the correct language to write in the contract so they do not have to bring money to closing.  It should also include information that states the sale is contingent upon lender approval.  This language needs to be obtained from an attorney.  Your title company will be able to help you with this (have the language before the offer comes in). 
9. Make sure close date is realistic. You need time to negotiate with the bank.
10. Send the contract over with Comparative Market Analysis to help bank determine value (most will perform an appraisal before accepting an offer). 
11. Make sure that the bank is forgiving the debt if not the seller may still have liability after the sell.  Make sure they are aware of what ever is coming their way.  (Banks can also issue a 1099 for that forgiveness of debt. In which case, this could also show up as income on their tax statement).
12. Once agreed tell everyone (seller, buyer, and title company) that they will obtain a formal short sale payoff statement and can begin moving forward with closing.
13. Continue to keep in touch with everyone periodically until closing (including the bank)!
14. Pat yourself on the bank, congratualtions you did it!

Tags: short sale

A short sale is not a foreclosure.  And the process for a short sale is different than a foreclosure. 

Short sales are still owned by the seller and NOT the bank.  However, most short sales are at least 90 days behind in house payments.  So the seller hopes the bank will agree to let them sell it at a loss with no money owed at closing (or in the future).

The bank is NOT obligated to work with a buyer and seller to see that the house is sold.  Most sellers do not have enough equity so the bank is usually taking a loss.  Making their motivation even less. 

The bank could foreclose at any moment.  There are no grantees. 

Here are some tips to help you and your buyer:

1. Have a talk with the buyer explain the process of short sales.  Make sure they are prepared for what may come. 
2. Attempt to discover value.  Prepare a Comparative Market Analysis.  Attempt to discover how much the seller’s owes.  Look at the tax value.  Look at how fast homes in the neighborhood are selling in the neighborhood.
3. Help your buyer come up with a reasonable offer to present to the bank based on your evaluation of the value.  If the bank could easily expect to get more than the offer your buyers want to present the bank may never respond. 
4. Give a time frame in the contract of how long the buyers are willing to wait for the seller to get a response from the bank.  A good estimate is 7 to 14 days.  Most short sales take longer than the average 30 days to close.
5. Find out if your state has a “short sale addendum” that needs to be included with the contract.
6. Submit your offer to the seller’s agent.  Help the agent understand your buyer’s offer so they can explain it to the bank.
7. Don’t be surprised if the bank asks you to reduce your commission.  Know up front what your broker will allow you to do.
8. Call the seller’s agent every few days to help your buyers stay in the loop.  
9. Negotiate the contract as needed. 
10. Make sure the bank has signed off on the offer.
11. Inspect.  Short sales are generally sold AS IS.  The bank will usually not allow for repairs.  If the buyer’s lender requires the repairs the bank may make an exception. (If the buyer’s lender requires the repairs, bid estimates will need to be presented to the bank to negotiate for those repairs.  If the bank will not negotiate for those repairs then you may want to make sure the buyer has a way to get out of the contract).
12. Continue to keep in touch with the seller’s agent (buyer and the title company or closer).  Stay in the loop until closing.

A young couple decided to buy their first home.  They pick out a really cute house.  I write up the contract and the contract is accepted.  The lender starts working on the loan.

A few weeks later the lender calls me and says it would be best for this couple if they could roll in $7000 of their closing costs into the price of the home.   Just to help understand this.  The contract amount is $175,000.  The buyer needs $7000 cash to buy the house.  So we took the $7000 and added it to $175,000 bringing the new contract price to $182,000.  The seller then issues a credit at closing for the $7000 to the buyer.  The buyer uses this money to pay their closing costs instead of having to have the cash in hand.  However, their loan is now $182,000 so they in essence finance that additional $7000 for the term of the loan.  The house also has to appraise for the $182,000. 

The seller agrees to the changes and contract changes are made to reflect the new sales price and the $7000 back to the buyer.  Everything seems to be going smoothly until we get to closing.

At closing the paperwork comes out and I start looking at it.  The settlement statement (HUD-1) shows the buyers closing cost came to $6300 and not $7000.  I inform the buyers that we have a problem.  The way the paperwork is they will be giving the seller an additional $700 for the house because they can not get money back at closing.  There are three options: 1.) delay closing so the lender can redo the loan amount to $181,300 2.) have the seller refund the money after closing 3.) see if the lender will let them have the $700 cash back at closing 4) let the seller keep the extra $700. 

Well scenario one didn’t work because the buyers had already ended their apartment lease and couldn’t stay without having to pay another months rent.  And the third option the lender wouldn’t allow them to do and the forth option was not desirable.  But the problem with scenario two was there was nothing that obligated the seller to give back this money.  I inform them of this.  But they don’t have much choice so they close on the house.

I then spend the next THREE MONTHS working on trying to get this money back from the seller.  I email, mail, and call him.  Finally, the seller agrees to refund the money and they did get it back. 

With the end of 100% financing hopefully that will be the end of that problem.  I saw that same problem while representing other sellers and buyers.  Lenders often do an estimated guess on the closing costs.  And sometimes they are wrong.  If you really don’t have the cash just realize you may be paying more for the house then you planned. 

Several years ago, I assisted an attorney and his girlfriend in finding a home.  She fell in love with a very expensive 5,000+ sq feet home that overlooked Lake Grapevine (in Texas).  This house was also in a wonderful location.  The house was located on a cul-de-sac and only two private streets made up the whole neighborhood.  The houses were all on one side of the street as the lake bordered the other side of the street.  There were also no houses directly behind this house.  It backed to a heavily treed area that was government owned. 

Needless to say they entered into a contract to purchase the home.  My buyers (the attorney and his girlfriend) were told up front that the home had undergone foundation repairs (approximately 47 piers had been place under this home). 

For those not familiar with North Texas, North Texas sits on a natural area of clay.  That means water does not absorb into the soil correctly.  The ground constantly expands and contracts.  If regular watering is not maintained than a home can get extensive foundation problems.  This leads to uneven flooring, separations in doors and windows, and cracking in walls.   Correcting requires piers drilled into the ground under the home.  These peirs are set in the area that the house has shifted to even the home up. Cosmetic repairs are also done to the home to repair cracking in walls and brick. 

Both clients were familiar with North Texas homes.  They also knew of the problems with foundations.  This was not a deterrent in wanting to purchase this home. 

To protect my clients, however, I had them go through several inspections.  They had a general inspector inspect the home.  I had them meet with the company that did the original foundation repairs.  We also had an engineer come out and reevaluate to see if the house needed more foundation repairs.  We then had two other foundation companies come out to the home.  A roofer was sent to make sure the roof had not been affected.  And a contractor came out to evaluate the retaining walls to see if they could be reinforced. 

It was discovered during all this inspecting that additional foundation repairs (6 more piers) were needed.  My clients decided to go ahead and purchase the home as long as the seller paid for these additional repairs.  The sellers agreed.  My clients bought the house. 

Clients need to be able to make informed decisions when purchasing a home.  Some contracts may require you to go above and beyond to help them discover as much as possible.  This not only helps to protect them but yourself as well.  Homes are big investments.  And they can easily lead to big lawsuits. All clients should be advised to get a home inspection.  If they waive this right get it in writing.  In the end be sure to protect your client(s) and yourself.

To buy a house you will need to start meeting with a lender.  Here are the items that you will need during the process.  You will most likely need these items for both the borrower and the co-borrower.

General:

• Picture ID
• Social Security Numbers
• Application Fee (payment)
• Credit Report Fee (payment - reports will be pulled from all three credit agencies)

Income:

• Name, address, phone number, and employment dates of employer(s) for the past 2 years
• Copy of most recent pay stub
• w-2 forms or signed income tax returns, with all schedules for the past 2 years
• Verification of other income (child support, retirement, social security, etc)
• Lease Agreements on any rental properties

Assests:

• Bank statements for the past 3 months
• Investment or retirement account statements for the past 3 months
• Titles of any owned automobiles (including boats, RV’s, and motorcycles)
• List of any major household item(s) of value
• Life insurance policies (face amount, monthly premium, and face value)

Creditors:

• Letters of explanation for any bad debts (for any bankruptcy bring discharge and schedule of creditors)
• Landlords (name and address) for the past 2 years
• Mortgage loans for the past 2 years (proof of sale, or current property address, lender name, lender address, lender phone number, account number, monthly payment, and balance owed)
• Child care expenses (name, address, phone number)

Other (if applicable):

• Divorce decrees, propery settlements, quit claim deeds, and modifications
• VA Form DD214 and Cerfication of Eligibiltiy
• Retirement and Social Security Award Letter

Purchasing a home is a very important decision. The experience should be fun and enjoyable as there are many beautiful homes on the market. Here are some tips to help you find the right home and not get caught up in the moment. You don’t want to move into a home only to find out it really doesn’t fit your needs.

1. Get pre-qualified with a lender. This is really your fist and most important step in selecting a home. If you start looking at homes in the that are worth $300K only to find out a bank will only give you a loan for $200K it is hard to lower your expectations. Knowing what you can afford first will make it easier to find the right home in the long run.
2. Make a list. Before you look make a list of items that are REQUIREMENTS in a home (ie: number of bedrooms, number of living areas, school district, etc). Then make a list of items that are EXTRAS (lot size, number of bathrooms, pool, etc). There are many different features in a home. Some will be necessary while others will be added luxury. A home loaded with amenities is easy to get excited about but you may find that it might not truly meet your needs. It is important to find a home that meets most of your requirements first before worrying about the extras.
3. Take notes on the homes as you go through them. You will find that the more houses you look at the harder it will be to remember them. They will all begin to look the same and you will find that you just don’t remember things about the homes that you wish you did. It is also helpful to keep track of you top 3 favorites throughout the showings. Ask your self with each house where it ranks in the list of houses you looked at. This will help you remember the ones you like and help eliminate the rest. Homes that do not fulfill your list of REQUIREMENTS should also be eliminated.
4. Be aware of the house and surrounding neighborhood. Be aware of the location, the neighborhood, the neighbors, and the house itself. You may love the house but you suddenly notice the neighbor has not maintained his home you may decide that it is not the house for you after all. All these items could easily contribute to a potential for a hard re-sale. If possible eliminate all hard re-sales. If you cannot eliminate the house and the location is less then desirable be prepared for a hard time selling it in the future.
5. Talk to the neighbors. The neighbors are a great way to get a better sense of the community. Meeting the neighbors is also a great way to find out if anyone knows anything about the house that could give you an advantage when putting in your offer. Side Tip: Be sure to ask those neighbors if they know why the owners are moving. And ask what do they think of the neighbors and the neighborhood. These items are not only informative but could help you get a better deal on the home.
6. Drive the route. Drive to work and to the house during different hours of the day. This will give you an idea of what type of traffic you will be facing. It will also help you gauge access to freeways and the community. Be sure the house fits in the parameters of what you need for work commutes and/or any other special needs.
7. See it again. Do another walk through before making an offer. Look at the walls, ceilings, in the closets, walk the exterior, and get a copy of the seller’s disclosure notice (if available in your state). All offers should reflect the house in its present condition. You do not want to make an offer only to realize that you came in too high due to a condition issue that was clearly visible.