How Does Someone Steal A Home?
Ask "Anthony The REALTOR®" of San Bernadino, CA, who was arrested this week for doing just that. It's no wonder the general public distrusts agents.
Apparently, this crook stole a ranch owned by an elderly couple who had never met him. The ranch had no mortgage and therefore no existing liens. So, Anthony filled out a Grant Deed, forged the owners' signatures, recorded the document at the courthouse and became the "legal" owner of the property. Then he took out a loan on the property in the amount of $250,000. The appraisal showed the ranch to be worth $1.2 million.
What I find amusing about this is his bail. It was set at $1.45 million...higher than the value of the ranch he stole. I suppose morals and values meant nothing to this guy. Obviously, neither did logic or common sense. Did he really expect to get away with this?
We all have those friends who like to send us countless forwarded emails. Typically, I'll glance at one from time to time, particularly if the subject draws my attention. Recently, a friend sent me a cartoon I'm unable to publish due to copyright restrictions. The toon was titled "Haunted Houses" and was a cartoon of kids walking down the street dressed in their Halloween costumes. Every house on the block had a "Foreclosed" sign in front of it, the kids had empty candy bags, and pitiful frowns on their faces as they passed by the homes.
It was a simple reminder: We need to lighten up, calm down, and laugh from time to time, despite our circumstances.
Todd
www.HuntsvilleAlabamaHouses.com
It's been a while since I posted anything to my blog. A hard drive crash, unforeseen personal incidences, and just being plain busy have all contributed to my neglect of this blog. But, I'm back and there is PLENTY to talk about.
Since my last post, the following events have occurred:
-McCain chose Palin as his running mate
-The campaign on both sides has gotten nasty
-Freddie Mac and Fannie Mae collapsed
-AIG lost nearly half its value in one day
-The government passed a very expensive bailout of Freddie Mac and Fannie Mae
-The stock market has practically collapsed
I could go on and on with each of this issues, but I only want to make a few observations.
No matter who gets elected President, he's got a huge mess to deal with. Barring some kind of miracle, this President will probably be blamed for a lot of things over which he has no control.
Freddie Mac and Fannie Mae most likely collapsed due to corruption (the FBI is investigating) and the subsequent bailout is not the best answer. It does little to help struggling homeowners.
And, 700 billion dollars is a LOT of money. Let's look at the number... $700,000,000,000. Consider this: If that money had been split up amongst everyone in the US holding a mortgage, we each would have received $21,000 dollars. Wow.
Now, let me detail the Todd Hess plan.
It's easy to track who has a mortgage. When a mortgage holder files his tax return, he can deduct the interest he paid to the lender. Furthermore, lenders are required to send a copy of form 1098-SUBST (Mortgage Interest Statement) to the IRS and the homeowner.
So, rather than paying a 700 billion dollar bailout to firms who were irresponsible, pay the money to the people who were damaged by these firms. In the form of a tax credit or rebate, give each person who has a mortgage a total of $21,000 in increments based on their mortgage payment. For example, let's say a homeowner pays $1000 a month on their mortgage. That totals $12,000 in one year. When the taxpayer files his taxes, the IRS sends him a check in addition to his refund for that amount. This reoccurs yearly until the $21,000 is used up.
In my opinion, thats a MUCH better strategy. Put the money in the hands of the victims, not the hands of the companies that created this problem.
And finally, the stock market crash... I have a lot of people wondering how the stock market can dip so low while the interest rates continue to rise.
Mortgage rates are a complex issue, so I'll keep it as simple as possible. Mortgage rates are largely dependent upon treasury security rates, and not the stock market. If treasury security rates go up, so do mortgage rates.
Hopefully, my next post will be on a much brighter note and we'll have some good news. Until then, hang in there.
W. Todd Hess
Relocation Specialist
Well, it's law now. The new housing bill goes into effect October 1, and additional details are finally getting out. Isn't it funny how many bills in Congress get explained AFTER it has passed?
There's some good and some bad news, though.
The good news - From what I gather, the law will allow lenders to help homeowner's whose property values have plummeted to refinance at 90% of current appraised value.
The bad news - Borrowers who take advantage of the refinance will be required to share 50% of ALL future appreciation with FHA. Yikes! Over 30 years, that's quite a chunk of change. Then, the government will get more in capital gains if the capital gains tax on personal residences is reinstated, which is beginning to look like a possibility.
The good news - The $7500 tax credit is included.
The bad news - That tax credit is only available through June 2009 and is REPAYABLE. ie, it's a loan, not a credit.
The good news - FHA down payment assistance is still allowed from family members and nonprofits, contrary to the information I gathered and posted in my blog a few days ago.
The bad news - Minimum down payment is now 3.5% of contract price. That down payment assistance cannot involve anyone in the transaction including the seller. Bye-bye seller assisted down payment programs. You are going to have to hit up your mom, dad, brother, church, or even your employer for cash.
Lots more changes, including good and bad, are part of the new law. However, most of them don't significantly effect the individual. Most of the other new laws set up regulatory bodies and rules or provide money to states and local communities to purchase homes. The effects of these are more global and the effects shouldn't be noticable...at first.
If you've tuned into the news the last few days, you've probably heard about the new housing bill (H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act of 2008) introduced into Congress. The House of Representatives has already passed it. It goes to the Senate and the President next, where it is also expected to pass. The bill is apparently designed to help kick start the housing market by enticing buyers while protecting lenders. However, does the bill protect lenders more than it helps buyers?
Without going into all the details of every single thing the bill will do, let me explain the major points of the bill, which mostly regard FHA loans.
First time home buyers will get a $7500 tax credit. This, according to supporters of the bill, will get buyers off the fence and start buying.
Huh? While I can't speak for other markets, I can say in the Huntsville area, there is no shortage of first time home buyers who are looking for homes. In fact, nearly all my current buyers are first time home buyers. The buyers who are on the fence and sitting on top of their wallets are the ones who already own homes and are taking a "wait and see" approach. They are the buyers who more easily qualify for a loan. Shouldnt' these be the people who should be getting a tax credit?
FHA loan limits will be increased, meaning FHA will loan on homes with higher prices. This one has been a long time coming, although it's a little late now. The catch? The minimum down payment will now be 3.5% and down payment assistance is not allowed....at all...not from the seller and not even from a third party of any kind.
Ok, let's get this straight. We offer a $7500 tax credit only for first time home buyers who rarely if ever have enough cash for a 3.5% down payment ,and who most frequently use down payment assistance programs since they have no existing equity, but we tell them they can't get down payment assistance.
I'm certainly hoping someone can open my eyes on this one and educate me on how this is supposed to help the buyer. To me, this looks like it protects the lenders and hurts potential buyers. The lenders made bad choices over the last few years. Does this bill reward them for that behavior? Oh, and did I mention the $7500 tax credit is temporary?
Every decent sales person knows qualified buyers are those that are willing to pay and have the ability to pay. I see plenty of first time home seekers with the willingness to pay. But, they don't have the ability to pay because of the overcompensated restrictions by lenders. Now, it looks like the government is following in their footsteps. Sometimes it seems to me we are returning to the days where only nobles could own property while everyone else leased from the nobles.
While I typically keep my rants out of my blog, I couldn't control myself on this one. However, when I see politicians patting themselves on the back over a bill they passed that supposedly helps the American people, which obviously does not, I cannot help speaking out.
I certainly hope I'm wrong, but this bill will do more harm to an already ailing industry. Buyers need incentives to buy homes, not more red tape and restrictions preventing them from living an important part of the American dream: owning your own home.
I will end on a positive note, though. One portion of the bill "encourages" states to create a licensing system for anyone who originates a residential loan. Currently, anyone involved in a real estate transaction is licensed except for loan originators. It's about time they were required to be licensed too. Although the bill only "encourages" states to do so, it is at least a step in the right direction.
Huntsville Area Housing Market Statistics Page Added
By far, the most common question I'm asked is, "How is the Huntsville market doing?" In response to that question, I've added a new page to my site. I will update it from time to time. The page includes a summary based on reports and charts generated from the North Alabama MLS system. The charts and reports are also included. The page is:
http://www.HuntsvilleAlabamaHouses.com/huntsvillestats
Property Addresses To Remain Private
It's a question I'm often asked: "Why can't I find addresses online?" It's been an issue with no clear answer, with pros and cons on both sides of the equation. Should property addresses be made available on public websites including valleymls.com?
One side states that making addresses public allows buyers to obtain the address, drive by the property, and call the listing agent on the yard sign and sign a contract. This, according to supporters, is unfair to the agent who provided the information via their own web page. It also brings more business to those that list properties, leaving the rest of the agents to scramble for listings or buyers. Some pundits even state this would create a "commission cutting war". Others state providing the address publicly allows crooks to obtain address information and break into the home. Personally, I think this is the main, good reason for not doing so.
The other side states making addresses public allows the buyers to obtain the address, drive by the property, and make a decision whether or not to call an agent to view it. Supporters of this side state buyers demand information and we are living in the 2000's, not the 1970's. "Get with the program" is their theme. They also maintain that Huntsville is one of the only two boards in the state who don't publish property addresses. (I can't confirm or deny this as I haven't researched it.)
Personally, my biggest problem with not providing addresses is the amount of time I spend giving address information to a customer calling or emailing me from a web page. Not only do I have to provide them the address, I usually have to talk them through how to get there, often keeping me on the phone 20 or 30 minutes while they look for the property. And, I rarely, if ever, procure a customer just because I provided address info or directions.
Recently, the Huntsville Area Association of Realtors® allowed its members to vote on the issue. The results: Roughly 60% of the members voted "NO".
So, for the time being, property addresses will not be public and you will still need to call an agent to obtain the information. Don't fret, though. Simply write down the MLS number and call your favorite agent. Oh, and I'm mobile. I can obtain address information for you even if I'm out of the office and have no access to a computer. Simply give me a call!
Some FHA Officials Seek to Outlaw Down Payment Assistance
The news released yesterday is just another blow to potential home buyers. I read a report a few days ago stating more than 70 percent of people who could get a home loan last year no longer qualify. Did you get that? 70% of the home buyer market is gone. Lender restrictions on loans have become so tight, only those with wealth or good credit scores can now buy a home. No wonder the economy continues its steep decline.
In a further slap in the face to potential home owners, some FHA officials are making a move to ban down payments provided by sellers. In case you don't know, down payment assistant programs allow a seller to donate the down payment to a third party who then gives it to the buyer at the closing table. This wonderful program has helped many people own their own homes.
However, Brian Montgomery, the FHA Commissioner, says defaults on government loans where these programs were used are three times higher than those loans where the buyer paid his or her own down payment.
Personally, I've used the down payment assistance programs as a buyer many times and I've never foreclosed. I know many others like myself. I don't believe the problem is related to down payment assistance as much as it is standards and procedures. Most people simply don't have 20% to put down, and with fuel prices out of control and prices on everything else going up, people simply cannot afford to come up with $20,000 for a $100,000 home. And that's just the lower end.
Sure, there are still some 97% loans out there, but they are becoming harder and harder to find. As lenders continue to over compensate, it would be a blunder for the FHA to follow suit. Nearly everyone wants to live the American dream of home ownership and further regulation will only make it more difficult for the average American to own his or her own home.
Let's not go back to the days where the "nobles" owned all the property and leased it back to everyone else. Every American deserves the opportunity to own their own home and take the risks associated with it.
Agents Falling For "Get Rich Quick" Schemes
In order to keep our license in Alabama, an agent must take 15 hours of continuing education. One of the most important classes is the ethics class which covers the Code of Ethics agents and brokers are supposed to follow.
One of the motivating factors for me to become an agent was the lack of trust and disdain the general public has toward most agents. I've always had positive experience with agents, so I had no idea why the public distrusts them so much. So, I decided to be an agent of change and have met with varying degrees of success.
Like most agents, I've dealt with agents who weren't honest or simply pulled stunts that were borderline unethical. There aren't many out there, but they do exist and they give the rest of us a bad rep in the public's eye. Sad.
Putting that aside, let me get to the meat of this post. When you first become an agent, your email gets flooded with every marketer promising lots of leads, lots of training, and lots of business with minimal effort. Most of these programs do not work, albeit these are legitimate companies offering a service and there is no law against selling services that are SUPPOSED to work.
Since the housing bust kicked in, I've been flooded with emails from other so-called people who used to be agents who have now retired because they replaced their income within two months with an automatic program that makes them thousands per month without lifting a finger. One of the most frequent emails I get promises about a $1000 per day. I looked at the marketing tactics of what they are doing, and found nothing short of at least a near pyramid marketing scheme whereby money is made by signing other people up - Another get rich quick scheme.
It made me wonder...Are these really real estate agents? Or are they just people pretending to be an agent so they can relate to real agents to get those agents to trust them and sign up? I did my research and found my answer. Roughly half of these people were agents - nearly all of those still had active licenses and active web sites. So much for retiring.
I suppose my point is this. Agents and brokers have a bad reputation for various reasons and the "get rich quick" mentality many of them have does nothing to improve it. When agents begin "spamming" people with these "make $30,000 per month" emails, they may not be breaking any of the rules of the code of ethics, but they are proving to be the nieve type whose goal is the dollar rather than the customer.
The way I see it, if you take care of your customers the money will eventually come. Your reputation will precede you and success will follow in the future. Oh, and it takes longer than a couple of months. No successful business ever became so successful overnight. As the old cliche goes, "Rome wasn't built in a day".
Is Filling The Tank A Priority Over A Mortgage Payment?
I awoke this morning, following my usual ritual of opening up a cold soft drink and checking the news. Over the last few months, the real estate bust and gas prices have dominated the news, almost daily. And, there was no shortage of news on either one today.
I read a couple of stories regarding experts saying the "bust" is over since sales of existing homes have increased the last couple of months, albeit they were nowhere near sales levels we saw over the last few years. They also predict sales will boom again, but will take 15 years to get back to the levels and prices we saw in 2005 and 2006.
Another news story reported crude oil prices at record highs (again), and that OPEC is refusing to increase production for the summer months which is expected to drive prices even higher. As I type this, crude oil is approaching $130 a barrel, up 30% since January. Experts are predicting crude oil prices to exceed $400 a barrel in the foreseeable future.
Do you know what I find most interesting? In all these reports, I rarely see the two linked together. However, speaking with those attempting to sell their homes or those in foreclosure, the two are linked to each other. I suppose significant data is left out of those reports in order to support those theories. Experts and scientists both have a terrible habit of doing so and always have throughout history.
The experts and media simply aren't reporting the same thing I'm hearing in the real world. Here's the real world - Due to rising gas prices, people are being forced to sacrifice their hard earned cash to gasoline before other priorities up to and including their mortgage. After all, they have to be able to commute to work in order to pay their mortgages.
I've spoken with some people who are losing their homes to foreclosure because they can no longer make their monthly payments and pay for gasoline. Gas prices have more than doubled in the last year and food prices have risen 20% this fiscal year. Incomes have not risen anywhere near those levels and are not expected to.
I've also spoken to others who are not in foreclosure, but are trying to sell their homes either to downsize or move closer to their place of employment. However, they are having trouble finding buyers for their homes for the same reason they are selling their home.
Do I think the bust is over? No, not yet. Although I think the downward spiral has leveled out some, I personally don't believe the bust will be over until gas prices come down.
I still stand behind my prediction that the market will level out by late summer, but i do believe it will remain at that stagnant level for some time to come.
Financing A Home In Today's Market
In recent months, lenders have tightened their standards on lending practices, leaving many potential homeowners wondering if they can even obtain a loan. I spoke with a mortgage broker today regarding the opportunities available to my customers and here is what I found.
100% loans, although more scarce than they were a year ago, are still available. These loans are now strictly conforming, which means you must be able to verify income either through pay stubs or tax returns. You will also need a credit score above 620.
FHA loans, though not 100%, will still work with down payment assistance, such as that provided by the city of Huntsville or another down payment assistance program.
If your credit scores are below 620, don't fret. You may still qualify for a loan as long as you provide some kind of down payment, and of course, proof of income. This down payment could come from your own funds, a gift from a family member, or even through a down payment assistance program.
If you are looking to buy a home and have been reluctant because you aren't sure you can qualify, give it a shot. Contact a mortgage broker, let them pull credit for you, and see what programs they have available for your current situation. Don't worry about your credit being hurt by a mortgage enquiry. Those don't hurt your score unless you do it several times within a year. You never know until you try.
Most lenders want to keep your debt to income ratio below 35%. Basically, you total up all your monthly minimum payments towards debt (this only includes things on your credit report), total up your monthly income and divide the monthly debt by your monthly income. This will give you your current debt to income ratio. Let's say it's 20%. A lender will look at this and see you can afford up to an additional 15% debt. This number is multiplied by your income to see what monthly mortgage payment you can afford. Then, based on current interest rates, the lender works backward to see what price home you could qualify for.
Feel free to search MLS listings on my web page to see what's out there. Don't know what you can afford? Check out the handy calculators on my page to calculate your debt to income ratio and therefore what price range you should focus on.
When you are ready to purchase, you know who to call. :)
Typically, I keep my real estate blog limited only to posts related to real estate. However, this post is different.
Lately, I've been receiving blog comments from spammers seeking to put links to their websites selling everything from prescription drugs to...well...you know, things best left to the bedroom. Therefore, I feel it necessary to let the general public know my policy regarding comments to my blog
This blog is moderated, meaning comments must pass my approval before being posted on my blog. Rude comments, foul language, and "flames" are all blocked without regard to content. Furthermore, advertisements of any kind outside the realm of real estate are also blocked. Therefore, when subscribing to my blog, and your intent is to SPAM....you are simply wasting your time.
With that said, if you wish to advertise or place a link on my page and your advertisement or link is real estate related, you may contact me via telephone and we can discuss various options for doing so. I always welcome anything that may be of benefit to the general public, particularly if it provides valuable information or services.
I'm toying with the idea of changing my FSBO (For Sale By Owner) program, which is part of my "Less Mess Hess" program. I would like your feedback, either through comments to this blog or via email.
Here are some ideas I'm toying with:
Basically, the plan would work like this. All the services above would be free. If I bring a buyer, the seller would agree to pay 3%. If the owner brings the buyer, the seller owes nothing, or would have the option of choosing my "Contract to Closing" option for a low flat fee.
The "Contract to Closing" option would include the following services:
Let me know what you think and feel free to share any other ideas you may have.
Foreclosures - Truth and Fiction
A common question I get is "Is it true you can get foreclosures for pennies on the dollar?". The answer isn't as simple as a "yes" or "no".
First, you must understand how foreclosed properties are priced. Most people I speak with have the impression banks discount these properties in an effort to rid themselves of inventory. While banks do not like holding inventory, they aren't in the business of losing money either. Nearly all foreclosed properties are priced based on market value minus cost for repairs, not based on what was owed when it foreclosed. For example, let's say a foreclosed home would sell for about $100,000 on the open market under normal circumstances. Let's also say it needs $20,000 worth of repairs to sell for $100,000. Let's also assume the previous owner only owed $50,000 on the home when it foreclosed. Now, many people I speak with assume the bank would try to sell it for $50,000 to $55,000. Wrong answer. The bank will price it at $80,000.If you purchase the home, you are getting it cheaper, but you still need $20,000 worth of repairs to bring it up to market value. Most all foreclosed properties are sold "as-is" meaning the bank will not pay for any repairs the home may need, whether minor or major. And, nearly all of them need repairs. I'm astounded at the number of foreclosures where the disgruntled homeowner punched holes in all the walls, stole all the appliances, and in one situation took a water hose to the inside of the home.This condition can create another condition. If you are purchasing the foreclosed home with a mortgage, your lender may refuse to loan the money, particularly if the home needs major repairs before it is in "livable" condition. Most lenders are also unwilling to lend money above the contract price, which means you will have to get money for the repairs from some other source, such as your bank account, relative, or worse...putting it on a credit card.Finally, one other thing you must be aware of is the "right of redemption". This varies state by state, but in Alabama the "right of redemption" lasts for one year. What this means is within a period of one year after foreclosure, the homeowner who lost the home has the right to take that property back. Granted, that homeowner would have to be able to pay for the home somehow in order to do so. Plus, the homeowner would also have to reimburse you for repairs only. If you make modifications or updates, they would not have to pay you for those. So, if the 20 year old 30 gallon hot water heater didn't work and you replaced it with an 80 gallon hot water heater, he/she would only owe you for a 30 gallon heater. Any other updates, such as modern lighting or modern kitchen counters would also be at your loss.The fortunate thing is less than 1% of all those foreclosed homes are actually redeemed. Typically, if someone forecloses they aren't able to get financing for at least two or three years due to the huge negative impact a foreclosure has on credit. But, if he/she wins the lottery, inherits some money, or gets it from a relative, you could be forced to move out of your home.Buying a foreclosure can save you money in the short term, particularly if you can do the repairs yourself. Do your homework, estimate costs, and learn from professionals. Then, you'll be in a much better position to purchase a foreclosure without losing money or lots of time.
Haunted Homes in Huntsville?
From time to time, I check my web page statistics to see what key words are directing people to my page. This morning, I found an interesting search phrase driving traffic to my web page; "haunted homes for sale in Huntsville". At first, I was amused. Then I noticed several other similar search phrases such as "haunted homes Huntsville" and "haunted houses in Huntsville".
"Hmmm...", I thought, "Maybe I need to blog this".
So, for all those of you who are interested in hauntings in Huntsville, here's what I found:
-Huntsville is reported to be the most haunted city in Alabama.
-Many of the hauntings in Huntsville are centered around an old cemetery, less than 1 mile from my office on California Street. Here's the map: http://www.google.com/maps?f=q&hl=en&geocode=&q=maple+hill+cemetary,+huntsville,+al&ie=UTF8&ll=34.731949,-86.569798&spn=0.008288,0.019526&t=h&z=16.
- Dead children's playground: Located right next to Maple Hill Cemetery, this playground is rumored to be haunted by ghosts of children who swing in the swing sets between 11 pm and 3 am.
- Carter Mansion: Rumor has it, Sally Carter, a 16 year old who died violently, turns over her headstone from time to time and flings furniture about the place.
- Maple Hill Cemetery: An elderly woman who loved her rocking chair passed away. They placed her in the family crypt with the rocking chair and it is rumored she can be heard rocking from time to time.
- Space Camp: An unfortunate accident claimed a worker's life, burying him alive while one of the sleeping quarters was under construction. It is rumored at night he can be heard calling for help.
- Huntsville High School: It is rumored footsteps and laughter of teenagers can be heard in the empty halls at night.
While this isn't a complete list, there are many more reports of hauntings in Huntsville. The city of Huntsville maintains a webpage with a few details of these supposed hauntings. You can find it here: http://www.hsvcity.com/kids/ghosts.php
I can't claim to have ever seen a "ghost", but I will say I have seen homes in "scary" condition. If you are in the market for a "haunted home", I have no problem helping you find one reported to be so. Just drop me a line or email me.
Happy Haunting... errrrr... Hunting, that is!
Top Ten Buyer Mistakes
1. Using an out of town lender
The most common reasons deals either fall through or get delayed are usually related to lender problems. Internet lenders or out of town lenders simply complicate those problems. Internet clearing houses which represent multiple lenders have a tendency to tack their own fees to your closing costs while guaranteeing you the lowest rate. Furthermore, many of these cut rate lenders have loan programs with pre-payment penalties, high fees, and pre-paid "discount points" which can quickly add up. Many of them aren't in a hurry either. They don't have a reputation to uphold and they are handling massive amounts of loans every day, often causing deals to slip through the cracks. Do yourself a favor and choose a local lender who has a reputation to uphold.
2. Failing to hire a licensed home inspector
A typical home inspection can cost you $350, and that money is usually due the day of the inspection. in an effort to save money, many buyers opt to do their own inspection or hire a family member who is somewhat savvy. Since Alabama is a "buyer beware" state, I can't stress the importance of hiring someone who is licensed to do the inspection. It could save you thousands of dollars in hidden repairs.
3. Demanding too much of the seller
When making an offer, use reason. Most sellers are willing to come down on price, pay some of the closing costs, do some repairs, or even provide a home warranty. When a buyer makes a low offer and requests all of the above, a seller will usually balk and not even consider the offer. If you ask the seller for a massive amount of closing costs or other things, make sure you make a fairly high offer. You'll have a much better chance of buying the home if you do.
4. Asking for too much in the request for repairs
An inspector's job is to find what's wrong with a house up to and including loose door knobs and stuck windows. The contract specifies a seller MUST deliver electrical, appliances, plumbing, and heating/cooling in normal and operating condition. It does not specify they must fix everything on the inspection report. When you sit down with your agent to choose what you want repaired, be reasonable. Obviously, ask for things that the contract specifies the seller must do, but don't ask for everything under the sun. A good rule of thumb is the higher your offer, the more the seller will be willing to repair.
5. Obtaining additional credit between the time of approval and closing
After you've been approved for a loan, most lenders will continually check your credit up to and including the day of closing. If you've financed a new car or obtained a new credit card during that time, you take the risk of the lender denying you a home loan. Furthermore, stop using your credit cards until after closing. Don't finance that new furniture until after closing. Don't do ANYTHING that will negatively impact your credit.
6. Being too picky when choosing a home
Finding a home should take no more than 30 days. If you've looked at more than 10 homes and none of them interest you, then you are probably too picky for your price range. We all have our wants, but when a buyer demands 6 bedrooms and 4 baths in a $75,000 home that is ready to move in, said buyer is being unrealistic. The more you want, the more you will have to pay. If those amenities are important to you, then my advice is to wait until your income rises to the level of the type home you want before you even look. If you don't, you'll just be setting yourself up for a lot of disappointment.
7. Having no money for closing
When a seller pays your closing costs, he will want to cap the amount. If closing costs are estimated to be $3000 and the seller agrees to pay up to that amount, this does not mean those costs won't exceed that cap. As a buyer, any closing costs over the amount the seller is willing to pay is your responsibility and you should anticipate that. Also, pre-paid taxes and homeowner's insurance are the buyer's responsibility as well. Open a savings account and put back enough money to pay those costs and any overages well before closing.
8. Trying to buy a home "my own way"
Many buyers drive around looking at "For Sale By Owner" yard signs, refusing to use an agent, typically because they think they can do it better or find a better deal without an agent. While that is commendable, one thing you must understand is sellers rarely discount their home just because it is for sale by owner. Most "For Sale By Owner" sellers are trying to maximize their returns. If they were to lower their price by 6% since they don't have to pay commission, then their bottom line is no different than if they had hired an agent. What would be the point? Also, when you buy direct without representation, you don't have access to the experience and wisdom an agent can provide.
9. Obtaining an adjustable rate mortgage (ARM)
I threw this one in here due to the problems lenders are now having. Adjustable Rate Mortgages have lower initial interest rates than fixed rates, but rates fluctuate daily. The biggest risk is the rates going up over time and your monthly payment doubling or even tripling! This is what happened over the last 6 months. Many buyers got these adjustable rate mortgages and are now losing their homes due to inability to pay. Statistics report over 90% of the current loans in default are ARMs. Do yourself a favor and demand a fixed rate.
10. Choosing the wrong agent
Which one is the right agent? The biggest name in town or the one with the most experience? Actually, the answer is neither. The right agent is the one you feel most comfortable with and represents your interests, not his/her own. All agents have differing personalities and differing ways to help you find your home. The right agent for you is usually the one who identifies your wants and needs up front and finds you a home based on those things. The wrong agent is usually the one who is pushing you into seeing homes out of your price range or homes that don't meet your needs. Those are usually the agents trying to push you into buying one of their own listings so they can get double commission. Remember, you are entering a relationship and the agent that is well known or has the most experience may not match your personality or be taking your best interests at heart.
Top Ten Seller Mistakes
Selling a home is an art, not a science. But, there are some very common mistakes most sellers make which make their home less attractive to buyers. Here they are:
1) Pricing the home too high
We all have a tendency to think our home is the nicest in the neighborhood, and therefore worth more. However, a good market analysis tends to keep things in perspective. But, a market analysis alone is not sufficient to properly price a home. The condition, size, amenities, etc as compared to other homes that have sold in the area are equally important. Another thing to consider is the price of your home versus the price of other homes currently on the market. ie, what are you competing with?
2) Failure to address deferred repairs before putting it up for sale
Many sellers prefer to wait on a contract and then make only the repairs the buyer requests. While this may seem a good strategy, it's a double edged sword. Often, $1000 worth of needed repairs can bring you much closer to your asking price much quicker. $1000 worth of repairs today can potentially bring you $2000 or more tomorrow on the sale of your home.
3) Neglecting to thoroughly clean the home
The kitchen and the master bathroom are the most important rooms in any home and are the most critical areas to clean. As a seller, it is important to make sure not only the floors and sinks are spotless, but also the hand towels, mirror, shower, shower curtain, and of course the toilet. Put away all personal hygiene items including toothbrushes and toothpaste. In the kitchen all appliances should be spotless and there should be no dishes in sight. Steam clean all carpet throughout the house. Dust all rooms of the house thoroughly and burn scented candles to mask any odors good or bad. Note: Using spray aerosols before a prospect shows up usually makes them think you are hiding strange odors. Candles are MUCH less intrusive to the nose and send a more positive message.
4) Lots of clutter
Another agent put it to me the best: Sellers, remove your treasures both inside and out. Clutter detracts attention from the home and directs it to the clutter. I'm not just talking about paperwork, extra furniture, extra cars, or other various treasures. I'm also talking about pictures of your family on the walls and refrigerator. Many sellers are reluctant to take those pictures down, but if you don't, your prospective buyers will spend more time looking at your photos than they will the home. An hour later, they won't be able to remember any redeeming feature about your home other than your photos.
5) Failure to paint with neutral colors
You may love purple, but most buyers don't. The balloons painted on bright yellow in your child's bedroom may be cute to you, but it does little to help make your home seem appealing. Maybe you are the artsy type and you've painted the living room with artwork or abstract designs. Everyone has their own personal tastes, but they typically won't appeal to most people. Before you put your home on the market, paint with neutral colors such as off whites and very light beiges. I recommend staying away from pure white as it tends to take away from the warmth other colors can provide.
5) Remaining at the house during a showing
Very few things are more awkward than this situation. If you remain home during a showing, the buyers and their agent cannot adequately talk about the pros and cons of the home. Also, the buyer will feel rushed into leaving and most likely won't have a favorable view of your home.
6) Leaving the pets roaming the house or freely roaming the yard
In my opinion, this is one of the most annoying things a seller can do. I've shown homes where the cat ran out and we had to chase it down. I've shown others where the overly friendly dog jumped on my buyers on a muddy day. Even worse, I've been slobbered on. If you have pets, either take them with you when you vacate the house before a showing, or keep them leashed or tethered somewhere away from the vicinity of the house. Furthermore, if the pets are indoor pets, hide the food and water dish, and of course, the litter box.
7) Doing nothing about the curb appeal
First impressions are usually the best impressions. When the buyers pull up, they are already looking at the house before they even pull into the driveway. More than once in my career I have had a buyer tell me to keep on driving before I ever pulled in the driveway. $500 worth of shrubs, trees, flowers, and general landscaping can often mean the difference between full price offers and low offers. I learned this lesson years ago when I was selling a home. I had a beautiful home and got plenty of offers...all of them more than 10% below my asking price. I paid $500 for landscaping and got a full price offer 3 days later. The couple that bought it stated, "We knew it was our home before we ever went inside."
8) Providing a phone number nobody is available to answer
Obviously, you want a call from an agent before they show your home. Make sure the number you provide to them has someone available to answer. If you both work, and you provide your home phone number for the answering machine to catch, chances are your home will not show. If you provide a cell phone number, make sure the ringer is on and you are able to answer it. If you miss a call and the agent leaves a message on your voice mail....CALL BACK ASAP! Most agents try to give you at least a one hour's notice, and they aren't going to show your home unless they have your permission.
9) The home is unavailable to show
Buyers have plenty of homes to choose from and they aren't yet in love with yours. Requiring 24 hours notice before showing is a near guaranteed bet your home will not be seen by serious buyers. Worse yet, telling an agent they can't show the home until so and so date practically eliminates any chances that buyer will look at your home. Your home must simply be ready for a showing at all times. Just like you, buyers and agents value their time and don't want to waste it.
10) Choosing the wrong agent
Which one is the right agent? The one that sells the most homes or the one with the most experience? Actually, the answer is neither. The right agent is the one you feel most comfortable with and can provide you with services you like. All agents have differing personalities and differing ways to market your home. The right agent for you may be the numbers guy or it could be the one offering the lowest commission. The right agent may be the one you feel you can trust the most or the one who has the best marketing plan that matches your goals and ideas. Remember, you are entering a relationship and the agent that sells the most homes or has the most experience may not match your personality or have the same goals you do.
What does a Real Estate agent do?
When someone asked me this question recently, I have to admit I was pleasantly surprised. Why? There is a common misconception, even among students in real estate school, that all there is to it is showing houses, filling out contracts and collecting a fat commission check.
Oh, that it would be so easy!
My answer to this person was, "being a Real Estate agent is no different from being a business owner."
Having failed at many businesses and succeeded in even fewer, I at least had a small advantage over other beginning agents. The drop out rates are phenomenal...80% of new agents are gone within the first two years. This isn't much different from the rest of the business world. Most experts cite "lack of business experience" as the culprit.
With that being said, running a successful real estate business is dependent upon the same factors as any other business. First, as an agent, you are self-employed, even though you have to work as somewhat of an apprentice to a broker. To a certain extent, he/she is still your boss and has certain systems in place you must follow, but for a price.
That 3% commission you earn is split with the broker. 65% to you and 35% to your broker is not uncommon. Some brokerage firms charge a "lease" for your office that must be paid monthly whether you are bringing in deals or not. Other brokerage firms require you pay them a certain amount if you don't meet a quota.
An agent also has to consider marketing, which is CRITICAL to operating any business. Any business owner must have an effective marketing strategy and spend money on that marketing to keep the business growing. Marketing expenses can get away from you quickly!
Finances are a major portion of it too. As a business owner, you must control expenses and do your own accounting. Sure, you can hire a CPA, but you must still keep accurate records. Other important things to consider are cash on hand for those seasonal down turns and how much to hold back from the net commission check for taxes. Being self-employed, no one takes it out of your pay check automatically.
You know those little lockboxes that hold the keys? Well, those don't come free. Annual insurance, attorney fees, association fees, listing service fees, and other fees all add up very quickly, particularly in the first year of business.
And the mountains of paperwork? I digress...
Don't get me wrong...I thoroughly enjoy my career in Real Estate. It's fun and exciting to me. My point is this: just like any other business, if you are going into it for the money, you are going into it for the wrong reason.
I went into the computer field in the early days of the desktop computer (for the money), and stayed in it for 17 long, miserable years. As a result, not only did I wake up every morning with a feeling of dread, I never reached the full financial potential it offered. Why? Because I did not enjoy it, and therefore didn't work as hard for it. You cannot separate the two.
If you are considering a Real Estate career, I advise you to get some business operation training first. It will give you a huge advantage over other new agents and give you some insight on being self employed.
It's as simple as this. No matter what you do, do it because you enjoy it. You'll work much harder at it and pat yourself on the back when the money finally comes. Then it will feel like a hobby, not a job.
Searching for Homes in Huntsville Just Got Easier!
Want to see North Alabama listings in a convenient, easy to use web page? Rise Five Star Realty has set up a new web page that makes searching listings much easier. Any feedback you could give me would be much appreciated. Try it out and let me know. Here's the link:
http://huntsville.alabama.mls.searchrealestatehomesforsale.com/
Thanks,
Despite recent cuts in key rates, mortgage rates are on the rise. Huh? How's that?
Without getting too technical or detailed here, let me explain a little:
A lot more goes into mortgage interest rates than just the Federal Reserve's influence. In fact, they are only a small part of it. Other factors influence the rate, such as 10 year treasury bills, supply and demand, the state of the economy, speculation among investors about the future, and inflation just to name a few.
Remember your basic economics class in school? If demand goes up, price goes up. If demand goes down, price goes down. If supply goes up, price goes down and if supply goes down price goes up.
Well, you may be thinking, "wait a minute... demand for loans is going down so shouldn't the interest rate go down too?" In this particular case, supply for home loans has been cut more sharply than has demand. Sub-prime loans have practically disappeared and lenders have tightened their lending standards. Therefore, supply is down, so it's ONE possible reason rates could be on the rise.
Rising energy costs are fueling inflation. Deja vu... Remember the 70's? Oil supply was low, driving prices up which in turn fueled inflation of the economy. Something very similar is happening right now. Energy costs are rising, forcing businesses to charge more for products and services, which is driving inflation. In the late 70's and early 80's, the 12% inflation rate was synonymous with rising mortgage interest rates, which peaked at 21% in 1981!
Can you imagine a 21% interest rate on a $100,000 home? Hopefully, our rates won't rise that much.
Also, let's not forget future speculation. It's basically the same type of speculation you see in the futures market, where investors make educated investing decisions on the future. Speculation in the mortgage market could influence rates. If the future looks bright, rates will rise.
Now, I know it sounds like I'm backstepping from a previous post where I said a rate cut was good news. But, a lot has happened since then and for all practical purposes, the interest rates would typically be steady or going lower as a result. However, higher than expected inflation, rising energy costs, and many other things have changed. I digress.
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