A win for homeowners!

The new 2015 transportation bill does NOT take money from those who pay mortgages.

After a huge outcry from realtors and many others, the proposal to appropriate steal part of the guarantee fees (mortgage insurance premiums) from homeowners who pay them was dropped from the transportation bill. The bill was then passed and signed into law. In our recent article, we detailed this proposal, and how damaging it would be to almost everyone who pays a mortgage. The idea was  strongly opposed across the board. Only some Washington DC politicians supported it, seeing it as yet another way to get hardworking homeowners to shoulder the financial burden of yet another government project they can’t afford.

To our pleasant surprise, common sense prevailed. We want to express our sincere thanks to all who contacted their representatives in Congress and opposed this ridiculous proposal. Great job!

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The Dreaded Holiday Real Estate Slump

The Dreaded Holiday Real Estate Slump?

But, as with Santa, we have to wonder: Is it real, or imaginary?

In our opinion, the answer is a little bit of both. There is no question that as the holidays approach, buyers get caught up in preparing for the season. Also, some sellers may not want showings to take place, as they’re having parties and company at their houses. Agents are people too, and have their own holiday obligations and commitments as well.

However, it seems that many buyers, sellers, and agents too readily accept as fact that “real estate is going to slow down for the holidays”, so they themselves slow down. Thus, their belief brings about the very result they fear! What we have seen is that this belief is contagious. Sellers all too often decide to take their houses off the market and “wait until next year” or “hold off until the spring”, missing out on months of prime exposure. Buyers sometimes make the same mistake.

This holiday “can’t do” attitude is something we heartily disagree with. At this wonderful time of the year, we do not let up one bit in marketing our listings or working with our buyers. The result is that historically, the months of November and especially December have been among our very busiest ever!

Rather than looking at the holidays as a time when “everything is going to slow down”, we recognize the great opportunity it presents for buyers and sellers. People have time off of work, students are out of school, and those who are motivated seize this opportunity with gusto.

If you have a house to sell, let us put it on the market for you NOW. While others sit around “waiting till next year”, YOUR house can be getting all the activity!

If you’re a buyer, RIGHT NOW is the time to be looking. There is less competition from other buyers, meaning you’ll have more homes from which to choose.

Even though the holidays stay busy for us and our clients, we still do take time to enjoy all that they offer. No matter what, be sure you do the same, and set aside time for celebration, relaxation, family, friends, and God.

Have a blessed holiday season!

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Once again, the idiots in Washington, DC are trying to find a way to make it harder and more expensive to purchase a home.

Background: Every type of loan has some sort of mortgage insurance which the buyer is required to pay. It is called PMI (Private Mortgage Insurance), or MIP (Mortgage Insurance Premium), or a Guarantee Fee. This insurance can be an up-front lump sum payment, a monthly premium added onto your note, or a combination of both. Even conventional loans with a 20% down payment, which don’t charge any monthly PMI, compensate for that by having a higher interest rate! So, while some forms of PMI are more apparent than others, the American homeowner always ends up paying to cover the lender’s risk of loans going bad.

Behind every lender is some entity which is ultimately responsible for the loan. VA loans are backed by the Veterans Administration; Rural Development loans are backed by the US Department of Agriculture; and FHA loans are backed by the Department of Housing and Urban Development (HUD). Note that these are all government agencies…

Conventional loans are backed by FNMA (Federal National Mortgage Association, commonly called “Fannie Mae”) and FHLMC (Federal Home Loan Mortgage Corporation, known as “Freddie Mac”). These are public government-sponsored enterprises (GSEs), created decades ago to provide a “private” secondary market for mortgages. In simple terms, they purchase conventional mortgages from the lenders. In our opinion, since the government has pretty much taken over Fannie and Freddie along with every other form of home lending, the GSEs are now just another department of the government.

Unfortunately, if you want to finance the purchase of a house, you WILL end up paying some form of mortgage insurance. It is a necessary evil, and there is no way around it. With so many mortgages going bad in past years, lenders are more reluctant than ever to write loans, and mortgage insurance helps reduce their risk. Without it, financing a house would be even harder, so there is a benefit to homebuyers.

The problem: RIGHT NOW, a new transportation (highway) funding bill is being debated in Congress which would steal part of those premiums away from the GSEs and use it for roads! The federal government cannot resist ANY opportunity to take money from taxpayers whenever they see it, and this is just the latest attempt by them to do so. It turns out that they raised guarantee fee rates for the GSEs back in 2011 to “offset” a measly 2-month payroll tax cut. This rate increase was for 10 YEARS! In other words, the millions of hardworking Americans who financed or will finance a home with a conventional loan between 2011 and 2021 will be paying for that “tax cut” over the entire life of their mortgages!

The highway funding bill currently in Congress seeks to extend that rate increase another 4 years. And, there’s no telling if they’ll try to raise the rates even more! Either way would keep the financial burden squarely on the shoulders of homeowners. This will prolong the harm being done to everyone trying to purchase a home, and possibly make it worse, all the way through the year 2025!

We urge you to contact your Senators and Representatives and ask them to oppose any use of guarantee fees (“G-fees”) in this highway bill. Homebuyers should NOT have a special “tax” placed on them alone to fund public projects which have nothing at all to do with housing.

You can get contact info for your Senators and Representatives at this website simply by entering your zip code.

Please act NOW, as this bill could be voted on at any time! They are pressing hard to get it pushed through.

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How a faraway tropical storm or hurricane can affect your closing

How a faraway tropical storm or hurricane can affect your closing

Both buyers and sellers need to keep abreast of tropical storm activity, and plan ahead to avoid insurance issues.

The Atlantic hurricane season begins June 1 and ends November 30, meaning it is in effect for 6 months out of every year! Thus, there’s a 50% chance that you could be closing on a sale or purchase during hurricane season. There is an important aspect to be aware of regarding named storms, because even if a storm doesn’t threaten our area, it can still impact real estate closings in a major way.

If you are planning on buying or selling a property, always stay current on the status of tropical activity. The reason is that insurance companies use a “hurricane box”, shown on the map above, as a guideline for writing homeowners and flood policies. The area of the box may vary slightly from company to company, but this one, which begins at 20 degrees N latitude and 80 degrees W longitude, is a good example. Once a named storm enters the box, insurance companies will no longer issue new policies, nor increase coverage on existing policies. This status is sometimes referred to as “non-bind”. When an insurance company officially commits to a policy, they “issue a binder” or are “bound” to that policy. Thus, when they are in non-bind status, no policies are bound, and no insurance can be obtained. They stay in non-bind status until the storm is no more, which can take days.

As a real estate closing draws near, one of the crucial steps required by the buyer’s lender is the binding of the homeowners insurance policy. Also, if flood insurance is mandated, it must be bound too. Usually insurance is bound in the late stages leading up toward closing, but therein lies the danger. Should the insurance not be bound, and a named storm enters the box, the closing would likely be delayed, possibly for a considerable time. That in turn could cause the contract date to pass by, the buyer’s rate lock to expire, and/or many other problems. All of these issues are serious, and can make the entire sale fall through. Therefore, closing delays must be avoided at all costs. (Keep in mind that the government-mandated changes to closing procedures effective October 3, 2015 are another potential cause of delay.)

To avoid problems due to named storms, both buyers and sellers MUST pay close attention to tropical activity. (Click here to reach an excellent website for monitoring the tropics.) If you’re a buyer and it seems even remotely possible that a named storm might enter the box around the time of closing, get the insurance bound IMMEDIATELY! If you are a seller, don’t rely on the buyer knowing about this and acting on it. Be proactive and have your agent contact theirs to make sure it is done. Otherwise, your sale could be in jeopardy.

By staying aware of potential storms, and taking care of the insurance binder(s) ahead of time, closings can proceed as planned, even if a named storm enters the box after the insurance is bound.

If you have any questions about how to handle this, give us a call or email!

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Changes coming in October 2015

Changes coming in October 2015

In just a few weeks, 2 significant changes are being implemented which will affect residential real estate transactions.

These changes are:

1. On October 1, 2015, the upfront guarantee fee for Rural Development (RD) loans is increasing. Currently, RD loans require that the buyer pay a 2.0% upfront guarantee fee. After October 1, the fee will increase to 2.75%. To illustrate the difference this will make, let’s use a $150,000 loan as an example. Currently, the fee would be $3,000. At the new rate, it will be higher by $1,125.00 for a total of $4,125.00. This increase means buyers will have to bring more money to closing, or finance it into their loan, or negotiate it from the seller.

As long as RD has issued their commitment (in other words, has approved the file and sent it back to the lender to finish the pre-closing process) by September 30, 2015, the existing rate will still apply. As we’ll discuss in another article, RD is and has been taking about 32 days to issue their commitment after receiving a file from a lender. If this turnaround time continues, loans will have to be sent to RD by August 29, 2015 if they are to obtain the RD commitment prior to the fee increase.

2. The government has mandated that effective October 3, 2015, new forms and procedures must be used on ALL closings. According to title companies and others, it will take longer to get to closing, and other delays as well as higher closing costs may result. This was supposed to become effective on August 1, but concerns from the real estate industry, as well as errors which were found in the new forms and procedures, prompted the government to push it back to October. In our opinion, this will not provide any benefit to buyers and sellers whatsoever. Instead, like almost everything the government does when it meddles in private markets, the only result will be more paperwork, more delay, and more costs.

These changes are not minor, and will make the process of buying or selling a home take longer and cost more.

If you are thinking about buying or selling, there is still enough of a window left to avoid these upcoming issues. However, you must act fast in order to do so.

If you have any questions about either of these impending changes, post them below and we’ll get you the answers fast.

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Details, Details, Details!

Details, Details, Details!

It is crucial to include as much information as possible when selling a house, as sometimes one key item makes all the difference.

Not long ago we listed a beautiful home. It was about 30 years old, but had been lovingly maintained. When listing the house, the seller was concerned about the walk-in bathtub which had been installed. They told us that the cost of doing so was $10,000.00! The seller feared that because the tub was not a common feature, it might turn off some buyers.

Our reply was that while not the most common type of tub, this was truly a top-quality fixture, and one which they certainly would not want to remove. We said it was quite possible that it would catch the attention of buyers who might very well need such a tub for themselves.

Only 8 days after listing the house, we received a full-price offer, and closed the sale soon afterwards. While communicating with the buyer’s agent, we learned that they had been hunting 6 months for a house which was suited for their elderly parent, who has special needs. Upon seeing this home’s wonderful tub, they immediately wrote their offer. It didn’t hurt that they loved the rest of the house too, but the tub is what clinched it.

Another well-maintained older home had been listed for 8 months with another agent. When the listing expired, the owners chose us to represent them. At the listing appointment, the owners gave us lots of information about the updated electrical panel, high efficiency AC system, solar shades, incredibly low utility bills, and many other great aspects of the house. We were amazed. When we asked why none of this was in their previous listing, they said the other agent had told them, “That stuff isn’t important!” We listed the house, and included all of its great features. The owners told us they had gotten more showings after 2 weeks with us than they had during the 8 months they were listed before! The house had many showings, received multiple offers, and successfully sold.

Details and information are VERY important to buyers, which is why we are so thorough in our listings. All it takes is that ONE right buyer to sell a house, and if they see up front that your home has the feature or features which they need, then they will look no further, and your house is sold.

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Good buyer agent

What to look for in a buyer agent

A good buyer agent can guide you through the intricate process of finding and purchasing a house.

In a previous article on this subject, we talked about the advantages of having your own buyer agent when buying a home. Here we will build upon that, and describe the things that a GOOD buyer agent should do for you throughout the entire process.

At the very beginning, a good buyer agent is going to first LISTEN carefully to what you need, want, and do not want in a house. We ask questions and find out as much detail as possible. Looking for a house is largely a process of eliminating those houses that do not meet your needs, budget, etc. It is NOT about finding the first house that seems to work, and getting a quick sale. We take your list of criteria, perform a detailed search based on those criteria, and then screen the results. Agents who devote themselves to their buyers know which subdivisions are declining in value or lie below Base Flood Elevation, etc. Specific houses with major problems are known to us too. We apply our expertise and knowledge, coupled with background research, to weed out the many homes which would simply be a waste of your time. Only then do we send you a list of possible candidates.

Recent improvements in MLS software allow us to send this to you via a website interface, which also gives you control over your search results. After we’ve filtered them, and as new listings come to you automatically, you can evaluate them further, marking them as Rejected, Possible, or Favorites. We are immediately notified, and follow up by getting you in-depth background details on those you deem worthy of a closer look.

In addition to value, condition, previous sales, and disclosed defects, we research flood zoning and much more, including clerk of court and tax records wherever possible!

Here are a couple of actual examples when our research saved our buyers money and major headaches:

1. Our buyer clients had very particular needs in a house. After searching for them a long time, we found one that seemed to fit those needs perfectly. However, during our thorough research, we discovered that the owner had $300,000.00 in personal judgments filed against him, AND that his ex-wife was technically still on the title! This title was clouded beyond all hope, and the house should not have even been listed for sale. The listing agent had no clue whatsoever that these issues existed until we showed them. We were able to halt the purchase process before our clients lost a dime. Normally problems like this would not be discovered until late in the purchase process, after inspections, appraisal, etc. The buyers would have spent a lot of time and money, only to see everything fall apart when the title work was done. By our being extremely diligent and proactive, we were able to prevent that disaster. And, a week later, a much nicer house came up for sale in the same neighborhood, and we had it under contract for our buyers literally within hours, and they successfully closed on it.

2. We took a longtime buyer client of ours to view a foreclosure which had just come up for sale. It was a large house on beautiful acreage, all in flood zone X (the best “no-flood” classification.) It turned out to be very nice, so we researched it in-depth. The house had been “bought” by the bank at sheriff sale about 2 months prior, for about $180K. (The amount of the sheriff sale is almost always meaningless, since the bank holding the mortgage is usually who takes possession of a foreclosed property at sheriff sales.) In this case though, the amount was important. The property was listed on the open market by the bank for about $260K. Our research revealed that the previous owner had a large IRS lien against him. Not everyone knows this, but IRS liens are NOT truly cleared by a sheriff sale. For 120 days after the sale, the IRS has the right to show up, present the new owner with a check for the amount of the sheriff sale, and take possession of the property! For this and other reasons, we didn’t pursue this house any further. We told the listing agent about it, and they said flat out that it wasn’t their responsibility! (This response disgusted us…) I followed it in the MLS, and saw that someone else soon bought it for around $250K, before the 120 days was up. This means that they risked losing $70K, and the house! Their agent either had no clue about the potential disaster, or simply didn’t care. There is no way we would ever put a client of ours in jeopardy like that.

Once the right house has been found, the duties of a good buyer agent are far from over. Our responsibility is to negotiate to get you the best possible deal, while protecting your interests above all else. There are procedures and timetables to follow, and some agents play fast and loose with those rules. Doing so can easily jeopardize your offer, therefore it is important to have a buyer agent who does things the right way.

After a contract is successfully signed, the clock really starts ticking, and many vitally important steps must take place before the sale is ready to be closed. They include: Termite inspection, home inspection, followup inspections if necessary, appraisal, and title work. Each of these is critical in its own unique way, and most can open up new back and forth negotiations with the seller. All must be handled correctly and in a timely manner.

The sequence of all these events is absolutely crucial. These days, appraisals cost about $450. The appraisal should come only after the termite and home inspections have been passed. Do not let a pushy agent or loan officer convince you to order appraisal and/or title work early on in the process! If you were to prematurely spend the money for an appraisal, only to then find out that the house has major defects causing you to back out, you will not get that $450 back. When representing buyers, we always take a very methodical, conservative approach. We never forget that you have money on the line. We start out with the least expensive item, then move on from there. That way, if the sale falls through for some reason, our clients have spent the smallest amount possible. Do understand that there is risk involved with buying a house, and that it is indeed possible to lose some money if the sale doesn’t close. However, that risk can be minimized if your agent gets things done in the right order.

(As a side note, we always recommend getting a thorough home inspection. Spending $300-$400 on a home inspection to find out if a house is full of problems is small change compared to buying those problems for $150,000.00 or much more, and dealing with them for many years.)

Finally, when everything is ready for closing, a good buyer agent will do a final walk-through of the house with you, get you a copy of the preliminary settlement statement showing the monetary details, and make sure you know exactly what to bring to the act of sale. They should also be there beside you at the closing to handle anything which might come up, to answer all your questions, and to review the documents you are signing.

A house is probably the largest purchase you will make in your lifetime, so choose your buyer agent carefully.

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Before and After

A House Reborn

One of the nicest things about real estate is seeing someone take an old house and give it new life with quality renovations, and a lot of love.

We recently had the pleasure of helping a client find an old house in a high demand area. Their list of needs and wants was detailed, and it took quite a while for the right property to come along. When it did however, we acted quickly, and though there were obstacles along the way, we got it closed.

The property was approximately 100 years old, and had decades of deferred maintenance. Wood rot, foundation issues, termites, problems with AC, plumbing, and electrical systems – these were all on the list of known defects. In spite of this, the house was very special, and provided our buyer exactly what they’d been looking for. At the same time, they had no illusions about the amount of work needed, or the cost.termiteAlmost immediately after closing, the contractor whom they had carefully chosen got to work. As they tore into the home, they discovered that the termite damage was even worse than expected, though it was not a complete surprise. Fully half of the framing had to be replaced. They completely gutted the interior, changing the floorplan to one which was more useful, spacious, and modern. Outside, 100% of the old wood siding was discarded, and the house re-covered with HardiePlank cement fiber siding. Windows were added, as were completely new AC units, knotty pine flooring, and much more. It was a complete remodel in the truest sense of the word.We got to visit the home recently when it was just about complete. Only a few cosmetic items were left to do. We were stunned by how beautiful it is. After having been in the house at the very start, seeing it renovated was almost like being in a different home. Yet, the charm and character of the house remain. The new owners put a lot of thought, care, and tasteful creativity into the renovations. What was an old, badly neglected home has been transformed into a showpiece.

Renovating a home in this manner is a huge plus for the owners, the neighbors, and the surrounding community as a whole. The appeal and value of the house are astronomically higher now, and this all carries over into elevating neighborhood property values and  appearance. Everyone benefits from such a transformation. It gave us a great feeling knowing that we’d played a part in making this possible. We can’t wait for the next one!

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Buyer Agents: What to look out for

Buyer Agents: What to look out for

When choosing a buyer agent to help you purchase a home, there are things to look OUT for, and things to look for. Today, we’ll talk about the former.

The job of a buyer agent encompasses many tasks, and when done correctly is not easy. Being a good buyer agent means keeping abreast of the market, constantly searching for possible homes, thoroughly researching those possibilities, evaluating them for you and with you, negotiating the contract, coordinating inspections, and much more. It is a very detailed job and a huge responsibility.

Unfortunately, not all agents work this way, so the buyer experience varies widely. Firstly, there are agents would rather not work with buyers at all, and prefer only to list houses. While this seems strange to us, as we love working with buyers, we think that agents who feel this way are at least honest about it, and far better than agents who don’t like buyer work, but do it anyway. If an agent tells you they prefer not to work with buyers, ask them to refer you to a buyer agent they trust. They will almost certainly be glad to do so.

Many buyer agents find houses for their clients, but only by doing a very superficial search. They typically take the most basic requirements and send the buyer a huge list of properties, without doing any additional screening. Often, this is done via an automatic “set and forget” software function. The MLS system keeps sending search results, with no further action or attention on the part of the agent. The buyer, not having any guidance, usually picks a long list of possibilities from the mass of houses constantly arriving in their email, then calls the agent to come show them. Such a “shotgun” approach is a huge waste of time and resources, yet is very common. We’ve seen agents have people look at 15 houses in a single afternoon! One buyer came to us after being shown at least a half dozen homes by another agent. The problem was that NONE of those homes were eligible for the type of loan the buyer was using! The former agent didn’t bother to check this first, so the buyer lost a huge amount of time in their search for a house. Unfortunately, we see this superficial level of service quite often.

Over the years, we have spoken to buyers who said, “Yes, I have an agent. They told me to just drive all over looking for houses myself and to check the Internet, until I find one that interests me. Then I call them and they come show me the house and write an offer if I like it!” These buyers were doing all the work themselves, with their so-called “buyer agents” simply showing up afterwards to open the door and write an offer. This is appalling, and is the most extreme example of how a buyer agent is NOT supposed to act!

When you are ready to start looking for a house, seek and find a GOOD buyer agent, one who will work hard for you and act in your best interests. If you have an agent, but find yourself doing the work yourself, and/or getting no results or analysis from them, then it’s time to move on. If they are uncommunicative, and don’t seem interested or willing to put forth a lot of effort for you, then it’s time to move on. Good agents are out there, so there’s no need to leave the purchase of your future home to anyone else.

In an upcoming post we’ll describe what to look for in a good buyer agent, and the things they should do for you throughout the entire process.

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Having your own buyer’s agent is vitally important, and it’s free!

Having your own buyer’s agent is vitally important, and it’s free!

Clearing up myths about the role agents play in the purchase of a home.

Many people, especially those who have not bought a house before, often misunderstand the way real estate works with regard to agents. That misunderstanding can cause you problems when looking for a home.

Myth 1: I have to call the agent on the sign.

NO! Understand that ANY agent can show and sell ANY listed property! It does not matter at all if the property is listed with a different company. All too frequently, we hear buyers commenting about a house being listed with someone else, and thinking that they “have” to call the person on the sign. Such is NOT the case, and as we will explain below, it is a HUGE advantage to have your own agent representing you as a buyer, and to work with them instead of the listing agent.

Myth 2: I’ll have to pay a buyer agent to represent me.

FALSE! When a seller lists a home for sale with their agent, they agreed to pay a certain amount, usually a percentage of the sales price, as the total commission. That commission is what pays their agent AND yours if you have one. The commission is split between the two agents. Thus, having a buyer agent working for you costs you nothing! A buyer agent not only is free to you, but also doesn’t cost the seller anything extra. In return, you get an agent who represents only you, and not the seller.

If you deal directly with a listing agent, on your own, it makes that agent yours on that property by default. This is called dual agency, and can lead to disadvantages for you as a buyer. First, that agent already has a relationship with the seller, and may have a strong sense of loyalty to them. This could affect you negatively during negotiations. Secondly, now that you know how commissions work, realize that if you don’t have a buyer agent representing you, the listing agent will get the entire commission! This can mean they would receive twice the pay or even more. Greed is a powerful temptation, and we’ve seen several cases where agents in a dual role did NOT work in the buyer’s best interest. Rather, they did everything they could to get the buyer to purchase THEIR property, whether it was right for the buyer or not. Dual agents are not supposed to act like this, but it happens.

This is not to say that all listing agents will act this way when put in a dual role. If an agent is honest, they will tell you up front if their house does not fit your needs, and offer to find you one which does. We do this ourselves all the time when unrepresented buyers call about one of our listings, and it’s not what they’re looking for. They appreciate the honesty, and we then work with them and search for the right house. We have also represented buyers as dual agents when our listing WAS right for them. When we do, we take the role of dual agency very seriously, and diligently protect the buyer’s interests and confidentiality to the same high level as those of the seller. Many clients have trusted us in the role of dual agents, and we have never let them down. If the listing agent is truly honest and worthy of your trust, then using them may not be a problem. Usually however you have no knowledge of who they are. And, if their motivation is about money, not about doing what’s right, then there will be problems.

In general, we believe that a buyer should always have an agent representing them. The duty, obligation, and loyalty of your buyer agent is to you and you alone, and does not cost you anything. It’s the best deal in real estate! A good buyer agent can save you an untold amount of time, money, and heartache, and even help you avoid making a disastrous home purchase mistake.

Next time, we will cover some of the things that a good buyer agent should do for you.

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