About Essex County, NJ

When prospective buyers decide to make an offer for a home, they predominantly focus on the price they will offer, and often think about the other terms as something that will get worked out later.

In my local market, that has led to some very surprised rejections, even in this economy. Any offer that doesn’t come with a pre-approval letter from a reliable lender is not considered worthy. Having an offer that’s contingent on a property to sell is also a non-starter to most sellers. The closing date can also be a critical factor. That much is pretty well travelled ground. Is there more?

In the areas I focus, 454 homes closed since 9/1. Of those, we have data on 312 of them (come on guys, update the MLS), so we’ll just look at sales we have data for.

For homes under $300K, 48% were financed through conventional loans, 24% were financed through VHA loans, and 28% were paid cash (In our system cash means that the mortgage contingency was either waived or the home was purchased in cash). This means the buyers had the means to close without a mortgage, whether they used one or not, and made the purchase on that basis, making for a much stronger statement to a seller.

In this range, one quarter of the purchases fell into this category. If a buyer were using an FHA loan (with 3% down) and competing with another offer that was effectively a cash deal, we see that from a terms standpoint, the FHA offer would be blown out of the water, even if it was a little higher.

Between $500K-$600K, the number of deals classified as cash drop to 5%. FHA loans are 10% and conventional loans are 85%. Since the majority of buyers fell into the ‘conventional loan’ category, then other terms could become more important, such as the size of downpayment. We don’t have numbers to support that self evident truth, but we do know many agents discourage offers with lower down payments because they recognize the risk of having a home not appraise for the borrowed amount, which effectively kills the deal.

In the $900K-$1MM range, 24% were classified as cash. A full one quarter of them either waived their mortgage contingency or paid cash altogether. We saw a surprising amount of multiple offers and bidding rounds in this range and its fair to say that in this economy perfectly good buyers lost homes to stronger terms. We’re not privy to the prices each offer submitted, but we can guess that the cash deal was not necessarily the highest price.

Up to $300K terms could make a huge difference in determining if an offer was accepted. Between $500K-$600K perhaps not as much, between $900K-$1MM it could make the difference again between getting your offer accepted or not. Analyzing specific markets, towns, and price ranges can reveal very different things going on.Don’t generalize!

Make sure you understand the dynamics around the particular purchase you’re considering so that you can make an offer that will give you the strongest chance of moving into your new home!

Keeping The American Dream Alive

A part of an individual's life experience is to achieve the American Dream, and in doing so, experiencing home ownership is one of the main ingredients to fulfillment, of that dream.

Focusing on why an individual toil and labor with the reward of comfort and security through home ownership on their horizon is very real.

A Realtor controls the process, however the buyer and the seller enjoys the experience that the process provides, therefore the need to sharpen that process is paramount to meet the needs of to days technological and sophisticated client.

Buying a Home is an experience more than it is a transaction.

We’ve seen our share of home negotiators beat up the other side over a few thousand dollars under the guise of getting the best deal. Is that a good practice for home buyers? Many prospective buyers get into a competitive position when negotiating with sellers and miss out on larger issues that have a bigger effect on the overall cost of their purchase.

When negotiating for a home, buyers should remember that it’s not a two party negotiation (buyers and sellers). It’s at least a three party negotiation (buyers, sellers, mortgage rate). Most buyers simply forget about the interest rate variations and focus on the seller’s concessions (price, inclusions, etc). Perhaps it’s the one on one nature of negotiating with ‘the other side’, which is easier to focus on than an anonymous corporation and an ever moving bank rate.

In my local market, the interest rates have wandered one quarter of one percent in the week. If buyers are not focused on these nominal rate movements and the timing of their rate lock, they are not considering a pricey component of their purchase. While 1/4% is not a particularly alarming swing, what does it mean?

Let’s compare a purchase where the buyers and sellers are $5,000 apart and spend a week splitting the difference, which delays attorney review and their rate lock. If we compare a $500,000 mortgage at 5%* to a $497,500 mortgage at 5.25%, we would find that a quarter percent increase $23,000 more expensive over the life of the loan, for a net loss of $20,000.

Should a buyer be fixated on that last concession? Are buyers cognizant of interest rate movements at the quarter of one percent level while in the heat of negotiations? How many buyers won or split the $5,000 battle but lost the $20,000 war and didn’t even realize it? Although interest rates are set to increase over time, that quarter of one percent could easily drop this week, go back up the following, etc.

Buyers should keep in mind all the elements that make up their total cost of ownership and not treat any negotiation as a personal two way contest. Buyers should also get their financing in place earlier in their home selection process so their lender can give them daily updates on rates. This will help them get a feel for the saw tooth nature (up and down) of interest rates and help them time better.

The numbers:

*30 year conventional.

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Montclair NJ Non-Profit Awarded National Business Grant

Investing In Women has awarded a $500 “stimulus package” to a woman owned business, The Underground Railroad To Success. The URS was started by Tanisha Cunningham to teach independence to foster children. This grant will give the non-profit a chance to market their business.

Montclair NJ, November 9, 2009- Investing In Women www.iiWomen.com has awarded their first grant to a woman owned business in the USA. The recipient of the award is Tanisha Cunningham, founder of The Underground Railroad to Success (www.railroad2success.com). The URS is a non-profit that provides a service to foster children aging out of the system to live independently as adults while becoming an integral part of society. This is great for foster children and also has a positive affect on our society as a whole.

“Aging out” is the term used for children who go into foster care, but are never returned to their families of origin or adopted by others. They stay in the system until they turn 18, or graduate from high school, and for the most part, are left to fend for themselves as best they can.

Read full story on A Greater Town

Originally posted in my How Many Buyers and Sellers have Benefited from the $8000 Tax Credit post, which was written in line with the 2009 First-time Homebuyer $8000 tax credit deadline of November 30, the following tips may help first-time homebuyers, repeat buyers (i.e., move up buyers or empty nesters) and sellers close escrow before July 1, 2010 and reap the benefits of the Extension and Expansion of the Homebuyer Tax Credit.

FOR BUYERS who want to benefit from the $8,000 federal tax credit, taking advantage of low prices and attractive interest rates, the following tips may help you close escrow before July 1, 2010:

• You need to contact a REALTOR® today;
• You need to have a solid pre-approval from a reputable bank;
• You need proof of funds for cash deals;
• Don't waste time with low ball offers, have your REALTOR® run the sold comparable properties, make an educated offer and definitely in a multiple offer situation...put your best offer on the table because you may not get a second chance;
• Don't waste your time looking for houses out of your price range - you can only buy and a bank will only lend you money what you can afford to buy;
• Get in and out of attorney review (not sure about other states but here in NJ, listings in attorney review are still active listings and offers can still be submitted thus bumping your offer right off the table) and/or request the seller agree to back-up offers only;
• Even with the extension, most short sales, if not all short sales, will never close in time (by July 1, 2010);
• You lose control on purchases where the sellers need to find suitable housing before they can sell (your purchase would then be contingent upon the seller first finding another house); and
• You need to be under contract by the end of April 2010 and close no later than June 30, 2009.

FOR SELLERS who really want to sell their home, take advantage of today's affordability, and the expansion of the $6,500 tax credit, the following tips may help you close escrow before July 1, 2010:

• Price your home at market value from the start (Do NOT overprice);
• Work with a REALTOR® in your area who has an aggressive marketing plan;
• Make your home irresistible (do everything you can to make the home so attractive, charming, cozy, inviting, comfortable and exciting so that a buyer would want that lifestyle too);
• Be flexible with showings, lockbox and for sale sign (a home cannot sell if a buyer cannot get in to see it and even more importantly, it cannot be sold if nobody knows its for sale);
• If you don't want to sell your house, don't put it on the market not only does it waste the time of buyers and their agents but it brings the property stats down as well);
• If selling and buying, do not make an offer on the house you want to buy until your house is under contract, and if at all possible, after the home inspection and mortgage contingencies are satisfied on your sale (most sellers will not sign a contract with a home sale contigency...would you?); and
• If selling and buying and if you qualify for the $6,500 tax credit, you need to be under contract no later than the end of April 2010 and close no later than June 30, 2009.

For more information on the First-Time Homebuyer $8000 Tax Credit Extension and the Expansion Credit of $6,500 to move-up buyers, please read my post First-Time Homebuyer Extended through April 30, 2010 and Expanded to Include Qualified Homeowners.

Even with the extension there is no reason for New Jersey buyers and sellers to still be waiting on the fence. It takes time to buy and sell your New Jersey home. Don't wait until the last minute...wouldn't you like to be in your new house before we spring forward?