How Much Do We Pay?

http://www.washingtonpost.com/wp-dyn/articles/A59515-2005Apr16.html

Read this very interesting article published in the Washington Post. It talks to both sides of the "housing bubble debate." Who is right and who is wrong remains to be seen. I have purchased real estate for years, buying my first house about 20 years ago. I have bought and sold foreclosures, estate homes, homes to live in and haven't lost any money yet. But, it is important to point out that this market is absolutely CRAZY.

Just this week, after working with a buyer for two months he went a bit crazy. We had made offers (substantial) on four properties. He did not get any of the contracts even though one was $25,000 over the asking price with $100,000 cash to put down. He called me yesterday, understandably upset. He wanted to know why the seller would not sell his house to him. He has problems understanding that sellers can pretty much do what they want and don't need to give a reason. The listing agent told me she had 8 offers on the property. My client insisted that he would pay whatever he needed to in order to purchase the property. He is clearly frustrated as am I, however, he should not "pay anything" to own the property. He may have lost the property based on my advise. When writing the contract he told me to bid $500.00 over the highest offer, no matter what. I am supposed to do what my buyer or seller request of me as long as it is legal. In this case the buyer was not exactly comfortable with the english language and I was concerned that he did not know what he was saying. I suggested we stop somewhere in our offer. Am I doing a good job for my buyer if I let the sky be the limit? In a year, if that property drops 15% in value from the current market he could really get hurt. This is especially true if he pays 10% too much for the property now. I have opened him up for a potential loss of 25% or about $75,000.00. I cannot do that to a customer. At this point I may refer him to another agent. He probably feels I am the cause for him "loosing" 4 houses.

This is what is going on in parts of this Maryland market. Personally, I cannot justify allowing a buyer to damage their financial strength. I believe I should council my client to protect them, especially if I don't think they understand the full context of the business.

Please, please be careful. I know many of you buyers are frustrated right now. Many people say this is going to continue. How can it? people's incomes are now lagging way behind their ability to purchase a home. Many cannot afford to move. This creates a continued short supply of homes on the market and more bidding wars.

Before you tell your agent to bid anything, "just get the damn house" take a very deep,slow breath and think it through.

LOANS, LOANS AND SO MANY MORE LOANS

My belief is, “pay me now or pay me later” when it comes to home loans. There are more and more and more loan types. Some are designed for specific purposes others make no sense to me at all.

To simplify the loan process for yourself you must do the following. Determine, as best you can these items; How long will I live in the house? Will I be able to afford more payment later than I can now? Is this property going to be a long term investment when I move? Am I payment sensitive? can affect you. Take the time to really think about your needs now and into the future.

Please, don’t always assume that you can refinance later and be quick to take a certain loan today. Remember, when you refinance later you are refinancing a loan at the current interest rates. I remember my first home loan was at an interest rate of 17 ½% interests. Now, I could have said I’ll take the ARM loan and refinance later, the rate had to get better, right? In this environment, when rates are at there lowest point in years do you really think you will be able to get a less expensive loan in five years? I doubt it.

If you start out with a fixed rate loan now and your income grows and your payments don’t, that is a win for you. If you honestly cannot afford a loan payment and want to reduce it there are some ways better than others to accomplish that. Interest only loans are great for the first several years. If it stays fixed for ten years and then converts to a 20 year amortization for the balance AT THE SAME RATE, it may be a good choice. The payment will obviously jump but the rate will at least stay the same. Before you choose this loan, please have your mortgage lender print you a schedule of payments. Another way to achieve a lower payment now would be a 723 product. It will stay fixed for seven years and then steps up for the balance.

If you KNOW you are moving in a certain time period then you can take more risk. You can go for the lowest payment now as long as there are no increases or adjustments before you move.

Call your lender, sit down with them and ask all the questions that are important to you. Protect yourself, just because it’s “suggested” does not mean it’s good for you.

Please, check to make sure the loan you select DOES NOT HAVE A PRE-PAYMENT PENALTY. They can eat up your equity.

How Should I Hold Title To My New Home?

How you hold title to property can have a big impact later. There are more and more people buying homes with friends, relatives, co-workers and investors. Before you go to settlement you will need to know how you are going to hold title with the other person or group of persons involved.

Sole Ownership is the easy one. That is you and you alone.

Tenants in Common is when two or more people have ownership in one property. The ownership percentage in relation to the sales price may or may not be equal. The distinct difference with tenants in common is that you or the other parties involved can sell their interest to a third party. You may still retain your share of the property while other co-owners sell their interest in the property. Tenants in Common has right of survivorship. That means when you die your share of the property can be willed as you please. The heirs can then maintain or sell their interest in the property.

Joint Tenants is when two or more people purchase a property in equal shares and at the same time. One owner cannot sell a portion of the property to a third party. And with this form of ownership you cannot choose who your share passes to upon your death. The property passes to the remaining owner(s) with an automatic right of survivorship.

Lastly, Tenants by the Entirety is another form of ownership. This is really designed for husband and wife. Together the husband and wife hold title to the property with a right of survivorship. In this case unlike other forms of ownership the survivor will have automatic, sole ownership. This survivorship will be to the exclusion of the deceased spouse’s heirs that may be named in a will.

It is wise to check with you attorney as to which way may be best for you in your situation. I am not an attorney and cannot and should not suggest any form of ownership.

I would be interested in your hearing your suggestions regarding future blogs about the world of real estate.

Search For The Right Agent

I have heard some people say that any agent will do. I don't agree for many reasons. This market is tough. If your a buyer you need different qualities in an agent than you do if you are a seller. You also need to hire the person that can get your job done your way.

Sure, any agent, or hopefully most agents can do the minimum. They should be able to write a contract and get it to the listing agent so it can be presented to the seller. They should be able to put listing information into the multiple listing service, making your home available to the many buyers that exist in this market. Hopefully they can return enough calls to get the job done. There is so much effort that goes into each real estate transaction. You should hire someone that is willing to give you the effort that is needed.

Your home sale or home purchase is a major life event and deserves concentrated attention. Interview your agent. Find out what they have done, who they have helped sell or buy a home. Get references and then actually call the references. Call the local board of realtors and see if there are any complaints against the agent. Ask them about their real estate education, do they have any specific designations? Find out why they are "better" than the other agents in their market area.

You should feel very comfortable with the agent before you decide to utilize their services. This is a personal business and if you can't feel a bit personal with your agent then probably other agents won't either. When I am presenting your purchase contract to another agent so they can present it to the seller, you better hope I can build rapport with the other agent. I have to sell myself before I can sell your contract.

Do not be afraid to use a new agent. Experienced agents are new agents with a few years under their belt. We all start somewhere. They may not have references in the real estate business, but may be able to supply other references in other business fields. I strongly believe in helping new agents succeed and learn the business. Give the new guy on the block a chance. I have met and worked with some "heavy hitters" that I would prefer not to work with again. Just because an agent has many years of experience, it does not mean they are right for the job

The real estate business is a tough business to be in. I believe that most people do their best to give their clients the 100% effort they deserve, some just do it better than others. Do your homework and if you have any questions please feel free to call me.

Check out a couple of new property listings in Upper Marlboro, Md and Annapolis Md. Go to my listings page on my web site for more information.

Buyers Be Patient

This fast paced market will make the most courageous tread lightly. Buyers today are at a disadvantage. I know many agents, including myself that have lost clients because we cannot get some contracts accepted. Sellers are getting three, five, sometimes ten or more contracts on one property. How do you know what to pay, what terms to include, what to try to negociate? It is a very difficult process, especially in the lower end price range.

There are a few things you can do to make your offer more attractive. First and foremost, the presentation of your offer is important. That means your agent needs to take the time to prepare your contract in such a manner that it looks very professional. It should be in a presentation binder and hand delivered if at all possible. I usually write a letter to the listing agent, thanking them for presenting the offer. I give a recap of the offer my client is making on the front page so their job is easier if they get multiple offers. This may sound a bit corney, but it does make a difference. If a seller has narrowed it down to two contracts and yours is neat and very professional looking yours may get the nod. Ok, so it looks good, what else can we do?

We as realtors tend to try to protect the buyer every which way. We add more addendums regarding home inspections, radon, lead,water,septic, etc., etc., than we sometimes need to. The more obstcales between contract and settlement the less attractive your offer becomes. I have seen buyers who insist on every inspection out there, offer the asking price or less and want 100% financing all in the same offer. Those are hurdles and messes that most sellers want to do without. I am not advocating you dropping all inspections, just be selective and think about the house, how new it is, where it is and then decide which inspections are really important to you.

If you have a loan letter, which you certainly should, make sure it is up to date and hopefully it will have the house address on it that you are making an offer on. That I think, makes the seller feel you are on the ball and want to borrow money just for their house.

Unfortunately there is not a magic bullet. I have presented as many as 5 different contracts for the same buyer and had them all refused. There comes a point when the buyer gets frustrated with their agent and moves on to another. I have adopted a couple of those buyers and we have been successful. I would like to think it is my cleaverness, however, it could have just been their time.

Keep your spirits up. It's a tough market. Try to look at things in a way that says, if we don't get it, it wasn't meant to be. Be patient and try not to shoot the messenger (realtor).

The Model Effect Helps Sell Your Home

Sellers, make the first impression a great one. There are many, many things that people think they need to do in order to sell their homes. I sometimes get to the listing appointment and have the sellers give me a huge laundry list of things they have done or plan to do to their home. "We just put in new windows, a new roof, a patio and the new orange coutner top". I am amazed at people who do all the things they wanted to do while living there but didn't do them until it was time to sell.

It's great to make improvements to your home and ready it for the market. It is important to make your home attractive to potential buyers, but there is a thing called overkill.

New home builders often hire very talented interior design companies to stage their models. I was well aware of this when I worked for new home builders. The "model effect" is what sellers should be striving for. You say, "how in the world can we do that, we live in our home, our dogs and cats and 4 year old live with us." You can't ship the cats and dogs out and put them in storage, you can't take little Laura and put her in storage, I understand that. But you can do some of the following things to help yourself out.

First, take an objective look at the exterior of your home. Ask a friend or neighbor to take a look with you. Are their weeds in the garden, does it need mulch, does the yard need raking? Are there flowers growing out of the gutters that you always admired but the potential buyer may not. I have sent crews to some of my customers homes and just had them clean up the whole yard. You may not have the time to do this so get an agent to handle it or hire it out. The first thing potential buyers see is the front of your home. Make it cozy, put a wreath on the door with a bow, put some candles in the window (don't leave them lit), pick up ANY and ALL debris, dog stuff etc. that is in the yard.

We live in our homes, some of us much more than others. Many sellers loose touch with reality. The hole in the wall near the bathroom door has been there so long it looks like home to them. The crayon drawing on little Laura's wall was done when she was in kindergarden so to you it's cute. This list goes on and on. I have seen it all. You must get rid of the clutter. That means all the magazines, books, clothes, 40 weeks of junk mail, nic nacks etc. Either throw out or pack it up. Get the 150 notes and pictures off the front of the refrigerator and keep the kitchen counter very clean. Put some candles, or fruit in a bowl or something attractive on the counter. You might consider leaving the table set when you are not home. If you need paint touch up get it done. If its dark green or red or something equally lovely, consider painting a fresh coat of a neutral color. Make the beds and hang up ALL clothes, please don't leave stuff on the floor or chairs. Use something to freshen the air especially if you have pets. I have sent professional cleaning crews in to assist with this, maybe you could consider that. Get an objective opinion on the amount of clutter and the cleanliness of your home. Replace the filters in the heat pump or furnance. That's one of the first things home inspectors look at. It scares people that notice those things. When they are full of hair and dirt it makes the buyer feel like the home they may by buying is dirty and can really turn them off.

Sellers, use your agent for this process. They should be very candid with you about the condition of your home and what you need to do to make it more attractive. Before you spend money to make major improvements discuss it with your agent, why spend $10,000.00 to get $5,000.00 more for your house. You may be able to spend $500.00 for professional cleaning and save the $9,500.00.

What If The Housing Bubble Bursts?

Below is an interesting article from CNN/Money. It speaks directly to the many concerns people have regarding the "housing bubble". Is it going to burst?
My experience in past correction markets is that the higher end homes tend to take a bigger hit as a percentage of the original sales price.

The nice thing I see in this analysis is that the Washington DC market, in the author's opinon, is only 10% over valued. REMEMBER opinons are like appraisals, you can get 5 different answers with 5 different appraisers.

There is a lot of strength in the Washington DC area housing market. It's good to be aware of what could happen, but don't let it stop you from owning your own home.

CNN/Money: Top housing markets

Crazy Sales Prices Not Always Good For Seller

Sellers, whats not to like about this market? Buyers are willing to step up and pay whatever it takes to get a home these days. Many buyers are frustrated, tired and very confused. I have seen buyers bid $20,000 over the asking price and still not get the home they want.
For you, the seller, this can be so exciting. You get to compare 4 or 5 or even more contracts on your house. You talk with your agent to determine which one you should accept. You ratify a contract for more than you dreamed, sit back and think of taking it to the bank.

Is the highest offer always the best? No! I've seen it happen all too often, we get a great price then have to renegociate the price when the appraisal comes back. The belief is that the value of a property is what someone is willing to pay. Buyers are paying what they have to in order to own a home. Many buyers have 100% loans. What does that mean to the seller. In many situations order the house needs to appraise for the sales price in order for the lender to make the loan. If it does not, then it may be time for the seller to start over. In the meantime you have lost valuable time and energy.

What then should a seller do? To reduce the risk of these problems take a good amout of time to review the offers. What type of loan is the buyer getting? Is there an appraisal addendum protecting the buyer? If the buyer is putting down a good amount of cash, it may not matter what the house appraises for. Ask your agent for recent comparables to determine how much higher your offer is compared to comparable homes that have recently settled.

If you don't want to start over and resell your property several times, slow down, and consider all the factors.

New Home Builders Pave The Way

The demand for newly constructed homes is tremendous; and builders are enjoying this sellers' market. They are setting the price and value in their subdivisions and profit margins are high. So how do you, as the buyer, navigate the maze of buying a new home?

Research is key. I know that all builders are not created equal. I sold new homes for a builder for 7 years and understand their programs.

Just because a builder has signs in place, a nicely appointed sales trailer and a friendly, bright salesperson does not mean that you are going to get a good house. I believe you have to be very careful in this rushed market. The demand is so high and as a result, the builders resources are being stretched to their limits. That means they are trying to build too much too fast and qualilty can take a hit.

Take a ride through the community and construction site. Try to talk to some of the tradespeople, construction superintendants and possibly newly settled buyers. Ask if their home was delivered on time, were there problems with quality, workmanship or even the builder's lender. Does the builder do what they say they will do? Who is the developer? The developer is the company that takes the land from a raw state and gets it through the development process and sells finished lots to the builders. Just like builders, there are some developers that are much better than others.

Remember, that the new home salesperson works for the seller. They are watching out for the seller's best interest. It doesn't mean they don't care about you, they just serve the hand that feeds them first. Just because a builders asking price is printed and offered does not mean it is a fair price. Have someone check the recently settled homes in the .resale market that are fairly new and similar to the one you are buying. You may find over $100,000.00 differences.

Read the entire contract. Yes, I know, it's long and tedious; but, you are responsible for the content. The bells, whistles and buzz can reel you in so be careful.

Consult a local realtor that has new homes experience. Good luck!

Sellers follow the money

Sellers Beware

When you have placed your home on the market, you may assume that getting a contract for the asking price is the hard part. Actually it is the easy part in most real estate transactions in this great seller's market.

Buyer's, in many instances, are encouraged by their great agents to step up to the plate and offer the asking price and sometimes much more. Lender's are eager to get the buyer's business so many of them issue a "pre approval" letter a bit prematurely. Sellers Beware.

Sellers, make very sure that your listing agent is constantly in touch with the lender and or the realtor representing the buyer. There have been numerous cases that I have witnessed first hand and heard about where the money was not there at settlement. The poor unsuspecting seller thinks all is fine and at the last possible moment you find out the loan is not funded or not a good loan. By this time you have already made other plans regarding your living situation, moving etc.

How do you protect yourself? Even though you think your agent is on top of things, and many are, you must ask them often about the buyers financing. Are they checking to make sure they have a full commitement? Are the lender and the title company communicating? In other words is everything in order?

Open communication is key. If everyone is communicating many potential problems can be managed.