Archive for the ‘Buyers’ Category

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Caution Needed!

Friday, March 8th, 2013

scammerOK, people…please, please, please.  When looking for a home to buy or rent, use some caution.  Particularly if you are considering buying a home on a land contract or a rent to own program.  This should be old news by now, but until these cases cease it has to be repeated.   DO NOT WRITE A CHECK FOR A HOME UNTIL YOU DO A LITTLE RESEARCH!  Yes…people are getting scammed.  It happened again and we get a phone call every week from somebody asking why the ad they found on line for a home was placed by somebody other than the Wilmoth Group.

The usual scenario is scammer finds a vacant property and markets it on some inexpensive advertising platform.  Interested party calls and sometimes they are given the lockbox code (troubling) and sometimes they actually meet the scammer and are shown the property (even more troubling).  Most of these scammers are NOT licensed or Realtors, but they probably had a Realtor give them the access information by pretending to be interested in the home.  So, Realtors, please stop just giving out lockbox codes to strangers because you are to lazy to go show a home!  You may be unintentionally contributing to a scam!

So, lets say as an interested party for purchase or rental, you do want to make a deposit or provide earnest money.  Here is a checklist of things to do to make sure you are not scammed.

If a person states they are a Realtor or licensed agent, confirm with the state licensing board, real estate board, or even the company they claim to work for. 

Most of these scammers seem to indicate they work solo, so checking on licensing is a smart first step.

Type the address into a search engine on the web and see if other listings come up for the home.  If so, call  and inquire and see if it is the same people.

Deposits and earnest money should not be made payable to individuals.  If you are asked to write a check to an individual, do a lot more homework.

If things seem really suspicious, check the local tax records and locate the name of the owner per these records.  Test the agent’s knowledge or even better, attempt to confirm with the owner that they are selling or renting their home with the person you are dealing with.

Do not accept funds from the person you are dealing with in an arrangement to return those funds to them.  These scams are elaborate but you will end up ripped off…promise.

Do not send funds to a person claiming they are the owner of a property without using every method in the book to actually confirm that they are the owner.  Tax records, picture ID, utility bills…there are many ways to connect the dots!

I am getting sick of these scammers and would like to preach caution to all.  If things do not appear right, they probably are not.

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Posted in Buyers, Fraud, Issues | No Comments »

Proof of Funds

Monday, February 18th, 2013

real estate contract lockboxHave you ever wanted to make an offer on a home and have the seller or their agent tell you that they need a “proof of funds”?  Probably…and when that happened did you question who it is really for?  Aren’t agents obligated to submit every offer…without additional requirements?   Agents today are relating to their buyers that the demand for a “proof of funds” (actually evidence that current funds exist in cash or loan commitment) is something selling agents are demanding for their own protection.  Well, if your cynical side is running the show on this issue please take a minute to finish reading this post.

It is true that many of the major servicers/owners of defaulted mortgages and foreclosed properties are now utilizing on-line offer systems that allow the seller to have a complete snapshot of all bids for a property.  In most cases these bidding systems do not have an initial method for uploading proof of funds.  So, the conclusion some are reaching is that this requirement is one that the selling agent is creating and enforcing.  This is no closer to the truth than Lance Armstrong’s multiple claims to not be using PED’s.

While the electronic bidding systems are now a large part of the foreclosed property landscape, ultimately there still is a contract package that must be submitted.  With that contract package, there are certain supplementary documents.  Jennifer Wilmoth, my partner and one of the largest volume REO brokers in America, stated  “We must have a proof of funds statement when submitting final contracts for a seller to execute in all cases for the clients we work for.  No exceptions.  So, why would we want to submit a bid for an agent or buyer unless we know that a satisfactory proof exists?  With the time lines these offers must follow, and the competition for many homes, if one does not exist when submitting a bid it likely will not be available when completing the contract package.”ing

Lets look at HUD homes for an example.  A buyers agent can submit a bid electronically for a HUD home and in that process they acknowledge that the buyer has funds to perform on the proposal.  Their bid could be accepted the next morning and then there is only two business days for a HUD contract package (including the Proof of Funds) to be in an office in another part of the country.   The entire contract package needs to be completed when submitting the electronic bid!  Same goes for Fannie Mae bidding at HomePath.com.  Much the same for other servicers also.

Bottom line is that proof of a buyers ability to perform on an offer is still very much a part of the corporate seller’s requirements..even when using an electronic bidding platform.  The listing agents are relaying sellers requirements, it is just that the delivery method has changed.

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Mortgages In Real Time

Monday, January 7th, 2013

walmartA  study focused on consumer attitudes about home ownership was released last month.   The focus was centered on the mortgage application process.  The big headline from the study was that 1 in 3 consumers stated they would consider obtaining a mortgage from Walmart.  The headlines seem to blare that this was quite the revelation…33% of people would consider a Walmart mortgage!  My thought was…why so low?

Later in the study, the focus turned to consumer frustration with the mortgage process.  Beyond the usual complaints about interest rates, taxes and escrow…the main issue is execution of the process.   Slow execution.  I agree totally.  Why does it take 4-6 weeks to obtain a mortgage?  In the 1980′s I would not have questioned that it takes so long for the paper to flow through the process.  Today, I can’t figure out why the mortgage industry has not trimmed this time line.  I have been involved in the world of real estate finance since the 1980′s, and I venture to say it takes as long today to close on a mortgage as it did in 1984 when I purchased my first home!

Lets contrast this with the second biggest purchase most people make.  Over the holidays, my daughter was home from college and we needed to address her driving situation.  After she did her shopping, she selected a nice used vehicle from a local dealer.   I negotiated with the dealership by email until a deal was struck.  About two hours later we went to the dealership, completed some paperwork, and within an hour, drove away with the car and a car loan.  I can make a case that this car loan is much more risky than a mortgage.  Yet, all the underwriting and documentation can be completed in one hour!

Any wonder the mortgage industry has a problem with consumer satisfaction?

When you think of Walmart you think of low prices first.  Convenience..maybe second.   Much of Walmart’s success is based on speed though.  Quick inventory turns are a part of how you keep prices really low.  Does anybody not think Walmart (or any non-bank) mortgage provider could not speed up the approval and funding process?  I can hear the banks now…they believe we are willing to take a longer journey for that mortgage due to the professional, personal service we receive.  Stop me from laughing please!  This study says 56% of its participants are laughing with me.

The final conclusion of the study is that consumers want price, service and trust.   Service means not waiting 3-4 weeks to find out if you are approved.  I can name several non-mortgage companies that can offer all three of these benefits if they chose to commit to offering mortgages.  The question left is who will challenge the banks model first?

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Crucial Steps To Buying A Foreclosure

Tuesday, December 4th, 2012

Seems like when the conversation gets around to what I do for a living, just the smallest mention of being involved with foreclosures sparks people’s attention.  Many people are intrigued by the prospects of purchasing a foreclosure as an investment.  Others are trying to find a home to live in a foreclosure leaves them with more questions than answers.  With most Realtor associations reporting default sales making up 25% to 30% of all sales, it is easy to see why so many potential buyers are interested.

I always try and keep these conversations simple because each case has its own unique circumstances.  Nevertheless, the basics that I explain to buyers they need to consider when they are considering a foreclosure consists of the following.

Disposition:  By this I ask the buyer to self-assess.  Foreclosure sales can be tricky and involve more time than many buyers have the ability, or patience, to work through.  The time involved is on both the buyer and seller’s ends.  For a buyer to assess a foreclosure properly, there is some legwork.  Famously, the seller’s are also not known for timeliness.  This causes frustration if one is accustomed to traditional sales methods.

Value : Most buyers have this one figured out..or at least they think they do.  The main reason people want to buy a foreclosure is “to get a good deal”.  But what exactly does that mean?  We are in the business of determining value and most properties come with a range of them!  The reality that most buyers should understand is when a foreclosure is priced within that range, it will frequently get multiple offers.   Seller’s know this to be true.  An offer of 50% of list price is not going to get you far and likely will end up with the buyer watching the home go under contract while they are asking what happened to their offer.  Do the homework of identifying that range.  This is an important function of using a buyers agent.

Inspect:  So many offers are made by buyers who have not thoroughly inspected the property.  Many buyers believe they just get the winning bid, then inspect and determine if they still want the home.  Many will pursue requesting repairs prior to closing.  This might be an option with some sellers…but the majority of the time it is not.  Many foreclosures are sold “as-is” and the seller accepts your offer on that condition.  For a buyer that means getting your earnest money returned may be challenged.  Do your homework upfront by using professionals to help you determine the condition of the home.

Financing: There are some tremendous options available for buyers of foreclosures!  Some programs provide financing for repairs and allow a buyer to make some personal selections for things like carpets and paint.   Owner-occupants and investors both have possible low down payment options.  One of the best seller financing program for a foreclosure is HomePath from Fannie Mae, offering many closing related costs waived, low down payments and many other attractive terms.  The presence of a great financing package can be a huge deal when considering a foreclosure.

Ready:  All foreclosure sellers require proof of funds prior to considering an offer.  If you want to make an offer on a foreclosure, traditional financing contingencies do not apply.  You need to have a bank approval letter dated in the last thirty days or proof of cash.  If you do not have one of these, then you are not ready to be looking at foreclosures.

One final thought.  Buyers are often confused about short sales and foreclosures.  They are NOT the same thing.  Short sales are still owned by a seller who has not acquired the property through a default..ie foreclosure.  They are people just like you and me.  They do not have the ability to sell their home without their mortgage company blessing the sale because it will not provide enough cash to pay off the mortgage and provide a release.  It is a complicated process and a topic for another day.

 

 

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Low Ball Bids

Friday, November 2nd, 2012

Nobody wants to pay more than they have to for anything.  If we are talking about groceries, where a combination of the lowest prices with the best quality and shopping experience are important factors,  price will usually  trump.  Buying real estate though involves a bidding or offer process.  Bank owned real estate is even a little more different.  Many of the institutions and government entities with properties for sale have converted to electronic bidding systems.   In many instances, these systems have eliminated the concept of a counter offer.  The bidder has one shot.  The sellers are dismissing the low ball offers while seeking to work only with the competitive bidders.

From the seller’s perspective, they have valuations from appraisers and brokers to  consider.  They are also not like a typical seller who might just be desperate.   The banks are NOT desperate to move or give away their real estate owned!  They want to contribute to a housing recovery by selling their properties at near market prices.  Market prices mean similar to the range of prices the immediate area yields.  The buyers with the low ball offers that are being sprinkled all over town, looking for a bite, will not get far with the institutional sellers.

I also run into buyers who want to make their low ball offer with a letter of explanation.  This letter includes comparative sales they have used to determine value and a list of repairs needed to the property.  I fully understand why somebody wants to present their case…we just have no way to facilitate this.  The bank seller has their own comps and their own list of repairs.  We have no way to submit a letter like this and, even if we did, I seriously doubt it would be read.

My suggestions to potential bidders for bank owned homes:

Make your best offer the first time.  Don’t expect a counter offer.  If you do, and you made your best offer, stick to it.  See what happens.

If the property is one you want, for a home or investment, don’t wait.  Bank owned properties sell quickly.  The reason- they are priced appropriately for the market and their condition.

If you are looking for an investment-review the aged inventory.  This is the best place to find a property where there will be consideration of any offer presented.

Offer expiration dates mean zilch to bank sellers.  Sometimes offers are held until the bank has enough to review several.  I have seen banks come back three weeks after an offer is presented and ask if the buyer was still interested.   The bank would now like to bring their offer under contract.

Finally, whatever else you might do, DO NOT fail to provide a current proof of funds with all the details to make it very clear that the buyer has the resources, or an adequate loan approval, in place to perform on their offer.

 

 

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Posted in Buyers, Buyers Agents, Good Offers, Offers | 1 Comment »

Multiple Offers

Friday, October 5th, 2012

One of the major improvements in selling bank owned homes over the last five years is the systematization of the multiple offer scenarios.  So many agents in the past insisted that they be told how many offers a seller had received…like it was a right that existed for the buyer.  There also was a belief that the first offer submitted was the only one a seller could respond to before moving to another offer.  Both of these beliefs were wrong..but I still run into them today.  Usually, it is a misinformed buyer who is confused by the process because it was not adequately explained by their agent.

The Multiple Offer dialogue begins and ends with an understanding that disclosure of any other offers is only to be done by a listing agent when given that permission as part of their listing or other written agreement.  It is not a violation of the Code of Ethics to decline such requests from other agents.  In fact,  Article 1, Standard of Practice 1-15 of the Code of Ethics of the National Association of REALTORS®, requires that listing agent disclose the existence of multiple offers ONLY with the seller’s approval.   An addition to the Code of Ethics in the last few years added the following requirement: Where disclosure is authorized by the seller, REALTORS® shall, if asked,  also disclose whether the offers were obtained by the listing broker, another licensee in the listing firm, or by a cooperating broker.  For a buyer or agent to expect this information is not correct.  A seller must authorize it.  Most of the bank sellers now authorize, with a certain set of procedures for how disclosure of multiple offers are to take place.  Please remember these are not laws but pledges anybody who is a Realtor is expected to conform to as part of a Realtor Code of Ethics.  You may be working with a licensee who is not a Realtor.  In that case, these same ethical duties may be ignored.

Educating your buyer is the best thing to do about this process.  It is a very common part of the bank owned home purchase process.   It should not cause buyers or agents to shy away from making an offer on a property.  A good understanding of the process, with expectations set accordingly, will result in the best experience for all.  The most important thing for a buyer to understand?  A low offer may never have a second chance.  Sellers often select the most competitive offers and allow them a “highest and best” period to submit one more offer.  There is no requirement that every submitted offer will receive this opportunity.

The National Association of Realtors has published an excellent guide for Realtors to use when advising sellers and buyers in multiple offer situations.  Click here to download “Presenting and Negotiating Multiple Offers.”

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Immigrants As FHA Buyers

Tuesday, September 4th, 2012

Wrongly, at one of my trainings,  I had an agent ask me how to finance a resident, non-US citizen “since they can’t use FHA”.  Several other agents at the session were under the same impression.   Not something you may run into every day but still worth the effort to know that in fact, certain  non-US citizens (immigrants) can use FHA financing to purchase a home!

Some of the confusion may derive from the fact FHA does have criteria the borrower needs to meet.   These guidelines are in place so that the lender can establish the type of residency status of the borrower.  The key to approval is for the borrower to have an approved residency called a “permanent resident alien” status.  Any borrower who has “permanent resident alien” status will also have a social security number.   They also should have a social security card.  If they don’t, the lender will need to validate that the borrower has a social security number.  This can be done by obtaining a letter from social security, or a copy of a tax return, W-2, or 1099.

As I discussed this further with the agents, I learned the confusion on this topic revolves around residency.  “Permanent resident aliens” actually live in the United States and with their social security number may buy a home using an FHA loan.  Non-residents may not utilize FHA for financing.  It is important to understand this distinction prior to beginning to work with any buyer.

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Tell Me About Yourself

Friday, July 13th, 2012

Just met with a fairly new agent who was frustrated.  Since so many of our homes are vacant, we require our agents to do some serious pre-qualifying prior to agreeing to show a home.  Some potential buyers/tenants take offense to this.   I hate to disclose this but some of our clients think we should just, at any request,  show up to a property and show it to whoever asks.  I am getting tired of the ignorance that comes with this expectation.  Our agent had just been spoken to in a rough fashion by a prospective buyer who expected to be shown a home without being willing to share any information about themselves.  Well, we don’t do that.  We want to know who you are, why you are looking, contact information, and some other things such as if you are pre-qualified or willing to go through a tenant screening.

Why are we this way?  Well lets start with why would anybody expect us to do business any other way?  First, the obvious.  The time invested in situations that clearly will not work out.  When you only get paid by a client when you accomplish a goal, we should all agree wasting time on things that will not produce the desired result is a waste for both parties.  It is also actually a waste for the third party involved- the prospect.  Unless they have a viable chance to accomplish a transaction.  When you think about it, a lot of prospects don’t know if they qualify and we provide a service just getting them on the right path to accomplishing their goals.  Anybody who is a prospect who is offended by our trying to actually help them also causes me some alarm.

The reasons for alarm involve the dirty secret of this industry.  Agent safety.  Much more important than making clients or prospects happy is our agents own safety.  Being expected to meet strangers in vacant houses is not something many people would consider a great career opportunity.  Real estate agents love their careers and the opportunity to help people achieve their goals.  Sometimes, they love it too much.  Even the best screening methods don’t always identify every nut case that thinks calling agents to look for a way to hurt somebody is a great way to channel their anger or whatever sets them off.  It does not take long to complete a quick search to find news about the dangers our agents face.

Bottom line..we take every measure possible to not put ourselves in a situation that is uncomfortable.  If the prospect does not like it…fine..play along.  Understand why.  Just don’t expect us to be able to help you if you refuse.

 

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Don’t Do This Before Applying For A Home Loan

Tuesday, May 15th, 2012

When we work with first time buyers, we do everything possible to counsel them as to what to expect in the home loan process.   Getting approved for a loan is one of the scariest, and most exciting, parts of the process to a first time buyer.  Yet, in their haste to purchase a new home, many home buyers (not just the first timers) will open themselves up for scrutiny that will make the lender seem like Satan’s brother.

One of the most basic pieces of advise…no new credit cards!  Yes it is tempting to be offered six months same as cash when you are purchasing that new sofa, but it involves applying for credit and a new obligation.  Most home buyers hate the idea of waiting to start shopping for furnishings but they really need to execute their mortgage before messing up their credit scores and debt load.  In fact, first timers should probably take as many hand-me-downs as possible until they get comfortable with their new monthly payment.  It is still rather easy to finance major purchases and before you know it, you will have so many payments that you will lose sleep at night!

If somebody is going to gift to you the down payment funds, get a gift letter from the lender to use and document the receipt of the funds correctly.  Lenders will request 3-6 months of bank statements and when they see that large deposit of cash, they will want you to provide documentation.  Make sure if you have a recent large one time deposit, you will apply toward a down payment, that you can document it.   If it is not possible to explain (you found the money, you have gambling winnings, you stole the money) you will find this issue to be a big sticking point for your mortgage.

Many bank owned properties today are for sale to only owner occupants for a period of 15-30 days after first coming on the market.   Unfortunately, we are seeing prospective buyers who are thinking they can sneak around these rules based on some technicality.  Unfortunately, many are guided by uninformed, inexperienced agents.   If you own another home, you will need to document that the one you are bidding for will be your home.  Not that the other home you own is going to turn into a rental and you are now going to drive an extra 50 miles to work.  Lenders are not that stupid.  I have even seen cash buyers get caught up on this one based on the location of their employment.  Better really be able to prove that you work remote and do not be surprised if the lender asks for a letter from your supervisor!

Not so long ago, lending standards were more lax and a lot of borrowers could say just about anything and not have to provide proof.  We all have seen how that worked out and nobody is going to allow us to get back to those standards anytime soon.  Be prepared for your lender, and don’t give them any reason to doubt you!

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Good Neighbor Next Door

Thursday, March 22nd, 2012

We get lots of questions from buyers and agents about the Good Neighbor Next Door program (GNND).  People hear bits and pieces of the program and hope that it applies to them.  If you do qualify, it most certainly is a program that you should consider participating in.

The purpose of the GNND Sales Program is to improve the quality of life in distressed urban communities by encouraging law enforcement officers, teachers and fire-fighters/emergency medical technicians, whose daily responsibilities represent a nexus to the needs of the community, to purchase and live in homes in these communities.

What you need to know:

Available to Teachers,  Police Officer, Fire Fighters and Emergency Medical Responders.

Buyer can get a 50% discount off the HUD appraised value.

Homes are available in HUD designated revitalization areas.

Buyer must live in the home for a full 36 months as the buyer’s sole residence.

Must not have owned another residential property for the last 12 months.

Eligible Participants (Details)

Teachers

·         Full-Time

·         Pre-K – 12

·         Employed at State-Accredited Public and Private Schools

·         Serving Students From the Area Where the Home is Located

Police Officers

·         Full-Time

·         Employed by a Law Enforcement Agency of the Federal Government, a State, A Unit of General Local Government or an Indian Tribal Government

·         Must be Sworn to Uphold and Make Arrests for Violations of Federal, State, Tribal County, Township or Municipal Law

Fire-fighters/ Emergency Responders

·         Full-Time

·         Employed by a Fire Department or Emergency Medical Services Responder Unit of the Federal Government, a State, A Unit of General Local Government or an Indian Tribal Government

·         Serving the Area Where the Home Is Located

General Rules

·         Earnest Money Is Required of  1% of the List Price (No less than $500 and No More than $2,000)

·         Must “Bid” 100% of the List Price

·         Offers Selected by Lottery Number – Not Net to HUD

·         If Buyer Uses FHA Financing-  May Get Their Loan for $100 Down Payment and may finance the cost of reasonable and customary closing costs

·         Buyer Must Qualify for the list price (not just the discounted amount)

·         Silent Second Mortgage will be Recorded

·         Silent Second Mortgage Will be Reduced by 1/36th on the Last Day of Each Month of Occupancy

·         HUD WILL NOT PAY COMMISSION OR CLOSING COSTS- Buyer must build those into financing or pay with cash.

There is also a helpful FAQ at HUD.gov to answer all of your questions on this program.

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