Real Estate Trade Secrets

Real Estate News and Tips for Buying and Selling Real Estate in the San Francisco Bay Area

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How long do I have to wait before I can qualify for a home loan after a derogatory credit event?

November 15th, 2011 · No Comments

 

 Waiting periods and re- establishing credit after Serious Derogatory Events

Event                                    Waiting period                                                 Waiting Period with extenuating circumstances

Bankruptcy 7 or 11           4 years  from discharge                 2 years from discharge

Bankruptcy 13                   2 years from Discharge                  2 years from discharge

Multiple Bankruptcy      5 years                                                  3 years

Foreclosure                        7 years                                                  3 years up to 90%  max financing

Short Sale OR

Deed in Lieu                      7 years for max financing             2 years 90% max financing

                                                4 years for 90% financing

                                                2 years for 80% financing

Requirements for Re-establishing Credit

The borrower’s credit will be considered re-established if all of the following are met.

The loan receives recommendation from DU (designated underwriting system) that is acceptable for delivery to Fannie Mae or if manually underwritten, meets the minimum credit score requirements

The borrower has traditional credit re- established and (3) trade lines marked as agreed.

Extenuating Circumstances Defined

Non-recurring events that are beyond the borrower’s control that can be substantiated. Examples include divorce, medical emergencies, job layoff, etc.  The borrower must provide a letter explaining the relevance of supporting documentation, confirm the nature of the event that led to the bankruptcy or foreclosure action, and illustrate the borrower had no reasonable options other than to default on their financial obligations.

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Discover One of the Most Powerful Tools in Real Estate Financing…

June 6th, 2011 · No Comments

In most real estate markets throughout the country, sellers are trying to cope with a slower moving market burdened with an over supply of competing homes for sale and weak buyer demand. Buyers are struggling with rising mortgage interest rates, tougher loan underwriting qualifying standards, high prices and low affordability. Real estate investors want positive monthly rental income cash flow and a hedge against a softening rental market in the future.   

Solution:
 
 

  •  A mortgage interest rate “buy-down” allows the seller to expand the pool of qualified buyers and real estate investors.
  •  The mortgage interest rate buy-down is a seller strategy with multiple options to maintain the seller’s price position
  •  The property is offered for sale at the full asking price with a seller credit to discount the mortgage interest rate or a discounted price without a seller credit to discount the mortgage interest rate
  •   It’s a “win-win” for both the buyer and seller
  •   The seller can deduct the buy down credit as a selling cost expense
  •  The buyer receives a 1098 form from the lender and a tax deduction for the buy down credit – “points” paid for the new loan to purchase the property
  •  Higher sales price maintains neighborhood property values
  •   The discounted mortgage interest rate helps to ensure the buyer will qualify for the loan
  •  The buy-down empowers the seller to compete with new home builders offering substantial buyer incentives
  •   The lower monthly loan payment increases the potential for positive rental cash flow for real estate investors 

 
Why Buyers and Sellers are stuck:
 In a slow real estate market, sellers usually experience long protracted marketing time-lines to find a qualified buyer.  An over supply of competing homes for sale leaves the seller with few options except to make consistent and substantial downward asking price adjustments until the property sells. Investors are reluctant to buy income properties with negative monthly rental cash flow. Buyers cannot qualify for financing to move up into a larger home or move to a more desirable location. Buyers relocating from a lower cost area into a higher priced market must make a major lifestyle set back to buy a smaller home in a lesser location.
 
The process to solve the problem:
 
Sellers can align themselves with a reputable lender to find the best mortgage interest rate buy down program and integrate the buy-down with their marketing and pricing strategies
 Buyers can obtain a loan pre-approval with a reputable lender using a mortgage interest rate buy down program to increase their purchasing power.    
How does mortgage interest rate buy-down program work?
 The seller uses a credit from the proceeds of the property sale to pay additional loan points on the buyer’s loan. The additional loan points will “buy-down” the mortgage interest rate. The discounted mortgage interest rate applied against the same loan amount will reduce the monthly loan payment. So, there is no “out-of-pocket” cost to the seller. The credit paid to the buyer’s lender is a paper transfer at the close of escrow. The buy-down fee is a debit from the seller’s proceeds of the property sale.   
Review the Example and the type of loan used – The five-year interest-only loan.
Example:$644,000 sales price with the Buyer purchasing with 20%down:
Down payment 20% $128,800
Loan amount 80% $515,200
Rate/payment 6.375% $2,737 per month

Option I
$644,000 sales price with Seller credit of $10,000 applied to interest rate buy down:
Down payment 20% $128,800
Loan amount 80% $515,200
Rate/Payment 5.5% $2,361 per month
**This results in a monthly payment reduction of $376.
 
Option II
Reduce sales price by $10,000 to $634,000 with the Buyer purchasing with 20% down:
Down payment 20% $126,800
Loan amount 80% $507,200
Rate/Payment 6.375% $2,694 per month
*** Your buyer saved only $43 per month.In order to achieve the same payment of $2,361 per month by using a price reduction you would have to reduce the sales price by $88,750! (see example below)

Reduce sales price by $88,750 to $555,250:

Down payment 20% $111,050
Loan amount 80% $444,200
Rate/ Payment 6.375% $2,361 per month

While a $10,000 sales price reduction is reasonable, an $88,750 sales price reduction is not. The loan interest rate buy down credit is a win/win for the buyer and seller.

Review Option I Compare the difference in the interest rate and monthly payment between the Example and Option 1

How much will the buyer save each month using the buy-down loan?

$376 per month…multiply this monthly savings by 60 months and the buyer saves over $22,560 in five years.If the buyer decides to pay a lower price instead of taking advantage of the buy-down interest rate loan- how much does the buyer save each month if the seller lowers the purchase price by a sum equivalent to the 3% credit, in this case, $10,000?

Review Option II –The buyer saves $43 per month or $2,580 over five years.The buyer can pocket an additional $19,980 if the buyer chooses to pay the full asking price with the mortgage rate buy-down loan.

How much would the seller have to lower the asking price to achieve the same discounted monthly loan payment and the borrower financing 80% of the purchase price?
The seller would have to lower the asking price by $88,750 to achieve the same payment using an 80% loan to value ratio.
(Review the “sales price reduction” example)The seller is more than likely to be unable or willing to make such a large price concession.

Why does the buyer receive a tax credit for the buy-down fees paid by the seller?
The lender is required to issue a 1098 form to the borrower for points paid on the purchase loan. The seller is not the lender’s customer. Therefore, the buyer receives a significant tax deduction of which could make the property purchase even more attractive.
 
 
How do lenders benefit from these buy-down loans?
 

  1. It is easier for a buyer to qualify under a discounted loan interest rate and the bank receives upfront “pre-paid” profit from the additional points paid on the loan.
  2. The discounted interest rate can make it easier to put a second loan behind the discounted first loan and therefore, the buyer can use a smaller down payment to purchase the property – like an 80-10-10 loan. 
  3. The discounted monthly payment can offset additional monthly association fees for buyers purchasing a condominium.

 Is it possible to buy down an adjustable rate loan? 
The interest rate index and margin are added together to create the “note rate”. The buy-down of the margin will lower the note rate and, therefore, the related monthly mortgage payment. The benefits of a margin buy-down in a rising interest rate environment include lower monthly payment increases.
 Is it possible to buy-down the interest rate in a loan refinance? The buy-down fee (points) in a refinance is built-in by obtaining a larger loan amount above the existing loan amount. You can reduce the monthly mortgage payment through a buy-down refinance loan. Buying down the interest rate on a new first loan may enable the buyer to qualify for “piggyback” second loan financing to minimize the buyer’s down payment requirement. A lower monthly loan payment on the discounted first loan leaves qualifying room for the buyer’s debt-to-income ratio for the monthly payment on a second loan.  Also, a lower monthly loan payment leaves qualifying room for a buyer’s debt-to-income ratio to pay monthly condo association fees Here is a strategy to enable buyers to find sellers willing to pay the buy-down loan fees….

  •  Team up with a Realtor to search for properties listed on the MLS for at least 30 to 45 days
  •  Look for properties that are vacant and are still listed at the original asking price
  •  Occupied properties are OK, too
  •  Ask your lender to prepare a loan interest rate “buy-down” outline like the handout for this conference call
  •  Draft a full price purchase offer with your Realtor
  •  Ask your Realtor to contact the seller’s agent and make it a requirement that your Realtor meet with the seller and the seller’s Realtor in person or on a 3-way conference call including the seller’s agent to present your offer
  •  Ask your lender to be on “stand-by” to answer any questions that may come up during the presentation of your offer      

[Read more →]

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How to Avoid the Most Deadly Lending Landmines…

June 5th, 2011 · No Comments

 

Here are some tips I learned from a seasoned California mortgage banker who successfully funded over 100 loans during the tough 2010 real estate market. These tales from the trenches can prevent your deal from the shrapnel of a loan decline or last minute tighter “prior to document or funding” conditions:

  •  Most conventional (up to $417k) and non-conforming (Jumbo) loans above $417k require Desktop Underwriting approval
  • Conventional secondary financing is very difficult to obtain. A maximum of 90% loan-to-value (LTV) ratio should be relied upon from the buyer
  • Jumbo interest rates are currently at least 1% higher than conforming loan interest rates
  • Secondary “seller carry-back” financing is a great sales tool strategy. In some cases 100% total loan-to-value will be allowed with the first loan at 80% LTV or less
  • Beware of “declining market” underwriting guidelines –
    • A 5% reduction on the guideline is required by most lenders, so if the buyer is applying for an 80/10/10 loan, the underwriting guideline would have to meet or exceed 85/15/5 underwriting guidelines
    • Be sure to work out these important details in advance during the loan “pre-approval” stage instead of in the middle of a transaction!
    • All of California is now considered to be in a “declining market”- check with your lender to see how your local market is rated
  •  Credit scores of less than 620 will not pass

  • Appraisal reports are submitted to underwriting
    • Underwriting runs an Automated Value (AVM) which almost always comes in low
    • Desk/Field appraisal review is then ordered
    • Make sure the appraisal is always signed off by the underwriter within a reasonable amount of time

 One more thing…don’t forget to wear your flack jacket in this ever changing lending environment.

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Protect Your Transaction From the Number One Deal Killer…

June 3rd, 2011 · No Comments

 

In today’s challenging and uncertain lending environment, qualifying standards for home loans and refinancing are becoming increasingly more stringent. Many potential borrowers who were “pre-approved” under yesterday’s loan underwriting guidelines may discover that their loan program qualifying standards have changed or the loan program is no longer available.

Unfortunately, some unwary prospective homebuyers discover they cannot meet the revised underwriting criteria when they are in escrow waiting for the lender to fund the loan to complete their purchase transaction. The loan documents sometimes will arrive just a few days prior to the scheduled closing date with different loan terms and/or “prior-to-funding” conditions of which the borrower cannot comply.

Here are some tips to protect your transaction from the dreaded last minute failure due to unfulfilled financing to complete the purchase:

  •  25 day maximum close of escrow deadline falls within the premium (least expensive) loan interest rate lock period and will avoid changing loan underwriting guidelines
  • Seller to insert a contingency clause into the purchase agreement “Buyer shall lock in loan interest rate within 24 hours of acceptance”
  • Buyers- demand that your Financing and Appraisal Contingencies remain in place until funding of the loan (usually the day before or day of close of escrow) to protect your good-faith earnest money deposit from forfeiture to the Seller
  • Sellers- instead of requiring the entire Financing Contingency removal in advance of the loan funding- insert a contingency clause that requires the Buyer to provide written evidence directly from the bank underwriter of full loan approval with all conditions met (within reason), verification of employment, down payment monies and a complete sign off of the appraisal report. The only item remaining to complete the financing are delivery of the loan documents and loan funds to the title company escrow account
  • For occupied properties, ALWAYS include a rent-back option in favor of the tenant or seller in the event there is a delay or worse, a cancellation of the sale due to financing problems. There is nothing worse than contacting the Seller that the deal is dead after they have moved out or all of their possessions are packed.

Many Sellers of occupied properties are buying and moving into another home and these suggested precautions can mitigate the pitfalls of these uncertain times in the lending arena.

BEWARE of using a Mortgage Broker to obtain financing. Direct lenders (banks) are closing their wholesale lending departments or eliminating the majority of Mortgage Brokers who fall outside of their performance requirements.

 

Additionally, Congress is likely to eliminate the Yield Spread Premiums (YSP) that Mortgage Brokers need to be competitive in loan costs to the borrower. Loan programs are being eliminated or modified on a consistent basis and many Mortgage Brokers are not in the direct line of communication when banks issue these memos to their in-house lending divisions.

Therefore, Mortgage Brokers are at a disadvantage in this tough lending environment. Don’t take unnecessary chances with your transaction. Use a direct lender such as a major bank, credit union or mortgage banker.

 

Sellers- if the Buyer insists on using a Mortgage Broker, insert a contingency clause into the purchase agreement “Within 3 days after acceptance, Buyer shall provide Seller a letter from a direct lender (Bank or Mortgage Banker) stating that upon review of Buyer’s written application and credit report, Buyer is pre-approved for the new loan stated and Buyer hereby agrees to accept the best available loan from either Direct Lender or Mortgage Broker at close of escrow”.

 

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VA Loans Offer Attractive Financing Terms

May 29th, 2011 · No Comments

 The Veteran’s Administration has modernized the current VA loan programs available to qualified veteran borrowers. These loans are very competitive and can offer an affordable financing alternative to prospective home buyers and people who want to refinance their existing mortgage.  Additionally, the current maximum VA loan limit is $1,000,000 which can be a great alternative to an expensive non-conforming jumbo loan (above $417,000) in high cost real estate markets like California and the San Francisco Bay Area.

Here are some of the terms and conditions for current VA loan programs: 

  • 100% loan to value (LTV) up to $417,000
  • Over $417,000 – down payment is 25% of the difference between $417,000 to $1,000,000
  • 580 minimum required credit score
  • Veteran borrowers need a DD214 (Notice of Discharge)
  • Seller allowed to pay up to 4% of the purchase price toward the Buyer’s closing costs plus 1% loan origination fee
  • 2/1 loan interest rate buy-downs available
  • All recommended section 1 structural pest control repairs, all recommended further inspections of inaccessible areas and all recommended section 2 repairs which may lead to infestation must be completed by the Seller
  • A structural pest control certification must be obtained prior to close of escrow
  • 45 day close of escrow

 Other significant benefits include loans over $417,000 will be priced at interest rates as good as conforming loan interest rates; down payment on a $1,000,000 loan will be only $145,750 or 14.57% of the purchase price; no private mortgage insurance required (PMI).  

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FHA Loan Programs Offer Great Financing in a Tight Credit Market…

May 26th, 2011 · No Comments

The current credit crunch in the financial and real estate markets have significantly eliminated a vast pool of borrowers with a desire to purchase or refinance a home. This especially rings true in high cost markets like California and the San Francisco Bay Area.

 

FHA loan programs offer great terms compared to conventional loan programs affected by challenging qualifying standards that require a large down payment. Congress and the federal government are on the verge of raising conforming loan limits for Fannie Mae and Freddie Mac mortgages in high cost areas.

 

Those in the know believe it’s a matter of when not if the conforming loan limit will be raised and when this happens, the FHA loan limit will be increase to match the higher conforming loan limit. Therefore, the revised FHA loan limit could be increased from $362,750 to $625,000 or higher.

 

The following are some of the attractive features of the FHA loan programs for owner-occupied properties:

 

  • Down payment is 2.85% of the purchase price
  • Down payment assistance / “Nehamiah” programs available *
  • No credit score required- good credit for the previous 12 months is OK
  • 100% gift for down payment is allowed
  • Seller can credit the buyer up to 6% of the purchase price for Buyer’s non-recurring and recurring closing costs
  • 2/1 interest rate buy-down and straight 30 year interest rate buy-downs are available
  • Pest control recommended repairs- all section 1 items, all section 2 items (that could lead to further damage) and all recommended further inspections of inaccessible areas must be completed with a pest control certification at close of escrow
  • Allow 45 days to close escrow
  • Collection accounts on credit report do not automatically have to be paid in full
  • Bankruptcies OK if older than 2 years (in some cases, older than 1 year is allowed!)
  • Non-occupant co-borrowers are OK (blended debt-to-income ratios allowed)
  • Back-end qualifying ratios from 41% up to 50% in some cases
  • 1 to 4 residential units OK – 2 to 4 units have higher loan limits
  • Condominiums do not require private mortgage insurance (PMI)
  • Single family dwelling (SFD) and planned unit developments (PUD’s) require PMI at .5% of the purchase price (conforming loans require PMI at 1%)
  • Unapproved condominium complexes require “spot” approval
    • Not previously approved and then removed from approval list
    • No pending litigation against the condo homeowner’s association
    • No more than 10% of the units delinquent on HOA dues
    • 51% owner occupancy ratio required
    • Up to 10 units maximum in complex under spot approval (some exceptions may apply)

 

* The Nehamiah down payment assistance program is a non-profit organization. The seller makes a charitable donation to Nehamiah then Nehamiah forwards the Buyer’s down payment to the escrow account. Please note that some title companies may not facilitate this program and you should confirm prior to opening and escrow account.                                                                                

  

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The Power and Benefits of “Buying Down” the Loan Interest Rate

April 12th, 2011 · No Comments

In most real estate markets throughout the country, sellers are trying to cope with a slower moving market burdened with an over supply of competing homes for sale and weak buyer demand. Many potential home buyers can no longer afford the prices of homes in high cost real estate markets like the San Francisco Bay Area in California.

 

 

Buyers are struggling with rising mortgage interest rates, tougher loan underwriting qualifying standards, high prices and low affordability. Real estate investors want positive monthly rental income cash flow and a hedge against a softening rental market in the future.

 

Solution:

·         A mortgage interest rate “buy-down” allows the seller to expand the pool of qualified buyers and real estate investors.

·         The mortgage interest rate buy-down is a seller strategy with multiple options to maintain the seller’s price position

·         The property is offered for sale at the full asking price with a seller credit to discount the mortgage interest rate or a discounted price without a seller credit to discount the mortgage interest rate

·         It’s a “win-win” for both the buyer and seller

·         The seller can deduct the buy down credit as a selling cost expense

·         The buyer receives a 1098 form from the lender and a tax deduction for the buy down credit – “points” paid for the new loan to purchase the property

·         Higher sales price maintains neighborhood property values

·         The discounted mortgage interest rate helps to ensure the buyer will qualify for the loan

·         The buy-down empowers the seller to compete with new home builders offering substantial buyer incentives

·         The lower monthly loan payment increases the potential for positive rental cash flow for real estate investors

 

 

Why Buyers and Sellers are stuck:

In a slow real estate market, sellers usually experience long protracted marketing time-lines to find a qualified buyer.  An over supply of competing homes for sale leaves the seller with few options except to make consistent and substantial downward asking price adjustments until the property sells. Investors are reluctant to buy income properties with negative monthly rental cash flow. Buyers cannot qualify for financing to move up into a larger home or move to a more desirable location. Buyers relocating from a lower cost area into a higher priced market must make a major lifestyle set back to buy a smaller home in a lesser location.

 

The process to solve the problem:

Sellers can align themselves with a reputable lender to find the best mortgage interest rate buy down program and integrate the buy-down with their marketing and pricing strategies Buyers can obtain a loan pre-approval with a reputable lender using a mortgage interest rate buy down program to increase their purchasing power.   

 

How does mortgage interest rate buy-down program work?

The seller uses a credit from the proceeds of the property sale to pay additional loan points on the buyer’s loan. The additional loan points will “buy-down” the mortgage interest rate. The discounted mortgage interest rate applied against the same loan amount will reduce the monthly loan payment. So, there is no “out-of-pocket” cost to the seller. The credit paid to the buyer’s lender is a paper transfer at the close of escrow. The buy-down fee is a debit from the seller’s proceeds of the property sale.

Review the Example and the type of loan used – five-year interest-only loan.

 

Example:$644,000 sales price with the Buyer purchasing with 20%down:

Down payment             20%     $128,800

Loan amount                80%     $515,200

Rate/payment               6.375%                       $2,737 per month

 

Option I

$644,000 sales price with Seller credit of $10,000 applied to interest rate buy down:

Down payment 20%     $128,800

Loan amount                80%     $515,200        

Rate/Payment               5.5%                           $2,361 per month      

**This results in a monthly payment reduction of $376.

 

Option II

Reduce sales price by $10,000 to $634,000 with the Buyer purchasing with 20% down:

Down payment 20%     $126,800Loan amount                80%     $507,200Rate/Payment               6.375%                       $2,694 per month

 

*** Your buyer saved only $43 per month In order to achieve the same payment of $2,361 per month by using a price reduction you would have to reduce the sales price by $88,750! (see example below)

 

Reduce sales price by $88,750 to $555,250:

Down payment 20%     $111,050

Loan amount                80%     $444,200

Rate/ Payment              6.375%                       $2,361 per month

 

While a $10,000 sales price reduction is reasonable, an $88,750 sales price reduction is not. The loan interest rate buy down credit is a win/win for the buyer and seller. 

 

Review Option I –

Compare the difference in the interest rate and monthly payment between the Example and Option 1.

 

How much will the buyer save each month using the buy-down loan?

$376 per month…multiply this monthly savings by 60 months and the buyer saves over $22,560 in five years. If the buyer decides to pay a lower price instead of taking advantage of the buy-down interest rate loan- how much does the buyer save each month if the seller lowers the purchase price by a sum equivalent to the 3% credit, in this case, $10,000?

 

Review Option II –

The buyer saves $43 per month or $2,580 over five years.

The buyer can pocket an additional $19,980 if the buyer chooses to pay the full asking price with the mortgage rate buy-down loan.

 

How much would the seller have to lower the asking price to achieve the same discounted monthly loan payment and the borrower financing 80% of the purchase price?

The seller would have to lower the asking price by $88,750 to achieve the same payment using an 80% loan to value ratio.

(Review the “sales price reduction” example)

The seller is more than likely to be unable or willing to make such a large price concession. 

 

Why does the buyer receive a tax credit for the buy-down fees paid by the seller?

The lender is required to issue a 1098 form to the borrower for points paid on the purchase loan. The seller is not the lender’s customer. Therefore, the buyer receives a significant tax deduction of which could make the property purchase even more attractive.

 

How do lenders benefit from these buy-down loans?

1.      It is easier for a buyer to qualify under a discounted loan interest rate and the bank receives upfront “pre-paid” profit from the additional points paid on the loan.

2.      The discounted interest rate can make it easier to put a second loan behind the discounted first loan and therefore, the buyer can use a smaller down payment to purchase the property – like an 80-10-10 loan.

3.      The discounted monthly payment can offset additional monthly association fees for buyers purchasing a condominium.

 

Is it possible to buy down an adjustable rate loan?

The interest rate index and margin are added together to create the “note rate”. The buy-down of the margin will lower the note rate and, therefore, the related monthly mortgage payment. The benefits of a margin buy-down in a rising interest rate environment include lower monthly payment increases.

 

Is it possible to buy-down the interest rate in a loan refinance?

The buy-down fee (points) in a refinance is built-in by obtaining a larger loan amount above the existing loan amount. You can reduce the monthly mortgage payment through a buy-down refinance loan. Buying down the interest rate on a new first loan may enable the buyer to qualify for “piggyback” second loan financing to minimize the buyer’s down payment requirement. A lower monthly loan payment on the discounted first loan leaves qualifying room for the buyer’s debt-to-income ratio for the monthly payment on a second loan.  Also, a lower monthly loan payment leaves qualifying room for a buyer’s debt-to-income ratio to pay monthly condo association fees

 

Here is a strategy to enable buyers to find sellers willing to pay the buy-down loan fees….

·         Team up with a Realtor to search for properties listed on the MLS for at least 30 to 45 days

·         Look for properties that are vacant and are still listed at the original asking price

·         Occupied properties are OK, too

·         Ask your lender to prepare a loan interest rate “buy-down” outline like the handout for this conference call

·         Draft a full price purchase offer with your Realtor

·         Ask your Realtor to contact the seller’s agent and make it a requirement that your Realtor meet with the seller and the seller’s Realtor in person or on a 3-way conference call including the seller’s agent to present your offer

·         Ask your lender to be on “stand-by” to answer any questions that may come up during the presentation of your offer   

 

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Home Valuation: How To Find Out What Houses In ANY Neighborhood Are Really Selling For — And How Long It Takes…

April 4th, 2011 · No Comments

Have you ever talked with someone who tells you that they sold their house and “got what they wanted?” You remember that they were asking $429,000 so that must be what they sold for – or so you’d think. Or someone tells you that all the houses in your neighborhood have been selling for full price because the market is so hot right now, or the buyers are out their like never before.   One thing you can be sure of when you are getting ready to price your house for sale is that most of the information you hear on the street is not what is actually happening in reality. Buyers and sellers tend to over or understate the prices that they sold for or bought for, but the reality is that you can get information on what houses are actually selling for.    Here’s How To Get A Free Market Analysis On Any Neighborhood Before you consider buying a home in any neighborhood, you need to get the real information on what’s happening in the market. You can find out what houses are really selling for and how long it takes them to sell by calling my office to tell me what area you are considering and I will complete a market analysis on that neighborhood for you. Having the right information can literally save you thousands of dollars – especially when you are buying a home, so don’t end up overpaying for a house because you don’t know the market.  Questions/comments, please post to the blog, call me at 925-407-0606 or visit www.GetRealEstateHelp.com (c) Copyright 2000. NewInformation!8 

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Don’t Be Clueless About Your Home Owner Insurance

April 1st, 2011 · No Comments

Leaky roof? Stolen bike? Broken rain gutter? You may want to think twice before even calling your insurance company. 

Many home insurers count inquiry calls – calls in which homeowners simply ask informally whether their policy will cover certain damages and are told that it won’t – as unpaid losses. 

Most insurance companies file loss information, paid or unpaid, into a centralized database called the Comprehensive Loss Underwriting Exchange, better know as CLUE. 

Even if a policyholder just makes a phone call and doesn’t report any damage, there’s still a chance the call will be logged into the CLUE database as an unpaid loss. The information stays on the record for five years, and can mar homeowner’s chances of obtaining a standard policy the next time they apply for insurance. 

When a homeowner applies for a new policy, the insurance company usually orders a copy of his or her CLUE report. Two or more reported losses, depending on severity, can cause an applicant to be charged a double or triple premium or to be denied coverage altogether. 

While lawmakers in several states are trying to rein in insurers over this issue, there’s not much consumers can do to fight back. But homeowners can take basic steps to protect their CLUE reports:

Know the specifics of your insurance policy and the deductible. Refrain from calling your insurance company to ask about coverage questions that can be answered elsewhere.

Avoid preliminary calls to your insurance company. It’s not necessary to call the insurance company unless you plan to file a claim and know the damage will be covered.

If you do need to call the insurance company, don’t mention actual damage unless filing a claim. Any mention of damage will likely be recorded as a loss, regardless of whether it’s covered.

When in doubt, call a professional repairman first to get an estimate. Insurance companies will often send out a repairman to estimate damages before committing to covered damage anyway.

Report only major damage. Reporting small damages can add unnecessary claims on your report.

Check your CLUE report. Make the effort to clean up any disputed claims before it has a negative effect on selling your home or renewing your policy.

If there is an error on your CLUE report, the disputed item will be sent to the reporting insurer for verification. If the item is not removed, you have the right to append a statement to the report. CLUE reports can be ordered by calling Choice Point (866) 527-2600 or on-line at www.ChoiceTrust.com. The cost is $12.95 for California residents. You can’t get a CLUE report for someone else’s home. However, if you are buying a home, the sale can be made contingent upon your approval of the CLUE report provided by the seller. 

Call Pete Sabine (925) 407-0606 for a consultation or visit www.GetRealEstateHelp.com 

RE/MAX CC Connection

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Sell Your Home:Choosing the Right Purchase Offer

March 22nd, 2011 · No Comments

Most sellers would be delighted to receive multiple offers from prospective buyers. However, figuring out which offer to accept is not always as simple as you might think. Suppose you receive three purchase offers. One is for $495,000, your asking price. Another is for $10,000 more. And the highest offer is for $525,000 – $30,000 over the list price. If you consider all the factors of each offer, then the best offer might not be the offer with the highest price. Let’s look at each offer a bit more closely. 

Offer 1:There’s more to consider about an offer than the price. The $495,000 offer might be from a pre-approved buyer who has a $250,000 cash down payment and no appraisal contingency. This means that if the house appraises for less than the offer price, the buyer may not use this reason to back out of the contract without the risk of losing their good faith deposit monies. The lender should have no problem granting the buyer a mortgage for approximately 50 percent of the purchase price, even if the appraisal comes in low. The larger the cash down payment, the more likely the lender will approve the loan.  

Offer 2:The highest-price offer might be from a buyer with a 5 percent cash down payment and an appraisal contingency. This means that if the property appraises for less than the purchase price, the buyer has the right to back out of the contract without forfeiture of their deposit to the seller. Even if the buyer doesn’t want out, the lender won’t be willing to grant a mortgage in the amount the buyer needs to complete the sale.  With only 5 percent down, there’s a good chance the buyer won’t have enough extra cash to make up the difference between the appraisal value and the purchase price.  

Offer 3:The third offer could be contingent upon the successful close of escrow of the buyer’s current home that is now under contract. If the transaction on the buyer’s home fails to close, the buyer can withdraw from your contract without penalty and forfeiture of their deposit to the seller. If this happens, you’ll be back on the market searching for a new buyer.  

Counteroffers:In terms of a risk analysis, the lowest price offer appears to be the offer with the best terms. One negotiating option would be to counter the lowest offer with a higher price, based on the fact that you have two offers higher than offer #1. Before making a counter offer, consider that the buyer could reject your counter offer and disappear from the negotiations leaving you with two riskier offers to choose from. If you have already purchased another home, you might be better off leaving the price alone on the lowest offer and asking for a short close of escrow date. A quick close could save you the cost of interim financing, which would effectively put more money in your pocket with less risk. When analyzing offers, the fewer the contingencies, the better. Contingencies can complicate a contract by providing more opportunities for a transaction to fall apart. In general, you’re looking for the highest price, the quickest close and the least number of contingencies. 

Call Pete Sabine (925) 407-0606 for a free consultation or visit www.GetRealEstateHelp.com 

RE/MAX C.C. Connection  

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