Top 10 Questions to Ask the Short Sale Listing Agent Before Making an Offer

Admin Note: Over the coming weeks, I will be discussing short sales here at Buy Home Blog. I found an excellent article from an experienced short sale realtor’s perspective.

HOW TO EVALUATE A LISTING AGENT IF YOU ARE REPRESENTING A BUYER

1. What is your experience representing sellers in short sales?

Dealing with a knowledgeable and experienced agent who has successfully closed many short sales is the sine qua non for a successful short sale.

Thousands of agents are now taking short sale certification programs and presenting themselves as short sale specialists. Many of these agents have never closed a short sale in their lives. In fact many of the people teaching certification classes have themselves never closed a short sale.

Knowing the mechanics of a short sale is not enough. Lots of agents now have this information from taking one of the many certification classes now prevalent. It will not get the job done.

Ask the agent how many short sales they have closed representing sellers in the last year. I would also ask them if they have closed any representing a seller with the particular loan servicer who is the third party approver(s).

(Representation of buyers in a short sale counts for nothing in terms of short sale experience since all the approval action goes on with the listing side.)

The listing agent needs to know how to escalate a deal to get an approval. Some loan servicers – BOA immediately comes to mind – reflexively decline short sales and, I believe, manufacture values, notwithstanding what their appraisal or BPO says, hoping to extract the maximum dollars from the buyer and agents.

(Understandable perhaps, but if they really wanted to get the most money from the short sale, they should provide a target number up front, not spend months jerking buyers and sellers around).

The agent needs to know how to get to management to get an approval with Servicers like this. In fact the listing agent needs to know how to do this just as reflexively as the servicer who is going to reflexively decline the deal.

Negotiating price prior to getting to the Management level is going to prolong the process, not shorten it. But the listing agent has to know how to get around the lower level negotiators.

2. How many liens are there on the property?

First or first and second or HELOC, HOA, Condo, Special Assessment, Tax?

3. Who is/are the servicer(s)?

BOA, for example is extremely difficult to deal with. Much more so than Wells Fargo. So unless you just get lucky it will take a much more experienced and savvy agent to get an approval from BOA than WF.

4. Who is the investor or insurer on the loan?

Fannie Mae, Freddie Mac, FHA or VA or Conventional or PMI.

Conventional loans are the Wild West for servicers since they can approve or deny anything they want.

Fannie Mae loans frequently have PMI which means, nothing is happening without the PMI companies approval, so even if there is only one lien, there may be two approvals required.

FHA has a proscribed process which allows servicers little latitude for game playing.

5. Is the listing agent going to have one contract signed and submitted or do they say they are going to submit the offers to the servicer to decide which one they want?

I would personally advise my buyers to run away from any deal where the agent says they are going to submit multiple offers to a servicer. That tells me the listing agent is clueless. Why would you send multiple offers to a loan servicer who takes months to approve one deal? If the agent can’t figure out which is the best deal in a multiple offer situation, they should get out of this business completely.

6. Has the servicer previously approved a deal which the buyer walked away from or has the servicer disclosed an acceptable price?

This may shorten the process, but not necessarily. Some servicers will force the agent to start all over from square one again with a new buyer, including ordering a new appraisal.

7. Does the agent have any financial modeling program to determine whether the offer is going to yield more cash to the investor than foreclosing?

This is how the lenders ultimately decide whether or not to approve a deal. Absence of this is means you are pretty much throwing darts with a blindfold on.

8. Has the property been priced appropriately?

I still see short sale listings where it is obvious the property is priced at a number which would pay off all of the liens. Ridiculous. Don’t even think about showing your buyers this property.

9. Do the agent comments say something like “commission paid on net sales price” or “50% to selling agent of approved commission”?

Either this agent is clueless or they don’t know how to handle commission negotiations with the lender. This is a run away, don’t walk situation.

10. Does the agent purport to be an expert?

I would be very, very wary of anyone who purports to be an expert. The only experts I am aware of are the guys sworn in as such in court rooms. We have 10 to 15 short sales in various stages of approval all the time and I see new twists on servicer tactics and processes every day – and there are dozens of servicer representing hundreds if not thousands of different investors. And don’t forget HAMP or HAFA.

Bonus Question:

11. Will an Attorney get you a better deal on a Short Sale?

Think about it. Until this year, most attorneys would have turned their noses up at dealing with loan servicers on short sales. Suddenly, they’re experts in short sales.

(The inspiration for this blog post was a question asked me by another agent at a meeting of the top agents in the Anne Arundel County Association of Realtors in Annapolis).

Copyright – 2010 – Michael Davis

Michael Davis is a Realtor with Davis-Resnick Group, LLC. He is a short sale specialist in the suburban Washington, DC and Baltimore area and Residential Sales: Anne Arundel Real Estate and Annapolis Real Estate. Visit his site today at http://www.davisresnick.com.


Buying a Home: Your Step-by-Step Guide

Admin. note: Here’s a good home-buying overview article. We will be going more deeply into each step of the process of buying a home over the coming weeks. As we always stress – don’t get emotionally over-sold in the process, and don’t skip a step that you see below. There are plenty of homes in the sea of real estate.

Buying a piece of real estate for the first time is an exciting life event and can be somewhat of a challenging process. There are so many things going on, with so many parties involved. It’s easy to get confused about what to do next in what seems to be an overly complex maze of legal formalities. This article will explain, in easy terms for the inexperienced buyer, how the process works.

Step 1. Loan Pre-Approval

The first thing to do when you are looking for a home is to get yourself pre-approved for the home loan. This will involve completing paperwork about your income and assets. Once you complete that process, you will know how much money you have available to spend for your home purchase.

Step 2. Searching for Your New Home

Start looking. It is good to begin your search in earnest already having defined what you actually want. You can define your ideas in a systematic way, by making a list.

Step 3. Identify Home

When You find your dream home, you’ll know it. The right home for you might be the very first home you find or the thirtieth.

Step 4. Making the Offer

Before making a formal offer, put some appropriately serious research behind it. Learn what properties in the area have recently sold for. Make a fair offer — if it is too low you could all too easily alienate the seller; if it is too much you could end up paying more than you have to. In most cases, when you make an offer, you will need to put up anywhere from 1% to 3% of the asking price in “earnest money.” Your offer will cover the terms and contingencies that you want in addition to price, such as inspection, any needed repairs, and your desired closing date.

Step 5. Acceptance of the Offer

After a little negotiation back and forth, the seller and you will reach agreement on terms.

Step 6. Title Review

A title review, in most jurisdictions in, is normally conducted by a real estate attorney who researches the title, or ownership history of the home, and gives a formal opinion as to whether the seller’s title is clear and meets the terms of the contract to which you have agreed. In some states this is done without a lawyer but almost without exception there will be a requirement for a title search.

Step 7. Home Inspection and Necessary Repairs

Getting an independent inspection is important. An inspection can reveal problems that could be significant, from a furnace problem to a crumbling fireplace. If the inspection shows problems, you will have to discuss and negotiate repairs.

Step 8. Appraisal

An appraisal is a formal estimate of the home’s true value. No lender will be able to lend you a larger amount than the appraised value of the property. If the appraisal comes out lower than the selling price, your deal is in serious trouble. Solutions include the buyer adding in the difference in cash, the seller agreeing to lower the selling price to match the appraisal, or the seller and the buyer getting a different appraisal. This subject has come under increased scrutiny recently, so be careful.

Step 9. Final Loan Commitment

You will feel a big sense of relief when the lender completes a final review of your documents and approves your loan.

Step 10. Final Walk Through

The walk through takes place a few days to a few hours before closing. During the walk through inspection, ensure that the home is in the shape in which you agreed to purchase it. All repairs required of the seller need to have been accomplished satisfactorily. The final inspection is your chance to ensure that the home has not been damaged or altered since you contracted to purchase it.

Step 11. Closing

Closing is the transfer of title to you, as the buyer,. As the buyer you will have to pay the down payment on the property and your part of the closing costs. Before the day of the closing find out exactly how much money you will need to bring at closing.

That’s it! You’ve made it through. Once you’ve accomplished these steps, you’ll have your dream home.

This article was made available by your Broomfield Colorado real estate experts, Automated Homefinder.


What is PITI in Your Home Loan Documentation?

Hey all – Here is another timely article from Joel McDonald, a real estate broker from Colorado, and owner of a large Boulder, Colorado, real estate firm. The PITI information is something you really need to know when p purchasing a home, particularly if you are a first time home buyer. Enjoy! Kent

Whenever you are involved with the purchase or sale of real property, there are many terms and definitions that you should know. Although it’s not practical for the average buyer or seller to learn them all, there are some that you should become familiar with for your own benefit and PITI is one of them. Here is a short explanation of the term.

P Is for Principal
The principal is the actual amount that you are borrowing from the lending institution in order to buy the property. This figure varies from one scenario to another depending on how much you put down on the home and how much you actually end up borrowing. The principal is almost always the biggest portion of the PITI total.

I Is for Interest
As with any transaction in which you borrow or pay over time, you are charged interest. This is the amount the lender earns from you as the price of loaning you the sum you need, based on the time value of money. It is expressed in percentages. Based on the terms you have, the interest rate can remain at a fixed percentage of the loaned amount for the entire term of the loan or it can vary, meaning it can be changed by published standard rates and other factors.

T Is for Taxes
Even when you are buying real estate, you can’t get away from paying taxes to Uncle Sam. Taxes on real estate typically go to local government jurisdictions to help education and infrastructure operate. The tax revenues collected from homeowners help medical facilities, recreational centers, local schools and other public facilities serve the residents. The taxes are usually included with your monthly mortgage payment and are prorated each month. The lender passes the tax share to your government authority.

The Other I Is for Insurance
You don’t want to own a home without being adequately insured. Your home is your largest investment and a good insurance policy is essential for your family’s protection. Depending on what your home is worth and where you live, there are various insurance policies from which you can select. The choices that are available to you will vary depending on how much you put down on a property. If you put down of less than 20 percent, lenders require that you buy a certain kind of policy that covers them so they get their money if something happens to your home or if you are foreclosed. Similar to the way it is with taxes, these payments are usually added in with your monthly mortgage payment as well.

This article was provided by Automated Homefinder, Colorado’s top Boulder real estate professionals.


Need Help Buying a Home? 5 Critical Tips

Don’t let this down market fool you – many folks still need help buying a house. First time home buyers are notorious for making mistakes that cost them dearly in the long run. Here are 5 must-do strategies to make sure you’re getting the best deal possible on the home you may be buying.

1. Don’t let the realtor pre-sell you. I love realtors, but don’t assume the realtor is your best buddy – they are there to sell you a home. Maybe you really want a pool – never tell a realtor “we only want to look at homes with pools.” Why? Because a) You may find your dream home and it doesn’t have a pool; b) the realtor will leverage that against you. Yes – I said against you. Just keep it to yourself – the realtor does not have to know everything.

2. Know home values in the area before you make an offer. So, the seller is coming off his list price $12,000… he may have been $15,000 high to begin with. Do your homework – look at tons of MLS sheets and local flyers. Research your local Appraisal District. Simply put, place the burden on yourself to understand pricing in your market.

3. Don’t get sold on little features. Don’t major in the minors. So, the home has crown molding – don’t forget it needs $12,000 of new flooring – a far more important feature than crown molding. See No. 1 – never place too much emphasis on small features.

4. Be thick-skinned about offending someone. I say it again – don’t let a realtor control you or your situation. If you don’t like a home and you know it, tell the realtor, or owner “this one isn’t for me” and move on – quickly. More importantly – don’t worry about your offering price offending a seller or realtor. Don’t be afraid to ask for repairs to be made – in fact – demand it.

5. Let the appraiser be your friend. If you’re obtaining bank financing, you will most likely get to pay for an appraiser. Most are good and very knowledgable of their market. Take the appraisal report as good information, not as something that may “kill your deal”. You may disagree with the conclusion, but use it as good data for future reference, especially things like the square footage, flood information, etc.

In any market – up, down, or stagnant – new and experienced home buyers need helping buying a home. Do your research and be open to picking up new and old tips as you move toward buying a home.


Home Building in a Down Economy

The downward spiriling market has produced a major decline in home building.  This decline is making some doubt that now is now the right time to build a home.  Is the decline in residential home building a good thing or bad?

Photo. courtesy of http://www.flickr.com/photos/cindy47452

The current financial crisis is affecting everyone, but it is particularly difficult on the home construction market. Construction jobs are in decline, and many folks are losing their homes to foreclose.

 

 

From the positive side – many home building contractors are very slow and have dropped their profit margins.  Thus, one could assume the cost of building a new home has at least stabilized, if not declined. 

 

On the negative – lenders have tightened their lending policies,  AND, just as importantly, they’ve increased the requirements on building contractors – which has in turn driven up the cost of home building insurance or liability insurance. 

But, if you are set on forging ahead and getting home building estimates, here are some suggestions. 

 

First, get in touch with several local builders that have constructed houses similar to the size, quality and features that you want. By talking to them, you get a straight answer as to how much it is going to cost for the entire project plus what materials they will use.

 

Ask them the following questions:

 

1) Are your home building costs increasing, stabile or declining?

 

2) What is the general per square foot cost range to construct a a standard home like (list an address of a home he/she has completed)?

 

3) What new home features are most expensive presently?

There are numerous other questions you would want answered, but this is a start for your prospective home builder.

 

Don’t forget to put a 5-10% additional allowance to your budget when you make your estimate because plans change and in most cases, you and you contract will encounter unforeseen circumstances. Naturally you have to deal with the situation otherwise there will be delays when everything will be finished.

Also remember -  the cost per square foot is higher for a small home than a big one. Why? Because the cost of items is spread over and a two story home if that is what you want has a smaller roof and foundation. The same goes for plumbing and ventilation.

 

Another thing that could reduce cost is the shape of the home. Houses that are shaped like a rectangle, square or dome shaped are more affordable to build since there are not that many angles or corners which increases the amount of labor and the materials that will be needed.

 

As much as possible, work with even numbers because this reduces wasted materials. The ideal home to make should be not less than 32 feet deep otherwise your roof trusses will have to be custom made which will cost more.

 

Until the market stabilizes – one would have to think long and hard about about constructing a house when there is a decline in home building due to the financial crisis. The best advice is to keep these tips in mind when the economy does improve so you will already have an idea how much money you need to build it.

 


Home Market Values? 5 Steps to Find and Track Them

 A few days ago I called home values pendulums on steroids.  They are swinging wildly.  Others might suggest that the value of homes were like skydiving with a questionable parachute – you’re falling way too fast and you hope the ‘chute opens before you hit bottom. 

 

 

Whatever you call this current real estate home market, most can agree it is difficult right now to find true home market value.

 

Before we jump in and look at the 5 step process to assist you in finding home values, let me present a definition of market value.  The simple answer to the market value definition is:  the price a willing buyer will pay a willing seller. 

 

However, I think taking a closer look at the definition of home market value, or simply market value, is worth noting. 

 

The Federal Office of the Comptroller of the Currency states market value is:  The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus 

 

The definition goes on and gets more detailed, but, in layman’s terms what this says is that market value is the price a buyer pays to a seller when they both know what they’re doing and the property has been exposed and available for sale.  In ever simpler terms – what would someone pay for a home with a “for sale” sign in the yard? 

 

 

That is the essence of home market value.

 

Ok, now let’s look at the five steps to determine what a home is worth, or the value of the home.

 

1)     Start by looking at national, regional and local housing trends.  National trends are everywhere – just make sure you’re looking at facts and not opinion on home values.  Statewide or regional area trends are typically available somewhere on line for free if you can locate them.  Here in Texas, the Texas A&M Real Estate Research Center puts out an excellent home value trends report.  Contact your local appraiser, realtor or lender for a source in your area.  You’ll notice your region could be substantially different from national trends –either for the better or worse.  Home values continue to plummet in the Phoenix area, while some markets in Texas have had flat to slightly increasing values. Your local market probably has a Multiple Listing Service, or MLS, and most usually compile quarterly or regional data. 

 

2)     Pull up the current assessed value of a home and others in its market area.  Look at the assessment history.  Is the value trending up, down, or is it stagnant?  This is a good initial research step that will just take a few minutes, assuming your assessor’s office has on-line data. Here’s a key – divide the total assessment by the home’s square footage and look for trends and consistency.

 

3)     Talk to realtors.  Notice I realtors, not realtor.  Talk to several about home values in their market area.  I find most realtors are pleasant and pretty chatty.  Good places to talk to realtors (and appraisers for that matter) are at local Chamber or community events.  Bad places to talk to realtors are church, the grocery store, or any other place where you may be intruding. 

 

4)     Talk to appraisers.  Anyone truly seeking to know home values for their area needs a working, or at least talking relationship with a good appraiser.  Realtors can be a source for quality appraisers, but do some research on your own.

 

5)     Monitor listing prices in your area. Check your Sunday paper and other classified sources.  Do you see a large number of “reduced” prices listed?  Make a simple chart of homes/areas you’re familiar with.  Are these home prices lower than you recall 6 months prior?  Remember when it comes to determining the value of homes – data is king.

 

Ok, these five steps are not only the beginning, but also the cornerstones for determining values and home value trends in your area.  Make a habit of tracking where home values are heading.  Once you start you’ll develop a better eye for value and home pricing in general. 


First-time Home Buyer? Three Critical Points to Help

Are you in the market for buying a home?  Congratulations if so! I think 2009 could be a good year to buy.  Interest rates, while all over the place, appear to be moving generally lower.  Home prices have come down in all markets by and large, dramatically so in some areas.

If this is your first time home buying journey, let me offer up three key elements you must know and do before you really get going – let’s call these “must do’s”. 

1) You must know “how much” home you can afford.

Whether you are buying a new home or existing one – it really does not matter - you must know how much home you can buy. Remember this – the biggest mistake first time home buyers make is looking at, or worse, purchasing too much home. Therefore, I highly recommend you get yourself “pre-qualified” with a mortgage professional first. If you are already looking at homes – that’s o.k. – just meet with a lender at your next earliest convenience.  Also remember – what you can qualify for is usually more home than you can truly afford.  I can’t imagine actually paying the mortgage on what I could “qualify for” – I can’t afford it.  Keep this in mind.

Since this is your first time looking for a house, you probably don’t have a mortgage person selected. I highly recommend networking with your local friends who have bought a home recently. Personal referrals in a local market are the best method to select a loan officer.

2) You must not let your realtor control you.

If you’re buying a home, chances are you’re using a realtor. I’ve worked with hundreds and hundreds of realtors over the past 20+ years.  Many I know work extremely hard – and in ways you don’t see.

But, let me make two points about realtors:

 

  • The majority of all realtors I’ve ever worked with have been professional and ethical.
  • Realtors make a living by selling homes. What separates the pros from the amateur realtors is their ability to get you to buy a home quickly.

 

The rub here for you making your first time home buying trip is you must stay in control of the situation with the realtor – whatever that situation is. If you need to look at more homes – let the realtor know that. If you can’t stand a home – speak up and let them know. The realtor’s motivation is to sell you a home – the quicker the better. If they can control the situation – they can more easily sell you a home. I’m not saying the realtor is not there to help, but I am saying they want to get you in a home quickly.

Don’t be bashful about asking the realtor for first time home buying tips. See what they know – pick their brain. If you get the feeling they really have no clue about the market – move on to another realtor – and quickly!

3) Get yourself a home buying checklist.

I’ve mentioned this before – and will say it again…. The No. 1 first time home buying tip I can give you after knowing how much home you can buy, and making sure you are in control of your home-buying experience – is to get organized with a checklist.  I recommend the free home buyers checklist from the Department of Housing and Urban Development – or HUD. Get one and use it.  The link is found below.  Print it out several times and have one handy on your next home visit. 

http://www.hud.gov/buying/checklist.pdf

Buying a home is an exciting time, and buying a first home is not only exciting, but new (and stressful). The more you can control your elements, learn as you go and not get in a hurry – the greater your odds that the home buying experience will be a great – and financially smart one – for your family.


Use a Home Buying Checklist

A Home-Buying Checklist is probably one of the important items to have in your hands when you start the house-hunting process. If you’re seriously looking for organizational help buying a home – you need a home buying checklist – period.

If you’re like me, you tend to be a little un-organized, particularly when you start a project or activity you don’t do every month or year like house-shopping.  When I’m in the market to buy a home, I know I need some organizational help and a home buying checklist provides just that.

What should be your home-buying checklist look like? That will obviously vary from person to person, but the best checklist I’ve found is actually a freebie from the Department of Housing and Urban Development. I’ve provided a link below.

I really like the layout of HUD’s home buying checklist, and it’s broken down into four sections:

1) The Home

It goes without saying that “the home” is a key part of the buyer’s checklist. This part of the checklist offers a concise method of what to look for in the home, and notes you can make as you walk through and around the home.  At the end of a long day of looking at homes, how are you going to remember the details of each home – your likes and dislikes?

Let’s say you looked at four houses on a Saturday. At the end of the day, what do you have to help you remember what you looked at? Four realtor sheets? What if there things about home No. 2 you loved, but several things you disliked as well? Get your HUD home buyer checklist and use it.

I would also recommend taking several pictures of each house – a front view, street view, rear view, and a couple of interior pictures as well.

2) The Neighborhood

Just as important as the home is the neighborhood the home is within. What’s the appearance of the area? Is traffic a problem? Is this area safe? Trust me – these are things a savvy realtor won’t talk about most likely – it’s up to you to investigate.

3) Schools

While this is a key home buying tip for younger couples, strong schools often reflect strong home values and shorter marketing times. So, schools are also important when you become a home seller as well.

4) Home convenience

I place this in my neighborhood section, but HUD places convenience features as a stand-alone. How is this home situated to your world? Is it within a reasonable commute to work, school, shopping, church, etc.

Getting organized is the first step in a successful buying experience, whether you are first time buying or an experienced buyer, of if you are buying a new home or an older home. It is critical to get organized and stay organized through the process of buying. Get an inexpensive folder, download the home buyer checklist from below, take pictures, and make tons of notes – you won’t regret it.

I highly recommend HUD’s buying checklist.  The link is found below.  Print it out several times and have one handy on your next home visit. 

http://www.hud.gov/buying/checklist.pdf


A big Thanks to Garry Conn at www.GarryConn.com

You may notice from my footer that this site was designed by Garry Conn – free of charge I might add.  Well, technically free, but not a freebie. 

Garry is one of the true stand-up bloggers out there today and he’s been encouraging me for some time now to start a real estate blog – which I’ve done here.  Thanks Garry – looks great!

Garry blogs daily at:

www.garryconn.com and www.bloggingquestions.com

Both sites are chock-full of tips, helpful ideas and just generally good, non-hypey stuff.  Check it out.


First Time Home-buying Tips – Location is Key!

Are you in the process of first time home buying?  Maybe you’ve heard this saying  – The three most important things to consider when buying a home are location, location and location.  While it is cliche’ – I’ve found in my experience that the statement is very accurate.

For this reason alone – location education is a “must learn” on your home buying checklist. 

In my experience as a real estate professional I’ve found that most things which provide value to a home can – to at least some degree – point back to a home’s location.  A great home in a bad location will never be more than an overall average home, and a stinker of a home in a great location will usually find willing buyers.

Draw upon my real estate knowledge and let me provide some locational assistance – which is one of the key first time home buying tips.

Let’s take a closer look at what this “Location, location, location” phrase really means. If you’re a first time home buyer it’s okay to admit you haven’t decided exactly which location feature is “most” important to you just yet – that’s o.k.  However, I can tell you from a home value perspective, here are three key Location elements to consider during your first time home buying experience:

1) Neighborhood Location

Many things make a neighborhood desirable, but three primary universal factors are:

  •  Conformity of homes to a high quality standard.  Homes in your location should be well built and in good condition.  If half the homes are in dis-repair, and the other half have become rentals – keep looking! 
  • Safety of neighborhood.  Your potential location should be overall safe.  It doesn’t have to have a spotless police blotter – but you better make sure convicted child predators, felons and other bad folks are in the area.  There are many ways to check for this.
  • Good schools.  This is very important if you have younger children, or are plannning to have children.  It also has proven to be a key element of many people’s home buying checklist – thus, it increases home values.

2) Street location

A great home in a desirable neighborhood, but with bad access, high adverse noise influence or other negative factors should be considered.

3) Amenities Location

I live in a neat, little addition that is tucked away off a significant carrier and is just a couple of minutes from the local mall, restaurants, movie theatre, health club.  I can’t tell you how much I love this aspect of our location. And, while I frankly didn’t even fully consider it when we built the home – the amenity location has propelled home values to very lucrative levels for homeowners in the addition. 

Some folks make the mistake of finding an ideal “retreat” home that is often in the middle of nowhere.  Guess what? Others may or may not have a desire to live that far removed.  So, use caution when considering a amenity location – is it universal?