Thursday, January 26, 2012

Why Real Estate Deals Fall Apart

I have seen estimates stating that 29% of deals that go to contract and require a mortgage, don't close. That number boggles my mind. It means that even after a buyer and seller come to terms on a sale (not an easy feat these days), 3 out of 10 transactions fall apart. What are some of the more common reasons?

■ Appraisal issues – In many markets, we are still seeing declining values. Appraisers are in a difficult position, and with so many transactions (including seller's concessions to assist buyers with closing costs) values aren't always coming in at sales prices.

■ Short Sales not being approved by the current lender – With so many sellers owing more than their home is worth, buyers’ proposals need to be sanctioned by the lender (who will be receiving less than they are owed). Some of the offers are too low, but often, the lender isn't local and they really don't know what the property is worth today.

■ Bad pre-approvals from the loan officer – Today, loan officers who are not reviewing tax returns, analyzing bank statements, and asking for detailed explanations and documentation on credit blemishes, are truly hurting the customers. Issuing pre-approvals based on the representations of the customer is reckless and a cause for dismay later.

■ A lack of transparency – Whether it's a seller or agent not disclosing property issues, or a buyer trying to sneak things by an underwriter, too many people think they can cut corners. That is not the world we live in anymore. Everything is uncovered. Being honest in the beginning, gives you the best chance to overcome obstacles.

It is clear by the numbers that closing loans can be more difficult today. However, with proper planning and integrity, many of the challenges can be dealt with early and successfully. Agents documenting values of the homes, loan officers doing complete reviews of the loan profile up-front, and everyone telling the truth helps get deals to a successful conclusion and avoids horror stories.

It helps to have a good agent, or two of them, for that matter (HINT HINT)! Give us a call or send us an email. We have a 95% contract to close ratio!

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Article from KCM Blog, Steve Harney

Friday, January 20, 2012

A Thank You from Our Clients Who Closed Today....

One of the most rewarding parts of our job is knowing that we truly helped someone. We closed this morning with a very sweet couple purchasing their first home. They initially found us on the internet while browsing homes and set up a meeting to view one. After meeting the first time, we hoped that they felt as comfortable with us as we did them, because we truly wanted to help them. They did! They called us back and we showed them a few more homes over the course of two weeks before they came across this sweet home in the Eagle's Landing area ---> 

They scooped this beautiful 4 bedroom/2 bath ranch up as a foreclosure with new carpet, fresh paint, new stove, new dishwasher, and a new roof at the wonderful price of $100,000. The seller even paid $3000 in closing costs for them! Their monthly payment (just shy of $800) is only $40 more a month than they were paying in rent and now they are paying for something that is truly theirs. This home sold for $169,997 in July of 2005!

With that said, we are glad to know that they were as happy with our service. Here is the thank you note we received from them today at closing.

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Thursday, January 19, 2012

Assumable Mortgages - There's Power in Them!

One of the rarely touted advantages of people taking FHA mortgages today is the fact that they are assumable. What that means is, when the FHA homebuyer of today is looking to sell his home, a qualified purchaser can "take over" their loan.

Most people believe that interest rates will return to a "normal" range (between 6.5% and 7%) in a couple of years. When you assume a mortgage, the terms remain the same. This means that a buyer five years from now can enjoy a 4 – 4.5% mortgage by assumption rather than the 6.5% – 7% mortgage they would get without it. Since most people buy homes based on how the monthly payment fits into their personal monthly budget, this is extremely impactful.

As an example, a $300,000 loan at 4% today carries with it a $1,432.25 principal and interest payment on a 30 year fixed mortgage. If offered for sale in five years, the purchaser could assume the $271,858.56 balance with the same $1,432.25 payment and remaining term of 25 years. The total payments over the 25 years would be $429,675.

Compare that to a new $272,000 loan at 6.5% for 25 years, which would carry a monthly payment of $1,836.56 (over $400 more a month than the assumption and more than $120,000 more over the 25 year term).

At 6.5% for 25 years, to wind up with the same payment as the assumed mortgage, our borrowers would only be getting $212,000…$60,000 LESS!

The point here is that, when rates go up, homes with assumable mortgages will have more value and will sell at higher prices because they are more affordable. As an additional bonus, the closing costs on assumable mortgages are significantly less (especially here in New York where NYS Mortgage Tax is such a large component of closing costs).

The borrowers must be credit-worthy of course (have good credit, qualifying income, and necessary assets to close), but they would have to be credit-worthy to get a new mortgage too!

Besides the multiple other reasons to obtain an FHA mortgage (low down payment requirements, extended income ratios, lower credit scores, and easier sourcing of funds), there is another perk. In the future, there is a good chance that you may be able to sell your home for more money because of the FHA loan's assumability.

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Thursday, January 12, 2012

Homes Are Selling! People are Getting Mortgages!

Many believe that very few houses are selling and that almost no one can get a mortgage. We want to let everyone know that neither of these assumptions is true.

Recently, the National Association of Realtors (NAR) released their Existing Homes Sales Report. According to the report there are, on average, 12,109 homes selling in the United States EACH and EVERY DAY! That means that approximately 12,000 houses sold yesterday, approximately 12,000 will sell today and approximately 12,000 will sell tomorrow. So the thinking that homes aren't selling just isn't true.

Another interesting fact in the report was that 72% of these transactions were accompanied by a mortgage. That means that approximately 8,719 people qualify for a mortgage on a daily basis in this country.

There are over 12,000 homes sold and over 8,000 mortgages granted every day. The real estate market is doing better than many believe!

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Thursday, January 5, 2012

Guitar Shaped House - Fayetteville, GA UPDATE!

Remember awhile back when we did the blog post about the guitar shaped house in Fayetteville, GA? If not, take a look here:  Guitar Shaped House

As it turns out, we get a TON of hits about this property on our blog and so it made me wonder the other day... what happened to the ol' guitar? Did it ever sale? If so, for how much? When I initally posted about it, it was listed for $160,000. As of today, you can own this fabulous house for the LOW, LOW price of $68,000!!!! What a price reduction! According to the agent's notes in MLS it needs a total renovation! Any investors out there looking for a project?!?
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