Archive for the ‘First time home buyers’ Category
Friday, March 3rd, 2017
Home buyers these days have many hurdles to jump through in order to finally purchase a new home, from finding a home, to making an offer in possible multiple offer situations, to actually getting to closing without other issues. One such issue is appraisal – with inventory so low and prices climbing to meet demand it is not out of the ordinary for an appraisal to come in on the low side. But have no fear – there are a few things you can do to keep the sale moving along.
1. Renegotiate price/ compromise. If the home does not appraise there is always an opportunity to renegotiate price with the seller. Either the price can be negotiated down to the appraisal price, or the buyer and seller can agree on a compromise (for example, if the appraisal comes in $10,000 under contract price the parties can split the difference – buyer pays $5,000 more in cash and seller lowers the price by $5,000). However, if the seller had multiple offers there may be another buyer willing to pay that high price just to get into contract, so sometimes a seller will not renegotiate. It is always worth a try though, because if the other potential buyers are getting loans the seller could wind up in the same position.
2. Pay the difference with cash. Lenders are only concerned with the appraisal only because it affects the borrower’s loan-to-value ratio. The lender will only make a loan based on the contractual amount or appraised value.
3. Seller can carry a second loan. If you cannot lower the price and the buyer cannot pay cash over appraisal value, the seller can offer to carry a small second loan to make up the difference. The problem with this is that often the interest rate is higher than normal, but you can negotiate with the seller
4. Challenge the appraisal and ask for another to be ordered. Depending on the type of loan the buyer is obtaining this can be a possibility. If there is a good reason to challenge the appraisal with a conventional loan, say the appraiser was from out of the area or did not know the reasons why comparable properties sold for different prices (maybe your home is highly upgraded or has a better lot or view, etc.), then the appraisal can be challenged and you can ask for a second appraisal. Make sure that you provide comparables and an analysis of their sales to the new appraiser or to the lender – a job that the listing agent should have done (but even if s/he did there could still be other issues that did not bring in the appraisal value to the contract price). Talk to your agent and mortgage professional and figure out a plan that works best.
5. Cancel the sale. If there are no other options available the buyer has the right to cancel the sale without losing any deposits (unless otherwise agreed in the contract).
The bottom line is that there are potential solutions if your appraisal does not come in at contract value, so don’t panic. Make a plan with your agent and mortgage professional and see what you can do. Most of the time there will be a valid solution.
Wednesday, February 13th, 2013
Is Fannie Mae hurting the real estate market? Those following the practices of this government lending giant know that as of late, Fannie has been accused by many in the industry of price fixing and falsely inflating the real estate market. What is going on, and how can this happen at this time, after the housing market is finally on the road to recovery?
The majority of lenders and those who guaranty loans seem to be cooperating recently with foreclosure avoidance, opting for the less painful option of short sales. They claim that not only do they want to ease the homeowners’ pain, but that they do not have a desire to own property, and would rather take a loss sooner than have to go through the foreclosure process – one which has a hefty price tag.
There is one exception to this rule, and real estate agents are baffled. Fannie Mae – a government agency, who along with it’s cousin Freddie Mac guarantees and purchases loans, and owns or controls about 31 million U.S. mortgages – has been implementing some strategies lately that go against this notion, despite statements of intentions to help:
1. Price Fixing? One of the claims expressed most frequently as of late by real estate professionals is that Fannie is engaging in price fixing. Here’s how it works: instead of opting for short sales, it is choosing to proceed with foreclosures. Then, once the home is ready to list, it’s selected agents list the property for over comparative market value, under Fannie’s Homepath program. No appraisals are needed, as Fannie is the largest provider of mortgage credit. Buyers are jumping in and paying over market value for these properties, and are closing escrows.
Initially this looks like a win-win, as the buyers get their home and do not have to go through the appraisal process, and the area comps are raised with the closing of the property at a value higher than any other recent sales, thus increasing comps for the next seller. Sounds good, right? Not so fast.
The downside of this tactic is that the buyers are literally moving into their new homes as UNDERWATER homeowners. Their homes have no equity – they own the most expensive property in the neighborhood because Fannie has falsely inflated the home values. Appraisers will not look solely to the most expensive home that sold, but will include it with the other comps…thus leading to the next problem:
As a result, future sellers will not likely benefit from the most expensive neighborhood sales (for more on this click here.). Appraisers will include the most expensive sale in their analysis, but they will not focus solely on that one sale; thus the next home to sell, even in better condition and with more to offer, will be evaluated by appraisers based on the combination of recent sales. What seller in their right mind, who did not have to sell, would choose to do so in such a situation? This will keep homes off the market, sustaining low inventory levels.
2. Countering short sale offers at prices higher than comparable sold properties. Another tactic that is being used by Fannie when they DO agree to short sales, is to counter offers received higher than comparable sold properties. Again, this is crazy! These homes will not appraise, but still there are buyers willing – and doing it! – to pay cash over and above appraisal value in order to close escrow. Again, these new homeowners move into their homes in negative equity positions. This tactic also prices many homebuyers out of the market.
I’m not sure how to explain what is going on, but it scares me. Our market is healing right now, and if prices are falsely inflated and comparable sold properties ignored, we will see large market increases in short time periods. If you remember, this is what led to the last market crash. Please share your thoughts.
Wednesday, January 30th, 2013
San Diego is not included in the following infographic, but entry level home prices here are between $200,000-$300,000.. However, note that it may vary greatly by area. If you would like information on a specific area please let me know and I will be happy to provide it.
Wednesday, December 5th, 2012
The real estate market continues to improve, demand is high, inventory is low, and prices are going up in many local markets, including here in San Diego county. Many areas/neighborhoods have even become “seller markets,” meaning that properties are going into escrow for over asking price or over neighborhood comparable sold values (and often times with multiple offers). But there is one type of buyer that seems to be taking a hit with the new surge – the first time homebuyer.
Armed with a preapproval letter and a saved downpayment, first time homebuyers in certain price ranges – usually under $400,000 – are faced with challenges. Many properties in this price range are being snatched up by investors and other cash buyers, oftentimes over asking price. If no appraisal is needed, these cash buyers can offer as much as they like – and for the great properties they are doing just that.
Most first time homebuyers, on the other hand, need to obtain a loan to purchase a property, and therefore the property value must appraise. Thus these buyers cannot offer over comparable value unless they have the cash to pay any difference between an appraisal and the offered price. This puts first time buyers in a hard position, as they can offer their best price but are prevented from going too high due to appraisal restraints. This usually causes them to be outbid by those buyers who either have cash or have a larger downpayment.
It is a frustrating prospect, and it is made even harder by the lack of local inventory. I showed 2 properties in the last week the day they came on the market. Both times we were ready to write offers, and then the listing agents called me back. Both properties had multiple offers (both properties had over 10 on the first day), several of them cash and most of them over asking price (and asking price was already higher than the comparable sold properties in the area). The rest of the offers at asking price were from buyers who were putting more money down than my first time buyers…it was not even worth it to write an offer.
It is hard to keep your clients excited about the prospect of purchasing a home if they keep running into these situations. But my advice is to be persistent. Don’t let your buyers get frustrated and give up. The silver lining is that they will get to know different neighborhoods and floor plans. They will be more educated and will really know what they like and do not like. When the inventory starts to rise – which I am thinking will happen after the holidays end and we head toward Spring – your buyers will find the right property.
Monday, August 13th, 2012
Many home buyers these days are feeling frustrated, due to lack of inventory, multiple offer situations and competition from investor buyers. In certain price ranges this is the norm, and buyers want to know how they can avoid these situations.
Well, if you are patient there is one program that may help you get the edge you need – elimination of investor buyers. Via a Fannie Mae program called First Look (under Fannie Mae’s HomePath), you can search for Fannie Mae properties that offer a “first look” to owner occupant buyers. For a period of time, usually 15 days (30 days in Nevada), only owner occupant buyers (including public entities and some non profit agencies) will be able to submit offers on these properties. The program is designed to encourage homeownership.
If you or your agent finds a property on the site you are able to submit your offer for the property online – Fannie Mae uses it’s own forms and not standard purchase contracts.
This program is a great way to beat out those investor buyers, but you have to keep checking with the site to see if there are any new listings; some areas have few or none, and some have many, so don’t give up!
For more details on the First Look Program click here.
Monday, November 14th, 2011
With the advent and growth of the internet, many tasks are much easier now – you can shop without leaving your home, place your dinner order before arriving at the restaurant, get all the information needed to write a paper without going to the library, and, according to some believers – get accurate property valuations in order to buy or sell a home without a Realtor. Let’s look at the problem with this last part.
Online home valuation sites (like Zillow and Trulia, to name a few of the more popular ones) are more prevalent today, making home buyers and sellers feel as if they have access to the same information as Realtors. The misnomer is that this is very far from the case. Although there are times when the numbers provided are realistic, more often than not they are incorrect – sometimes by a few thousand dollars, or even as much as $20-50,000. Would you want to make an important decision on value based on a number that may be incorrect?
Realtors still play a very important role in home valuation. Working with a local, experienced agent who knows your area provides not only peace of mind, but information beyond just value. There are many facets involved with pricing a home, and while the starting point is always comparable sales, there are many other important things to consider that software cannot detect. For example, what if you have an oversized yard compared to your neighbors? A view? Multiple upgrades to your home? An addition? These are some of the things that a Realtor will take into consideration in determining value.
Comparable sold properties have likely been appraised before they sold – and appraisers are specifically trained to value homes, taking into consideration similarities and differences between properties. Realtors in turn use these comparable values and then tweak them, as do appraisers, when it comes to factors other than square footage or similar location, that can alter prices. Being a Realtor does not magically allow one to be skilled at this – it takes an in-depth knowledge of the business, the area and the market, as well as experience.
It is important to note that the same is true of rental values. While some sites that offer rental income information may be close or even spot-on, they are not always correct. If you need to obtain rental information I highly advise you to contact a skilled property management company in your area.
While obtaining information online is a good place to start to get an idea of your home’s value, deciding to forgo the expertise of an agent could end up costing you both money and time. There is a big difference between a computer valuation of a home and one completed by an expert. So, if you are thinking of selling your home, or if you are a buyer who is home shopping, please consult with an expert so that you are completely informed and able to make the right decisions.
Monday, September 26th, 2011
The distressed property market continues to be a big part of our real estate market, and there is a lot going on as of late. Here are some of the highlights:
First time homebuyers getting tired of short sales: A survey conducted by Campbell/Inside Mortgage Finance revealed that first time buyers have had enough with short sales. This segment of buyers purchased around 40% of short sales in August, compared to 54% of all short sales purchased in November of 2009. Some of the reasons sited for this drop in short sale purchases are frustration with timelines to get the home through escrow, paperwork glitches and appraisal issues, and overall dissatisfaction with short sale lenders. Short sales are still seen as good bargains by many buyers, as they typically sell for 27% less than similar traditional sale homes, making them a great deal for many first time and repeat home buyers who do not have to move immediately.
Florida may change to a non-judicial foreclosure state. The state of Florida, one with a large number of foreclosures, is heeding the cry of many homeowners and buyers by contemplating switching to a non-judicial foreclosure state. Currently a judicial foreclosure state – which means that all foreclosures must go through the court system to be finalized (and there is a huge backlog) – Florida’s foreclosures take longer than those in non-judicial states, up to three times as long by some estimates. Some lawmakers are afraid that these lags will cause lenders not to lend in the state, and that the current system stagnates the market and leads to neighborhood blight. The court system, as we know, can be very slow, so I think this is a good idea, although some lawmakers are opposed to a change with the status quo.
State attorneys general still not close to agreement in robo-signing scandal: Yes, it pains me to report that once again, there is no final decision in the robo-signing scandal. Lenders and attorneys general cannot seem to come up with a punishment for the lenders that makes all happy. Really? Whose money is being used for these attorneys general to meet ad nauseum and figure this out? I frankly think it ridiculous. Some AGs are saying that the banks should not be held liable for things that have not been investigated yet (what?), and that the liability should be placed on Wall Street and not so much on the lenders. Come on people – accept the blame and move on. The committee has stated that it the lenders will not be released from all civil liability…the saga continues.
Fixing the foreclosure mess may take more than a year. The latest statistics on fixing the foreclosure nightmare are that it may take more than a year, according to one story in HousingWire.com. Not a big surprise to many folks, and much of the long fix is due to the robo-signing fiasco. Over 4.5 million files must be examined for signs of improper foreclosure procedures, and new plans put in place to prevent such incidences from occurring in the future.
Some interesting numbers: 31% of all home purchases in California in August were short sales. In San Diego county alone, there are currently over 2500 short sales on the market today, with 1098 pending and over 3000 awaiting lender approval (contingent status). In the last six months in the county there have been 3412 short sales that closed escrow, with an average market time of 149 days. The point is that short sales are still very much a part of our current market, and I don’t think that will change any time soon.
Wednesday, September 21st, 2011
Friday, September 2nd, 2011
Today is my parents’ 50th anniversary – an amazing milestone to reach in this day and age – and it got me thinking about sustainability. In our world of bigger, better, faster, oftentimes a new widget is replaced so quickly that you barely had time to enjoy the now “old” version you just purchased a few months ago. I still love my iPad 1, and don’t plan to buy the 2. As for my iPhone 4, it does everything I need and I don’t plan on replacing it with the iPhone 5 that is shrouded in mystery but being hyped up nonetheless. Housing is similar.
Back during the housing boom everyone wanted to upsize – McMansions sprung up all over and there were multiple offer situations going on everywhere. It was a listing agent’s dream. I remember I put a listing on the market on a Thursday, with instructions that there would be no showings until Saturday (the sellers wanted to clean it), and I had 3 offers Friday night (sight unseen), 7 by the end of the weekend. It was a great time to be a listing agent, but I often wondered why so many people wanted to move up – many of them had nice homes and didn’t need more space. I think in part many people were keeping up with the Joneses, others just were thrilled that the banks were going to give them mortgages on their dream homes – ones they thought they’d never be able to afford (and many could not).
Sustainability is defined as the ability to be sustained, supported, upheld, or confirmed. In an economy that is gripping people around the wallet so tightly, many don’t focus on sustainability. But housing is sustainable. Let’s consider how: first, it is necessary; we all need a roof over our heads. Second, it is like the stock market – it goes up and it goes down, but when it is down you know it will rise again. The difference with housing is that the risk in buying a home (that you can actually AFFORD) is not as great as investing in stocks, bonds, or minerals. In the long run it becomes sustainable. But that is the trick: you need to focus on the long run.
Buying a home these days is not as easy as it was in the early 2000s, and in this we should take comfort. Buyers who buy a home that they can live in for a long time, one for which the payments are comfortable and possible, will eventually see equity grow. Investing in a home is investing in your future, the future of your family, and the economy as a whole. So choose wisely, and focus on long term goals. You will be happy you did, and you will understand that homeownership is still part of the American dream, and a smart choice.
In the spirit of sustainability, I wish a very happy 50th anniversary to my incredible parents. They are enjoying an Alaskan cruise, courtesy of their loving children (something I am so glad I was able to do). I too celebrate a wedding anniversary this weekend – 18 years; not as long as 50 years, but we plan to be there too one day. No matter what you do in your life, sustainability is a positive goal on which to focus in many situations, especially when you are in it for the long haul.
Sunday, August 21st, 2011
These days it is more difficult than ever before to qualify for a loan. Lenders have such a tight grip on their money that they practically require you to sign over your firstborn to release it. Many buyers find themselves in tricky situations – first time buyers who might not have enough cash or credit scores that are not practically off the top of the charts, and move-up buyers who may not have enough equity in their homes for downpayments. But there is an option that may make home buying possible: FHA loans.
FHA loans have been popular with first time buyers for some time, as they offer low rates, underwriting standards that are not as strict, and only require very minimum downpayments. Furthermore, these loans allow use of rent history for qualification purposes – a great help for those who have never owned. But more recently repeat buyers have been discovering these types of loans, allowing many to purchase when they do not have the cash reserves available for a traditional 20% downpayment.
There are requirements for FHA loans – the buyer must be purchasing the home as a primary residence, have reasonable credit scores, and be able to afford monthly payments, for starters – and these can vary depending on county or state, so it is imperative to consult with an FHA-approved mortgage lender. If you need referrals please let me know. If you are considering a home purchase you should definitely look into FHA loans.