I think that there are still challenges in today’s real estate market in either buying or selling a house. Suffice it to say that there are a lot of folks who owe more than what their home is worth (“underwater”). There are enough people who have credit problems because of the recession that started in 2007. Lots of recent college graduates are strapped with student debt and no jobs and living at home. The economic “recovery” has begun but it is taking forever. And certainly the banks and mortgage companies have not eased up that much on underwriting criteria for buyers. An average credit score to get a conventional mortgage is still almost in the mid 700s. FHA and VA are still options but I think we need to do a better job in spreading the word on those programs and how they work. Plus there are concerns regarding FHA continuous funding. FHA mortgage insurance premium is the highest of any program and never goes away until you finally sell.
I would speculate that with the uncertainty of the economy, that customers are just reluctant to take the risk in owning.
I’ll offer a few alternatives that you might consider in getting into the housing market. I mean you have to live somewhere. Might as well be a place of your own. Here are three for your consideration.
1. Rent with an option to buy. Probably the most well-known and popular. However it can be the most misunderstood program. An “option” is exactly that. You enter into a lease to rent a home and you agree with the owner that at some point in time you will, or will not, exercise the option to buy the house at an agreed upon price. You may or may not have put up any money toward that option at the lease signing. You and the landlord may have decided that a portion of the rent goes toward the purchase price or the option. Just remember if you don’t exercise the option, you just remain a tenant and have no ownership rights. Whether you get any money back is determined by the terms of the option agreement.
2. Lease purchase , land contract or installment contract. Buyer and Seller enter into an agreement of sale for the purchase of property. The sellers maintain the title to the property during the term of the contract and the buyers have an equitable interest. A note of caution here to both parties. If the seller has an existing mortgage on the property there may be and probably is a “Due on Sale ” clause in the mortgage documents. This will indicate that if any transfer of equity occurs then the entire loan will become due in full immediately. Depending on the size of the existing loan, this could cause some major problems for both buyer and seller. Any real estate agent worth their salt will check all recorded documents before proceeding with a proposal. A good real estate attorney needs to be involved for each party. If there is no mortgage , then the owner can act as the bank and transfer title to the buyer . Depending on any down money and credit obligations the equity build up is subject to negotiations at the time of the offer. Again I would recommend a good real estate attorney get involved with any preparation for both buyer and seller.
One nice benefit of this type of transaction is that the buyers can get the tax benefits of home ownership.
3. New program. Just heard about this one. A company buys the home for you and the client enters into an agreement of sale to purchase the property within a certain period of time, i.e 5 years. You put up a down payment of 5 or 10% and pay a 3% admin fee to the company at the time of occupancy. You get the house and its yours to live in as a renter at an agreed upon monthly rent and purchase price. The big difference between this and the rent with option is if you do not get a mortgage by the end of the term you get your down payment back. They keep the 3%. You also agree to a 2-3 % annual rent increase during the term. Again this program is for people who have not been able to qualify for a normal mortgage because of unusual catastrophic circumstances. Lost a job, unusually high medical bills, and then lost a home through foreclosure or just had some hard times and are trying to work yourself back. That’s why you agree to a 5+ term. And of course if you can a mortgage sooner, there is no prepayment penalty. There are some additional features. Give me a call and we can discuss some additional details.
A few “options” to think about. Just leave me a comment. Contact me via Facebook, Linkedin or Twitter or the old fashion ways of email, firstname.lastname@example.org or cell phone 6107372310
Haven’t played Jeopardy in a while or watched it on TV. But I always thought that the premise was a good one. Give someone the answer and see if they can come up with the right question. It occurred to me that I am usually walking around with what I think are all the right answers to all kinds of questions. I guess I might now recognize that I am somewhat pretentious in my conclusion. I guess I need your help. How about I give you some answers and you give me what you think are the right questions. Hopefully, I can learn something with you and become a better agent.
You know, years ago when I first got into the Real Estate business, I had a Broker who told me “Sam, you don’t sell real estate, you solve people’s problems”. That’s stuck with me and I think I have done a pretty good job in asking the right questions to solve those problems. But I think its time to get the customer’s take on this and get you to ask some questions. Anyway, lets see where we go with this and work together. I’ll give you the answer. You let me know what the questions should be. I’ll look at your questions and post them later to get some other folks to chime in if they think you are right wron. Let me give you an example. 3.5% down payment is the answer. The question might be,” What is an FHA mortgage ? ” Okay, lets give it a try.
1. Seller Assist is the answer. What is the question? This is the format which I won’t repeat every time. You’ll get the drift.
2. No down payment required
4. Buyer’s Agent
5. Seller’s Agent
6. Multiple Listing Service
8. Radon Gas
9. Short Sale
10. Transunion, Experian, Equifax
11. Title Insurance
13. 2 years worth of tax returns
14. A real estate agent
15. Purchase offer
Okay, that’s enough for now. Give it a shot. Either comment below with your questions or email me if you like. The more I think about it there can be several different questions for the answers. In addition here is a podcast that will explain how one might go about purchasing a multi family home where you can live in and collect rent to help pay for your mortgage. If you would like to pursue that let me know. It can be challenging , but it can be the start of a pretty good investment portfolio.
Contact me at 610-737-2310 or email me at email@example.com. Appreciate it.
I’m not one who just takes recent economic news as gospel. But having said that, it does look like we are moving forward with a better housing market. Just take a look at this recent post by Don DeZube of the National Association of Realtors. Spring Market. You have to admit its pretty positive. The increases are slight but are running ahead of last year. The office that I manage is up about 6% over last year. That includes all categories: average sale price, less time on the market, list price of homes, total volume sold and total listing volume.
If there is one problem, it’s that we do not have enough good salable properties on the market. The buyer demand is there and we find ourselves in multiple offer situations. The sellers are happy but the buyers are not. One cause for the shortage certainly can be attributed in part to thousands of properties still”underwater”, that is, the owners owe more than the house is worth. Banks are slow in approving possible short sales. Also the Feds have not extended the “debt forgiveness ” provision that allowed sellers to escape the tax consequences of such a sale. There is also some implication that lenders are holding back millions of stalled foreclosures from the market in the hope that rising prices will allow the lenders to recoup a larger return of dollars at the “Sheriff Sale”. Who knows…Plus under the new QM rules (Qualified Mortgage), underwriting guidelines are making it much harder for the average home purchaser to qualify for a mortgage.
Lenders are trying to address the above issues by loosing up certain underwriting criteria. Credit scores of 620 and in some cases 550 will get you into a home. The fact that mortgage applications for all types of loans are off in some cases 60% from last year might be one reason that lenders are looking for business with less than a truant officer’s mentality. If they don’t lend it, they are not going to make it. Not rocket science.
Here is an explanation to help you better understand the “QM” rules.
One last thing that I have mentioned several times. If you are in financial trouble, wondering about whether you can stay in your home because you are behind in your mortgage, are considering bankruptcy or in a reverse mortgage and you have any questions, please give me a call. Don’t do anything drastic until you have a chance to talk to a professional. I can recommend several that can help. Call me at 6107372310. No obligation.
I don’t have a clue. Used to be able to gauge the housing market by what’s going on in the Stock Market.
I gave up on that comparison a long time ago. To me it makes absolutely no sense. How can a barometer of the economy change so fast. I mean really, up 200 points one day, down 225 the next. I saw a pundit on a business show the other day that said traders are now using computer programs that make changes in a nano second. How is that possible? They buy, sell and set the tone for the market before you or I even have a chance to act before our first cup of coffee. Crazy…. There is a thing called “Penny Stocks”. Companies that are looking for money and issue stocks that are worth literally less than a penny a share. Okay…… I’ll buy a hundred shares for a dollar? Still sounds like a night at the Casinos to me. Kinda like playing the penny slot machines. Maybe I’ll hit it big and get a 1000% return.
Wall street might be a dead-end for the average family. But then there is the housing market. The great banking debacle of 2007 seems like a generation ago. Mention to a millennial that their grandparents actually had double-digit interest rates when they bought their first house, they look at you like you have two heads. But it’s 2014 and there is a zero point 30 year fixed rate at 4.875%. Pretty good. The values of homes are rising again and home owners are looking at increased equity. Buyers are coming out of hibernation but are still a little unsure of how to go about that purchase. One thing that is a must, is that both buyers and sellers have to be reasonable in negotiating.
Credit is still a concern but there are programs to address the buyer with as little as 580 credit score. How can that be? I have always said that there are only a few ways that banks can make money. The main way is to lend it. The refinance boom is over for lenders. That means they have to go after purchasers of homes who need mortgages. Now is a great time to be a buyer and negotiate with a lender for a great rate. For a really concise explanation of the current market and what you might need for a down payment and minimum credit scores for potential buyers, listen to this podcast.
There is no getting away from the financial trauma we all experienced over the last several years, but the housing market is coming back and there is no better investment for the average family. The volatility of the stock market is something that a lot of us just don’t want to risk, at least not right now. There’s something about an”Inverted Yield Curve” that leaves me wondering what it all means. Call me for housing info at 6107372310. Or email me at my new email address firstname.lastname@example.org
I think you know what I mean. Its inevitable. But I guess I anticipate the tax portion of this phrase with utmost dread every year. April 15, or some day real close when the government comes a calling and tells me to pay up. God I hate it. and I always pay. Oh I know what some you are thinking… you always get money back. How come I don’t. Well because I basically don’t want to give the government the use of my money interest free all year-long. That what it is. They take it out of my paycheck send it in and then those spend happy bureaucrats use it all year-long without so much as a thank you let alone any interest on it. Where’s the fairness in that?
No, I’ll take my chances in taking as many exemptions as I can to get as much cash as I can in my paycheck. I’ll pay up once a year and the penalty. But in the meantime I am using the money for me and my family. But ideally I should zero out, no refund, no penalty. I’m working on that.
But regardless,you can’t escape. But the good news is, if you are a home owner and borrowed money to purchase the home ,the mortgage interest is deductible. That, along with any property taxes that you pay. Pray to God that our leaders in Washington stop trying to eliminate these deductions from the average homeowner. That fact that we are almost 18 trillion dollars in debt as a country, leaves little doubt that they will continue to come up with creative waves of separating you from your hard-earned money.
It really is a war. Us fighting to keep it, and them fighting to take it. And even death won’t free you from the tax man. Your federal estate is taxable over 5.4 million dollars and in some states like Pa. the inheritance tax can be as high as 20%.
Because of the terrible economic situation that has occurred since the crash of 2007-2008, many folks have found themselves owing money to the Federal government when they thought they were out of the woods and on the way back to stability. Let me give you some examples.
1. Selling your home short. This is where you received the okay from your lender to sell your home for less than what you owe. Up until the end of 2013, there was no income tax due on debt forgiveness by a lender for an owner occupied single family home. This exclusion expired at the end of 2013 and Congress has shown no interest in extending this provision. So if you sell underwater in 2014 you may owe a big fat tax bill to Uncle Sam. The only way to escape this is to file Bankruptcy or be declared “Insolvent” by the IRS. There is a difference. Talk to a lawyer and an accountant about these alternatives.
2. Forgiveness on credit card debt. This is similar to the above scenario except there has never been an exclusion. I have met several folks who have worked long and hard to rearrange credit card debt only to receive a 1099 C from the credit card company indicating that the debt is forgiven but now report it to the IRS as income.
It really is a shame that folks are trying hard to work out some equitable solution to pay their bills and find out that the hole is some cases is deeper.
Because of situations I mentioned, it is getting harder and harder to reestablish oneself for the possible purchase of a home, let alone pay off debt. But there is hope. Did you know that you can buy a house and get a mortgage after a discharged bankruptcy. Also if you lost a home to foreclosure, yes you can buy another house after a period of time. There are some new credit caveats for sure, but it is possible. If you are in a Chapter 13 Bankruptcy your time frame is even quicker. Chapter 13 is when you are actually making payments to a creditor under court supervision.
Look, we all have problems. Some are financial, some are medical, some are emotional. But I am one of those guys that feels if you recognize your limitations and mistakes and are willing to keep on plugging for you and your family, then don’t give up the dream. That’s why I’m here, to discuss the options and give you some advice. Those experts that I can suggest you meet with will help you, not for free, but they won’t break the bank for you again.You owe it to yourself and those you love. But you have to take the initiative. Call me and get started. 6107372310. The first meeting with me is on the house. Click here for some additional 2013 tax tips.
Internet, smart phone,voice mail, email,Facebook. What do they all have in common? Heck this one is easy. They all allow so-called communication between two or more people without any overt face to face interaction. No, you can’t count Skype.You know you all have heard or seen the story, or perhaps you actually participated in the event, where two or more people are at some location, function, or event, where or at least the majority of people are transfixed on their cell phones and everyone is texting, emailing or Facebooking to someone else and are not even looking or speaking at the person next to them. By the way is Facebooking really a verb?
I’ll probably be accused of paranoia or at a minimum some old senior member of the real estate community who just doesn’t quite get it. They will say this is not the wave of the future but it is the present. It’s reality, and get on board. Well I think, notwithstanding my age, I get around pretty good in the Digital Age. I am Linked In, Facebooked, Pinned, Twittered and am blogging away. But I know from my long life in the Real Estate profession, that after searching online for their dream house, buyers want to talk to somebody for advice, they want to go out and look at the house, drive by the neighborhood, go inside, look at the carpeting, paint and room sizes. They want to smell the air inside to see if there were smokers in the house, if it smells like, cat, dog or a beauty salon. A Buyer is not going to get the “feel” for those things just looking online. And most importantly, they want to be with a professional who can provide decent council about the house. Here are some additional tips on preparing yourself before you buy. Tips
If you are a seller , can you really be objective about the house where your kids were born, or where you grew up? Maybe you really liked all of that Flock wallpaper when you lived there. Or those metal kitchen cabinets that you painted 3 times different colors over the last 20 years. And 1 and half baths were just fine for your family of 5 and you never had any problems with the 20 year stove, refrigerator or the dark walnut paneling in the family room or finished basement. You get the drift. If you are honest with your self, if you are a seller, here are some examples of things you can do to get your house ready. Click here.
I guess what I am saying that if you want to sell or buy a home and you think you can do it by yourself using only digital and social media marketing; then maybe you might want to rethink your purchasing and selling strategy. Go with an agent and touch the house, feel it, see it and ask a million questions. If your selling home sweet home, look that agent straight in the eye and make him give you no baloney answers on what you need to do to get it sold. You might have to spend a few dollars, but it might save you some eye strain staring at those digital devices. And you might make a connection with someone who will become a trusted adviser.
Real Estate Agents are always put in a position of representing somebody. Most of us tend to think of an agent as either representing the seller or the buyer. Pennsylvania law requires that once an agent meets a consumer for the first time and there is a “significant discussion of real estate” that we are required to give them a written disclosure regarding the different kinds of representation that we can provide. The client has to acknowledge that disclosure in writing. It doesn’t bind the client to the agent. It’s just that it proves that the agent has done his or her due diligence in complying with the law. There is no contract at this time.
There is also the tricky position an agent is put in if a consumer calls the real estate office for the first time and begins to engage in a “significant discussion regarding real estate”. There is particular language that an agent must use and disclose to the consumer again regarding representation. To say the least it can get to be a little unusual and uncomfortable for both parties especially if the customer is just calling to find out where the property is or whether it has 3 or 4 bedrooms. We are not lawyers but sometimes you wonder how close we come. It really gets complicated if you have to explain the differences between buyer, seller, transaction brokerage(No representation) or Dual or Designated Agency. Dual Agency is when the client purchases the listing agent’s property and Designated Agency is when the client wants to purchase another home through the agent’s office listed by a fellow agent in that office. Oh yeh, that puts the broker of the company in a dual agency position.
Did you get all that? I can assure that even some experienced agents don’t get it. Where does the rapport development come in? Where does the need determination start by the agent? I have to ask you some questions. I don’t want to interrogate you like we are in some court. There is this “dance” that occurs between the agent and the potential client. I want to comply with the law but I don’t want to offend the customer.
Let me get back to that “little secret” that will help you in negotiating with either the buyer or seller in a transaction. When you decide you want to either buy or sell a home and you are checking out agents to assist you. Ask them right up front “Are they going to represent you” In other words are they going to work for you on your behalf. Are the going to keep everything you tell them confidential, are they going to use their negotiating skills to get you the best deal possible. Do this up front and before you give them any information ask them to put that obligation in writing. In the case of the home for sale , a listing contract that will spell out their obligation to work on your behalf to get the highest and best price for your home. In the case of the buyer, a buyer agency contract that obligates the agent to find you the best home for the best price. In either case, you the consumer make the final decision. But the point is, if you do this up front in writing then you have something that you can enforce if you feel that the agent isn’t representing you in your best interests.
The written contract is usually not a problem with a listing,that is, an owner who wants to sell his or her home. No one is going to do anything regarding the marketing of that home until there is contract. Representing a buyer is a usually a different story. A lot of buyers do not want to feel obligated to one agent. Fine shop around, but one more little secret,do not disclose any personal information as far as your financial, bottom line pricing or other personal information, until you have a contract with that agent. As far as a fee you can negotiate that in with the Buyer’s Agency Contract , so that the fee can actually come from the seller at the time of settlement.
I guess as a final note and it isn’t any secret , before you pick someone, make the contacts, make sure they provide you with Consumer Notice , understand representation, make the agent commit in writing and then discuss confidential information.
Need some help on this topic and just want to chat about it? Contact me at email@example.com or call me at 610-7372310.
Sooner or later you are going to meet a real estate agent that you want to do business with. Pennsylvania law and most other states require that the agent sit and discuss with you “Agency”. What does that mean? It means; how is that agent going to represent you?. And before you agree to that representation you need to know about the different kinds of representation that are out there. Let’s itemize those descriptions first, and then in future blogs I will discuss each in detail.
Buyers agency Representing the Buyer
Sellers agency. Representing the Seller
Transaction agency. Representing neither party and acting as a facilitator to the transaction.
Designated agent. The Broker designates agents from the company to represent buyer and seller for a property in a particular transaction
Dual agent. Agent and Broker represent the buyer and seller for the same transaction . Client has to agree to this in writing.
Get It? Yeh, sure. If you get this on the first pass you are a better human being than I am. I have been practicing Real Estate for over 30 years and it still confuses me to the point that I have to remind myself to reread the PA Consumer Notice before explaining it to a client. By the way the Consumer Notice is a document that you have to sign and acknowledge that the agent sat down and discussed agency with you. This is supposed to occur at the first “significant meeting ” where the possibility of business is going to be discussed. Whenever that happens is sometimes anybody’s guess. But you should know that it also includes phone conversations. This has been the cause of some interesting personal situations. For example, I went to a baseball game with a buddy of mine who also invited a friend of his who I didn’t know. I was introduced as Sam in Real Estate. As many of the vets will tell you, it doesn’t take long before someone in that scene will be asking “So you”re in real estate, how’s the market?…I live over in XYZ subdivision, in a 2 story colonial, what do you think my house is worth?” Or maybe its a buyer who wants info on a house he’s seen on the internet, or maybe its your listing. What do I do? Am I required to whip out the consumer notice between balls and strikes and go from stoic business professional or crazed fan as I watch my favorite player strike out again. Or how about that phone conversation for the first time caller. We have been instructed to use certain language to that customer that makes me feel more like law school instructor than a sales person who is trying to determine what your needs are. Nobody seems to have the answer for similar real life situations. But regardless you, the customer, have to sign that piece of paper because its going into a file somewhere in case the Real Estate Commission audits that Broker’s office for compliance. The fine is substantial to the agent and the Broker if it is not there. But enough of all of this legalize. Lets discuss Buyers Agency. The definition comes right from the Consumer Notice.
“As a buyer agent, the licensee and the licensee’s company work exclusively for the buyer/tenant even if paid by the seller/landlord. The buyer agent must act in the buyer/tenant’s best interest, including making a continuous and good faith effort to find a property for the buyer/tenant, except while the buyer is subject to an existing contract, and must keep all confidential information, other than known material defects about the property, confidential.”
In other words, that agent is your agent only, exclusively. He or she and their company has to go out and work in your best interest to find a house for you, Find it at the best possible price and keep all of your information private. If you sign a buyers agency contract to seal the representation, there is usually a fee. But don’t worry, just make sure the language is in there that your agent is willing to accept the cooperating fee from the other broker as payment in full for your fee obligation. Most do, but in some cases if you agree to a percentage of the sale price and the other broker is offering less, than you are on the hook for the difference. But to be fair there are some companies that provide extra services to buyers and they want to be compensated for that. That’s a decision you make but ask the questions up front. No agent worth their salt will refuse to give you a breakdown of their services. Check the link below to get a look at the full Consumer Notice and take particular notice to the duties of the agent regardless of the type of representation.
Once the agency is established be fair with your agent. He or she is going to work very hard to help you find that dream house. But the loyalty thing is a two-way street. Yes you signed a contract. But I know agents who are working night and day for their buyer but find out later that the client is out calling other companies and going to open houses without discussing it with their agent. I would say in most cases they are not purposely dodging their agent. Its more of a lack of understanding of the agent’s duties. If you are not happy with the agent’s performance, tell them or go to their Broker.
Well that’s a beginning. Next time I’ll talk about Sellers Agency. Have a good one. Leave me a comment and let me know what you think about this explanation.