Banks do not have to loan you the money you seek to purchase your new home. It is not that banks do not want to lend money to finance mortgages. It is that lenders’ underwriting standards have significantly tightened. They have tightened because so many of their previous loans have defaulted, the housing crisis (which many lenders contributed so much to) triggered a nationwide and then worldwide financial crisis forcing Lenders to carefully scrutinize each prospective borrower’s financial history and current financial health. They do this to substantially reduce their risk. After years of very loose lending standards, the pendulum has swung the other way.
Our Team speaks with more than a hundred new prospective buyers each month. And among the important questions we ask each caller is, “Have you spoken with a lender to see what mortgage amount you qualify for?” That question has two meanings. First, does the caller know whether their personal financial picture is clear and bright, or murky and marred by low credit scores, a recent bankruptcy or foreclosure or other credit defaults. Second, if they seem to have a pretty healthy credit history, just how much does their current financial structure indicate is an appropriate amount for a lender to provide which the Buyer can comfortably pay back each month?
When we ask that all important question, meant to help buyers begin this fundamental first step in the home buying process, we can often feel the chill it causes on the other end of the call. We know that asking the financial qualifier question means making a commitment to the home buying process some callers are not yet prepared to make. But we also know there are many aspects of the home buying process we can help buyers sort through and successfully complete, including helping them get a clear picture of their financial strength as it applies to purchasing a home.
However, even after a buyer speaks with a qualified loan officer and gets a lender’s letter indicating the lender’s belief in the buyer’s “bankability,” that does not always mean the buyer will be able to purchase a loan. That’s because the over-the-phone Q & A session with a loan officer is just the very first step in qualifying for a home loan. It can trigger what is called a “Pre-Qualification” letter indicating the potential bankability of the buyer - pending receipt of a long list of documents and explanations of past financial transactions that will be required to satisfy an ever-changing and constantly narrowing of the lender’s underwriter’s criteria for approving a home loan. The process is detailed, lengthy and more than occasionally frustrating for everyone concerned. But it is a critical and necessary part of buying a home so here is what we recommend.
Don’t just get pre-qualified, get pre-approved. Pre-approval means the lender does believe you are bankable and will likely qualify for a home loan. Here is the list of documents one of our Team’s Lenders require at the start of the loan process and before you begin riding around looking for your perfect home. This information is necessary in order to help buyers know you are justifiably qualified to purchase a home and won’t have to face nearly as much scrutiny in the final underwriting stages of securing a loan for your new home purchase.
A. Confirms they have filed returns on time; if they have not they will have to file. Avoids scrambling
to get returns files before closing.
B. Uncovers side businesses which may show a loss that will lower income and buying power Borrowers sometimes do forget about these businesses
C Uncovers unreimbursed business expenses even for W-2 type employees. Borrowers are sometimes “unaware” of these write offs.
D Uncovers whether or not they are actually W-2’d or 1099’d. Someone could work for a large company and think they are W-2’d but are actually 1099’d in which case we would need a 2 year history to show how much they write off because they are considered self-employed from an underwriting stand point.
A. Verifies hourly pay rate and number of hours worked. Borrowers often overstate their hourly rate if they work a little overtime or if they are giving the co-borrowers hourly rate.
A. Must verify most recent 24 month work history and identify any gaps in employment. If recently out of work force for over 6 months, then they must be on current job for at least 6 months to qualify for an FHA loan.
All this coupled with credit scores high enough to assure the lender you have a consistent payment history for everything from credit cards to your monthly electric bill gives lenders a reasonably clear picture of your credit worthiness when seeking a home loan. And now you are “Pre-Approved.”
Remember, banks do not have to loan you the money you seek to purchase your new home.
Don’t forget…selling or buying a home is a process and a journey, not an event; you will want to subscribe to our free video e-mail series for home sellers and buyers. For access to the complete series of free video and informational emails that can provide you with many of the important strategies and information you will need to make the best home selling or buying decisions you can CLICK HERE ==èSPECIAL E-MAIL SERIES REPORTS and ask for the free no obligation series of email reports to be sent to you regularly over the next few weeks. Just put FREE VIDEO EMAIL SERIES in the subject line and let us know if want the home seller or home buyer series.
If you just want to see what other homes in your area are selling for by searching the MLS CLICK HERE =èSEARCH THE MLS FREE
Or contact us directly for free, no obligation information at info@TMTRealtyGroup.net
The New Year has brought with it a number of new negotiation points to work through for Realty Teams representing Buyers making offers on REO (foreclosed) properties. The most myopic negotiation point to date came up the other day in a multiple offer and highest and best negotiation situation one of our Team’s Buyer Specialists is negotiating.
The property is a foreclosure in a pleasant sub division in Kennesaw, GA. The Investor (the actual owner of the property’s note that is serviced by a Lender) invested the money to clean up and update the property. It is a great move-in condition home and perfect for the young first-time buyer hoping to close the deal on their first new home. A realistic Comparative Market Analysis was completed prior to presenting an offer to the REO listing agent for presentation to the asset manager directing the sale of the property on behalf of the Investor. The asset manager had smartly instructed the REO Agent to list the property at around 10% below fair market value. So, here is a great property at a very good price. Not an unfair tactic on the part of the asset manager, but one our Buyer Specialist was aware of when the offer was written. A multiple offer situation and a highest and best competition were expected, and the Buyers were told that the property would likely sell for around 10% above initial list price. Within days there were multiple offers.
As with all offers our Buyer Specialists present, an Appraisal Contingency exhibit was included. This is an important protection for the Buyer. It states that an appraisal will be completed within a specific number of days following binding agreement, and that if the property appraises for less than the initially agreed selling price, the Buyer has the right to ask the Seller to lower the sale price to the appraisal price. Without this exhibit, the Buyer must pay the previously agreed selling price, even if their lender will only finance a loan for the lower appraisal price. The Buyer would have to come up with the difference in order to complete the sale. The use of the Appraisal Contingency Exhibit is a commonly used, fair and necessary protection for the Buyer.
In this offer, however, the Investor steadfastly refused to accept the Appraisal Contingency stating: “The seller rejected your client's last counter. Seller will not take an appraisal contingency. Seller indicated he will not agree to appraisal/sale price adjustment.
Seller staying firm in his belief if the property is on a multiple offer situation, the buyer is willing to pay the difference.
Please note property is available to any potential buyer. We are getting too many inquiries at the present time, to include buyers that previously submitted an offer. “
With the seller (Investor) refusing to accept an Appraisal Contingency, the Buyer is being placed in double jeopardy. First, if the property does appraise for less than the selling price, the Buyer will have to still pay the difference to close the sale. They will have to pay more than the property is worth and start out under water. But if they refuse to pay the difference and back out of the sale, under the terms of the agreement they will be in default and lose their earnest money deposit.
Perhaps there are some Buyer Agents that will let their Buyer take that risk. Not us though.
Buyers… purchasing a home is an emotional experience; but it is also an important, and often, your biggest investment. In real estate you make your money when you purchase your home, not when you sell it. Buying your home for the right price at the start helps significantly in managing the home’s equity value when you sell it.
As for this Investor and asset manager: Are they coy, wise, greedy, myopic? How tough is too tough before Buyers and experienced Buyer Specialists simply must move on and reject an otherwise great property?
Don’t forget…selling or buying a home is a process and a journey, not an event; you will want to subscribe to our free video e-mail series for home sellers and buyers. For access to the complete series of free video and informational emails that can provide you with many of the important strategies and information you will need to make the best home selling or buying decisions you can CLICK HERE ==èSPECIAL E-MAIL SERIES REPORTS and ask for the free no obligation series of email reports to be sent to you regularly over the next few weeks. Just put FREE VIDEO EMAIL SERIES in the subject line and let us know if want the home seller or home buyer series.
If you just want to see what other homes in your area are selling for by searching the MLS CLICK HERE =èSEARCH THE MLS FREE
Or contact us directly for free, no obligation information at info@TMTRealtyGroup.net
In the Atlanta Metro Area, as the winter season begins to settle in, Thanksgiving marks the beginning of a seasonal slowdown in home sales activity. That doesn’t mean there are fewer homes for sale. Nor does it mean “motivated Buyers” are any less motivated to buy a home. What seems to occur is a “mental sigh” accompanied by a significant slowdown in showing activity.
True, most of us are thinking about the upcoming holiday events, days off spent with friends and family, a few days of rest before re-entering the fray as a prelude to the spring and summer “selling season.” However, for us and our Team, it is not unusual to be writing or negotiating an Agreement the night before Thanksgiving or the day before Christmas. A wonderful holiday present for both Buyers and Sellers is a firm agreement leading to a closed home sale.
We know too, that REO asset managers don’t shut down in December and rejoin the market again in January. The clock and ticker is always running on the millions of dollars of assets on their books. We have concluded many a great deal for our Buyers right around the holidays.
Sellers, reaching out to those “motivated Buyers” with innovative marketing and pricing adjustments can often bring a sale that otherwise might be missed. For Buyers, your negotiating power is at a peak. Everyone should be ready, willing and able to make a good win-win deal.
So don’t slow down for the holidays. You could have the best Christmas ever!
Don’t forget…selling or buying a home is a process and a journey, not an event; you will want to subscribe to our free video e-mail series for home sellers and buyers. For access to the complete series of free video and informational emails that can provide you with many of the important strategies and information you will need to make the best home selling or buying decisions you can CLICK HERE ==èSPECIAL E-MAIL SERIES REPORTS and ask for the free no obligation series of email reports to be sent to you regularly over the next few weeks. Just put FREE VIDEO EMAIL SERIES in the subject line and let us know if want the home seller or home buyer series.
If you just want to see what other homes in your area are selling for by searching the MLS CLICK HERE =èSEARCH THE MLS FREE
Or contact us directly for free, no obligation information at info@TMTRealtyGroup.net
HUD homes come in all shapes and sizes. They are for sale in most segments of the Atlanta Metro Area and sell at a wide range of prices. For Buyers they serve a variety of needs.
Earlier this year one of our Team’s Realtors purchased a forlorn and somewhat neglected foreclosed town home in a pleasant town home community in Kennesaw, just a few minutes from Kennesaw State University. She purchased it for cash at a low enough price so that the cost of renovation still kept the overall cost of the property below market value. Right next door was another not yet, but soon to be foreclosed townhome. Like many residential single family and townhome communities in Kennesaw, this quiet neighborhood has weathered its share of foreclosures and short sales causing property values to plummet.
The great deal she got on a now lovely home for this young first-time home buying couple is typical of the kinds of great deals to be had if Buyers and their Realtors spend the time doing their homework and having the patience to wait for the right property to come along. But what of the townhome next door?
A few weeks ago it returned to the market as a HUD-owned property. Many Buyers’ Realtors shy away from showing their Clients HUD-owned properties because they are not very easy to buy, and take extra work and effort to get a HUD transaction completed. The purchasing process is actually a bidding process which demands all information is provided initially through the HUD transactional website… not always an easy site to navigate with a process of bidding and waiting that is unresponsive and somewhat arcane. The HUD listing agent representing the property on behalf of HUD has little to do with the transaction at the outset and since there is no human being to interact with as in most other residential real estate transactions, reporting progress to your Clients and helping them through the wait and often disappointment of not winning the property is can be daunting. However, once a Realtor understands the HUD system – which is actually not all that difficult to learn – helping clients benefit from the advantages of buying a HUD property can be rewarding for our Clients.
A huge plus for the Buyer is HUD’s $100 down payment purchase plan. Buyers can purchase a new home needing good credit but very little up-front cash. HUD will allow up to 3% of the purchase price to be credited to the Buyer to apply toward paying the Buyer’s customary closing costs. If the HUD property appraises for more than the selling price, the FHA upfront insurance fee which pays for the first year of FHA loan insurance, can be rolled into the home loan, again conserving the Buyer’s cash. When purchasing a HUD property using the 203K renovation loan program, most if not all the cost of bringing the property back to life can also be incorporated into the Buyer’s home loan.
Investors buy HUD properties for use as income producing rental properties or to renovate and resell at a profit. But Buyers of all types and needs, from singles to families, and first-time buyers to empty-nester down-sizers can all take advantage of a good program that can and often does help communities ravaged by the sub-prime mortgage debacle regain its footing, standing and value.
Whether you’re buying a home for twenty thousand dollars or two hundred thousand dollars, your Realtor and their Team – one who is not afraid of helping Buyers navigate through the HUD maze can help you find a good property at a great price.
Remember, HUD homes come in all shapes and sizes.
Don’t forget…selling or buying a home is a process and a journey, not an event; you will want to subscribe to our free video e-mail series for home sellers and buyers. For access to the complete series of free video and informational emails that can provide you with many of the important strategies and information you will need to make the best home selling or buying decisions you can CLICK HERE ==èSPECIAL E-MAIL SERIES REPORTS and ask for the free no obligation series of email reports to be sent to you regularly over the next few weeks. Just put FREE VIDEO EMAIL SERIES in the subject line and let us know if want the home seller or home buyer series.
If you just want to see what other homes in your area are selling for by searching the MLS CLICK HERE =èSEARCH THE MLS FREE
Or contact us directly for free, no obligation information at info@TMTRealtyGroup.net
Last week we spent a full day with nearly 200 of the top REO sales and marketing teams from across the USA listening to the collective thinking of eight of the top asset managers from six asset management companies representing billions of dollars of foreclosed properties for both large and small banks and investors. The information they shared was a stark commentary on the state of the housing market today and their best prognostication of the market to come.
They described the huge backlog of “grey or shadow inventory,” perhaps as many as 6 million mortgages in default or eminent default still to come to the market. That number in itself is more than 10% of all mortgages nationally. If the market is depressed today, imagine what would happen to the housing market and home prices if all these defaulting mortgages were foreclosed at once. A huge quandary for banks and investors holding these defaulting mortgages: How to clear the inventory from their balance sheets, which hurts their financial health, without crashing the housing market.
Although it seems like a large portion of the resale housing available for sale today are foreclosed homes, a rising percentage of the distressed properties for sale in the Metro Atlanta market and across the country are short sales. These are properties whose mortgages are in default and whose owners are attempting to sell and also work out a settlement with their mortgage holder to repay less than what is owed and have the balance (called the deficiency) forgiven.
For sellers of short sale properties this is still, although a good alternative to foreclosure, a tough row to hoe. Banks, investors and the asset management companies hired to manage the short sale negotiations are still woefully understaffed. Processing and procedures vary widely from bank to bank, and federal and local regulations and restrictions on how Realtors can represent sellers in short sale transactions are restrictive and inhibiting. Not a pretty picture out there.
The bright side of this gloomy picture is that industry professionals recognize what a mess the market and the process to clear out the glut of defaulting mortgages is. But there is much work to be done to stabilize home prices and allow the housing market to help lead the nation out of economic distress.
As Realtors, the more we know about how to navigate the unclear and turbulent waters of marketing and selling short sale and foreclosed properties, and the sharper our understanding of the internal systems of lenders and asset managers when negotiating sales for our distress sale sellers and buyers, the clearer the housing picture will become. Taking many months to unsuccessfully negotiate a short sale transaction only to see the property go to foreclosure helps no one. Learning how to successfully bring a short sale offer to a defaulting seller’s lender and thread the eye of the needle in order to get the sale approved, clearing one by one the backlog of distressed homes from the market, can only speed up change in this otherwise dismal residential housing environment.
At the end of the day, it may well be educated and adept Realtors and their Teams, who have become expert at guiding defaulting sellers and bargain hunting buyers through the process, who will clear out the defaulting inventory and bring the market back to health. We can help distressed home owners find financial relief, and help buyers anxious to find a good opportunity at the bottom of the market to find the “perfect home,” stabilize neighborhoods, and do our part in forging a path toward economic recovery.
Until then, there’s is no telling how long this tough market will continue.
Remember… selling or buying a home is a process and a journey, not an event; you will want to subscribe to our free video e-mail series for home sellers and buyers. For access to the complete series of free video and informational emails that can provide you with many of the important strategies and information you will need to make the best home selling or buying decisions you can CLICK HERE ==èSPECIAL E-MAIL SERIES REPORTS and ask for the free no obligation series of email reports to be sent to you regularly over the next few weeks. Just put FREE VIDEO EMAIL SERIES in the subject line and let us know if want the home seller or home buyer series.
If you just want to see what other homes in your area are selling for by searching the MLS CLICK HERE =èSEARCH THE MLS FREE
Or contact us directly for free, no obligation information at info@TMTRealtyGroup.net
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I am the Co-Team leader of TMT Realty Group - known to our hundreds of Clients and friends as "The Miskin Team"-acclaimed for our innovative marketing and "over-the-top" service.
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