Posts Tagged ‘Buyers’
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.
Tags: Buyers, buyers agents, Fannie Mae, Foreclosures, HUD
Posted in Buyers, Buyers Agents, FHA, Financing, HomePath, Offers | No Comments »
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.”
Tags: Bank Owned, Bank REO, Buyers, REO, Wilmoth, Wilmoth Group
Posted in Buyers, Buyers Agents, Good Offers, Offers | No Comments »
Friday, July 13th, 2012
J
ust 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.
Tags: Buyers, buyers agents, qualifying, safety
Posted in Buyers, Buyers Agents, Safety, Selling Process, Showing, Viewing Property | No Comments »
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!
Tags: Buyers, Financing, mortgage application, Wilmoth, Wilmoth Group
Posted in Buyers, Financing, mortgage, Underwriting | No Comments »
Monday, October 3rd, 2011
Since the demise long ago of the FHA 203k for investors, the ability to purchase a home with money for repairs has been much trickier. The investor needs cash or a private lender loan. The private lender loans came with huge price tags, which worked when homes were appreciating at 6% or more per year. The end result means owner occupants and investors with cash who truly can absorb the risk of putting that cash to work, are the only buyers for many properties.
The need is great, considering the amount of foreclosure inventory, combined with the lengthy time period these homes sit vacant and the ensuing deterioration. The retail local investor should be provided a chance to purchase and improve properties utilizing some type of all-in-one loan. What does not seem as well known is that there is a way for the retail investor to purchase Fannie Mae foreclosures and participate in the renovation with the financing.
Called the HomePath Renovation mortgage, it is available on select Fannie Mae properties all listed at HomePath.com. Properties listed at this site, with the above HomePath Renovation Mortgage logo qualify. The borrower needs to work with an approved HomePath lender and they are listed by state on the site.
Here are the reasons why you should consider this option for your residential investments or investor buyers.
The following are some additional notes sent to me by a HomePath lender regarding the program in general.
- Buyers are eligible to add up to 35% of the as renovated value or $35,000, whichever is less, to their loan for renovation expenses.
- The buyer must choose one credible General Contractor to complete the renovation bid and project. Do it yourself projects are not allowed.
- The minimum credit score for a down payment less than 20% is 660. For down payments of 20% or more the minimum credit score is 620.
- An “As Completed” appraisal is required for HomePath Renovation Mortgages.
- The current interest rate is less than 4.50%.
- Closing costs vary depending on the loan to value, credit score, property type and down payment, but typically run an extra $2,000 over standard fees.
- The minimum down payment is 3%, however 5% is almost always the right option.
- No mortgage insurance required. Compared to FHA the payment is always lower.
- Seller can pay up to 6% of the sales price towards closing costs.
- Investors and second home purchases are eligible. Second Homes require 10% down.
Investors require 15% down.
Tags: Bank Owned, Bank REO, Buyers, Fannie Mae, Financing, Home Path, Investors, REO, Wilmoth, Wilmoth Group
Posted in Buyers, Financing, HomePath, Investors, mortgage, Remodeling, Return | No Comments »
Wednesday, September 14th, 2011
Yesterday we covered a few of the more significant mistakes I have seen buyers and their agents making that end up costing time and money. There are some additional items that can cause problems that may not be as obvious. Today I will share with you this list and some ways to make sure you avoid them.
John bought a foreclosed property based on the representations of the bank, listing agency, and his title policy. Except nobody really reviewed the legal description on the title work closely enough to question why the lot width was only 60 feet when the structure he was buying was 80 feet. John actually waived his option to obtain a survey with the bank. John ended up with a house that the master bedroom (an addition) was on another lot owned by the foreclosed owner. Except nobody had yet foreclosed on the second parcel because even the lender did not know to make the loan on both parcels when refinancing a few years back! A survey would have revealed this issue very early in the process. Don’t skip a survey! This is an extreme example but I can tell you it is not unusual to find fences and driveways someplace where they are not suppose to be!
I have written several posts about the importance of a home inspection. That is still the case. It is your most important step to ensure you can negotiate a solution to a problem that may not otherwise be discovered.
What happens to a buyer who goes to closing and does not stop and inspect the property before the closing? There are plenty of horror stories when it comes to buying vacant homes. How about the couple who rushed in from out of town to the closing of their investment property, signed all the papers and handed over their check, then went to their new investment. Shocked is the best word to describe their reaction to the fact all the drywall was destroyed because thieves had pulled every stitch of copper plumbing from the home the week before closing. That investment became a huge loss. In fact, the couple ruined their credit because they could not afford the repairs and never made a single payment on the loan they had obtained! Don’t go to closing without a final walk through inspection.
Make sure that the buyer knows what their out of pocket costs will be before negotiating an offer. Confirm that the purchase agreement has the seller paying all taxes, association charges, and assessments through the date of the closing. If you are buying a bank owned home, do not assume anything is “standard” that the bank will pay. I still receive phone calls the day before closing of a HUD home sale where the buyers agent is screaming that the settlement statement is incorrect as the buyer is being made to pay for an owner’s title policy. Agents assume that the seller will pay this and it is a very costly assumption. HUD does not, but you have to review their policy to know that. Usually when this costly mistake occurs the agent ends up paying for it and at a cost that is most of the average HUD home buyer agent fee!
Finally, as much as possible before closing get a copy of the settlement sheet, known as a HUD-1. Review it and make sure all the charges make sense and are as agreed. Settlement entities are left to interpret the purchase documents on many issues and they do make the occasional mistake. It is better to get them corrected before closing than to try and fix them at the table.
Now that you know my list, in your experience, what other buying mistakes exist?
Tags: Buyers, buyers agents, Inspections, Wilmoth, Wilmoth Group
Posted in Buyers, Buyers Agents, Closings, HUD Sales Procedures, Selling Process | No Comments »
Tuesday, September 13th, 2011
Rates are low, prices are low..what is not to like? Right now is one of the best buyer markets we have seen in a lifetime. Yet, when people are entering the market, they are pursuing a course of DYI..or do it yourself. I am not sure why buyers hesitate to utilize professional Realtors but I believe it has to do with the ease a home can be found on line and the idea that contacting the listing agent directly will save them money. Rarely will using the listing agent save you money. It is my opinion that a professional listing agent can handle representing the seller and buyer..but how does a buyer know? In our office, with the majority of listings we assign buyers to a different agent than the listing agent. Even when a buyer has a contracted buyers agent, it is still prudent to be wise to some of the pot holes that may come up on the drive to a home purchase.
Here are some things to make sure you and your agent are avoiding.
Are you looking at the right home for you and your family? I see many first time buyers squeezing every dollar of borrowing approval in order to buy the biggest house. Somebody forgot to tell them that they need extra money to buy furniture, lawn equipment and heat the home. Keep in mind that you may one day wake up with an emergency and a need to make a repair. You need savings. Don’t tie your hands behind your back buying more home than you can afford…no matter what the mortgage lender tells you.
When it comes to the right home, please do not get hung up on foreclosures unless you have some reserves and can make repairs. Understand that foreclosed homes have been vacant for a long time and often will need investment that will only come from a future buyer.
If you are looking at homes from out of town, please invest in a buying trip and do not make offers without inspecting a home. I think this is one of my real pet peeves with agents today. If a buyer is a professional investor and the home clearly will require that type of buyer, at least tell the investor to have his local contractor come inspect the home. I really can’t think of anybody else that should be making an offer on a property without seeing it. Yet this still happens and it usually results in a cancelled deal and some pretty upset sellers.
After inspecting a home, ask your agent for comparative sold properties (comps). Make sure you understand what condition these comps represent and then build in your cost of repairs or maintenance. The market is hungry, but it is not stupid. We see offers everyday submitted because somebody has given a buyer some stupid formula to utilize on all offers. Usually it is based on a percentage of list price. Not only lazy, but the big news is the corporate sellers will not even make a counter offer to these types of offers. They just send a rejection back. Do your homework if you really want a home.
If a buyer is paying with cash, please still invest in a buyers title policy. Don’t fall into the idea that you do not need to incur this extra cost. Title insurance is the best money you will ever spend when buying real estate. It will protect you from surprise liens, taxes and other cash draining issues that only a professional title search will reveal.
My next post will provide some more tips for avoiding costly home buying mistakes. Yes there are more than just these and I hope you will continue to make yourself an educated, prepared buyer!
Tags: Buyers, First time buyers, Wilmoth Group
Posted in Buyers, Good Offers, Issues, Viewing Property | No Comments »
Monday, August 29th, 2011
Anybody who f0llows baseball understands how a great at-bat can wear on the pitcher and even the defense. A typical at-bat might consist of 4 to 7 pitches. An at-bat where the batter starts fouling off balls, can extend the at-bat until the batter gets a base on balls or hit by a pitch, strikes out, or puts the ball in play. The more pitches, the more the batter eats into the pitchers total pitch count. Eventually the pitcher’s day is over, even when having a great game, when the pitch count gets around 100. So, an extended at bat can wear on a pitcher, as the batter keeps in the game, but is not actually moving the game forward other than wearing out the pitcher.
Unfortunately, today’s home buyers and Realtors are finding that trying to buy a home for their family is a little like a 10 pitch strike out. In record numbers, contracted home purchases are not closing due to issues related to financing. Whether it is the buyer’s credit, or objections of the lender to the condition of the home, what we call “pended” transactions are not making it to the closing table. According to the National Association of Realtors (NAR) is reporting in July that one in six Realtors had contracts cancelled, in contrast to the previous 16 month average of 8 to 10%. Essentially doubling the failure rate over the average!
When interviewed, the agents are saying the biggest factor causing these cancellations are not the well documented struggles with financing approval but actual concern about the economy and fear that now is not a good time to make a commitment as significant as housing. This fear has caused many of these recent cancellations to be based on minor problems that could have easily been resolved, but also were used to cancel the contracts. This usually occurs in the inspection phase where almost any home will have some issues, but due to inspection contingencies, buyers can utilize one of these problems to demand a repair from an unwilling seller, or simply state that they do not wish to proceed. To a lesser extent, the difficulty in closing short sales-something I have written about several times-also is causing problems with buyers who eventually give up. This problem has been a part of the housing market though for the last three years. I am not sure buyers are any less patient with short sales today. Appraisal values also present challenges as appraisers find less and less comparable sales other than distressed sales to provide values. The argument remains if those values are the new norm or just an aberration. I think one has to be aware in their market tract, what percentage of sales are distressed or bank owned, and understand that may seriously impact value.
Realtors representing buyers though really have to become a part of the solution instead of just blaming the buyers. It is very unfortunate for sellers to pull their property off the market to any other buyer, and then incur the 10 pitch strike-out! With each new pitch, the seller finds a way to foul it off and stay in the game. The buyer slowly wearing down their total pitch count. I hear far to many agents blame the buyers when transactions cancel, but often later find that the buyer was not properly prepared to be making offers on homes. Here are some simple steps agents and buyers can take to make sure they are ready and not experience a strike out!
- Pre-qualification for a mortgage is not enough! Get a pre-approval and have it in hand with each offer. Make sure it is no more than 30 days old.
- Complete a fair opinion of value to assist the buyer when considering a home. Make offers on homes that seem to be valued realistically.
- Approach home inspections with an understanding of who the seller is. Bank owned or distressed properties are rarely going to be able or willing to make repairs. The inspection is a tool for the buyer to make sure there is nothing major that the eye could not discover, and to prepare their checklist for after they close.
- Finally, interview your buyers enough to understand their level of motivation. Is this a need or a game? The buyers agents really should not have time for a 10 pitch strike out either!
Tags: Buyers, buyers agents, closings, Offers, short sales, Wilmoth, Wilmoth Group
Posted in Buyers, Buyers Agents, Closings, Economy, mortgage, Offers, Selling Process, Viewing Property | No Comments »
Thursday, July 28th, 2011
A commonly asked question from buyers inquiring about one of our listed properties often comes around to time. After spending a few minutes talking about a property the conversation turns to the buyer and why they are looking. Anymore, it is not unusual to hear “I have recently gone through a (multiple choice) bankruptcy, foreclosure, short sale. Do you know if the owner will finance my purchase or how long it will be before I can get financed?”
Well, in general the owners do not offer financing so that is out of the question. There is a wait after any of these events and it is not simple to identify. Credit worthiness begins and ends with a borrower’s credit score. The single event with their home loss will affect their score…but it is only one part of the calculation. Other debts will also play into the score..and how fast it can be improved to a level where a mortgage can be obtained. This is particularly true with short sales. With a foreclosure about the fastest one can hope to get back into the game is three years. More likely four to five.
I found an interesting article that verifies these time lines in the New York Times. The volumes of people making these decisions regarding their mortgages and homes often seem to be mis-informed on these time lines. We often are the bearer of bad news as to how long the wait will be. It is also why we see more and more renters and rent to own requests. Over the next few years I believe we will see home ownership rates hit 20 year lows, and renter percentages hit similar highs. Far too many people are making these significant decisions lacking a full understanding of how long they will wait to own another home.
Tags: Buyers, Financing, mortgages, Wilmoth, Wilmoth Group
Posted in Buyers, Credit, Default, Financing, Foreclosure, mortgage, Short Sales, Short sales | No Comments »
Wednesday, June 29th, 2011
A new article at bankrate.com tackles the question from a buyers perspective. Both short sales and foreclosures make up over 40% of the market sales so if you are trying to buy a home for occupation or investment, you are likely going to run into one of these types of sellers.
Foreclosures offer faster closings, and more negotiation opportunities. They also have been vacant for a period of time that might exceed a year or more. The effects of being vacant this long are often combined with a poor condition left by the last owner, making the foreclosure a project with possible hidden surprises.
Short sales are often still occupied and the occupant is still trying to maintain the property. If a buyer is not wanting a potential project, short sales are the better alternative. Yet, short sales have many more hurdles to the sale process. Making an offer, and receiving a response can offer a different level of frustration and delay. Negotiations may be very limited. Approvals and closings can drag on.
Every day I see agents showing foreclosures to buyers who probably have no business purchasing a foreclosure. Similarly, I witness the buyer who needs a home in 30 days being shown short sales by their agents. Short sales and foreclosures are so much a part of the real estate world today that buyers believe they need to get in on the opportunity in order to save the most money. It is really important agents help buyers understand the challenges and benefits of both types of properties. This article is a good piece to hand out to buyers before starting the process of showing homes.
Tags: Buyers, buyers agents, Foreclosures, short sales, Wilmoth, Wilmoth Group
Posted in Buyers, Buyers Agents, Foreclosure, Selling Process, Short sales | 1 Comment »
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.
