Springfield, MO

This is the second installment in a series to guide you through buying a home in the Springfield, MO, area. I'm including a link to the first installment, Buying a Home in the Springfield MO Area - Part 1 - Getting PreApproved for a Loan.

In this post, we'll focus on selecting a Realtor. I have been a Realtor helping families buy and sell homes in the Springfield, MO, area for 10 years now. For the most part, Realtors in our area are very knowledgeable, hard-working, and ethical. Like any profession, there are bad ones, but I personally feel that the majority of Realtors in our area are honest, hardworking agents who work well with each other, regardless of their company affiliation.

Here are some tips for choosing the right Realtor for you:

Is the Realtor full-time or part-time? This is one of the most important criteria to look for. There is a world of difference in full-time and part-time agents. A full-time agent is someone who has dedicated themselves to being a Realtor. They have made a serious commitment to their profession and are motivated to succeed. Full-time Realtors have made a 100% investment in their own abilities and business. Why should you invest in a Realtor that is not willing to invest in themselves? They are dependent upon the real estate market to make their living, and know that devoting themselves 100% to their clients is the road to success. A full-time agent will be there for you when YOU need THEM.

What company is the Realtor affiliated with? No two real estate companies are the same. Look for an agent with a strong company behind them dedicated to providing their agents with the tools, technology and TRAINING they need to succeed. Are the majority of the company's agents part-time agents? Real estate companies offer different packages to their agents. Some companies work under a business model where the more the agent sells, the less the company takes from their commissions. These companies actually make more money from agents who sell little, yet pay a higher commission split to the company for the few transactions they do close. Other companies work off of a flat fee arrangement. The agent is paying to be with the company regardless of whether or not they sell anything. An agent must be able to produce in order to justify the cost involved to be with the company. Just because a company is larger, doesn't make them better.

How long has the Realtor been in the business? Personally, I don't think this criteria should be given as much weight as everyone tends to believe. I can honestly say that I worked as hard for my first client as I have with my current clients. A Realtor's work ethic is a personality trait within and does not have much bearing on how many years they've been in the business. There is an agent in my office who has only been licensed for one year, but is one of the hardest working agents I have ever met. I know other agents who have been licensed for 30 years that won't return a phone call or email. Look for how prompt the agent is with YOU, and how willing the agent is to accommodate your schedule, and how willing they are to do extra footwork and research on your behalf.

Does your Realtor know the market and the area? A Realtor who is familiar with the area that you're searching in is a must. While many buyers prefer to use a friend or family member, if that friend or family member is not familiar with the market in that particular area, they will not be as helpful to you in determining fair market value, or the resale potential of the home you purchase. Your Realtor is your "guide", and you want to be sure to hire a "guide" that knows the path they are leading you down.

Does your Realtor "get it"? Does your Realtor actually LISTEN to you? Do you feel like your agent has a clear picture of what your needs and wants in a home are? Has your Realtor taken the time to get to know YOU? Getting to know my clients and asking questions about their family, lifestyle, wants, needs, and specific preferences help me to focus on finding the perfect home for them. Working with a Realtor that is working FOR you will take a lot of stress and pressure off of your shoulders and enable you to enjoy the journey to your new home so much more.

Be sure to check back for the next installment - Choosing the Right Area/Community For You.

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The Greater Springfield Board of Realtors has lost over 1,000 members in the past three years. When I became a member in the year 2000, there were just over 1,800 members of the Board of Realtors. At the height of the market in 2005, the membership topped 3,000.

The Springfield Realtor Magazine came out online today and I noticed we now have 2,006 members. Because revenue from membership dues has decreased, the Board of Realtors was forced to downsize in staff and increase dues in order to maintain a balanced budget.

Our yearly dues are expected in January. As with the past couple of years, I expect to see another major fallout in membership by February and March of 2010. I think it's highly possible our membership will be down to the level of the year 2000.

I have asked our Membership Coordinator to provide me with stats of the membership from 2000 to present. I will share the numbers with you when I receive them.

As for me...I'm a Realtor. I am passionate about real estate. Take away my homes, my vehicle, and every material possession I have, and I'm still a Realtor. No matter how bad this market gets, or how long it lasts, as long as I have my license and my office, I will always have the ability to get back on my feet. So far God has blessed me with all of it.

Thinking of buying a home in the Springfield, MO, area? There are many things to consider, and many steps to follow to ensure a smooth purchase. This is the first in a series of posts that will help guide you through the homebuying process.

The first step in the process is to get preapproved for a loan. You need to know how much money you will be approved to spend on your new purchase, and what monthly payments you will be comfortable with. Because the lending requirements and guidelines are changing on pretty much a daily basis recently, it is necessary to have a "fresh" preapproval. Just because you were prequalified six months ago, doesn't mean you will qualify for the same loan today.

Here are a few tips to follow when searching for your loan:

Know how much money you can spend: Nothing is more discouraging than shopping through online listings of $200,000 homes, just to find out you can only spend $150,000. Many online mortgage calculators will quote loan amounts that only include principle and interest. Remember, you must calculate in taxes, insurance, PMI, etc., into your monthly payment.

Know what type of loan fits your needs the most: I've had clients who insisted on getting a VA loan because it does not require a down payment; however, the rural development loans do not require a down payment either and in many cases have lower interest rates and monthly payments. Talk to your lender about what loan fits your needs the most. Rural development loans can be used in an area where the population is less than 20,000. In the Springfield, MO, area, communities such as Ozark, Republic, Rogersville, Clever, Sparta, Highlandville, and others, still qualify. Springfield and Nixa do not qualify. Your lender will be able to look at your specific situation and find a loan tailored to your personal needs.

Know what type of lender to use: There are many factors to consider when selecting a lender. Sometimes going to your local bank will cost you more than a lender that specializes in mortgage loans. Questions you need to ask are:

• Are they loaning their own money? Or are they selling you someone else's loan, such as Wells Fargo or Bank of America? Any time a lender sells you a loan, there are charges for doing so. A lender that loans their own money oftentimes does not have fees as high as one who acts as a middle man. These lender will most often sell your loan after it closes. None of the terms or conditions can change. Your loan will be bundled in with hundreds of other loans and sold to another lender, such as Wells Fargo or Citibank. I have actually had a client choose an in-house lender over Wells Fargo, only to be sold off to Wells Fargo after closing. Now...they have a Wells Fargo loan cheaper than they could receive going through Well Fargo.
  
• Do they have their own in-house underwriter? Or are they going to ship your file off to an underwriter who is located out of state and out of touch with your loan officer? Having an underwriter in-house can save a lot of last minute headaches and delays in your closing.
• Get a Good Faith Estimate: Different lenders charge different fees. For example, some charge a document handling fee, while others do not. Always ask for a Good Faith Estimate so you can see the itemization of charges you will be responsible for.

Know how to compare apples to apples: When comparing lenders, it is important to compare the charges on the Good Faith Estimate. Many buyers simply look at the bottom line - which lender has the cheapest closing costs. Look to see if the charges between lenders are similar. For example, does one lender have your taxes estimated higher than another? Are the charges for the title company similar? Are the prepaids similar?

Know your payoff: One factor that is often overlooked is how much your payoff will be the day you close on your loan. While one lender may have a lower interest rate or closing costs, will you actually be financing more than a loan with a slightly higher monthly payment or interest rate? A difference of $1,000 or $2,000 may not seem like much today, but if your job forces you to relocate in two years and you are faced with selling your home, that small difference will suddenly seem very large.

Know the difference between a prequalification and a preapproval: In today's market, it is so important to be preapproved rather than prequalified. A prequalification is when you have spoken with a lender, verbally given the information regarding your income and debts, and the lender has run your credit report and validated your credit scores. Many lenders will give you a prequalification letter contingent upon receiving supporting documentation of the information you have given them verbally. A preapproval is when the lender has been provided your supporting documentation and your information has already been given approval by the underwriter. Most listing agents are requesting preapproval letters during offer negotiations. Having a current preapproval letter means having more negotiating power and less stress in your home purchase.

Shopping for a loan can be frustrating for a buyer who has not been through the process before and doesn't understand the terminology many lenders use. Never hesitate to discuss your financing options with your Realtor. Local Realtors understand the average costs in their area and can help determine if you are being overcharged for services, as well as provide close estimates for items such as taxes and insurance. They are also familiar with local lenders and will be able to provide you with a list of reputable lenders in the area.

Stay tuned for Part II - Selecting your Realtor.

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A few weeks ago I came across a new way to invest and borrow money that I find absolutely fascinating. No, it's not Madoff's newest ponzi scheme or some guaranteed results program. It's called peer to peer lending, and after much litigation it was only very recently made legal under SEC laws, however, currently only residents of certain states can participate (see below).

Social lending is not a new idea, can be traced back to 1750 BC by the ancient Babylonian King Hammurabi. Since recording data to stone tablets is a bit outdated, now we use the power of the Internet to enable people like you and me to lend and borrow money at our own discretion. The notion is simple, yet powerful -- both large and small banks should take notice.

You down with O.P.M. (other people's money?)

Currently there are two major players in the American peer to peer lending arena. LendingClub.com & Prosper.com. In 2008, Prosper had a debacle with the SEC for selling unlicensed securities (whoops) but has since settled the case and is originating loans again. In October 2009, Lending Club originated over $6 million in loans while Prosper originated $2 million.
(Source: American Banking News).

Combined, these companies and their social investors have originated over $251 million dollars in unsecured personal loans since 2005!

As a lender, you are investing in Notes. Each Note corresponds to a portion of a consumer loan, and gives the right to receive payments received under that consumer loan, minus a 1% service charge. Most Notes are purchased for a 3 year time period at a fixed rate of return.

As a borrower, one is able to borrow a minimum of $1,000 and up to $25,000. Each borrower is assigned a credit rating, based on credentials assigned by the lending site you are with (more information on this below). Each borrower will have a story as to why they are borrowing money and what they intend on using it for. Some are consolidating debt, some are starting a new business, some are renovating houses, getting married or buying a car. Lenders are free to ask the borrower questions about the use of their money and even ask for proof of documentation of finances, cash flow, business operations, etc.

You decide who and what you want to take a risk on.

Interest rates are determined by a bidding process. Lending peers bid on the lowest rate of return they would be willing to lend their money at for each borrower's case and credit rating. Because of this competition, the borrowers get the absolute best interest rate possible as a gauge in confidence in the borrower's rating and use of the money. As a matter of fact, borrowers are currently getting better rates on unsecured personal loans than they may through a bank!

Statistics from Prosper & Lending Club

Keep in mind that Prosper was the first lending site to the market, thus they have more originations. Also note that Lending Club has tighter credit restrictions for borrowers than Prosper does. Because of this, you will notice that Lending Club has a lower loss rate, and a slightly better rate of return.

Prosper.com:
$184,000,000 - Dollars Originated Since 2005
38,381 - Loans Originated
$4,794.00 - Average Loan Amount
15.12% - Average Yield
5.60% - Average Loss
9.52% - Average Rate of Return
(Source: Propser Marketplace Performance)

LendingClub.com:
$67,710,000 - Dollars Originated Since 2005
7,458 - Loans Originated
$9,078 - Average Loan Amount
12.58% - Average Yield
3.05% - Average Loss
9.67% - Average Rate of Return
(Source: Lending Club Statistics)

IMPORTANT - You can be a lender only if you reside in one of these states (as of 11/23/09):

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

The following states are not yet eligible: North Dakota, Iowa & Maine.

Trading Notes with Other Investors

Both Propser and LendingClub have recently integrated a Note trading platform for lenders to buy and sell debt notes to other investors. Both sites conduct trading through FOLIOfn, member FINRA/SIPC. Only Notes that were issued after October 12, 2008 can be traded on the Trading Platform.