Randy L. Prothero - Hawaii REALTOR® (808) 384-5645

Do you want to be a homeowner? Are you worried about timing? After reading this article, you will better understand why it is time to buy. Let’s look at a few factors, the amateur experts and the news media failed to tell you.

· Prices are down. Are they at the bottom? There is no possible way to predict the absolute bottom in any market, but they are down and in many areas are showing signs of leveling and even climbing. As you read down, you will see that timing the bottom; may be one of the lower priorities when deciding to become a home owner.

· Interest rates are historically low. This is the most important point to consider. If mortgage interest rates climb by only 1%, mortgage payments will increase by something closer to 21%. That was such an important point, that I need to repeat it. If the interest rates climb by only 1%, mortgage payments will increase by something closer to 21%. While you are waiting for prices to drop by a percent or two the payments may climb 20% or more. Even if you believe that you are in a more challenged area that prices may drop by as much as 5% or 10%; if you wait you may lose.

· Have you heard about the renter’s penalty tax already passed by Congress? Am I scaring you? If you are renting, you should be scared. Did you know you are already paying it? They are not calling it the renter’s penalty tax, but that is exactly what it is. Our politicians are calling it a tax credit for home owners. While you are waiting, the government is reaching in your pocket and grabbing out a big stack of bills. They are penalizing you for renting in a huge way. The interest part of your mortgage payments (which is the majority of the payment) on your primary home is tax deductable. That means you will not have to pay taxes on that part of your paycheck each month. To get a better picture of what that means to you, talk to a tax professional. (Not your amateur expert friend or hairdresser).

· If you rent, you do not control of your future. If your landlord sells your home you may be moving. If the landlord chooses, the rent may go up. If you own and take out a fixed rate mortgage, you know what your payments will be for many years. If prices go up, your mortgage payment, unlike rent will stay exactly the same.

· When prices go up your landlord gets to keep the equity. All profits to be gained down the road go to your landlord and not to you, if prices climb. So of course you ask; what if prices go down? You lose nothing. Ok, I know you doubt me with that statement. Let me explain. As long as you own the home, you will not take any losses or gains based on the value of the home. You can only lose on the value, if you sell while prices are down. If prices drop you will continue to take advantages of homeownership with the only impact being possible lower property taxes. If you sell then and only then, is when you win or lose on the equity. Even then, if you are relocating; you will take advantage of the lower prices on the other side. No loss.

I hope after reading this article you have a little more clarity about why it s the right time to buy.

Here is my last tip for potential homeowners. Get professional help. Do not try this on your own.

1) Get a full time professional Realtor®. Someone who is an expert in the areas you are interested in. Not a part time agent who does this on the side. Someone who will protect your interests. In most cases you will get their services for free. Sellers normally pick up their fees. Your Realtor® will let you know when you are looking at exceptions to that rule.

2) Get a top loan officer from a local, funding lender. Someone with a good reputation in your area. Someone that will be there to walk you through the process and be there to explain any documents you sign. Your Realtor® is a good source for a referral. They will know loan officers in your area and can share their experiences with you.

3) Start now! It is time to buy!

Good Luck and Happy House Hunting!

Over the last few years I have caught heat from mortgage brokers who disagree with my opinion in regards to why it is better to work with funding lenders over mortgage brokers. I have also gotten a far larger number of responses from real estate agents who from their experiences, agree completely.

In CE classes I teach for real estate agents, I use the following example to differentiate between loan approval letters from brokers and funding lenders.

Mr. & Mrs. Buyer are looking to purchase a home with a $500,000 mortgage. With my recommendation they contact a loan officer at a local funding mortgage lender. The loan officer runs Mr. & Mrs. Buyer through the system, reviews their documents and pulls their credit. It is then determined that Mr. & Mrs. Buyer is right at the edge of qualifying or not qualifying. So what does the loan officer do next? The loan officer gets out of their chair, walks down the hall and asks the underwriter to review Mr. & Mrs. Buyer’s file. At that point, based on the underwriter’s recommendations one of the following happens:

1) Loan approval is issued for the amount requested.

2) Loan approval is issued for a lesser amount.

3) Loan approval is denied.

4) Loan approval is issued with conditions (closing a credit card, etc.)

If the letter is issued, it has then been reviewed by the underwriter who will ultimately approve the loan.

Now let’s look at what would happen if Mr. & Mrs. Buyer instead went to Bob’s Mortgage and Hair Cutting Emporium, a local (fictitious) mortgage broker with the same scenario.

Mr. & Mrs. Buyer brings Broker Bob the same documents. After careful review Bob has determined that Mr. Buyer is either borderline or even worse. What does Broker Bob do next?

1) He issues a loan approval letter.

Let’s let that sink in for a second.

This is the reality of what I see on a regular basis in the real world. When does the underwriter get to see the file? I doesn’t happen until towards the end of the process. That is after the Mr. & Mrs. Buyer have paid for:

1) The loan application

2) Escrow / title fees

3) Appraisal

4) Home Inspection

5) Scheduled and possible paid money to the moving company. And any other expenses and effort to plan the move

6) They may also have given notice to their landlord that they are moving and will have no place to live if this transaction falls apart.

It is also after Mr. Seller has taken their home off the market and made their moving plans. They have also incurred expenses:

1) Survey

2) Repairs requested through the home inspection process

3) Termite inspection

4) Escrow / title fees.

5) They may also have expenses incurred on a replacement property.

Not to mention the waste time and expenses the real estate agents have incurred. All because of a bogus loan approval letter.

As a real estate agent representing buyers, I do not tell my clients who they have to use to get their loan. As a seller’s agent, we have no control over who the buyers choose to work with. There are a few things we can recommend to our clients to avoid they failed transactions caused by this above scenario.

1) If the buyer is using a mortgage broker, have them get a loan approval from the funding lender they plan to work through.

2) Seller’s can either require this or make a condition of their acceptance, that a loan officer from a local funding lender; review the file.

Tip For Home Buyers. The reason I keep mentioning a local lender, is that local lenders have an advantage over out of town lenders.

1) They will be there at the signing. The buyer’s will be signing a stack of complicated documents and they will want the loan officer at the signing to explain what they are signing.

2) They live, work and play in the area and will want future referrals from the real estate agent. For that to happen, their level of service has to exceed what an out of state loan offer would give.

Parting Thought. When a buyer presents an offer on a home, a letter from a funding lender carries more weight with a seller or their agent. Nobody cares about the broker’s opinion. They do not approve the loan, the lender does.

For my local friends and client’s, I keep a services directory of vender’s that I and my client’s have gotten great service from. It is really difficult for a vender to make my list, but they can be removed in 2 seconds.

Selling a home can be quite a stressful process for sellers. Many homes are on the market for months and sometimes longer. Sellers need to maintain their home in showing condition during that period. That can be a big burden while trying to live their lives. They are paying mortgage and can’t finalize their future plans until it sells.

Homes may linger around for a couple of reasons.

A) Failed marketing. It may be one or more of the following.

1. Over priced
2. Now showing well
3. Not properly advertised (MLS, Internet, virtual tours, flyers, open houses, etc.)
4. Hard to show
5. Bad neighbors
6. Poor location
1. Next to a pig farm.
2. Not convenient to transportation, shopping or schools.
3. Across from the sewage plant.
4. Surrounded by industrial properties, etc.

(Items 1 through 6 - can be overcome with a lower price.)

A) Changing market conditions.

1. Short sales and foreclosures in the area.
2. Bad economy (increasing unemployment in the area, etc.)
3. Prices falling
4. Surplus inventory

(Items 1 through 4 - can be overcome with price)

In the end there are many variables you have to deal with, when selling your home. The price is the great equalizer. Any home in any condition can be sold in one day at the right price. The question for sellers is, “How close to the one day price do you want to be? “

By properly marketing the home and having it better prepared (repairs and upgrades completed and the home staged), along with making it easy to show; the home will sell faster and possibly for more money.

If the home is not selling after being for sale for a long period of time, the market has rejected your home at that price. Buyers are able to find another home at equal or above condition for a better price. In some cases sellers hang on too long to their price because they are either convinced their home is worth more than buyers are willing to pay or because they need to hit a certain price. In a some cases the home is not being properly marketed.

Tips for sellers:

• Get a top full time Realtor® who specializes in your area.
• Listen to your Realtors® advice for getting your home ready, pricing and marketing strategy.
• Be prepared to adjust the price after it has been on the market a period of time.
• Remember time is money. If it is not selling, you are paying carrying costs. (Mortgage, utilities, taxes, insurance, maintenance, etc.)
• Have reasonable expectations and plan accordingly. If the average sale time in your area is X number of days and you want to sell faster than that, you have to do something to make your home a better deal than those you are competing with.
• If on Oahu call me for a free consultation. I would be honored to evaluate your home and present you a marketing plan for your home.

Good Luck and Happy Home Selling!

Professionalism is heavily discussed during CE classes (continuing education) I teach for real estate agents. When the State of Hawaii issues a salesman’s license to a real estate agent, the state is not saying you are qualified to properly represent a home buyer or a home seller. They are saying you are licensed and will be held to a set of standards.

As a professional you will honor your fiduciary duties to your client. Those duties are:

• Loyalty
• Obedience
• Disclosure
• Confidentiality
• Reasonable Care and Diligence
• Accounting

The one that I feel needs more focus on by new agents and their brokers is Reasonable Care and Diligence:

The standard of care you give your client is that of a competent professional.

• You are required to prepare yourself through education and study.

• You are not required to perform services outside the scope of your license. In those cases you should recommend your client seek the appropriate professional.

• Accounting, legal advice, engineering, tax advice, etc.

What I tell new agents is that there are no short cuts.

· Learn the business!

· Take classes.

· Team up with experienced agent.

· Get your broker involved in all of your dealings.

· Do not take on anything you are not qualified to do.

· And please refrain from inserting opinions on things outside the scope of your license.

Please remember if you are representing a client you are required to act as a professional. Inexperience is absolutely no excuse.

This Labor Day Weekend I will be wearing one of my other hats, that of Hawaii Chess Federation president. The Hawaii State Open Chess Championships will be held at the Ohana East Hotel in Waikiki. The time control will be Game/ 120. (Each player will have 2 hours on their clocks to complete of their moves. Giving a total of 4 hours for each game.) Pawns will be down range at 9:00am this morning.

Sat. 9/3/11

• 8:00am Registration & Check-in
• 9:00am Round 1
• 1:00pm Round 2

Sun. 9/4/11

• 9:00am Round 2
• 12:55pm Election of HCF Board Members
• 1:00pm Round 4

Mon. 9/5/11

• 9:00am Round 5 (Final Round)

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Monday Afternoon the State Blitz Chess Championships G/5 will be held. Each Player will have 5 minutes on their clock giving each game up to 10 minutes total. Each round has 2 games. The player will play one game with White and one game with Black. Each player will play a total of 14 games for the 7 rounds.

Mon. 9/5/11

• 1:30pm Registration
• 2:00pm Round 1
• 2:30pm Round 2
• 3:00pm Round 3
• 3:30pm Round 4
• 4:00pm Round 5
• 4:30pm Round 6
• 5:00pm Round 7