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SHORT SALE AND FORECLOSURE: HOW ARE THEY DIFFERENT?

As unfortunate as it can be when homeowners fall behind on mortgage payments and must face the possibility of losing their homes, short sales and foreclosures provide them options for moving on financially. The terms are often used interchangeably, but they’re actually quite different, with varying timelines and financial impact on the homeowner. Here’s a brief overview.

A short sale comes into play when a homeowner needs to sell their home but the home is worth less than the remaining balance that they owe. The lender can allow the homeowner to sell the home for less than the amount owed, freeing the homeowner from the financial predicament.

On the buyer side, short sales typically take three to four months to complete and many of the closing and repair costs are shifted from the seller to the lender.

On the other hand, a foreclosure occurs when a homeowner can no longer make payments on their home so the bank begins the process of repossessing it. A foreclosure usually moves much faster than a short sale and is more financially damaging to the homeowner.

After foreclosure the bank can sell the home in a foreclosure auction. For buyers, foreclosures are riskier than short sales, because homes are often bought sight unseen, with no inspection or warranty.

DISPELLING REFINANCING MYTHS

“Refinancing” is a scary word for many people, but that shouldn’t be the case for you. For many homeowners, refinancing can not only lower your monthly payments and help with your monthly budget, but it can save you thousands of dollars in the long run.

YOU’RE NOT TOO LATE

For years now, we’ve been hearing that interest rates will be on the rise, and although there have been some small increases, you’re still in a great position to drastically lower your interest rate.

REFINANCING IS NOT JUST ABOUT LOWER MORTGAGE RATES

If you have consumer debt, such as auto loans, student loans or credit cards that are at high rates, then consolidating your debt into one low rate makes perfect sense. The idea is to wind up with one low monthly payment that is less than all the combined monthly payments you currently have. And you can have all the costs built into the loan so you have no out of pocket expense.

IT’S NOT TOO TIME CONSUMING

Don’t brush off refinancing just because it seems like a long and daunting process. An informational call with someone like myself to do a quick analysis takes just a few minutes. And besides, isn’t the amount of money you could save worth the time and effort?

ARMS CAN BE REFINANCED, TOO

Seeing your Adjustable Rate Mortgage (ARM) increase after the introductory period can be incredibly stressful and place a squeeze on your budget. Many people assume they’re stuck, but ARMs can be refinanced, just like fixed-rate mortgages. You can even switch to a shorter term fixed-rate mortgage, such as 15 or 23 years. The longer you’re planning to stay in the home, the more sense it makes to look into refinancing.

DO THESE THINGS FIRST BEFORE MOVING IN

Moving into a new home is an exciting time, and you’re probably daydreaming about decor and paint schemes and new furniture. But before you get into the fun stuff, there are some basics you should cover first.

Change the locks

Even if you’re promised that new locks have been installed in your home, you can never be too careful. It’s worth the money to have the peace of mind that comes with knowing that no one else has the keys to your home. Changing the locks can be a DIY project, or you can call in a locksmith for a little extra money.

Steam clean the carpets

It’s good to get a fresh start with your floors before you start decorating. The previous owners may have had pets, young children, or just some plain old clumsiness. Take the time to steam clean the carpets so that your floors are free of stains and allergens. It’s pretty easy and affordable to rent a steam cleaner—your local grocery store may have them available.

Call an exterminator

Prior to move-in, you probably haven’t spent enough time in the house to get a view of any pests that may be lurking. Call an exterminator to take care of any mice, insects, and other critters that may be hiding in your home.

Clean out the kitchen

If the previous occupants wanted to skip on some of their cleaning duties when they moved out, the kitchen is where they probably cut corners. Wipe down the inside of cabinets, clean out the refrigerator, clean the oven, and clean in the nooks and crannies underneath the appliances.

Ensuring that these initial tasks are taken care of will give you peace of mind before you move in.

UPSIZING YOUR HOME

Unfortunately, our homes don’t always grow with us. What may have initially worked fine for a single person, a young couple’s starter home, or a family with a newborn can quickly become too small as families expand and multiple generations live under one roof.

Remodeling and adding to your home is one option for creating more space, but it can be costly, and the size of your property may be prohibitive. That’s when moving to a bigger home becomes the best solution.

WHERE DO YOU NEED MORE SPACE?

The first thought when upsizing your home is to simply consider square footage, bedrooms, and bathrooms. But it’s important to take a more critical approach to how your space will actually be used. If you have younger children (or possibly more on the way), then focusing on bedrooms and bathrooms makes sense. But if your children are closer to heading off to college or starting their own families, it may be better to prioritize group spaces like the kitchen, dining room, living room, and outdoor space—it’ll pay off during the holidays or summer vacations, when everyone is coming to visit for big gatherings.

MOVING OUTWARD

If you need more space, but don’t necessarily want a more expensive home, you can probably get a lot more house for your money if you move a little further from a city center. While the walkability and short commutes of a dense neighborhood or condo are hard to leave beyond, your lifestyle—and preferences for hosting Thanksgiving, barbecues, and birthdays—might mean that a spacious home in the suburbs makes the most sense. It’s your best option for upsizing while avoiding a heftier price tag.

FINANCING

Call me about financing your next move or fix up, I’m always here to help!

5 NEGOTIATING TACTICS THAT KILL A SALE

Negotiation is a subtle art in real estate, but skilled negotiators can usually find some common ground that satisfies all parties. On the other hand, using the wrong negotiation tactics can sink a deal pretty quickly. Here are some negotiation tactics buyers (and real estate professionals) should avoid:

  1. Lowball offers: Going far below market value when you make an offer damages your credibility as a buyer and can be insulting to the seller. The seller has a range in mind that they’ll accept, and if you’re not even approaching the low end of that range, they won’t even consider the offer.
  2. Incremental negotiations: Don’t continue to go back to the seller with small increases in your offer ($1,000 or less). The constant back-and-forth can grow tiresome and lead the seller to consider other opportunities.
  3. “Take it or leave it”: Try not to draw a line in the sand with your initial offer. The seller can get defensive and consider other offers if you immediately show that you’re unwilling to budge. Even if it’s true, don’t make a show of it.
  4. Nitpicking after inspection: Obviously if inspection reveals a major issue, it should be factored into the final sale price. But insisting on a lower price for every minor repair can put negotiations in a stalemate.
  5. Asking for more, more, more: Some buyers will request that the sellers throw in add-ons like furniture or appliances that weren’t included in the listing. Try to avoid giving the seller a reason to build up resentment and think that you’re being greedy.

Remember that you are negotiating to achieve a desired result rather than just to “win” the argument. If you keep the big picture in mind, your negotiations will be successful.

5 CRITERIA FOR PRICING A HOME

When you put your home up for sale, one of the best ways to determine the asking price is to look at comparable sales. There’s rarely a perfect apples-to-apples comparison, so a pricing decision often relies on comparisons to several recent sales in the area. Here are five criteria to look for in a sales comparison.

  1. Location: Homes in the same neighborhood typically follow the same market trends. Comparing your home to another in the same neighborhood is a good start, but comparing it to homes on the same street or block is even better.
  2. Date of sale: It varies by location, but housing markets can see a ton of fluctuation in a short time period. It‘s best to use the most recent sales data available.
  3. Home build: Look for homes with similar architectural styles, numbers of bathrooms and bedrooms, square footage, and other basics.
  4. Features and upgrades: Remodeled bathrooms and kitchens can raise a home’s price, and so can less flashy upgrades like a new roof or HVAC system. Be sure to look for similar bells and whistles.
  5. Sale types: Homes that are sold as short sales or foreclosures are often in distress or sold at a lower price than they’d receive from a more typical sale. These homes are not as useful for comparisons.

I strongly recommend using a Realtor to determine the best selling price for your home. The information they have at their fingertips on all of the above criteria as well as their ability to pre-screen a prospective buyer will save you a lot of time and effort.

When you are ready to look into financing, I stand ready to help you with every available program to meet your needs.

5 NEGOTIATING TACTICS THAT KILL A SALE

Negotiation is a subtle art in real estate, but skilled negotiators can usually find some common ground that satisfies all parties. On the other hand, using the wrong negotiation tactics can sink a deal pretty quickly.

Here are some negotiation tactics buyers (and real estate professionals) should avoid:

  1. Lowball offers: Going far below market value when you make an offer damages your credibility as a buyer and can be insulting to the seller. The seller has a range in mind that they’ll accept, and if you’re not even approaching the low end of that range, they won’t even consider the offer.
  2. Incremental negotiations: Don’t continue to go back to the seller with small increases in your offer ($1,000 or less). The constant back-and-forth can grow tiresome and lead the seller to consider other opportunities.
  3. “Take it or leave it”: Try not to draw a line in the sand with your initial offer. The seller can get defensive and consider other offers if you immediately show that you’re unwilling to budge. Even if it’s true, don’t make a show of it.
  4. Nitpicking after inspection: Obviously if inspection reveals a major issue, it should be factored into the final sale price. But insisting on a lower price for every minor repair can put negotiations in a stalemate.
  5. Asking for more, more, more: Some buyers will request that the sellers throw in add-ons like furniture or appliances that weren’t included in the listing. Try to avoid giving the seller a reason to build up resentment and think that you’re being greedy.

The Best Mortgage Program I have Come Across in 30 Years

I am not one to make bold statements, but I am so excited about what this loan can do to help first time homebuyers, buyers that are moving up, or even real estate investors, I want to shout it from the rooftops. But let me get down from the ledge and explain, so you’ll understand why I am so excited.

Prospective homebuyers always seem to have the same complaint. “Every home I look at needs work.” Realtors are just as frustrated trying to sell those homes, and home sellers are not willing to make those repairs, because their sights are set elsewhere; they just want to get out.

So what does a prospective homebuyer do? Banks don’t typically finance more than the mortgage to purchase the home itself. A home equity line or loan will not net the buyer enough money to make the upgrades, because they are based on the current value of the home, not on what it may be worth after the repairs or expansion. And most if not all of what is referred to as the “loan to value” has been used up by the mortgage itself. So it’s sort of a catch 22. A very frustrating one for the buyer, the realtor and the home seller.

Until now…

Enter, The Fannie Mae HomeStyle Mortgage. THE BEST MORTGAGE PROGRAM I HAVE COME ACROSS IN 30 YEARS! I may have mentioned that earlier.

Here is what is so special about HomeStyle.

The Fannie Mae HomeStyle Mortgage allows a prospective homebuyer to purchase a home and add money to fix up or expand all in one mortgage. And that isn’t even the best part!

The best part is that the amount of money borrowed is not based on what the home is worth today, but instead uses “after improved value.” That means if you’re adding a bedroom, a new kitchen, an extra bathroom or anything else, this loan will base the home’s value on what it will be worth after the home is improved!

Think of what that means. If you’re a first time homebuyer, you can borrow up to 97% for purchase and improvements based on what what the home will be worth after the work is done. This also means instant added equity to the home itself, because a home with five bedrooms is worth considerably more than a home with three, and we all know what a new kitchen can do to the value of a home.

Everyone is happy! If you’re a homebuyer, you can now pay for the improvements to a so so home on a great block or school district and turn it into the home of your dreams. If you’re a Realtor, think of all those homes no one wants to touch because it costs too much to fix. If you’re a seller, your listing just got so much more attractive. This loan is also available to investors, and can also be done as a refinance. It is also good for second homes as well.

So now you know what I’m so excited about. If you’re in the market for a new home, check out what all the excitement is about. Many lenders don’t carry this loan, but we do. And I’ll be happy to explain all the details to you.

Together, let’s try and make your dreams come true!

Mortgage Rates are Rising, What to Do?

If you’ve been following the stock market or just watching the news lately, you are probably aware that the market has been on a roller coaster lately, and certainly not for the faint of heart. Most analysts agree that this has been caused by the very volatile bond market, which controls mortgage interest rates. For the first time in years, there has been significant movement due to the threat of inflation in a strong economy. This has sent mortgage rates to their highest levels in four years.

A little perspective…

There are different ways to look at what’s been happening depending on what your needs are. One thing to keep in mind is that there is no reason to climb out on a ledge; things aren’t nearly as bad as you might think. Although rates have moved up from their historic lows, they are still very low. In general, fixed rates that were in the high threes, currently reside in the mid fours. To put things in perspective, I remember refinancing clients down to the incredibly low fixed rate of 11.75% for a 30 year fixed rate back around 1980, and they were very happy to get such low rates! Don’t live and die with every eighth of a point. A half percent rise on a 30 year fixed will cost you about $30 a month for a hundred thousand dollar loan.

Some ideas to think about…

If you are looking to purchase, keep your monthly payment down by putting down a little more upfront cash. A lower loan to value will give you a lower interest rate. If you can come up with the cash, this is a great option.

Pay a discount point or two at closing to bring down your rate. A point is one percent of your loan amount or $1000 on a $100,000 loan. Points can be included in the mortgage on a refinance. If you hold the mortgage over a significant point in time, you will “pay yourself back” that investment in the initial few years of the loan, but will continue to enjoy the lower rate for the full term of the loan.

Think about an ARM. 5/1 adjustable rate mortgages are about a half percent lower than fixed rate mortgages. After the initial five year term there is the risk of the rate going up based on market conditions, so you’ll have to keep your eye on fixed rates to see if it makes sense to refinance at some point. There are also 3/1, 7/1 and 10/1 programs. The longer the initial fixed period the higher the initial rate. If you don’t plan on holding the property for much longer than the initial period, this may be the perfect solution for you. Keep in mind that you will have to pay closing costs again if you refinance, but they can be included in your loan.

Finally, if you are worried about rates going up and are looking to purchase, you probably want to accelerate your shopping so that you can apply for a mortgage as soon as possible and lock in a good rate. If you are looking to refinance from either a higher fixed rate or from an ARM, the same rule applies. If you are moving from a higher fixed rate, at some point a refinance will no longer make sense, so don’t over shop to get the world’s lowest rate; it might be time to pull the trigger. If you are trying to go from an adjustable to a fixed rate, keep in mind that in a higher rate environment all rates will go up, so the same rule applies.

The bottom line…

Don’t panic! Rates don’t generally move that quickly; there will be ups and downs. However, the reality is that after a decade or more of historically low rates, in a healthy economy, rates will probably find a comfortable place given inflation and other economic factors. Better to be prepared and ahead of the curve so that you can make your decisions wisely. I’m here to help if you need me!

A Great Financial Technique to Get Your Home Sold Faster

For most people, the prospect of selling their home can be positively daunting. First of all, there are usually plenty of things to do just to get it ready for the market. Besides the traditional clean-up, painting and fix-up chores that invariably wind up costing more than you planned, there are always the overriding concerns about how much the market will bear and how much you will eventually wind up selling it for.

Will you get your asking price, or will you have to drop your price to make the deal? After all, your home is a major investment, no doubt a rather large one, so when it comes to selling it you want to get your highest possible return.

Yet in spite of everyone’s desire to get the top dollar for their property, most people are extremely unsure as to how to go about getting it. However, some savvy sellers have long known a little financial technique that has helped them to get top dollar for their property. In fact, on some rare occasions, they have even sold their properties for more than they were worth using this powerful financing tool. Although that might be the exception rather than the rule, you can certainly use this technique to get the most money possible when selling your property.

Seller carry-back, or take-back financing, has proven to be a surefire technique for closing deals. Even though most people do not think about when it comes to selling a property, they really should consider using it. According to the Federal Reserve, there are currently over 100 Billion dollars of seller carry-back (seller take-back) loans in existence. By any standard, that is a lot of money. But most importantly, it is also a very clear indication that more people are starting to use seller take-back financing techniques because it offers many financial benefits to both sellers and buyers.

Basically, seller take-back financing is a relatively simple concept. A seller-take back loan is created when a property is sold and the seller performs like a lender by assisting in financing all or part of the total transaction. In effect, the seller is actually lending the buyer a certain amount of money toward the purchase price, while a traditional mortgage company usually funds the balance of the purchase price.

A seller take-back loan is secured with the property. The loan then becomes the secondary mortgage and is fully secured by the property. In most seller take-back financing transactions, the buyer repays the seller with interest in accordance to mutually agreed terms over a period of time.

Usually, the terms call for the buyer to send the payments, consisting of principal and interest, on a monthly basis. This is advantageous because it creates a steady monthly cash flow for the note holder. And if the note holder decides to cash out, he or she can always sell the note for a lump sum cash payment.

Regardless of market conditions, seller take-back financing makes sound financial sense; it provides both buyer and seller with flexible financing options, makes the property easier to sell at higher price and shortens the sales cycle. It also has the added advantage of being an excellent investment that generates a steady cash flow and high return. If you ever need immediate cash, you can always sell the note. The first mortgage holder must be made aware of this second lien on the property in case there are any restrictions. Also, make sure to use an attorney to draw up the paperwork and have the mortgage properly recorded.

If you are planning to sell a property, then consider the many benefits of seller take-back financing.