So you want to “Flip” Houses Part #3

Ok I am sure ALL of you have seen at least of of those episodes of  Flip Flop, Flip This House, Millionaire Real Estate Agents,  and many other shows that make flipping homes seem so EASY, CAREFREE and JUST A BLAST.  Well, when things are going well, it is a great feeling of accomplishment as well as earning you a few extra coin.

However, it is ALOT more complicated and difficult than it seems on television.  You also may have heard about friends or family of aqcaintences that have dabbled in flipping houses and make it seem so “easy”.

Lets break Flipping down a bit.  Flipping is:  (taken from: http://www.Investopdia.com)
DEFINITION of ‘Flipping’
A type of real estate investment strategy in which an investor purchases properties with the goal of reselling them for a profit. Profit is generated either through the price appreciation that occurs as a result of a hot housing market and/or from renovations and capital improvements. Investors who employ these strategies face the risk of price depreciation in bad housing markets.

Basicallly, buy low, fix up, sell high.. keep the profits.

Other Vocabulary

Appreciation: Appreciation is the increase in value of an item (in our case a house) over a period time. This is due in part to inflation and the rise in costs of items.  Houses in Philly generally (historically) appreciate about 5% per year on average. Different areas and properties may vary.

Closing Costs: Closing cost are the costs associated with selling or buying a home. Buyer closing  costs include: items like real estate & transfer taxes, mortgage down payments, certifications (like Use & Occupancy), insurance and at time HOA or Condo fees.   For the Seller fees include: both real estate and transfer taxes with are prorated, possibly Use & Occupancy, utilities, any commissions, and other small loosely related charges.

Holding Costs: Holding costs are ALL the costs to maintain the property in GOOD STANDING prior to the sale.  This includes things like utilities current, taxes current, maintenance  to keep the property up while being “shown” (lawn, cleaning, trash, etc.) as well as any loan, finance or mortgage payments that are due monthly.

Pre-Foreclosure: This refers to properties identified for foreclosure by the bank.  It is NOT yet foreclosed so it is USUALLY still occupied.  This means you CANNOT view the property and is usually bid on AS-IS.

Tax Lien Sale/ Sheriff Sale:  Usually structured and performed by the city or county it is in.  Both are sales by either the bank (sheriff sale) or by the county or city (tax lien sale).  It is an auction sale and you usually DO NOT get to view the inside of the property.

Although this sounds very “doable” on the surface I want to walk you through some of the pitfalls.  Not to dissuade you. I would love to sell your flips but to make this a lot more realistic before you empty your 401k, savings , Home Depot cards or other lines of credit with hopes of not having to work in 7 years.

house_flippers

1: The BUY LOW part of flipping is probably the MOST important part of flipping.  This might not make sense but you will see why as we talk about it.  The saying is: “You make your money when you buy it”.  I tell budding flippers this all the time.  It is something an honest mentor will let you know right way.  Now  the issue with this is that buying low has become alot more difficult (especially in hot Philly).   Most “discounted” properties are GONE before they hit the “market” or Trend (the real estate online market place or.. where Zillow, Trulia and the others snatch their listings from… *smirking*).  May flipper now count on connections to get them PRe-forclosure listings, REOs, Bank Owned properties, Tax-liens properties, Foreclosure properties, and Sheriff  Sale properties.  Only savvy agents know how to acquire this and better yet how to get the information to connect the buyers to the sellers of these “distressed” properties.

2: It seems simple enough… Paint..check.. some tile or carpet.. check…maybe a bathroom or kitchen redo.. check… some flowers out front and you are ready to demand above market value on this gem.  Well, not so fast buddy.  Estimating the amount of work needed and price or each item is an art and many a flipper has a trusty spreadsheet or some, a mental estimate of the price.  This is a very important factor.  You start of small, then you get talked into a basement reno, the kitchen with high end and granite counter tops and the jacuzzi tube in the  bathroom. Well, before you know it $60,000 later you are struggling to do the yard and that electrical panel that you forgot needs to be replaced. Where will you gt the $$$ to finish…. you finish the story.

3: Selling you expect to put it on the market, and in 3 weeks, sold for full price.  Its is Brewerytown or West Oak Lane or Mt. Airy, why would it NOT sell quick.  Now you find that there are a few other “flippers” with the same idea and you are the third rehab listed on the block and you emptied your savings during the renovations.  Holding costs are the costs to hold onto the property WHILE you wait for the sale.  Any renovation loans (to banks, people or family), taxes on the house, utilities, maintenance and security or the property and various other expenses not accounted for but related to keeping the house in “sell-able” condition.

NOW, if I haven’t totally scared you  away, fear not here comes the good parts about how and why you might succeed in “Flipping in Philly”

1: Philly is HOT, still RED HOT for flipping in the United States.

(See Below)

 

Markets Near New Home Flipping Peaks

Also, there are various areas in Philly specifically that are hot as well.

Screen Shot 2016-06-19 at 10.46.38 PM

This chart lists the SAVINGS. Now remember the savings come from buying CHEAP, MAINLY BY “DISTRESSED PROPERTIES” like Foreclosure, Short Sale or Tax / Sheriff Sales.  That means SOMEONE Loses….. to the tune of :

1 in every 306
1 in every 325
1 in every 325
1 in every 398
1 in every 416
.. and Philadelphia total at about 1 in every 704 homes  sold through some sort of bank sale.
For the Flipper, if you can locate a property at the right price you can “get in the game”.
Actually, the Number you really need to concern with is the Value of the house AFTER you have repaired it know as the ARV (After Repair Value).
Let me break it down in stages:
  • You actually work backwards
  • You actually work backwards
  • You actually work backwards, from the price you believe you can comfortably sell it for (end result), back to the price you need to purchase it for.

Think of it as an math problem.. sorry, talking money you know math would eventually be involved.

Let’s start:

ARV – Amount of $$ to rehab – The possible holding costs –  Closing fees – Holding fees – the profit you would like = The price to buy the property at.  You can see why you want to buy it very cheap. Let’s put some imaginary numbers to make it a bit more real.

(ARV) $ 145,000 (a typical sale price of a property in West Oak Lane and parts of Mt. Airy)

minus – $ 50,000 (a rough estimate for a typical 3 br row home rehab)

minus – $ 2,000 (holding costs: including utility bills and other stuff)

minus – $ 12,000 (Closing costs including commissions, transfer &other taxes)

minus- $30,000  (Profit magin)

_____________________________

(Price to pay for the property) about $78,000.

Granted everything works out PERFECTLY, you might be able to buy at about $78,000 and be off to the races.  HOWEVER, there are ALWAYS things that happen

  • the subfloors are shot and need to be replaced
  • termite damage
  • plumbing and electrical all need to be replaced completely
  • main sewer line cracked
  • etc.

This can ballon your repair/ renovate costs to $65,000 easily.  Not to mention holding costs rise as the rehab timeline takes a major hit to redo something and now instead of $2000 it is $4500.  Contractor issues causes a loss of another $3000.  Sure you can see how this can EASILY get out of hand.

Also, Time is a VERY, VERY important factor in flips.  You are ALWAYS racing time.  The longer it takes to renovate, the more it will costs and the more holding costs you will pay.  Some people try to do the renovations on their own but let me ask you…. How long has it taken you, “my handy”, to fix the basement bathroom or replace the shower faucets with new washers? How long, after a full time day at work, do you think it would take you to totally break down a bathroom to the studs and renovate it including electrical, tile, drywall and fixtures.  Exactly.

 

In closing I will leave you with some links to sites that helps educate and support flippers:

  1.  Bigger pockets
  2. REI Club
  3. Investopedia
  4. 1-2-3 Flip
  5. Rehabber Pro

Also there are a few people that have been doing it in Philadelphia for a bit and have blogs and videos.

Greg Parker in Philadelphia as well as Lisa on Youtube posting in AffordableREI  She is pretty good and practical.

I will end here.  I know there is Soooo very much more to learn and know so if there are any questions fee free to email me at dirktherealtor@gmail.com.

 

 

 

Time to Buyer “Summer time” Programs to make it more affordable

As the Summer approaches, the time has come to SERIOUSLY think about taking the next step in your prosperous future ahead by thinking about either buying a home.  There are various reasons for buying now including but not limited to first time home buying instead of the continuos renting cycle (see previous post on renting vs buying in Philadelphia), purchasing your first investment property or starting a business.

1: Buying vs. Renting:

Why buy now, you might ask?  Well I am not here to give the “hard sell” on buying a home because I am sure the decision to buy or not to buy is far more personal than just reading these words. However, let’s start with what you may be doing otherwise, RENTING.  Renting is convenient and safe but not quite stable and self-determining.  Although it might be said that even purchasing a house requires you to be beholden to the “bank” replacing the “landlord”, the structure of a mortgage allows for OWNERSHIP.  Think of it sort of like the difference between leasing a car and purchasing a car.  At the end of the lease (which is often shorter that a purchase), you are responsible for mileage, damage, and wear and tear on the car.  You also need to have additional insurance because the “owner” may not trust that you will adequately take car of “what is NOT yours”.  Purchasing a car, you get the car loan and the car itself is collateral for the loan you took out with the bank. So, it is your as long as you pay what you promised to pay.  If you don’t (just like not paying rent) you can be forced to give back the property.  The process to “repossess a purchase as opposed to a lease is much more involved because you have more RIGHTS TO THE PROPERTY.   Buying a house is similar.  You can do major construction, rent it out, put a huge deck, buy 25 cats, and even renegotiate to loan you were given to take advantage of “equity” you built in owning the now.  EQUITY is the big difference.  As you pay a mortgage you gain EQUAL ownership and financial rights to the property of which you can do what ever you choose.  I’ll stop there…. oh forgot to mention the TAX BENEFITS.  You pay rent and receive NO CREDIT in the eyes of the IRS or state BUT with each dollar paid of interest on your mortgage and the taxes you pay on the house, you get that credited back in TAX benefit.  THIS IS HUGE.

 

2: Incentives:

 

Recently, as the market begins to rebound, many banks have begun to give more incentives for those willing to take on the responsibility of purchasing a home.  A HUGE incentive are programs like the First Front Door Program sponsored by the FHLBank of Pittsburg.  This programs gives up to $5,000.00 in grant money (“loans” that DO NOT have to be paid back).  The particulars of the program are:

  • A matching 3-1 contribution to closing costs meaning that for every dollar you have for closing they give you three dollars (ex. $1,000 by you equates to $3,000 given by FHLBank of Pittsburg totally NOW $4,000 dollars for closing from your $1,000, up to $5,000 given).  THIS IS HUGE.
  • Must be considered a 1st time home buyer (or no home in last 3 years or newly single)
  • Have an income at or below 80% of the median income in the area of the house (move up time)
  • Working at least 30 hours a week
  • Complete four (4) hours of home counseling (they help identify and set up the classes)
  • Stay in the home for at least five (5) years.

There are also other programs out there that offer grants and assistance like:

  1. Mt. Airy USA has grants as well as seminars and home buyer counseling
  2. OHCD: Philadelphia Office of Housing and Community Development with many other resources
  3. PNHS: Philadelphia Neighborhood Housing Services: provides counseling and grants as well

 

3. Mortgage Loan Assistance and favorable rates: Like I said in the opening, there are MANY banks and lenders offering more favorable loans to buyers.  THIS TIME, they seem better regulated and more stable than those that helped cause the housing issues in the past.  Check out this list of programs and companies and know there any MANY< MANY other.  Reach out to me for more:

 

4: Philly is HOT: I am sure you noticed how areas once seemed “undesirable” are not HOT and trending and in the process of being “reborn”.  Revitalization has hit Philadelphia BIG and that means big things for home owners.  Home owners will continue to see improvement in the value of their newly purchased home.  Philly gets an A+ in affordability compared to other big urban cities like LA and NY with a 78% affordability on a recent index.

Not much more to say except thing of the barriers or reasons you have decided NOT to purchase a home.  Is it your credit?  Is it your lifestyle and hesitancy to “own”? Is it money needed to purchase? Is it fear?. Regardless of the reason, think about owning this summer.  The time is right.

 

Interseting look from the past to NOW

 

 

Brave New World: The Reason your house is not Selling.

Let me begin with, the reason your house is not selling may or may not be your fault.

Ok, let’s get to it.  This post will include assistance for Sellers mainly but also some insight for Buyers as well. The reasons are in NO order but should be considered cumulatively and addressed or considered individually.

Before you watch the video and you own your home, take this survey:

 

 

Priced Too High, Period

I am sure this is not a surprise coming from a Real Estate agent and you might think that this is an agent’s “easy out” to explain why your house in STILL on the market.  There are a couple ways to look at it.

  • You could have just flat out priced it too high.  Meaning you considered yourself a savy business person and absolutely refuse to “give” your home away.  You expect to NET a certain amount and have a number in mind.  As a rule, I advise my clients.  What I mean by that is as I provide advise and information t assist my client in making the most informed decision in their best interest.  Notice I said ” so that they”.  I understand that I am selling YOUR house. I work for you, at your pleasure (forgive my British phrasing.  I often explain (after showing a Comparative Analysis for their home value):
  • This is the range in which I think your home will sell in a reasonable amount of time based on multiple factors, Ultimately the price you wish to sell for is up to you.  If you tell me that you wish to price it at ten million dollar, I will but we will probably have a discussion later as the market will tell us what is a more reasonable price point

What I mean by that is that ultimately the price you choose is up to you. We do not set your price, you do (after our advisement).  This means you need to trust the advisement you are given.  Trust the Professional.  This is often the major “beef” Real Estate Agents have with their listing clients.  TRUST their expertise.  Sometimes a high price is unavoidable. Perhaps a high mortgage, upside down mortgage, nursing home requirements, other liens, etc.  If this is the case be honest and upfront about it so that your agent can support you in this.

Somewhat related is the idea that you cant really help that you are overpriced because “that is actually what it is worth“.  How can that be you ask? Well, you are the type of person that loves a beautiful home and have ( over the course of living there), enhanced, updated and otherwise “beautified” you home a bit beyond what the comparable houses in the neighborhood can support.  You literally have the BEST HOUSE ON THE BLOCK.  Many may think this but there are actually a few that have done this and now for whatever reason they need to move.  There in lies the problem.  Outspending the area means that there is pretty much NO way to bump it up to where you want it UNLESS you have great fortune in a number of ways.

  1. Someone is willing to pay the price you asked
  2. An appraiser finds the value of your home to be what you think (a lot more rare and complicated than #1).  This is very rare because the nature of an appraisal is to find houses that are comparable to yours at the same or high price to justify (to the mortgage holder) the value of the home is worth that amount.

In closing this out, you will do best having your home as close to the area homes as possible.  Be honest with yourself and your Realtor.  Trust your Realtor’s expertise and allow honest discussions about your feelings and  issues.  Who knows you might need to have the conversation of “maybe now is not the time” and “if not now, when”.

The Condition of the Home in and out

Ok The Condition of the home has SEVERAL different meaning and viewpoints.

  1. Exterior Curb Appeal: It is Winter and of course there are no beautiful flowers and the possibility of dirty snow or other possible issues outside.  The key is to keep your outside clear or any debris (old circulars, mail, trash, leaves, junk cars, broken lawn furniture, etc.)  This is not just helpful for the “drive-by” buyer, but also if your home is vacant, it will help to NOT look vacant to others.  I think you get me on that !!
  2. The House is “Dated”: I don’t mean any disrespect but even if you don’t want to admit it, you know when your house is outdated in its furnishings and more importantly, vital areas (kitchen, bath, etc.).  If this is the case there are not many options except to spend money updating or to price accordingly.  Let me explain how that usually plays out.

You have not updated  (for any number of reasons) but priced your home very close to those in the neighborhood.  In the neighborhood there are a few homes that have those updated features (kitchen, bath, etc.) and are priced “close” to yours (within $5,000-$7,000 and usually a renovation or rehab). Ultimately their house sells even at a higher price, wouldn’t you?  Sometimes it is hard competing with Rehabbers because they bought their home at a CONSIDERABLE DISCOUNT.  You can only do what you can but always keep that in mind.

3.  You house is Cluttered or Messy or considered by most a.. “Fixer-Upper”. Note: Opening blinds and cleaning windows goes a big way to adding light into your home but be warned with more light inside, the more flaws will show up so you may need to address those too. I heard this quote before and it seemed to fit:

Your house isn’t run down but it sure looks like it

Ok, you have a busy life, children, work, etc. and cleaning everything up is too involved, to complicated and too inconvenient.  However, a messy home with things undone and a general sense of disorder gives the impression that the entire house is not in the best shape.  Similar to an unkept exterior.  Putting your best foot forward is very important, especially since you technically have one shot to impress a buyer with both value and style. Do yourself a favor and FIX any small issues like leaking anything, missing baseboards, wall or ceiling holes, dirty or unfinished bathrooms, etc.  Again, any small issue will send most buyers looking ardently for more issues to confirm their view of “the house needing too much work”.  Remember, buyers arrive at a home excited but enter your home skeptical and looking for a discount or to discount your home for another.

Examples:

**The stairs I just added because they look really cool**

 

Declutter 1 Declutter 3

Steps and storage Declutter 2

  Overcoming the Lean Times

The Economy is just beginning to recover, mortgage companies are finding alternative ways to earn their dividends other that lending money to home owners, the holiday season has abruptly slowed home searches and everyone is exhaling from the HUGE financial mess we found ourselves in in the most recent past.  This very well could influence whether you home has sold recently.  People STILL buy houses around the winter holidays but just not as much.  I usually tell clients that it shows a definite slow down in mid to late November returning slowly a bit after the Superbowl.

Overcoming the “lean times” means that prices may need to drop or put “On Sale” to attract people with limited resources and a discerning eye.  Also having your agent be creative with advertising, promotion and other things.  This does not mean that advertising and marketing is solely responsible. You have to look at the other previously mentioned factors but ADVERTISING AND MARKETING IS IMPORTANT. DON’T LET YOU AGENT SKIMP HERE.

 

Reboot, Refresh, Relist

Sometimes the herd mentality can affect your home either positively or negatively.  The negative affect is that…. if you were negatively affected by one of the factors mentioned before, chances are you home has been listed for a while.  Which means the DOM (Days on Market) click has ticked on your home past the “Red” and that some bypass looking at your home just because they “figure” it is something wrong with it because it should have sold by now.   Now they may be correct. Maybe there is an issue that is not being addressed and thus it is still on the market OR it just might seem that way to people who may not even get to see your wonderful home.   Usually after about 100 days, buyers re affected by this phenomena.

Dirk, how do I deal with this?  Well I will give you a hint.  I have relisted two of my listings after a short week off the market during the time when most don’t look anyway (see the Lean Times section).  I shorten my listing agreements to either 120 or 180 days to give a chance to reboot.  I am confident enough to know that my marketing strategies, pricing suggestions, cleaning/ declutter/repair suggestions, my highly competitive commission ability and general neighborhood expertise is unmatched and that I welcome another agent to try to match that combination.

I can list several previous clients that possibly assumed that my expertise or my information and guidance was questioned and they decided to choose another agent after a discussion with me.  All relisted their home at the original price (that was too high through my CMA comparative market analysis, agent and buyer feedback).  Of the four (4) homes, two (2) sold with the other agent (at my initially suggested lower price point, the other two (2) did not at all sell (both were a bit inflexible with price and opted to either keep that price or take it completely off the market).

 

Bottom line, if all possible listen a communicate with your agent and unless you find them being dishonest, unresponsive or ineffectual, trust their judgment.  Relist with them again especially if you done AL that they requested and it is not moving.

 

Unique circumstances:       Sometimes, just sometimes there are situations that are a bit of a mixture between many factors and on occasion, ones that are beyond their control.

Example:  A beautifully rehabbed home that was done with great care and with many wonderful features. Beautifully redone hardwoods, kitchen, bath, basement all on a quiet one way block in …… I will leave that out as I hope to sell in immediately.  The owner has always been flexible with price and both my client and I have had valuable communication around the issues.  The issue:  The NEIGHBORS.. I know you have seen this issue.  I won’t go into the specifics of the “dirty renters” next door, but to say that I was told  by two (2) separate buyers that it was all but the prospect of either needing to argue or deal with the neighbor that convinced them to NOT put in an offer.  We considered paying the renter to be cleaner, calling L & I on the owner, even purchasing the property outright.  This went on past the 100 day threshold.  Ironically the neighbor seems cleaner or at least the dog seems gone and we gave it a week break and relisted it with a combination of price adjustments, incentives and additional marketing to take place. With any luck, we will have a contract by February. 

 

 

Ok: Now that you have been disappointed and a bit overwhelmed with the process and prospect of selling, It can bee just this easy.  Must watch.

 

 

 

Short Sales, Foreclosures and Modifications.

 

One of my first blog posts way back in December was about the current phenomena that is sadly STILL hitting the housing market and families hard.  Short Sale, foreclosures, modifications, and sheriff sales are all part of the sad result of a troubled housing market trying to “correct itself”.

Past Post specifically on Short Sales: http://wp.me/p24GVW-1x

You might wonder what I mean by “correcting itself”. What I mean is that previously before the “busing bubble”, properties were selling like hotcakes at Denny’s.  Their prices went up higher and higher because more people wanted houses and mortgage companies were happy to oblige.  So, house prices skyrocketed, mortgage companies and banks agreed to write loans for them and happy new home owners “agreed” to pay. Next, those loans that home owners agreed to pay changed to sometimes be more expensive than they initially started.  When banks began the process of getting these houses back, the found out that they were overpriced and NO ONE would pay that price for them.  Sometimes being tens and hundreds of thousands of dollars over priced.

Banks had a few options.  Foreclose on the home and attempt to resell. Work with a home buyer to make the house more affordable for the owner or try to sell the home for what someone would pay for it, thus the Short Sale.

Short Sales happen because the loan is larger than the sale of the property minus all expenses.  In a Short Sale, the seller is asking the bank to take less than the amount owed to satisfy the loan.  You mint say “Well, this seems to be a straight forward yes or no question right?” But the problem is in this scenario:

Imagine a friend borrowing money from you to buy something.  They borrow $100.00. They promise to pay it all back in a month.  Next, the friend seems to be going through a hard time and said he can only give you back $75 from the $100 you owed.  You know have a choice, accept the $75 or  nothing or take back the thing he bought with the money.   

You might want to think about whether you will be fine with accepting less than what you loaned. 

You might want to take the property that they owe you.

Or, you might say, I need ALL my money and I will take you to court to get ALL my money.

 

These are the exact same choices left to a bank.  We can argue the fairness of this situation but I am just stating what the actual process is and why. At times banks take a long time “deciding”  which situation is the best for THEM.  They don’t immediately “cab” to the thought of losing that extra $25 dollars.

 

Selling your house at a loss is as hard as a decision as leaving your house or even losing it to foreclosure.  All sorts of reasons cause this situation.

 

I will give you a few examples I have PERSONALLY dealt with (No names):

  • A client suffering from cancer needed to move out of town for treatment.  They needed to pay for their current out of town living arrangements and had no money to pay for their previous home as well as not the hassle of selling outright.  The problem came as they were behind on their payments. Their choice was sell their home via SHORT SALE.  The client needed to complete paperwork from the lender to PROVE they could not afford to pay back all the money owed OR to be able to sell the home for how much is actually owed.
  • A client had a fire that destroyed their home. Although them received insurance money for repair, long store short, they were in court suing the contractors for lack of repair and theft of the insurance money.  They were left to either find someone trustworthy to repair while waiting on litigation of to just sell their home as is.  They are struggling with that situation now.

Now that you understand the dynamics of a Short Sale or Foreclosure, (we will leave Modification explanations for later on) and how it effects  both home owner and seller, I will go into the Good, Bad and Ugly of purchasing a Short Sale property.

You should first understand the biggest difference between a Short Sale and a standard home purchase.  This difference plays a key role in every part of the process, its successes and pitfalls.  This big difference is that instead of this transaction being between two parties, a Short Sale transaction is between at least THREE parties (Buyer, Seller and Bank).  Even in the case of an REO (Real Estate Owned or Bank Owned property), it is only two participants (Buyer and Bank).  This problem causes a very difficult three way negotiation.

Also, do not think that everyone has the sale goal in this transaction.  Sure the Buyer wants the house and the Seller wants out of the house but the bank…ummm the bank wants.. to make sure to come out of it with the best bottom line they possible can regardless of which other parties are “slighted”.  Meaning, that if the bank feels that there is a better deal” to be had instead of approving your Short Sale they will pursue this. They will take all the time they need to figure out their best position.

 

Steps to buying a Short Sale property:

Find a good Real Estate Agent

First find a real state agent that is familiar with and has successfully sold Short Sale properties.  This is important because although your Buyer agent cannot truly negotiate with the bank on your behalf, they know the right levers to push with all parties to help successfully navigate the process.

Get Financing

Work on getting preapproved.  Make sure you bank officer or mortgage broker understands that you might be interested in a Short Sale.

 

Once found, make sure it truly is a deal

You will need to make sure you are getting a deal worth going through this process.  Believe me the ONLY reason to go through this process is if you are getting a great deal.  Your agent can help by giving you a CMA (Comparative Market Analysis) that will more solidly identify the pricing of comparable properties in the area. Along with this, your agent should make sure to include enough “escape clauses” (contingencies in the Agreement of Sale) that will allow you to back out and find another home for various reasons.

 

Keep looking

This one is very important. Although you fee that this is the house of your dreams, you have spent money getting it inspected and getting your mortgage rate locked in, you may be in for a long wait.. that only leads to disappointment.

You need to find Plan B and C for yourself and this is where the “escape clauses” allow you out of the Short Sale and the ability to legally place another agreement on another home.  They passed legislation to speed up the time the bank has to complete a Short Sale.  However, there are only incentives for complying no consequences for not complying. So many Short Sales still languish for months.

I cannot say this any more emphatically that the bank can and may hold everything up is the wanted to.  If they feel as if they are not getting what the want they cannot be forced into any part of the agreement.  It is important to understand that understand that the bank is in the business to make as much money or to suffer the least amount of loss it can.  Selling you the house is not necessarily their goal.  You must have someone make your offer as attractive to the bank as possible. Even then it might not be accepted.

I have successfully closed four (4) Short Sale buyer side properties and two (2) seller side Short Sale closing accounts recently.  As each one i different there are some things that increase your chance to have your offer accepted.

  1. If your are buying, you might want to consider using the mortgage company that also has the short sale.  The are more likely to accept  the offer because they will just be trading loans and will suffer less financial losses.
  2. Make sure your offer is a good one and also still within the general area of the other comparable similar properties.  This is where the CMA (Comparative Market Analysis) comes into play. Make a good, fair offer. Look for the Win-Win.
  3. Understand the more you ask for in contingencies and other clauses, the less likely they will accept your offer.  Clauses mean you have apprehension in buying and want to be able to get out.  Even if this is true, you want to again give them something. This includes asking for repairs or other things related to the condition of the house.
  4.  Place a big earnest deposit down with your offer. This tells them that you are interested and willing to back up your offer with money before the closing.  I can remember doing this as my wife was ready to purchase a car. We dropped off $5000.00 checks at three different dealerships and told them to either: give her “these” terms or call us when we need to pick up our check. Only the best offer was able to cash the check but it showed that she was not just windows shopping of tire kicking.  ***But remember, this money will be tied up in this house unless you either close or are able to get out of it and get your deposit money returned.
  5. Offer to pay closing fees. You might say “Why should I, after all it is what the seller would pay.” Actually the Seller will not pay anything so it all falls under the “Short” or the Short Sale and the bank will have to pay it.  The less the bank needs to pay, the more likely they are to accept.
  6. If you are the Buyer or f you are the Seller, make sure all documents are updated. This might be the most frustrating thing because the documents that banks ask for often run out while waiting and you have to resubmit but keep a calendar of what needs to be updated and send it.  Include communicating with the lender on a weekly basis. Bug them.  If you are the Buyer, make sure your agent regularly talks to the Seller’s agent to ensure all documents are up to date and communication between Seller and lender happens frequently and regularly.

I could probably go on discussing this or related topics for a while but I will end this post by asking for any questions you might have when considering to buy or sell via Short Sale.

 

Oh I almost forgot about a great program that helps with Short Sales, foreclosure avoidance and loan modifications.  Please look at their site. http://www.naca.com. I would not suggest them if I have no experience in how they help people.

 

 

NO STATE SCHOOL TAXES in PA, What do you think of that?

Have you heard? It is call the Property Tax Independence Act.

Pennsylvania Senate Bill 76 and Pennsylvania House Bill 76

AR-140309605.jpg&maxh=400&maxw=667

It is sponsored by Senator David Argall with “bi-partisan” support including one other Republican Sponsor and two Democratic Sponsors.

Sen. Mike Folmer (Republican),

Sen. Judith Schwank (Democrat),

Sen. John Yudichak (Democrat)

If I was to sum up the purpose and rationale for the bill it would be to: ELIMINATE ALL SCHOOL PROPERTY TAXES IN THE STATE OF PENNSYLVANIA.

WOW.

Before I give my views on this (because I have many views on this and come are conflicting), I will go into the facts of the bill.  This bill is close to passage in both the Pennsylvania House and Senate and it is said that the current Governor Corbett (Republican) WILL sign it if it passes both and reaches his desk.

HOW: The funding to fund ALL Pennsylvania school would come from a few places:

  1. Increase the Sales and Use Tax in Pa. by 1%,  which would equal 8% in Pittsburg and Philadelphia and 7% everywhere else in the state (both Pittsburg and Philadelphia are already at 7% sales Tax).
  2. Add more items to the “Taxable” List of Goods AND Services. Below is a list of the Goods.

NEWLY TAXABLE GOODS

  • Food (Items not on WIC food list)
  • Personal hygiene products
  • Newspapers
  • Magazines
  • Clothing and footwear (items $50 and higher)
  • Non prescription drugs
  • Airline catering
  • Charges for returnable containers
  • Caskets and burial vaults
  • Flags
  • Hotel permanent resident
  • Liquor or malt beverage purchased from retail dispenser
  • Coin-operated food and beverage vending machines
  • Candy and gum
  • Storage
  • Bad debts
  • UCC filing fees
  • Call center tax credit
  • Rental of films for commercial exhibition
  • Investment metal bullion and investment coins
  • Catalogs and direct mail advertising
  • Construction of memorials
  • Horses
  • Textbooks
  • Commission – SUT collectors (capped at $250/month)

      3. Increase the state’s Personal Income Tax Rate from 3.07% to 4.34%.

Transition to this new system would take place via a two year phase-in period.  The first year, school property taxes would be frozen at their current level and in the second year they would be completely eliminated except for a small portion that will be retained in each school district to retire the individual district’s outstanding long-term debt.- Sen Argall

I have inserted an Excel Spreadsheet that you can download to calculate what YOUR savings will be based on this bill (Link Below):

property_tax_independence_act_v1-2.1_2013 HB-SB_76_IFO_Fiscal_Analysis

Now Some people might think that this does not or will not effect them if it passes or if it does not.  I want to take a survey to see if it will effect you

  • If you own a home (you will be paying less or the same to state school taxes).
  • If you pay a mortgage (you will continue to pay escrow to your state school taxes or have it eliminated).
  • If you rent a home (you will be paying more for all “Non-necessity” items or the same amount).
  • If you have a job or are employed (you will pay the current rate of state income tax or the increased rate).
  • If you have children in school (you will presumably receive the same services in their school either way because they will receive the same amount whether through the current property tax or the changed tax system).

This is a RADICAL change in the way things are done.  I was impressed with the thinking (whether I thought it was a good idea or what).  It did not seem to be one of those “get rich quick” eliminate this or that tax for a certain subset of people proposed by a team party or deficit hawk of some sort.

      *Note: I did not mention “progressives” or liberals here because we are known for making more taxes not eliminating them (I don’t believe that but that is the political “knock” on us).

So I decided to look up and see if any other states were exploring this option.  Guess what, I was on my third page of my Google search before I found any mention.  It is/ was being considered in Illinois, Hawaii has not property taxes for their state, and Iowa has a hybrid system in place.

If you are a home owner (like myself, and live in a County or the many Townships of Pa., you might be counting your money now.  In Cheltenham, my neighbors and I would stand to save between $5,000 – $10,000 per year.  Yes per year.

But here comes the rain on that parade.  Many in my district that have children in the district will fee very nervous about what the fate of our “Blue Ribbon” school district will be.  As we are rebuilding our aged schools into beautiful monuments of education, we might wonder will it continue to have the funding to do these “Capital Expenditures”.

Hmmmm……..

Some in the city may wonder, “will our district STILL be underfunded?”

Hmmm….

 It is a fact that many will save money, many seniors will be able to stay in their homes without the threat of that huge portion of their tax bill every year, home values will increase, some “ugh tax” housing areas will see an increase in the home purchases in that areas but at what cost to the education system is the bigger question.

Here is a chart and excerpt from a city Philadelphia city paper article.

IFO21

There’s one problem: The math doesn’t add up, according to the IFO.

Though districts would break even in the 2014 calendar year, the IFO study projects a widening gap between expected future property tax collections and expected revenues through the new taxes proposed in HB 76.

“It is true that under the proposal they will not receive as much as they would have under current system,” said Matthew Knittel, executive director of the IFO.

According to the IFO projections, the gap would be a mere $3 million in the first year, but it would grow to as much as $1 billion by 2018-19.

“It is true that under the proposal they will not receive as much as they would under the current system,” said Matthew Knittle, Executive Director of the IFO

According to IFO projections the gap will be a mere $3 million in the first year, but it would grow to as much as $1 billion by 2018-2019.

But rather than short-changing schools, some advocates of the property tax elimination plan see it as a way to control the spiraling cost of education, which has climbed faster than inflation over the past two decades.

Read more at http://www.philly.com/philly/news/politics/Pa_plan_to_eliminate_property_tax_comes_up_short.html#FtTzv94xfAJrL0K4.99

Some believe that schools with shortfalls under the current system will really struggle under the proposed law.  The STATE would allocate funds to the schools NOT the County or Township themselves.  Many believe this is not only a recipe for disaster but for disastrous schools in the future.

My View:

Well, as both a home owner and Real Estate agent, this would be not only great for business but also great for my pockets as well.  I would sell more homes for higher values due to prospective buyers being able to afford “more house” due to suddenly low taxes.  I would also save money on my own mortgage due to the dramatic decrease in my tax escrow.  WOW.  I must be for this new proposed bill.  The National Association of Realtors is lobbying my member fees towards its passing so I must be for it.

Ummm, I am also a teacher and I have children of school age (at least for the next 4 years).  I am a Liberal politically and if that does not explain where I sit on this then let me just say I have some serious reservations and concerns with this proposed bill.  I am certain that this will not be good for schools.

The state controlling the purse for ALL school districts as well as monitoring the needs for new school buildings, repairs and other issues that may arise.  I feel schools WILL suffer, PERIOD.

My dilemma is if is passes, I will, if it does not, the students and schools will.

What is your thoughts?  Please vote in the poll on whether this bill should be adopted.  The poll is directly below:

(Real Reform76.com)

(Pennsylvania Association of Realtors)

(Pennsylvania Coalition of Taxpayers Associations)

There comes a time when you reach out and grab your future

Regret is for people who are too scared to reach for the future with both hands. Never look back, stick to your word, and make sure you make a decision you can keep too.

“The future is up for grabs. It belongs to any and all who will take the risk and accept the responsibility of consciously creating the future they want.”

― Robert Anton Wilson

http://www.youtube.com/watch?v=lsSC2vx7zFQ

Why all of these quotes and inspirational video?  I  am feeling very motivated.  Motivated, nervous, umm maybe more like scared but very, very excited.  Why? Well there are several reasons…. all personal.  I am sharing to motivate ALL as well, to take my example and to run as fast as you can with it.

What have you wanted to do? How did you want to live? What would you like to leave to your loved ones?

Always understanding that I would eventually dig into Real Estate with both feet, I often just dipped my toe in to test the water, or sometimes one foot.  I think I have finally convinced myself to get in and sit down.  I have begun several changes in my career to facilitate this change.

  • I have just changed Real Estate brokerages from BHHS Fox and Roach- Jenkintown (formerly Prudential), to Realty Mark LLC Real Estate.
  • I have begun (with a few friends) again the Real Estate Investment group Venture Investors LLC.
  • I have pushed into commercial real estate with a few deals already working.

realtymarklogo_345x290I will explore all three of these and what they mean to my overall outlook. First RealtyMark.

Why Realty Mark LLC you might ask?  Well I have a great deal of reasons why I moved to this brokerage, but I will only list a few (Please don’t take his as an advertisement).

  1. Agents live by commission: At BHHS i DID NOT pay a monthly fee but I did pay for my E & O (Error and Omission Insurance) at about just under $700.
  2. I also paid for the office fees at around a shade over $800.
  3. I  have the percentage of my commission going to the office/ company to the tune of 40%.

At Realty Mark

  1.  I will currently pay $100 a month for the year.
  2. NO E & O insurance.
  3. I receive 100% of my earned commission (minus $275 each transaction).
  4. With 15 point transactions, me and my wife will be invited to a cruise.
  5. A limousine ride to closing for my buyers.
  6. If I expand to another state, I only pay that one $100 a month.
  7. Television exposure for not just my company but for my listings.
  8. Will have to rent signs  with a deposit.

The math looks good but there is much more into it and the JOY of being an agent and independent business person. Many other perks to mention. Now I know that NO arrangement is perfect but moving in the diction you believe best for you and your family is ALWAYS a good idea. I think this situation incentivizes me growing my business to do better.

Next topic: Screen Shot 2014-01-29 at 9.35.47 PM Venture Investors LLC.
Resurrected from previous deals a couple years ago, me and a group of friends have begun a real estate investment group focusing on Real Estate acquisition, renovation and sales as well as other possible Real Estate ventures.  Won’t go into the entire particulars but we invest, gain capital and financing and rehab houses to share the profits.  It is not a “get rich quick” type of investment but it DOES have proven income generation potential (passive income: the best there is).
Any time a person can do something to make their own future they need to be commended.
By the way, I am reading (actually audiobook) a great book that I will share with anyone who comments a copy of the book.  “The eMyth Revisited” by Micheal Gerber. 
So comment and leave an email to receive the book.      This is a teaser:
The first step to financial independence is to purchase a home, the second is to start a business or entrepreneurial opportunity (sometimes not in that order).  Everyone always hears the old cliche of “No one will pay you what you are truly worth except you“.  So begins the journey again for us finding another avenue on that road to financial independence.
Commercial Real Estate   banner_overview_commercial_real_estate
I have always been interested in Commercial Real Estate and the many facets of it, so although I did not do many deals working through them, I read, reviewed, watched and studied to prepare for that.  Commercial Real Estate is a different animal from Residential, but the middle ground that exposed me to the Commercial side is from dealing with Multi-Unit properties.  Multi-units are treated generally the same as Retail or Commercial properties where what is most important is the earning potential or “Cap Rate”.
Enough about that, that we can save for another post.
In short, if you are or were my client, you may receive an email detailing more specifically my change in brokers as well as the benefits to YOU as a client.  So if I see more excited about Real Estate in general, you have your answer.
Happy Hunting.

“So you’re a First Time Buyer?”

What to know, steps to take, things to focus on when buying your first home.

First, I applaud you for making the decision (at least in principal) to join the ranks of the “equity enhanced”.  I say in principal because many people “decide” to buy instead of rent, but when it get to the point of going beyond thinking about buying and making actionable steps to buy, some waver, get dissuaded or give up on this dream.

STEP ONE:

6 Steps to Help You Decide Before You Buy Decide to buy.

This is not as easy as it seems. For the most part, this means deciding to take on the responsibility to pay for and care for your own home.  Sure, you pay rent somewhere and have experience that level of responsibility.  Sure you pay utilities for where you stay probably, but paying the “house fees” in their entirety is another thing all together.  Some wish to decide if NOW is the time.  Some of the questions you consider: Should you buy before getting married? Am I ready for the responsibility?  All of these are valid and definitely worth considering.  Once you have decided to buy as opposed to renting or living with family or friends, the adventure really begins.

STEP TWO: How will I buy ?

GET THE MONEY !  GET A PRE APPROVAL

Once that big decision is made, many believe the next step is to find a house. NO, not any more.  The first step is to find out how much house you can afford.  As mortgages and mortgage approvals have become more difficult, most home sellers require a buyer to be armed with a pre approval in order to consider any offer.  So, most if not all agents request or require prospective buyers to be armed with a pre approval prior to writing any offers on a property (and rightly so).  You might think that is a bit demanding of an agent but consider this example:

The First family, Jen and John First have decided to buy a home, they have decided to take the step to build equity and add to their personal value.  They immediately call up their uncle Jim Agent to begin showing them houses immediately.  They hear that now is a buyer’s market and there are “great deals” on homes.  Excited to begin, Jim shows them houses on consecutive weekends and after the 8th property, the ninth was the charm.  They love it.  It has just enough yard, a patio and updated baths and kitchen.  The middle school is two blocks down and the neighbor’s home are meticulous.  “Can we write and offer on this one Uncle Jim? I really love this one.  I think it is our home. I can feel it.”  Jen said excitedly.  Agent Uncle Jim reluctantly replies, “I am so sorry puddin’ before I submit the offer, I will need you to get a pre approval for a mortgage company or mortgage broker. I will give you a number to a banker but he will have to approve you.”.  During the time it took for Jen and Joh to touch base with, to submit their information to, and to get a preapproval from (which is not always guaranteed), the Sellers of their dream home accepted an offer from the Pre’pared family.  Jen and John, especially Jen never really recovered and were hesitant to put any other offers in on homes thinking they missed their dream home.

Once you have talked to a banker or mortgage broker and obtained a mortgage pre approval, you will have an understanding of your price range so you can “go shopping”.

STEP THREE:  SHOPPING FOR YOUR FUTURE

Ok, you have your pre approval, your price range and an idea of what you are looking for.  Your list might differ but you usually should identify what is most important to you. Maybe the 10 most important factors, in order of how important they are.  Be mindful that NO HOUSE will fit 100% of your “wish list” but you have to find a balance between what you can “live” with and the amount you are willing to concede to pay for it.  Here is a list of possible factors (in no particular order):

  • Two bedrooms, two baths
  • Updated kitchen, baths
  • Safe, quiet neighborhood
  • Garden
  • Ability to add on
  • No major repairs needed
  • Master bath
  • Near close friends or family members
  • Close to downtown
  • Craftsman-style detached home
  • Lots of natural daylight
  • Parking
  • Good investment with excellent resale potential
  • Affordable property taxes
  • Neighborhood matches family personality, culturally and politically
  • Enclosed laundry area
  • Walk-in closet in master bedroom
  • Storage space for sports equipment
  • Gas hookup for stove
  • Back deck or patio
  • Close to work, schools, church
  • Finished basement for office or guest room
  • No threat of commercial encroachment
  • Within 1/2 hour of the airport
  • Hardwood floors
  • French doors leading to backyard
  • Close to public transportation

I said, “What you would concede to pay,” because one thing that Real Estate agents know is that ALMOST EVERYTHING IS NEGOTIABLE including price and other factors.  Of course you cannot move a house, but you can request particular items to be done OR that you be compensated or credited for them.  For example, gas appliances instead of electric might be as important to you as it was to my wife.  Solution, we asked for a seller’s credit to convert the dryer leads and stove to gas.  We received a credit at closing and payed our plumbing contractor (King Cobra Plumbing) to run gas lines and to run water/ice lines to the fridge while he was at it.

Many things are negotiable but you have to keep in mind it is NEGOTIATED. In other words, we can request it, but they do not always agree to it (at least the first time).

Bottom line: choose your most important factors and as you take time to make that list, stick with it through your house buying experience and do not sway.  Friends, family, co-workers, and even houses themselves will try to change your mind. Stay focused with what was/is important to you.

STEP FOUR:   I FOUND IT !

You walk in and you found it.  You have found your dream home.  It has 90% of everything you need plus some things you were amazed to find it included.  You talk to your agent and tell him you think you are ready and this house is it.

NOTE: There are some important factors that often your mortgage banker or Real Estate agent don’t explain in enough detail until after you have found your home and are ready to make it yours.  That is the CLOSING COSTS.  Closing costs are the costs and fees associated with the purchase of the house.  They are  generally connected to items like transfer taxes, mortgage fees, real estate taxes as well as other fees associated with th purchase of real estate.  When you are ready to sign an Agreement of Sale (this is the document you send to actually offer your price and terms to the seller), your agent (and mortgage broker) is also required to send you a Closing Costs Estimate.

This document (below) shows you an ESTIMATE of all the fees associated with the purchase.  It also shows the monthly fees for mortgage you will incur as well as other fees associated with the purchase.  Some of the fees are as follows:

Estimatd Closing Costs

  1. Transfer and Recordation Taxes.  In Pennsylvania transfer taxes are 2% of the sales price for BOTH SIDES. In Montgomery County it varies but usually 1%.
  2. Title Insurance.  This insurance protects you and your mortgage provider from any defects in title which crop up after settlement.  The details of a title insurance is an article on it’s own.  I find that 0.4% of the purchase price is a good estimate.
  3. Prepaids and Escrow.  Escrow accounts to pay for future property taxes and insurance will be setup.  The amount of property tax that you’ll pay at settlement depends on the timing of settlement.
  4. Loan Charges.  I typically see around $700 for an appraisal and $600 for underwriting and document preparation.  However, this can vary widely by mortgage providers.  When comparing different loan programs, don’t simply compare the total closing costs estimated.
  5. PMI: This usually only applies when you have an FHA or possibly a VA mortgage.  This is the charge that the government charges (both a lump sum at closing and a monthly fee in the mortgage payment) to offset their ability to allow a buyer to put only 3.5% down payment as opposed to the traditional 10-20%.  A bit more complicated but this is the gist of it.
  6. Sellers Assist: If sellers assist is given, then it is notated on here and credited to the buyer at closing. Sometimes a fixed amount, sometimes a percentage of the sale price.
  7. Sellers Escrow Deposit:  This is the deposit(s) you give both at the time you submit the offer and usually 14 days after the offer was accepted.  This money is to allow the buyer to put “skin in the game” to show their interest in the property.  It is also to allow the seller a deposit for removing their home from the market.  If, the buyer “backs out of the deal” for reasons not related to their contingencies (we can talk contingencies later), they will get this money. Otherwise, it stays with the buyer (but held by the Seller’s agent company) and they receive credit for this money at closing.

The important components of the closing cost estimate are the AMOUNT DUE AT CLOSING and THE MONTHLY MORTGAGE AMOUNT. The amounts on this estimate from your agent are just that, estimates.  They contain the fees that the agent is aware of.  Generally, the fees charged by mortgage companies vary so the Closing Cost Estimate from your agent is generally accurate but not exact.  This estimate (along with the Agreement of Sale) must be signed as part of the paperwork to ensue YOU, the buyer understands the costs associated with the purchase of your home.

There are other bits of paperwork associated with the purchase of the house. Mainly for quality control and legal purposes.  Realtor’s are bound under STRICT regulations because there is so much money related to the sale of a house but the MAIN pieces of paperwork related to the sale are:

  1. The Agreement of Sale
  2. The Closing Cost Estimate
  3. The Mortgage and Bank Pre-approval
  4. Addendums related to the Agreement of Sale
  5. Seller’s Disclosure
  6. Escrow Deposit Check

STEP FIVE:  Your offer was ACCEPTED! NOW WHAT?

Your agent calls you and “Congratulations, your offer was accepted”. Now I am of two minds in these terms.  If your offer is accepted,  the Agreement of Sale is not EXECUTED until the Seller’s agent has the actual check as well as signatures of both the Buyer (you) and Seller held by both Buyer’s agent and Seller’s agent.  I only truly congratulate clients when I have the executed (signed) agreement in my possession.  Now, a lot can still happen after this time where either Buyer or Seller can back out but the ball is in the court of you the Buyer and as long as you understand that “everything is a negotiation”.

STEP SIX:  Home Inspection

I have an entire post about this part of the process so I will not belabor it.  Just a few important tips. As I said before, again most everything is negotiable. Also as a buyer, understand that home inspectors are paid to find issues and at times almost feel that they did not earn their money if they do not “find” issues with a house.  Make sure to take your agent with you if possible to the home inspection because sometimes it may scare you right out of your dream house.  You might leave the home inspection saying “Wow, I thought this house was n great shape.  I am not sure I want this one, seems like a money pit.” Usually this is NOT true at all, it just may seem that way from your perspective.  Material defects are the only items to be concerned about. Everything else can generally be repaired and/or negotiated favorably by the knowledgeable agent and buyer. But do choose your home inspector wisely.

STEP SEVEN:   Mortgage Documents “They WANT EVERYTHING”

I put this as seven but actually this happens simultaneously AFTER the Agreement of Sale or “AOS” is “executed” or signed by both buyer and seller.  The banker or mortgage broker will ask for the AOS, and many, many, many … many other documents from you in order to get you your Mortgage Commitment.  This Mortgage Commitment is the REAL confirmation to your mortgage approval.  Within the commitment, you will know your interest rate, your monthly payment and many of the other important details you will need to know.

Consider the Pre-approval- Mortgage Commitment process similar to those pre-approved credit card letters you would receive in the mail shortly after turning the legal age to be responsible for your own finances.  For some it came when they first began working, for others it was like sophomore year at college.  The letter said’ “Congratulations, you are approved for a Capital One Credit Card”. I requested you to sign and send back the form with Name, SS# and a few other things.  What you may not have known is that they “Pre-approved” you based on preliminary information obtained about you (unsolicited).  Now as you sign the letter or call and give consent, they really dig into your financial situation and later send you the card with all the details like your APR, your credit limit and all the other legal items contained.

This process is like that, the Pre-approval you get from your banker or mortgage broker is just that, a “Pre-approval”.  It is definitely more than nothing (that is why sellers now require a buyer to have one), but in order for the bank to lend you the large sums of money it takes to purchase a home.  They have to know a “bit more” about you.  I do not want to spoil the surprise but you will be copying and emailing all sorts of thinks.  Why?  well because there are a group of people that are the “Gatekeepers of the loans”. They make sure that everything you gave, checks out and that what you make is what you make, what you have is what you have and what you spend is what you spend.  It will seem like they do this “Checking” for their sheer joy or watching you suffer, but they are THE UNDERWRITERS and they check everything.  Basically, your bankers asks you for all that stuff to satisfy them THE UNDERWRITERS.  Be warned, but you will be fine.

STEP EIGHT:  Preparing yourself financially

This is sometimes underrated.  There are a few things that you need to work on while waiting for the Mortgage Commitment. The mortgage underwriter WILL monitor your accounts up until the day of the closing.  It is important NOT to make any big deposits OR withdrawals beyond automatic deposits and withdrawals that are common in your account.  DO NOT DEPOSIT large  amounts of cash or family member checks, even if they are helping you with the purchase.  If you ARE receiving a “gift” of money from a family member, make sure you get a gift letter from them and they WILL have to provide a ban statement showing the money in there and showing where it was taken from their account.

Otherwise, secure movers, figure and coordinate rental agreement cancellations and all other utility and logistics loose ends to tie up.

STEP NINE:  Walk through and Closing

Usually on the same day or within a day of each other, both are important.  The Final Walk-through is important because as you walk through the house before you are actually the owner.  Everything that needed to be done, cleaned, trimmed, swept, or repaired should be completed or you have a few options.

  • Back out of the sale: usually without penalty especially if all the conditions were not met.
  • Ask for an adjustment at closing to cover what was not done.
  • Accept the property in this condition.

Closing: During closing the documents you will need are your Driver’s License, and a pretty sturdy writing wrist.  They will need to make sure you are who you are.  You will also need to sign many documents (most of them relate to the mortgage) for the deed and mortgage documents.  Mortgage companies require a great deal of paperwork because it is their money and they want to make sure nothing stands in their way to get it back.

WELL, this is about the long and short of buying a house.  Even in this form, there are still things I have left out for time. Read, reread this, look at the videos and please fee free t ask me any questions.  I have the answer.

Your Realtor, Dirk

Now that the market is turning…. I want to sell !!

As the market begins to swing a bit closer to favoring the seller, it is still a LONG……, way until we get to the solid multiple offer situations that we as agents and you as a seller want to see.  It is however a great idea to feel now and to have possibly already sold within the past few months.  As a previous blog post noted “The Perfect Storm” still applies even as the interest rates have went up (from about 3.5% to 5% for FHA in a matter of weeks) considerably, (that is a completely different topic) they are still at the point that a purchase as opposed to a lease makes more sense.

Home-Sales-and-Mortgages This graph shows that even with modest increases in interest rates, sales of both new and existing homes continue to rise (eating up the surplus inventory that was out there (a lot of houses to sell).  As we move out of an obscenely amount of foreclosures and short sales into “typical” home sales, the prices begin to “normalize”, whatever that means.  Now how does this effect YOU, the home seller.

Now onto the selling, I gathered  some valuable tips to help you navigate through this process to get the most for your home in the shortest amount of time for the highest NET value.  These tips are a variation of Tara-Nicholle Nelson’s past article with several update editions and personalizations as well.

Tips-and-Tricks-to-Sell-Your-Home1

These tips are in no particular order but should ALL be considered when selling.

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Get real about pricing: Today’s buyers are very educated about the comparable sales in the area, which heavily influence the fair market value of your home.  They also know that they’re in the driver’s seat. To make your home competitive, have your broker or agent get you the sales prices of the three most similar homes that have sold in your area in the last month or so, then try to go 10-15% below that when you set your home’s list price. The homes that look like a great deal are the ones that get the most visits from buyers and, on occasion even receive multiple offers. (Bidding wars do still exist!)  Broker’s Opens are a very good way to get feedback from Real Estate Professionals on things like pricing , staging and possible negative/ positive prospectives of your home.  Just like you want a deal, so does everyone else.  The irony of good business is that when buying something you want to best (cheapest) price with the best value, but when you are in sales you look to get the best(highest) price for your product with the least amount of “investment”.  Notice the dual definition of BEST.

Let your neighbors choose their neighbor: If you belong to neighborhood online message boards or email lists, send a link to your home’s online listing to your neighbors. Also, invite your neighbors to your open house – turn it into a block party. That creates opportunities for your neighbors to sell the neighborhood to prospective buyers and for your neighbors to invite house hunters they know who have always wanted to live in the area.  Some home sellers hesitate with this idea because they have “nosy neighbors” that just want to see what you have, but you have to also understand that often people have people or know people (or family) that may want to live where they live and a neighbor’s friend or family member may very well buy your home.  I lived two block from my mother for a bit and just sold a property on my mother’s block to a lovely couple that lived just two blocks away.

Leave some good stuff behind:  We’ve all heard about closing cost credits, but those are almost so common now that buyers expect them as they don’t really distinguish your house from any of the other homes on the market anymore (especially in the FHA, PHFA mortgage market we are in).  What can distinguish your home is leaving behind some of your personal property, ideally items that are above and beyond what the average homebuyer in your home’s price range would be able to afford. That may be stainless steel kitchen appliances or a plasma screen TV, custom built-ins or shelves, or it might be a golf cart if your home is on a golf course or even a home warranty.

Beat the competition with condition:  In many markets, much of the competition is low-priced foreclosures and short sales. As an individual homeowner, the way you can compete is on condition. Consider having a termite inspection or home inspection in advance of listing your home, and get as many of the repairs done as you can – it’s a major selling point to be able to advertise a very low or non-existent pest repair bill. Also, make sure that the little nicks and scratches, doorknobs that don’t work, and wonky handles are all repaired before you start showing your home.

Check up on your agent’s online marketing:  92% of homebuyers start their house hunt online, and they will never even get in the car to come see your home if the online listings aren’t compelling. In real estate, compelling means pictures! A study by Trulia.com shows that listings with more than 6 pictures are twice as likely to be viewed by buyers as listings that had fewer than 6 pictures. You also should make sure you have a robust online presence through any services your agent can provide.  Ask them about where their house will be seen.  Social media included, The law of multiples greatly extend the reach of your property if they utilize your_listing_graphicSocial Media Outlets like: Facebook,Instagram,Path, Twitter, LinkedIn, Google+, Foursquare, Tumbler, Vine and any others.  Craigslist  and YouTube should also be utilized.

Stage the exterior of your home too:  Stage the exterior with fresh paint, immaculate landscaping and even outdoor furniture to set up a Sunday brunch on the deck vignette. Buyers often fantasize about enjoying their backyards by entertaining and spending time outside.

Access is essential:  Homes that don’t get shown don’t get sold. And many foreclosures and short sale listings are vacant, so they can be shown anytime. Don’t make it difficult for agents to get their clients into your home.  If they have to make appointments way in advance, or can only show it during a very restrictive time frame, they will likely just cross your place off the list and go show the places that are easy to get into.  Lockboxes are the best situation.  I know many home owners don’t want a lockbox because they want either the agent or themselves there to guard their belongings.  However there is very good tracking of showings usually online and electronically to track down an agent that showed you home and the property is not as it was for any reason.  One more time:  LOCKBOX !!

Post a video love letter about your home on YouTube:  Get a $125 FlipCam and walk through your home AND your neighborhood, telling prospective buyers about the best bits – what your family loved about the house, your favorite bakery or coffee shop that you frequented on Saturday mornings, etc. Buyers like to know that a home was well-loved, and it helps them visualize living a great life there, too.

Get clued into your competition. Work with your broker or agent to get educated about the price, type of sale and condition of the other homes your home is up against. Attend some open houses in your area and do a real estate reality check: know that buyers that see your home will see those homes, too – make sure the real-time comparison will come out in your home’s favor by ensuring the condition of your home is up to par. Visit your competitor’s home.  You want to be a better deal AND great value than your competition (See and reread the first four tips)

De-personalize and De-clutter:  Pretend you’re moving out, because we home that you soon will be (The Secret). Take all the things that make your home “your” personal sanctuary (e.g., family photos, religious décor and kitschy memorabilia), pack them up and put them in storage. Buyers want to visualize your house being their house – and it’s difficult for them to do that with all your personal items marking the territory as yours.  You want it to present well, but not to be overpowered by your personal style. Staging is very valuable but not when it is overstated.  Keep the faux-moving in motion. Pack up anything that is sitting on top of a countertop, table or other flat surfaces that you don’t use regularly. This is especially important in baths and kitchens. Anything that you haven’t used in at least a year? That goes, too. Give away what you can, throw away as much as possible of what remains, and then pack the rest to get it ready to move.

Listen to your agent:  If you find an experienced real estate agent to list your home, who has a successful track record of selling homes in your area, listen to their recommendations! Find an agent you trust and follow their advice as often as you can.  Most people feel that being a Real Estate agent is very easy and you only need them for the paperwork.  They DO have a set of SKILLS and EXPERTISE that are valuable.  This is what they do.  Don’t you hate when a lay person thinks they can step in and do what you do as a Monday morning quarterback? Well, we all to stick to what we work and know and trust the process.

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So you want to make money in Real Estate Episode 2 Wholesalers

Ok as we talked about “Flipping” and what that process entails,  we will now discuss another part of the making money in Real Estate.  Wholesaling is the process of gaining procession of the property LEGALLY but not necessarily FINANCIALLY.  How do you actually do that:

1. You find a “distressed buyer“.  This means you find someone in a distressed position where they NEED to feel their home.  There could be a number of reasons why someone needs to sell their home.  Anything from: about to lose it due to taxes, need money for a family house that is just sitting, or the home is in bad shape and they can no longer stay in the home possibly due to the shape or condition of the property. Let’s say you folks decide on the price of $30,000.

2. You place the house under contract. Meaning you sign a Real Estate contract where you are the buyer (technically, I will get to that later) and the owner is the seller.  You set a date to close on the house and you give them a deposit to “consummate” the deal.  Money needs to be exchanged as collateral to the agreement between the two parties.  This could range from as little as $10 to around $1000.  This is to allow the seller some compensation in case the buyer (YOU) do not complete the sale.

3. Go find a BUYER.  I know you are thinking WAIT, I thought I was the buyer? Well you ARE for ONE of the transactions but then in lies the Wholesaling process. Ok, back to finding a buyer.  You need to find someone that will purchase the home for more than what you bought it for. Ok you are buying for 30k and now you need to look for some one to buy it for about 40-45,000. THERE IN LIES YOUR PROFIT.  If the home is worth hopefully about $100,000 or even $90,000 you may be able to convince a person, most likely a rehabber (see Episode 1) to buy it for your price so you can make money.

4. You sign a contract with YOUR  prospective buyer and YOU as the SELLER.  Just as before, the contract is set for the SAME DATE as your closing because hey will both be on the same day.  Your very deal depends on it!!

5.  Now comes he closing date.  This is the tricky part. The closing needs to be simultaneous because YOU DONT HAVE THE MONEY TO BUY IT YOURSELF !!!

Let me say that again so that it is clear.

YOU DON’T HAVE THE MONEY TO BUY IT YOURSELF.

You are wholesaling because you are not capable or willing to pay to actually own the property yourself.  So you buy it from the initial owner then immediately sell it to the next owner that you found.

WAIT FOR IT….. WAIT FOR IT…..

Did you find anything wrong with this scenario? Hint… have you ever bought something without paying for it then, sold it? Well, that is actually what happens here.

People will sometimes say different but you have a simultaneous closing because the money used to “fund” your buying the property is technically the same money that you receive from the buyer when you are selling that very same property.   I know… is that legal?  Well, generally it is depending on having a Title or Escrow company that will accept “putting the cart before the horse”

Welcome to the world of business.

The actual difference in why this works in concept is because some people will pay for a home to rehab as long as it is still at a profitable price.  People will sell your home to you if they are in desperate circumstances if you approach them correctly.  I would not be honest if I did not say that there are some moral issues that some have with this.  Included in this the fact that you very well may be in a closing where your initial seller may be made aware of your end purchaser and the price they are paying.  Imagine, selling something for $10,000 and seeing the person that you sold it to sell it 1 hour later for 3 times as much. 

I could write for days on this topic but I will also post a video as well as a link to a web group I am a member in that can also be helpful just.. promise to come back to me. !

Wholesaling is about work, building relationships and making the deal.  It is about knowing the area, the comparables of an area and finding a buyer.  This is THE CLOSEST THING TO REAL ESTATE INVESTING WITH NO MONEY DOWN.

Also try http://www.biggerpockets.com

So you want to make money in Real Estate? Episode 1 “Flipping a House”

Continue reading

Options Blooming to purchase your dream home.

Spring-Wallpapers-for-Desktop-4 Ok, the flowers are beginning to bloom, I just bought a few potted tulips that are budding ready to bloom, it is to me symbolic of the current Real Estate market, READY TO BLOOM.  I have been pretty busy over the past couple of months and even more so currently. So to my clients I thank you and ” Let’s find the house of your dreams”.

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**Courtesy of 7933 Limekiln Road** Absolute Realty Realtor Gary Umansky**

If you wish to see this one let me know but make sure you mention me to Gary !!!

Most of my current BUYER clients are looking for generally the same type of house in varying different neighborhoods and areas.  They are looking for a generally updated home with hardwoods or carpets, updated kitchen decked with stainless steel appliances, redone bathrooms with updated tiled walls and fixtures and possibly a finished basement.  Ask Ms Norman, the lovely young lady that recently closed on such a home.

Most people now do not want to do ANY work to the home of their dreams but want to have it ALL redone and “move-in ready”.

But for the savvy, patient and discerning home buyer, there is another way……

The HUD 203K way!!

I know that sounds like a Prince line or an infomercial but it is true.

The HUD 203K  and 203K Streamline Programs in conjunction with FHA.  Now FHA, VA and many governmental agency that help secure mortgage loans for people at low rates and low down payments (3.5%) are common and frankly the best option for buyers with sufficient credit but lack the “conventional” 10 or 20% down payment .  This loan allows a person to put only 3.5% down on their mortgage loan (plus the normal closing fees.)

Screen Shot 2013-03-27 at 10.39.18 PM** Note in closing it makes a heck of a difference***

However, FHA, VA and many of these programs have specific guidelines on how and when they lend money.  One of those rules is that the house must be “habitable”.  By habitable they mean that the home must have ALL the working and functioning components like functioning kitchen, bathroom and be safe and free of hazards. Sooo…. if there is not kitchen or stove, or running water or electric or functioning bathroom or any other items that you can think of.  So if you found the house in the area of your dreams, with great bones and great schools, you might be out of luck if it is not up to FHA requirements.

Wait, in steps Mr 203k!!

turn this into this-2 203k-Mortgage-1

Where you can borrow money for your NEW HOME, as well as money to make it “livable” ALL within your loan.  Money to BUY. and Money to RENOVATE . This would allow you to make you OWn dream home, renovated in the EXACT way you envision all the way down to the tiles, paint, flooring style and color, window, doors, stove, etc., etc. ALL within your loan… if you are willing to undertake this endeavor.  I have two current 203k loans going currently and will give an update as to how they do.

Below is more information about 203k mortgages.

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203(k) – How It Is Different

Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

Eligible Property

To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.

Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place.

In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit.

An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.

A 203(k) mortgage may be originated on a “mixed use” residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

How the Program Can Be Used

This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:

 -   To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
 -   To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
 -   To refinance existing liens secured against the subject property and rehabilitate such a dwelling.

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.

To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation.

This is the link to the HUD 203K Handbook to read more and get more information (click this link).  Most any mortgage broker should be pretty versed on this program. As always call email, or text me with any questions about it as well.

What cool Real Estate Stuff can you find online?

Ok, Quick Post here of really cool and vital information that can be found,  FOR FREE online.

  

NEIGHBORHOOD SCOUT

http://www.neighborhoodscout.com/pa/philadelphia/crime/

CITY DATA NEIGHBORHOOD INFO: able to get information on all major Pennsylvania cities

http://www.city-data.com/nbmaps/neigh-Philadelphia-Pennsylvania.html

CITY DATA BY ZIP CODE: same information site as previous but search by Zip Code.

http://www.city-data.com/city/Philadelphia-Pennsylvania.html

MONTGOMERY CO PROPERTY & TAX RECORDS:

http://propertyrecords.montcopa.org/Main/Home.aspx

MONTGOMERY CO FREE PUBLIC DATA SEARCH: Public records on EVERYTHING from inmates, to Commercial properties, traffic cams and Sheriff sales.  Great Site.

http://publicrecords.onlinesearches.com/PA_Montgomery.htm

DELAWARE COUNTY PUBLIC ACCESS: 

http://w01.co.delaware.pa.us/pa/publicaccess.asp?txt.x=1  TEXT ONLY

DELAWARE COUNTY REAL ESTATE AND TAX RECORDS

http://w01.co.delaware.pa.us/pa/publicaccess.asp?real.x=62&real.y=59  GENERAL PAGES

DELAWARE COUNTY RECORDER OF DEEDS

http://w01.co.delaware.pa.us/delcopa_net/(S(kikjex55aql0m1nucn1vg1mi))/ESP.aspx RECORDER FO DEEDS

When houses come out of the shadows- General interest post

Picture this scenerio:

A house not a particularly memorable home sits occupied by a quiet family that has livd there for around 7-8 years. They keep to themselves, the homelooks a bit more unkept than you recently remember it and the family of course like most, seem to be working and not home quite as much. You can remember that a ways back, the daughter was ill and taken to the hospital but you are not sure what became of it. You see all three children leave to get their school bus in the morning and that is about it.

Under the surface, the “Jones'” are actually in the final stages of the home forclosure process. The did not take the bank’s offer of a short sale because they would have no other home to move into. A slow economy causing less hours for the dad, coupled with a child’s illnss cost a great dead in care and needed medicine, has caused this family to fall more than a year behind in their mortgage. You say how? they work right? Well actually some mortgage companis will (after a certain point in time) not accept anypayment except for a lump sum payment of the amount owed. Sooo, now we find this family facing many legal letters and leters from their bank and related items stating that they are “in forclosure” but somehow, some way, no one hs come to serve them, to remove them or anything of the like so they say, pray and continue to do what they normally would do.

The reason this has become more common than not s because they are in the limbo land of being considered “Shadow Inventory. Where banks know they can and probably will eventually foreclose and take possession of the property but either choose not to at this point or are forbidden in doing so at this point in time.

On Wednesday of this week, Corel Logic reported that as of January 2012, the U.S. had approximately 1.6 million units of residential shadow inventory. This is a little more than half of the 3 million total properties that are currently seriously delinquent, in foreclosure status or bank-owned properties (known as REOs, for real estate owned). CHARTS BELOW !!

FC: Foreclosures

REO: Real Estate or “Bank Owned” (Already foreclosed)

“‘Shadow inventory” broadly speaking, refers to all the homes in the foreclosure pipeline that will eventually flow into the market but aren’t there yet. In practical terms, the definition of shadow inventory varies considerably depending on which analyst you ask, and there is truth to be gleaned from each of their carefully calculated studies.”

Huffington Post : Adam Heller March 31, 2012

The ‘Shadow Inventory’ Darkening Housing

Home sales can’t rise until the foreclosure backlog gets cleared. But that’s not happening nearly fast enough

Mar 23, 2012, 11:31 am EDT | By Ethan Roberts, InvestorPlace Contributor

Reducing inventory in the real estate market these days is like trying to shovel your driveway clean in the middle of a blizzard. No matter how fast you work, new falling snow just keeps covering over any progress you have made.

And housing’s biggest problem continues to be a blizzard of backlogged foreclosures, aka “shadow inventory,” which before the recent agreement with the 50 state attorneys general were backed up in the pipelines of the major banks.

http://www.dianomioffers.co.uk/smartads.epl?id=860

1.6 million homes in the current “shadow inventory”

1.6 million homes in the current “shadow inventory”

1.6 million homes in the current “shadow inventory”

That 1.6 million units equate with a about a six-month supply, and the good news is that’s a two-month reduction from the levels seen in January 2011. The bad news is the level of shadow inventory remains the same as it was six months ago. As fast as investors and cash purchasers snatch up these properties, new shadow inventory is released.

This is the frustrating Catch-22 of today’s real estate market. Prices can’t rise until inventory declines, and inventory can’t decline until prices rise. Let’s take a closer look at why this is the case.

Sellers Can’t Sell

Imagine you need to sell your home due to a change in job or family situation. But the problem is that you bought your home with a 30-year mortgage less than eight years ago, and you’re upside-down on your mortgage. If you sold your home, you would have to bring $30,000 or $40,000 to the closing, and that’s money you just don’t have.

One solution is to short-sell your home (sell for less than what’s owed on the mortgage). But if you do that (assuming your bank even agrees), it hurts your credit, could take up to eight months to get lender approval — and it ultimately brings down the value of the surrounding homes in your neighborhood.

Another solution is to rent your home, but depending on when you bought your home, your mortgage payment could be several hundred dollars a month more than your potential rental income.

Faced with this dilemma, many homeowners have chosen to simply walk away from their mortgage, a practice known as “strategic default.” But doing this has ruined their credit and now prevents them from buying another home for as long as seven years. The ongoing strategic defaults have continued to feed the shadow inventory levels, which eventually trickle down into the inventories of the local Multiple Listing Services (MLS).

Inventory rises and prices decline or remain low.

Buyers Can’t Buy

Some buyers can’t buy due to poor credit or high debt loads. Lenders are demanding better credit and lower debt-to-income levels than they did several years ago. Another obstacle for would-be buyers is higher down payment requirements and an increase in loan fees, especially on FHA loans.

Other buyers can’t buy because of their recent foreclosures or bankruptcies, thanks to that hit to their credit ratings.

Along with the buyers who can’t buy are those who “won’t” buy, either because the recent downturn in real estate has left a sour taste in their mouths or because they fear further decline is probable. These buyers won’t move until they see evidence that prices are rising again.

Since inventory is showing few signs of diminishing, prices are stagnant in many areas of the country, and buyers in those areas continue to hold off. By doing so, they perpetuate the cycle in which inventories remain abnormally high.

Solutions

As I have noted in a recent InvestorPlace article on homebuilder stocks, employment and the real estate market remain inexorably linked: Each relies on the other for growth. New construction creates thousands of jobs, and each re-sale provides additional revenue for dozens of independent contractors and service providers, who can then afford to hire more help.

So the key to a better real estate market remains an employment rate that will give more first-time buyers the wherewithal to qualify for loans. Additionally, the government needs to stop hindering the market with the kinds of programs now in force, including new FHA loan fees, excessive environmental regulations on older homes and a centralized appraisal system that’s destroying market values.

Another solution is for the government to give real estate investors incentives to purchase homes — without destroying property values, which is what happens when thousands of homes get sold in bulk to hedge funds. Incentives such as tax breaks or the ability to roll the cost of needed repairs into conventional home loans would help reduce the inventory of the foreclosures more quickly and would not hinder property values.

Until and unless we break through the stalemate that simply replaces one sold foreclosure with another from the pipeline, the housing market will continue to muddle along at the bottom for several more years.

Mar 23, 2012, 11:31 am EDT | By Ethan Roberts, InvestorPlace Contributor

My final words on this is that My prayers go out to all that are behind on their mortgage and the hope is that some of this inventor stays in the hand of the original owners. There is also talk of other programs on the horizon that may help homeowner.

Home Inspections:What to know & to keep in perspective.

A home inspection is a limited,  of the condition of a home, often in connection with the sale of that home. Home inspections are usually conducted by a home inspector who has the training and certifications (ASHI) to perform such inspections. The inspector prepares and delivers to the client a written report of findings (usually very detailed). The client then uses the knowledge gained to make informed decisions about their pending real estate purchase. The home inspector describes the condition of the home at the time of inspection but does not guarantee future condition, efficiency, or life expectancy of systems or components. A home inspection is anywhere from 20-100 pages depending on the issues found.

Ok that is the definition of a home inspector.  The general description of a home inspector is that the home inspector, inspects a home in a detailed manner and gives a written report and usually a verbal description on particular item in the home.  However, the home inspector can only observe conditions that are visible.  In other words, the home inspector cannot and  generally DO NOT open walls, disconnect components or do inspections that involve other deconstruction of home parts or items. 

They do what is call a NON-INVASIVE inspection.  Kind of sort of like a  physical.  During a physical the doctor uses tools and knowledge to give you a general overview of your health.  Ironically, a home inspection can feel much like a physical “in the end”, much like a Prostate Exam.  For both sides Buyer and Seller. 

                         

 

 

Ok I will break down the issues and pit fall for both buyer and seller in terms of home inspections. 

  • Sellers Side issues

As a Seller, home inspections always come with great angst.  They have already filled out their Sellers Disclosure. Seller Disclosure is a form of disclosure where the seller identifies any and all specific problems with their home (that they are aware of) and is a legal document. Now they have to endure an inspection that will ALWAYS, I TRULY MEAN ALWAYS WILL FIND ISSUES.  Even new construction homes I have seem come back with “issues”

In my opinion, many home inspectors may almost feel obligated to earn their payment and find “something” or things to justify their involvement in the process.

 Now, the inspection comes back with “issues” and you as the seller must choose whether to :

  1. give credits for negotiated repair items to get fixed by buyer
  2. fix items yourself before sale
  3. refuse and lose the sale
  4. any combination of the above

Now remember the only items that are definitely required in most cases to be “mitigated” are the ones listed as material defects.  Sometimes listing issues that are more signs of deferred maintainance or other minor issues, become pretty big when listed on paper and cumulative with ten (10) other small items.  It would make a good house look not so good and often scare first time buyers.

JWK Inspections: “What is Inspected”

  • BUYERS SIDE ISSUES

From the Buyers side it is a bit more involved since of course you are the one needing/ requesting the inspection in most cases and you are again the one paying.  Usually a home inspection for a buyer has two or three purposes:

  1. As a contingency to walk away from the deal if needed.
  2. To determine the cost, state of “health”, and concerns related to the property.
  3. As a negotiating tool to negotiate additional terms, repairs  or price adjustments in addition to the already agreed upon terms.

With this in mind, the factor most important is the ultimate goal or purpose of the inspection for the buyer.  Do they want a cheaper price? do they want repairs to an already seemingly sound home,? Do they want an “escape clause”, do they love the home and are being safe or responsible or any combination of the above.  Their ultimate goal matters and should be understood and discussed between buyer agent and buyer. 

The home inspector should be an impartial judge , reporting on the condition of the home without offering unsolicited opinions.  THIS IS VERY IMPORTANT.  VERY IMPORTANT.  I have witnessed new or inexperienced home inspectors either scaring home buyers into backing out of a deal or assuring them that a condition is “fine”.  Also a home inspector should have a current knowledge base on codes, exceptions, repairs and costs of repairs for many items in the hom AND NOT AFRAID TO RESEARCH SUCH INFORMATION AND GET BACK TO THEIR CLIENT.  This is important.  I recently had a deal fall apart due to a seemingly over zealous and a bit inexperienced home inspector WRITE in a report that a water heater that was “off”, was inoperable and worst yet state that the cost of the replacement STANDARD WATER HEATER was between $1500-$2500, WOW !!! 

I cannot name the company because I did not hire them but I can tell you that their estimate  is at least $700.00 TOO MUCH from even their lowest estimate.

Below is a cost estimate put together by a home inspection chain.

Cost Estimate: Repair or Remodel

Something important to remember is that as with any home or apartment you currently like in now, they are and will always be issues that need “looking at” in a residence with some being an emergency and other being a matter of preference or convenience.  A home inspector (in my opinion should point out issues, but also make sure to put them in perspective as to the cost,and overall effect on the home.  I am not saying to minimize issues, but I am sure the home they live in are not clear of “issues” not is any home they inspect.  I think they should protect home owners from bad buys and horror stories but to also be professional that can relate to buyers (especially 1st time buyers) and their already heightened anxiety around this most important purpose.

GET A HOME INSPECTION, KEEP IT IN PERSPECTIVE.

Now for a clip of the most famous home inspector MIKE HOLMES the INSPECTOR.  Note: What he does is far over and above what is considered non-invasive inspection.  Issues are highlighted for the show and there are many homes that are not this way.  This show is sensationalized for television just as Reality Shows are as well.  Not to say the issues don’t happen but, Really?

HOLMES INPSECTION: HGTV

Yes We Can – Barack Obama Music Video

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“A Home of Their Own”: Women and Home Buying

1st HAPPY NEW YEAR !!!

This will be your best year YET !!!

Women and Home Buying

I will take my time with this post because I know of:

  1. Its importance impact
  2. It truthfulness and validity

First for some facts (data):  these are numbers taken from the study done in 2006 from the Joint Center of Housing Policy of Harvard,  by Rachel Bogardus Drew

  • Women make or direct 91% of home buying decisions. (Price tag: about $2 trillion)
  • Women make 75% of the decisions about new homes. (Price tag: at least $250 billion)
  • Women initiate 80% of all home improvement purchasing decisions, especially when it comes to big ticket orders such as kitchen cabinets, flooring, and bathroom overhauls.
  • Women represent 51% of consumers that usually hire professionals for home improvement and remodeling projects.(Price tag: at least $100 billion)
  • Women purchase 94% of home furnishings.

Now I know this for a fact anecdotally as a Realtor.  If I were to count, about 85% of my current, active client base are  women and 100% of my total clients are women (married couples). So you are either a women or you have a women in your household. And if you are a married couple, it is quite clear (even from my own experiences) that the main decision maker in the home buying process is the fairer sex.  A fellow Realtor/ Investor and I had a lively conversation related to being a Realtor dealing almost primarily with female buyers and the women who love us…  I will not expound on the conversation too much but I will repeat his quoted words “It takes being married to a strong women to deal with a Realtor having women called all hours of the day and night in ‘distress’ over home buying issues“.Anon

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What does this mean?  Well for starters that as an Realtor I need to know what you ladies want, what are your fears and expectations in the process and work with both your level of comfort and knowledge.  Early in my Real Estate career I believe I lost a client due to not quite understanding the specific needs of this very important client base.

Taken from http://www.she-conomy.com is a list of current was marketing in gearing itself towards it most “rewarding” customer.

The following are six simple steps to take when marketing to women:

  • Use language that evokes feeling and thought. For example, describe a granite’s origin in a way that helps her visualize where it came from.  Don’t ever underestimate the power of description. She will probably use many of those same words when describing her new home’s granite to friends over cocktails.

  • Use color and textures in your collateral. Unlike men, women will actually read every word of a marketing piece, hang on to it and show it to their friends. And, when they can’t find it on their desk or in the file, they’ll describe the piece as “this really cool brochure that has this beautiful artist’s rendering of my dream home on it.” They may or may not remember the name of the model complex — because they often see 20 or 30 of them — but they will remember the pieces they collected from the sales office as long as those pieces are equal to the experience they felt as they went through the model.

  • Engage all five senses. The experience of buying or remodeling a home is the most personal journey a woman encounters in her lifetime. If you want her to remember her experiences in your home, appeal to all five of her senses. Engaging her sight is imperative, followed by her keen sense of smell. You don’t just have to use candles as air fresheners — there are all types of air fresheners on the market that are sight unseen without being overpowering. Then invite her to touch everything. Let her explore the appliances and open the closet doors. Accentuate spaces in the home that give her ample storage. Have music playing throughout the home she’s visiting. Finally, to appeal to her sense of taste, have snacks she can nibble on available throughout her buying experience.

  • Do something extraordinary. Women like to be pleasantly surprised, so take ordinary activities and make them extraordinary. For instance, if your demographic has a high percentage of single working mothers or down-sizers, it’s likely they work long hours so hold your grand opening in the evening. Be sure to have candles in the rooms and offer her a glass of wine as she unwinds from her day. Or, if the demographic is primarily young families, have a reading of a children’s author at your grand opening and send the children home with autographed copies. She’ll never forget the effort — and she will tell all of her friends.

  • Educate her. Today’s woman wants to know how her house works. Show her where the electrical panel is and label each connection. If you are a green builder, showcase the process with see-through panels to show her the insulation. If you feature Energy Star products, give her the supporting material in your sales office.

  • Ask for her feedback. This is perhaps the scariest thing for a builder or remodeler to do, but your best return on staging or modeling your homes is finding out what you may have missed and, better yet, what you got right. If you’ve done a great job, ask if you can use her testimonial in your campaign. If you missed the mark, ask her back after you’ve incorporated some of her ideas. According to She-conomy.com, 51% of women buyers will give a company a second chance if they feel the product or service missed the mark the first time. YOU !!

    She-conomy Video
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    There are organizations like She-conomy as well as writers and advocates that are geared specifically to help the female consumer not just in home buying but in many financial matters.  A favorite of mine is Tara Nichole-Nelson of http://www.REthinkrealestate.com.  As a matter of fact NEW followers that comment will receive a copy of the first Chapter of her book:
    Trillion Dollar Woman that is dedicated to educating women around home buying and one follower will get mailed to them a copy of the book:
    The Savvy Woman’s Homebuying Handbook: 150 Insider Secrets, Decision-Making Guides and Online Resources, plus the ONE Action Plan You Need

    Ok ladies!!  This is for you.

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Fear and Owning Part Two !!

Ok where did I leave off..

1st I would like to say I am sitting in the stands, watching my daughter at swimming practice. The sounds of 30 plus children swimming about 6000meters in a night is almost enough to put you to sleep just listening.

Ok back to Real Estate.

The Survey done my Yahoo ( ) that were referred to in the previous post also gave other valuable insight.

I ask you how satisfied are you with where you currently live? In fact I will make this a poll because this was a question on the survey as well. I will not put their findings chart up until the end of this post (will give you some suspense & something to look forward to).

I will not yet discuss these finding but will move us along to the findings of WHY most renters WANT to move and discuss those findings.

The top three (3) choices out of five were:

  • MORE OR LARGER LIVING SPACE (45%)
  • HOME BETTER SUITING MY STATION OR PHSE IN LIFE (44%)
  • HOME BETTER SUITING MY STYLE (42%)

Followed by:

  • MOVE TO A BETTER NEIGHBORHOOD (30%)
  • A “GREENER” or MORE ENERGY EFFICIENT HOME (27%)

Do any of these surprise you? Actually the “Greener” alternative being as high pleasantly surprises me a bit. But the top three and patented answers to the common reason to move or hopefully buy. I would like to add one more that is increasing more relevant as well as real. How would the option of wanting to move to *Save money on my tax footprint* or to *Pay less living expenses* or *Save responsibly*?

I hope I don’t sound preachy or that I am spewing the typical “industry line” in saying these three options, because ALL of them are good reasons and all are true. From the last post you can see that renting is more expensive, it gives you no tax advantages and it also does not allow you the opportunity to take advantage of my friends equity and appreciation.

I will talk about these at a later date.. maybe as the market allows for more of each (inside joke)!!

Ok as promised I will give the results of the Yahoo Home Horizons 2012 Survey

Home Satisfaction Survey

Also I have a bonus. Two Buying vs Renting Videos to hit home the point of my posts and what bore out in the Survey.

Enjoy

Renting vs. Buying a home 1
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Renting vs. buying a home (part 2)
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Fear and Owning

Ok, as we prepare for the New Year and add losing 15 lbs, gym membership/ trainer, better job, taking relationships/ friendships more seriously and other pieces of the “moving my life forward” puzzle, many add Owning a Home to their “resolutions” as well. In my life and experience with home ownership I went from

  1. living at home
  2. paying what was left of a mortgage at home when my mother moved and “gave” me our childhood home
  3. looking for a home of my own and being scared away a bit due to not getting what I wanted for what I wanted so we (wife and I) purchased our first “investment property” to later use to purchase our home.
  4. Later finding our “Dream Home” after a few missed opportunities after placing offers (we purchased during the height of the boom when multiple full price offers was the norm.. ). *NOTE: so you know where my home value is now! LOL.

This being said, I never had the first hand experience of renting for any period. I often wanted to do a survey on renters and what would or does motivate them to finally buy. Is it totally up to them or are there other circumstances and situations at play that dictate this move. Well lucky for me, Yahoo did such a study, sort of.

In this post I will summarize and offer my views on this survey. Full disclosure dictates that I also give credit to Ms Tara-Nicholle Nelson and her article also summarizing this issue.

Reasons for Renting Yahoo! Home Horizons Survey 2012

Source: Yahoo! Real Estate Home Horizons 2012 survey — based on responses 496 buyers/renters in the market to purchase a home.

Ok, Lets break this down. In fairness I will attack this from the standpoint of my belief that everyone should endeavor to own and part of my job is to help facilitate that.

  • DON’T HAVE MONEY FOR A DOWN PAYMENT 53%
  • INSUFFICIENT CAPITAL/ INCOME 51%
  • WON’T QUALIFY FOR A LOAN 38%
This is the top three reasons from the 415 respondents as the main factors for renting and not buying. I will approach the Down Payment and Income Responses with a Trulia chart.

Trulia Rent vs Buy Index

Ok, in Philly and the surrounding area, for that matter 95 plus % of the country it is cheaper to buy currently. You pay more renting than owning (unless buying in New York.)

As a landlord, I k now that a fully rented home or duplex makes me usually $200 more than the mortgage even before all the downturn.

Second as said by Ms Nelson in her article.

A full 30 percent of the owners and renters who self-identified as interested in buying a home expressed concerns that they might not be able to scrape up enough cash for a down payment.

As an agent my past 2 property closings have cost the client :

  • $1000 +$500 deposits
  • $700 home inspection
  • about $1200 at closing
for a home in the 130k range. How you might ask? Well…. because as an agent for a buyer, I always suggest Sellers Assist as well as exploring FHA mortgage options.
Sellers Assist is when a buyer requests assistance from the “seller” to be used for closing. This can be $0 to in some cases up to 6% of the price of the house. Keeping in mind that with a FHA mortgage TOTAL closing costs average around 6.5%-7% of the cost of the house. Hopefully you can see how Seller Assist can greatly reduce a buyer’s “contribution” at closing.

Now for the third point. I have to honestly admit that currently THIS is or could be an issue. Mortgage lenders have become more stringent with loan approval. However, with the right mortgage broker or lender it is definitely possible. More than possible, it is probably. I have seen approvals with a credit score of 630. Contact a broker they can and will also help you understand and guide you into what to do to improve your credit score.

Some other insightful findings.

Home Ownership

Cost of Owning a Home

I will give more on this later.. more on the survey and what it means

What motivates you more to purchase a home these days?

Ok as the season moves on and the market continues to slowly move forward.  I pose this question to you.  Which factor would make you more motivated to purchase property now.  You can answer it as an investor , a owner-occupant or a rehabber.  Whatever role you wish, please answer the poll.

Interest Rates vs Home Prices

Short Sales

Ok I want to talk a bit about a pretty hot topic currently. Unfortunately spinning off of the previous post related to the sad phenomena of foreclosures now, I will talk about Short Sales & Deed in Lue.

Distressed Homeowner Leads
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On occasion, one of the options that various mortgage companies suggest for families that they are refusing to grant a loan modification is a Short Sale. A Short Sale is where the mortgage holder or “bank” offers to allow the home owners to sell the house for whatever it can sell for and the BALANCE either the bank will forgive OR may require the previous home owner to pay. The term comes from selling the house SHORT of what the held mortgage is.

Short Sale

Short Sales

Short Sale

Short Sale

I will take the roses & thorns for each transaction seperately (buyer & seller).

Ok Seller’s side Short Sale:

As a Seller in a Short Sale, you are in the unique position of negotiating the loss of your property.  Your options are that you either having to endure a foreclosure of your property or the lesser of evils of

1. Short Sale or

A mortgage company or lien holder will usually offer this option if a foreclosure is eminent or it is an investment or secondary residence.  They will state that if you wish you can seek to SELL the home and whatever you get for it, the difference or SHORT-fall will either be “forgiven” or due to the mortgage holder.  Whether they forgive or not generally depends on the owner’s perceived ability to pay.  There are usually a slew of documents that a seller will need to provide to the bank as well as acquiring a buyer for the property. The sale side transaction side generally goes according to a typical sale of property except that instead of negotiating with the owner of the bank, you are negotiating with both the owner AND the mortgage holder.  Guess who has the most leverage?  Most terms have to be agreed to by both owner and mortgage holder including the fees paid to everyone even Realtors.  Once the buyer and seller(s) agree with terms of the sale.  the bank (mortgage or lien holder) will require documents from the seller to help decide whether they will complete the Short Sale and if the seller/ owner will need to pay the deficiency.  The bank (mortgage holder) usually goes not pay any other bills connected with the house unless they are liens that directly relate to transfer of title (can talk title later).  Sometimes they will decline a short sale because there are other bills that are high such as a Gas or Water bill or even tax or other judgements.  After the bank is satisfied that the seller cannot pay the deficiency, an appraisal is done to find out EXACTLY what the house is worth.  Once this is done, generally some loos ends are tied up and the sale os allowed to move forward.  As you can imagine, this process DOES take longer than a typical sale.. thus to the buyers side….

Buyer’s side of the transaction is very similar to a general purchase except a couple more forms and the WAITING !!!!!. The WAITING is the biggest issue and many buyers cannot or will not wait the time it takes to close the transaction and become frustrated with all involved.

                SIDE NOTE:   I once had a client that was very interested in purchasing a Short Sale.  The particulars that I can share were that the property worth about 750k was being “Short Sold” at an agreed upon 629k or so.  Now the rub was.. as all the work that was put in making this work, the Seller’s agent was less than honest and after a month wait and 2 postponed closings, the Seller’s agent “just found out” about two (2) additional liens for a Tax and business lien totally about 40-50k.  Of course, the deal feel through because no one was willing to pay this lien including the  bank.  So of course the waiting on behalf of my client AND the failed transaction my client decided to “take a break” from looking.  Fast forward a few months, they found another agent that sold them a house from an open house that “suggested” they complete the entire transaction through him and his “people” to allow it to go smoothly.  LESSON: Short sales are tricky for everyone involved and that a bad agent on the other side will make you look bad and lose a client at no fault of your own.

Two new forms are an affidavit to make sure that there is no shenanigans going on where you, your agent or anyone involved gain illegally from this sale (kick backs etc.), and one that gives the bank permission to act in the matter of the sale of the home.  Not much changes, except the waiting and that more can go wrong as well as the bank may be less willing to negotiate terms.

 

2. Deed in Lieu of forclosure:

I will not discuss much about this in this post because honestly I am NOT A FAN OF IT.  Ok that is out of the way.  Basically, you (the owner of the property voluntarily give all rights back to the bank and just leave.  Give keys, sign deed and are done with it.  Saves the bank the time and expense of the proceedings as well as putting the owner in better favor with the bank in terms of credit “dings” and overall responsibility.  I take pride in home ownership, thus my disfavor with this option.  Banks would disagree.

Deed in Lieu (Not my fav..)