Helpful Tips

Home Sellers – Feeling Lucky With Your Real Estate Sale?

In case you missed this morning’s headline, Existing Home Sales Swan Dive. That’s right. Sales of existing home sales plummeted 27.2 percent in July. Furthermore, the National Association of Realtors stated that July’s existing home sales is the lowest reading since NAR has been keeping track.

It should also be noted that total housing inventory increased by 2.5 percent in July. It will now take up to 12.5 months to sell the existing homes inventory.

What does this mean for home sellers?

If you’re a home seller, there’s no more time to waste on hoping for a buyer to come along and pay you what you think your home is worth. It’s time for home sellers to get serious and figure out what is their liquidation home sale price.

What are the odds that home sellers will actually sell their homes?

Every real estate market is different, but the growing consensus is the same. Successful real estate transactions are becoming more difficult by the day whether it is due to inflexible home sellers, home buyers remorse, unflattering home inspections and/or below market value home appraisals.

Other mind numbing real estate headlines for home sellers to think about.

• Redfin: Less Than Half of All Home-Sale Attempts Successful in ’09 - The Wall Street Journal
• Nearly Half of the Homes on the Market in July 2010 Had Prices Cut, According to ZipRealty – RISMedia

If home sales is a game of numbers, wouldn’t you want to be on the side with the highest probability of success. Understanding the dynamics of the real estate market is one aspect that your real estate professional must grasp. Working with a local real estate professional who can provide clarity is a must.

Otherwise, if you’re feeling lucky your best bet for your home sale may come down to the flip of a coin.

Understand Property Values Foot-By-Foot

To understand real estate property values one measurement that’s mentioned frequently  is Price-Per-Square-Foot. Simply put it is the PRICE of your home divided by its AREA. In other words,  how much you are paying for each 12 inch by 12 inch square. Easy right? If you have ever hired a contractor or bought carpet, they probably gave you a quote based on the size of the job or AREA of the rooms.

The most important reason for buyers and sellers to use this calculation is so you can compare  homes of different sizes. If one home is twice the size as another similar property it’s PRICE should be twice as much.

Comparing homes by price per square foot can give us great insights far beyond mere structure. Certainly we get a feel for it’s condition, and the quality of it’s construction, but beyond that are the amenities & landscaping, location of the home, even the surrounding community. All these add up to the home’s desirability or its’ value.

But let’s expand our view. Are there vacant homes on this block? Does one family have junk cars and trash all over? What price value can we put on a superior school system in dollar terms? Are there parks, a library, medical facilities  and shopping nearby? How much is a lakefront property worth more than one with just a lake view?

Taken together, do these outside  factors of the surrounding community give the house more value or take some value away? Understanding the price-per-foot measurement can be used not just for individual homes, but also for specific price segments, micro-neighborhoods, subdivisions, even entire towns.

Here is an example of how prices have fluctuated in Portage Indiana over the past year, measured in price per square foot terms. Notice  a 10% drop occurred in the average from $103 to $93 last Winter, then recently there has been a modest rebound.

So what changed exactly?  What made homes suddenly less desirable,  then become more valuable again?    Obviously none of the homes changed location.   Did the local home center have a clearance sale on granite counter-tops?  Probably not.  But the desirability of Portage Indiana real estate did change, first down, then up again, as reflected in hard dollars. Since the homes themselves didn’t change much, we will have to blame those mysterious “market forces”.

In future posts we will further break down the components that create and bend  these forces in more detail. For now just understand that the large sized numbers of real estate prices can be scaled down to the size of a shiny piece of 12 inch glazed ceramic tile that you can hold in your hand.

New Rules for Mortgage Transfers – Are You Confused Yet

With all the media buzz about Fannie Mae and Freddie Mac reform on Capitol Hill today, you may have missed an important press release from the Federal Reserve that will affect all homeowners with a mortgage. The press release was the issuance of a final rule amending Regulation Z about the notification of mortgage loan sales or transfers.

What exactly is Regulation Z?

Regulation Z, also known as the Truth in Lending, seeks to promote the informed use of consumer credit by requiring disclosures about its costs and terms. It seems that the government solution to every issue is the big “D” word. That’s right, more disclosures.

Stop! Do you know who owns your mortgage loan right now?

Unlike the Servicing Disclosure Statement that discloses who will be collecting your payments, the new rules for mortgage transfers will help disclose the legal owners of your mortgage.

The Federal Reserve is determined to make sure that every homeowner who has a home loan (i.e. first mortgage, home equity loans and/or home equity lines of credit) on their primary residence to receive proper notification. Within 30 days of the sale or transference of your home loan, the new company who has acquired your home loan must disclose…

• New Owner’s Identity, Address and Telephone Number
• Date the Loan was Transferred
• Contact Information of the Agent Authorized to Act on Behalf of the Owner

Why would you want to know who owns your mortgage?

The Federal Reserve believes it would be in the your best interest to know the actual owners of your home loan who can handle certain issues, including payment disputes and loan modifications.

Sounds great in theory. Unfortunately, the owner of the mortgage may or may not be the servicer of the home loan. A Chinese company, for instance, may own your mortgage but your loan payments are paid to Chase.

Who do you call when you have issues or questions about your mortgage?

If you’re like the vast majority of homeowners you only deal with your loan servicer. At the end of the day, you as the homeowner simply want to know to whom do you send your payment.

Another discrepancy with the new disclosure for mortgage transfer is the fact that it DOES NOT apply to loans on second homes, vacation homes, investment properties nor business properties.

Regardless of who owns or services your home loan, the terms of the recorded note cannot change. If you would like the personal touch through the home buying process and mounds of new disclosures, contact us.

How Far Has Google Come to Help Sell Your Home

Ever heard of Google? In case you’ve been living in a cave since 1997, here’s The Google Story in 2 minutes.

Did you recognize any features and/or applications that Google has released over the past 10 years? Better yet, do you use any of them? I know I certainly do. So, how can Google help sell your home faster?

Understanding patterns and trends were just the beginning for Google but it also happens to be the start point for every real estate agent. Not understanding real estate cycles and patterns in your local real estate market can lead to lost dollars and much frustration.

Think about it for a second. Why is every home offered for sale start with a comparative marketing analysis (aka CMA) and end with a valuation of property through a licensed appraiser?

The answer is simple. Home sellers and home buyers want to know which direction home prices are trending. This allows home sellers a solid foundation on how to price their home for today’s real estate market. It will also reaffirm the home buyers confidence that they did get a great deal on the purchase of a home today.

Beyond getting a grasp on real estate market trends, did you know that Google can help sell your home faster through it’s vast brand awareness and marketing prowess. It’s true.

How would anyone know that you actually wanted to sell your home if you never marketed your home for sale. They wouldn’t! Consequently, that’s why every Realtor offers to put a home for sale sign in your yard and broadcast that your home is for sale to other Realtors through the mulitple listing service (MLS).

Is this good enough in today’s real estate market? Absolutley not.

The whole premise of using a yard sign and the MLS is to get your home marketed to the largest eligible pool of home buyers. Where better to market your home for sale than on the number one website in terms of web traffic, unique visitors and page views. That’s right! Google.

If you would like to learn more about Google Tools for Real Estate Professionals, by all means buckle up and go for it. Or, you can work with a local Realtor who already knows how Google can help sell your home faster.

Why All The Confusion About The Good Faith Estimate 2010

Although the Good Faith Estimate (GFE) 2010 became effective nationwide on January 1st of this year, there is no other federal form in the home loan application package that creates more anxiety and confusion. 

The Good Faith Estimate is suppose to help consumers become better shoppers of real estate settlment services by creating more transparancy of home loan fees for the borrowers, which also happens to be one of the primary goals of RESPA (Real Estate Settlement Procedures Act of 1974).

So…why all the confusion then?

On November 17, 2008 the US Department of Housing and Urban Development published new RESPA regulations that created a tidal wave of regulatory change in the real estate industry. Watch this short video.

Here is a brief recap of both the good and the bad highlights of new Good Faith Estimate 2010.

Good Faith Estimate 2010 -- PROS:

• Discloses if a borrower has an escrow account
• Discloses the rate lock period to the client
• Discloses to the borrower if the rate can adjust

Good Faith Estimate 2010 -- CONS:

• Borrowers total housing payment (PITI+MI) is missing
• Borrowers cash-to-close is not shown
• CANNOT issue a GFE without having a complete loan application

In HUD’s effort to simplify the disclosure of home loan fees, they took a one page document with itemized breakdown of estimated costs and converted it to a 3 page discosure with lump sum totals.

Still confused? Don’t fret. There is also a mandatory, 48-page supplemental, HUD’s Settlement Cost Booklet to help clarify any questions you may now have. Otherwise, contact me anytime for all your mortgage needs.

Why Is Your Mortgage Approval Contingent On Form 4506-T

If you are in need of a mortgage, there is one document that could stop you in your tracks. It is IRS Form 4506-T.

What exactly is Form 4506-T?

Form 4506-T, aka. Request for Transcript of Tax Return, allows lending institutions to validate your income by confirming with the Internal Revenue Service (IRS) that you are a lawful tax payer.

For decades, prospective home buyers in Portage Indiana only had to provide their pay stubs, W-2′s and tax returns as proof of their income. Today the aforementioned documentation is just the minimum.

Uncle Sam due to his large role in residential financing (i.e. Fannie Mae, Freddie Mac and FHA) now wants to make sure that you have paid and will continue to pay your taxes.

So what’s the problem you ask?

The problem arises from the very safeguard that Congress mandated. Banks are required and forced to use Form 4506-T in order to validate every one’s income.

The form itself has not changed much over the years. How it is completed to the satisfactory nature of the IRS has though. They even go so far as to put the following disclaimer at the top of the form:

“Request may be rejected if the form is incomplete or illegible.”

Requests for transcripts are rejected by the IRS on a daily basis. The most common errors are illegible handwriting and non-compliant signature dates. A simple typographical error could cause a rejection and the IRS is not required to tell you the source of the rejection.

Most consumers and real estate professionals are not aware of the significance of Form 4506-T as it was used sparingly for loan audits in years past. Now that every loan requires it to be executed, the IRS themselves have become a bottle neck.

Even if you have electronically filed and made an electronic payment of outstanding taxes, the IRS may not be able to validate your tax returns.

How could that be?

Unfortunately, the processing side doesn’t know what the validation side is doing. The two systems are not fully integrated. This is how your mortgage approval and home loan transaction could be delayed.

You Can Still Get A Mortgage If You’re Pregnant – No Kidding

The New York Times ran an important story this week concerning pregnancy and mortgage approvals. Titled “Need a Mortgage? Don’t Get Pregnant“, the article discussed the difficulties that expecting and recently-expanded families are having with their mortgage financing.

NBC’s The Today Show picked up the story as well, as shown in the 3-minute clip above.

The crux of the issue is that maternity/paternity leave often leads to a change in household income and mortgage lenders will no longer assume one or both parents will go back to work full-time.  The loss of income can raise a household’s debt-to-income ratio to unacceptable levels.

Your mortgage loan originator cannot ask you about a pregnancy. Such questions would be in violation of Equal Credit Opportunity Act. But he can ask if whether you expect your future employment and income situation to change. This would be a perfect time to discuss the topic. And you should. If you’re found to have withheld employment and income information from your lender at a later date, it could result in an immediate loan denial plus a loss of earnest monies paid.

The prevailing message across both pieces is that families concurrently planning to (1) have a baby and (2) buy a home should be up-front and forthcoming with their mortgage loan originator. Financing is often still available for families expecting a new addition — there’s just some extra paperwork though which to work.

Be prepared for that paperwork and you’re more likely to get your home loan.

Your Choice, Refinance Your ARM Or Let It Adjust Lower

If your adjustable rate mortgage is due to adjust this year, don’t go rushing to replace it just yet. Your soon-to-adjust mortgage rate may actually go lower. It’s related to the math behind the ARM.

Conventional, adjustable-rate mortgages share a common life cycle:

1. There’s a “starter period” in which the interest rate remains fixed
2. There’s an initial adjustment period after the starter period called the “first adjustment”
3. There’s a subsequent annual adjustment until the loan’s term expires — usually at Year 30.

The starter period will vary from 1 to 10 years, but at the point of first adjustment, conventional ARMs become the same. A homeowner’s new, adjusted mortgage rate is determined by the sum of some constant, and a variable. The constant is most often 2.25% and the variable is most often the 12-month LIBOR.

As a formula, the math looks like this:

(Adjusted Mortgage Rates) = (12-Month LIBOR) + (2.250 Percent)

LIBOR is an acronym standing for London Interbank Offered Rate. It’s the rate at which banks borrow money from each other and, lately, LIBOR has been low. As a result, adjusting mortgage rates have been low, too.

Last year, 5-year ARMs were adjusting to 6 percent or higher. Today, they’re adjusting to 3.375%.

Based on the math, it may be wise to just let your ARM adjust this year. Or, depending on how long you plan to stay in your home, consider a refinance to a new ARM.  Starter rates on today’s adjustable rate mortgages are exceptionally low in Dyer Indiana, as are the rates for fixed rate loans.

Either way, talk to your licensed mortgage loan originator about making a plan. With mortgage rates as low as they’ve ever been in history, homeowners have some interesting options. Just don’t wait too long. LIBOR — and mortgage rates in general — are known to change quickly.

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