Sellers think their homes are worth more than their real estate professional recommends, and buyers think these same homes are worth less.
It’s a difficult disconnect that makes selling properties a challenge. Successfully marketing a home requires that the price be set carefully -- or it will languish on the market. Among the considerations:
- How many homes are for sale in the neighborhood? The more homes on the market, the more important it is to list at the lower end of the scale. "I want buyers to ask why is this house priced so competitively," said NAR President-elect Ron Phipps of Phipps Realty in Warwick, R.I. "I want the answer to be an offer."
- Take short sales and foreclosures into consideration when pricing. If the competing properties are in lousy condition, they are less of an issue, but if they are well taken care of, yet priced 25 percent below market, they can be a serious factor.
- Negotiate decisively. "Buyers are not interested in back-and-forth negotiations these days," Phipps said. "They are less emotional and more disciplined. They will walk away."
- Cut the price when you have to. If no one shows up for an open house, if no one calls and if there are no offers, then the price is too high. That means it's time to make a meaningful price cut.
Over the past 5 months a huge benefit has quietly snuck in under the radar for home buyers and the media failed to inform anyone. Interest rates have steadily tumbled since June 2010 and the 30 year fixed rate of 5.25% five months later is now around 4.25%. What does this mean to you?
For Buyers - Do the Math
A $200,000 30 year fixed loan at a June rate of 5.25% generated a payment of $1104/m. That same loan amount will now drop to $983 at 4.25% which is a savings of 12.5%. Let me put that into perspective for you. You just saved $121 per month or $43,560 over the life of the loan! But that’s not all you saved. It’s really more like $60,000 when you consider tax write offs for mortgage interest and the effect of compounding interest on your money. It’s also a forced savings plan. Most of us would like to think we could save $120/m for 30 years but life gets in the way and we don’t. In effect this is a forced savings plan ensuring you sock it away every month. This scenario does not even contemplate value appreciation or inflation protection your home provides over the coming years.
$200,000 - loan you just saved 12.5% or $25,000!
- Lower sale price on new home also generates closing cost savings of 20%
Additional Seller Savings
- Lower sale price on old home generates closing cost savings of 20%
- Lower purchase price on new home sees the same savings of 20%
- Lower interest rates generate savings of about 12% over the life of the new loan
They will never get lower than this! If you know someone who would like to take advantage of these historic rates, please call!
30 yr fixed at 4.5% NO POINTS
15 yr fixed at 3.875% NO points
5/1 ARM 3.5% NO POINTS
FHA rates ( ADD .25 DISCOUNT POINT FOR VA LOANS)
30 yr fixed 4.5% no points
5/1 ARM 3.5% no points
FHA AGENCY JUMBO
30 YR FIXED 4.5% + NO POINTS
- Create your own searches and then customize them to your specifications
- Get up to the minute sales info such as Days on Market, Price Changes, Price Reductions, Sold Info
- Save your favorite homes on a Watch List
- Organize your multiple searches using a simple online interface
- Set up property alerts
There are some really excellent interest rates out there at this time. Who is the next person you know looking to take advantage of these low rates, give me a call.
Applying for mortgage? Starting June 1, you could face another credit screening
By Kenneth R. Harney
Saturday, May 15, 2010; E01
If you're thinking about applying for a home mortgage, here's some important news: Beginning June 1, your lender is likely to order a second full credit screening immediately before closing.
The last-minute credit report will be designed to find out whether you have obtained -- or even shopped for -- new debt between the date of your loan application and the closing. If you've made applications for credit of any type -- for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card, you name it -- the closing could be put on hold pending additional research by the lender.
If you've actually taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the whole deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.
The June 1 changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and fraud by borrowers. Fannie's "loan quality initiative" will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers.
"There's an almost irresistible urge" for many mortgage borrowers, said Don Unger, chief executive of Advantage Credit of Evergreen, Colo. "The lender says, 'Okay, you're approved for the loan,' and you immediately think about shopping for all the things you need for the house. You go to Home Depot" or other major retailers, "and you put in an application."
In the past, that might not have raised an eyebrow -- or even been detected. But under the new double-check policy, when the Home Depot application shows up as a "hard," or borrower-initiated, inquiry on a credit report, Unger said, the lender "is going to have to contact" the merchant and determine whether credit was extended, in what amount, and how this might affect the applicant's home financing transaction.
Marc Savitt, president of the National Association of Independent Housing Professionals and a mortgage broker in Martinsburg, W.Va., said it's not an uncommon scenario. "Most often the new debt involves furniture or other goods for the house," Savitt said. "However, we have seen debt for new cars and other major purchases."
Terry Clemans, executive director of the National Credit Reporting Association, recalls one case in which the home buyers "went out and gorged on $40,000 worth of new furniture and all types of stuff" after their loan approval -- incurring monthly payments far beyond what they could possibly afford. Under the new policy, they would likely be shot down before closing.
Fannie Mae spokeswoman Janis Smith said lenders "will have to look for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, second mortgages -- anything that may have changed since initial application that might impact a borrower's debt-to-income ratio."
As a practical matter, some lenders are likely to ask their credit reporting vendors to perform the actual investigations when new debts or inquiries pop up on borrowers' files. Fannie Mae's instructions say that "lenders must determine that all debts of the borrower incurred or closed up to and concurrent with the closing" are considered in the final loan analysis.
Unger, however, said all this may not be as straightforward as it sounds. For example, if the credit report is pulled immediately before closing to comply with the "up to and concurrent" requirement, there may not be sufficient time to check out inquiries -- especially those in which no actual drawdown of debt has been reported to the national credit bureaus. He also questioned whether entire loan packages might need to be re-underwritten -- a time-consuming process -- based on credit data discovered at the eleventh hour.
In that event, poof goes your closing.
How should home buyers and refinancers prepare for the new credit check procedures? Lenders and credit reporting company executives say everybody needs to follow just one basic rule: abstinence. Between your application for a mortgage and the date of closing -- which might be a span of 45 to 60 days or more -- resist the irresistible.
Don't apply for new credit unless you discuss it in advance with your lender and get a green light.
- Opens April 19, 2010, and continues through Dec. 31, 2010 or until all available funds are disbursed, whichever occurs first.
- Program provides matching funds of up to $7500 per household for down-payment and closing-cost assistance to low-and moderate-income homebuyers.
- Qualified lenders in Maryland include: BankAnnapolis; Advance bank; Chesapeake Bank of Maryland; Hamilton Federal; MECU of Baltimore; Rosedale Federal S&L Assn.; Slavie Federal Savings; First Mariner; Ideal Federal Savings; Presidential Bank; Columbia Bank; First United Bank & Trust; First Shore Federal; K Bank; Carrollton Bank.
- Participation lenders may have geographic or demographic restrictions.
If you or someone you know would like to take advantage of this program or would like more information call or email me.
If you know of anyone interested in locking in a low interest rate on a new home purchase, give me a call.
Who is the next person you know that would like $8,000 or $6,500 for their next home purchase?
Click Here to View a Video Demo.
The recent heavy snows and storms have created a situation that we have not really experienced here before – Ice Damming. I have been receiving lots of phone calls and emails from people having problems with water coming into their homes as a result of ice dams on their roof. The purpose of this communication is to share some helpful information that will allow you to trouble shoot and prevent further damage. Because you have not had a problem yet doesn’t mean you won’t. The warmer weather and strong sun should take the snow off most roofs over the next few days. The melting snow could initially create more problems as the water builds up behind the ice dam. Here is what you can do.
See my recent post below about ice dams to understand the problem:
- Call a professional roofing contractor if you experience problems
- Don’t go up on your roof unless you know what you are doing - roofs covered with snow and ice can be slippery
- Don’t remove ice with an axe or other sharp tools unless you are experienced. Roofing shingles are not made to withstand heavy blows and in the cold weather they are brittle and can crack or break leading to leak problems in the future
Here are a couple of home remedies I have come across that can be helpful:
- Put ice melt into nylon stockings and tie the ends closed to create a "sausages." Place these in a couple of places along your roof, perpendicular to the edge. The chemicals will slowly melt and create a channel for the water to flow through.
- If you have a long enough garden hose, attach it to a hot water source and use that stream of hot water to melt channels through the ice dam. You can also melt and clear away the snow about four feet back from the edge of the roof to prevent further accumulation.
- Use the same method to thaw ice in gutters. You do not need to get all the ice out of the gutter – just enough so it loosens up. As soon as water is flowing in the gutter it will widen out the channel on its own.
Other helpful ideas:
- Keep snow cleared away from exterior heat pumps so they can operate unrestricted.
- Make sure your sump pump exterior drain pipe is clear so if your pump kicks on it will have a place to expel the water.
- Make sure the storm water drainage openings in your street are clear so when snow starts melting it will not back up and create a lake in front of your home or on your property.
- Remove icicles off your roof edge if possible – especially the big ones. They are dangerous and can actually rip the gutter or fascia boards right off your home. Be very careful when you do this!!
We are currently experiencing days where melting occurs, and then temperatures drop at night so a re-freeze occurs. This is good because it creates a controlled release of snow. However, we will likely experience a rapid melt at some point so be prepared to handle an excess of water. Try to keep snow and ice back from your home and make sure there are drainage channels for water to flow away from your home. If there is any chance of water working its way back to your house try to address that issue before the melt begins.
Good luck and call if you have any questions
View the Press Release
Downlaod the PDF
Buyer Benefits $8,000 for first time buyers - does not have to be repaid. See link for more details.
$6,500 for buyers who purchase a new residence even though they already own a home - does not have to be repaid. See link for more details.
Seller Benefits First time and move up buyers coming back into the market creates demand for homes which benefits sellers.
Window Closes - April 30, 2010 (homes need to be under contract by April 30, 2010 and closing before June 30, 2010 - Click here for details). Usually, it takes three months or longer to sell a home. That's why it is critical sellers put their home on the market right away. Otherwise they might not leave themselves enough time to both secure a buyer for their current house and find a new home by the April 30th deadline.
Your home purchase price is a one time event. Mortgage payments are a monthly event and will be around for a long time. You reap these benefits for years.
Seller Benefits Low interest rates bring buyers back into the market creating demand for homes. Sellers become buyers and take advantage of the same low rates.
Window Closes - Sometime Late 2010. There is no question that as we work our way out of the Great Recession rates will trend higher. Timing on this one is my best guesstimate. It could wiggle around a little depending on how the economy is fairing. Remember these rates are artificially low right now because of the Obama Housing Recovery initiative. We'll hear lots of chatter on the news as the rate increase process gains momentum.
Buyer Benefits Home prices seemed to have bottomed out. Deep discounting is rarely seen these days as homes coming on the market already reflect adjusted prices. We are seeing prices as low as 2002 levels in some areas. This is probably as close as anyone can get to perfectly timing the bottom of the price cycle.
Seller Benefits Buyers coming back into the market taking advantage of lower prices creates demand for homes. Your home may sell for much less than its value a few years ago, but the one you are buying will have dropped as much if not more.
Window Closes - Sometime 2011 or 2012. Prices will again begin to creep up once excess inventory disappears. We don't expect to see rapid price rises at that time but there will be a definite upswing at some point. Conservative lending practices and higher interest rates will keep any rapid rise in check.
Buyer Benefits We just received news about changes to FHA financing that will benefit buyers purchasing foreclosed Banks Owned or HUD properties (click here) which takes effect February 1, 2010. There are other changes looming which will not help buyers using this type of financing. The increasing of FHA insurance premiums and along with increased credit requirements will impact buyers (click here). Seller assistance (now at 6%) will be reduced to 3%. FHA loans are underperforming in most markets so expect to see more negative adjustments to this program.
Seller Benefits Buyer using FHA financing creates demand for home sales, which in turn helps sellers.
Window Closes - Spring 2010. We are waiting to hear when these changes will take effect but understand it will be soon - probably spring of this year.
Market Comment Mortgage bond prices rose last week pushing mortgage interest rates lower. The bond market rallied nicely Tuesday following moves by China to curb growth. Oil prices fell almost immediately providing a much-needed reprieve following the recent run up in prices tied to severe cold weather across the US. The consumer price index data showed tame inflation, which also helped rates improve. For the week interest rates fell by about 1/2 of a discount point.
The inflation data Wednesday will be the most important economic release this week. Signs of stronger than expected inflation would not be good for mortgage interest rates. The bond market is closed Monday in honor of the Martin Luther King holiday. Interest rates may be volatile Tuesday as trading resumes following the extended holiday weekend.
Release Date & Time: Monday, Jan. 18
Analysis: Important. Shortened trading week may result in volatility when trading resumes Tuesday.
Economic Indicator: Producer Price Index
Release Date & Time: Wednesday, Jan. 20, 8:30 am, et
Consensus Estimate: Unchanged, Core up 0.2%
Analysis: Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
Economic Indicator: Housing Starts
Release Date & Time: Wednesday, Jan. 20, 8:30 am, et
Consensus Estimate: Up 1.0%
Analysis: Important. A measure of housing sector strength. Weakness may lead to lower rates.
Economic Indicator: Weekly Jobless Claims
Release Date & Time: Thursday, Jan. 21, 8:30 am, et
Consensus Estimate: 445k
Analysis: Moderately Important. An indication of employment. Higher figures may result in lower rates.
Economic Indicator: Leading Economic Indicators
Release Date & Time: Thursday, Jan. 21, 10:00 am, et
Consensus Estimate: Up 0.5%
Analysis: Important. An indication of future economic activity. Weakness may lead to lower rates.
Economic Indicator: Philadelphia Fed Survey
Release Date & Time: Thursday, Jan. 21, 10:00 am, et
Consensus Estimate: 18.2
Analysis: Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Each of the variables that comprise the index has a tendency to predict (or lead) economic activity. For example, new orders for manufactured goods, new orders for plant and equipment, and new building permits are all direct measures of the amount of future production being planned for the economy.
Analysts monitor the LEI in an effort to predict future economic growth. When the LEI report is up, mortgage market participants expect credit demand to increase and inflationary pressures to build. Thus, when the LEI report is rising, interest rates tend to rise as well.
The LEI report is a valuable forecasting device that correctly predicts most economic turning points. The percentage change in the LEI is reported monthly and is an indication of the activity that will occur within the next three to six months. The LEI tends to turn down before peaks in the business cycle. Continuous declines are generally accepted as evidence that a recession continues.
Nine of the eleven components that make up this index are known before the release of the report, so the index is easy for economists to predict. Thus, although this is important predictive data for market participants, surprises are not common with the release of this data.
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Bill Hylind Chevy Chase Bank
Phone: (410) 872-8460
Fax: (410) 312-0301