One of the “free samples” of a Realtor’s services we provide to Sellers is the CMA — the Comparative Home Analysis — sometimes referred to as the Competitive Home Analysis.  No matter what you call it, the Realtor takes some time to do some research into what a particular home might sell for given current market conditions, location and condition of the home.  Lots of factors come into play during the research, not the least of which, is the Realtors personal experience both with the area and in the profession, generally.  An experienced Realtor will be pretty close, if not dead on, when determining a recommendation for a selling price.

All that said, Realtors are not appraisers.

I take that back.  Some Realtors are appraisers.  They may have been appraisers that decided to help people buy and sell houses or they may have just decided on a change in career.  Sometimes, Realtors decide to go through the process to get licensed as appraisers, too.  However, the vast majority of Realtors are not appraisers. So, even though an experienced Realtor will, through their own research and experience, recommend pricing to a home seller, it is the appraiser that will determine the valuation for the house for the mortgage company the buyer is using.

The Buyer’s Perspective

Everyone knows that home sellers want to sell their homes for the highest possible price (we’re not talking bank owned foreclosures or short sales). We also know that home buyers want to purchase their home for the lowest possible price.Thus, an experienced Realtor working for the buyer will perform a CMA independently so they can advise the home buyer about strategies to structure an attractive offer.  Again, the CMA prepared by a Realtor working as a buyer’s agent should be pretty darn close to true market value.  What the home buyer offers is a different story.

Regardless of what the home seller and home buyer may agree upon, if the home buyer needs to obtain financing, the mortgage company, bank, or credit union will not (repeat: will not) provide a mortgage to the home buyer for more than the market value of the house as determined by a professional, licensed appraiser.

Many times the appraised value of the home comes in very near the contract price (the price agreed upon by the home seller and home buyer).  Sometimes, it comes in higher.  Some examples include:

• estate sales — the heirs just want to sell the house and be done with it
• divorces — there may be pressure for one of the parties in the divorce or the courts to sell the property
• job relocation — a home owner may not want a vacant property or the mortgage on home they aren’t living in
• illness — a home owner may need to move into a long term health care facility assisted care facility and need to sell the home to pay for it

One particularly sad reason homes may appraise for more than the contract price is that the home seller has over priced the home initially in the hopes of obtaining a price higher than the market will bear.  The house sits on the market for an extended period of time.  At some point, the home seller really either needs to sell the house or has just tired of the constant interruptions to their life by potential home buyers.  The home seller will then either lower their asking price substantially to attract a home buyer or they will accept a “low ball” offer just to be able to move on.

Mr. Market Calls The Shots

The sad truth about home pricing is that neither the home seller, the home buyer, the Realtor nor the appraiser control the price of the home.  The market does. Many economists call this the “invisible hand” — market forces that are not fully understood create the environment for fair value. As much as a home seller wants to sell their home for a high price  and as much as a home buyer wants to purchase the same home for a low price, it is the market that determines the price.

That’s why we saw such wild fluctuations in home prices over the last ten years. Home prices went wildly up because, oddly, the market was supporting the price appreciation (due to exotic mortgage products, mostly).  Now, market value has fallen because  a large number of home buyers can no longer pay their mortgages making huge numbers of homes in distressed condition available for sale at bargain basement prices. Simultaneously, credit has become extremely difficult to obtain reducing the potential home buyer pool even more.

The market has spoken.

Check out the Real Estate Market Trends for your area .  Just click here.  You will get a totally FREE report e-mailed to you.

According to the National Association of Realtors, the organization that keeps track of such numbers, existing home sales (the type of homes that you and I live in) dropped by 7.2% in January 2010.  Although the numbers are up slightly from a year ago and prices are starting to stabilize, the report also points out the difficulty that moderate income home buyers have in obtaining a mortgage. The article quotes Vicki Cox Golder, President of the National Association of Realtors:

“First-time buyers and others who need a mortgage are increasingly losing out to all-cash investors for the best bargains in many areas, particularly for foreclosed homes where cash is king,” she said.

Lawrence Yun, Chief Economist of the National Association of Realtors points out:

“Most of the completed deals in January were based on contracts in November and December. People who got into the market after the home buyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales,” he said. “Still, the latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery.”

Believe it or not, the National Association of Realtors really tries to put a report like this in the best light.  But the facts are the facts.  It really doesn’t look good for a strong, robust or quick recovery for the housing market.  Rising mortgage interest rates, difficulty home buyers have obtaining mortgages and real estate investors with cash buying up the bargain basement home are making it a difficult road.

The home buyer tax credit will expire in about 60 days and that will decrease the number of motivated home buyers. It ain’t a pretty picture.

If you need expert advice or some help buying or selling your home, give me a call at 240-417-9100 or e-mail me.

There has been much brouhaha about the first time home buyer tax credit of $8,000 and the existing home owner “move up” tax credit of $6,500.  Well, that’s all well and good but here’s a news flash.  You can’t get the tax credit if you can’t get a mortgage to buy a house.

First Time Home Buyer Blues

For the first time home buyer getting a mortgage is not as easy as it sounds.  You need sterling credit, cash reserves (at least enough to make a 3.5% down payment) and verifiable documentation that shows you can repay the loan.  Back in the old days you could apply a little smoke and mirrors and get a mortgage.  Not so nowadays.  Banks, credit unions, mortgage companies of all types are putting people through the ringer in order to get a mortgage.  Then, if the house doesn’t appraise at the contract price or some loan underwriter has a bad hair day, you could be screwed anyway.

What If You Own A House?

For the existing home owner, you still need all the stuff a first timer needs — great credit, cash, proof that you can repay the loan.  The added kicker for existing home owners is that they may need to sell their house in order to qualify for a mortgage.  Back in the old days, this was easy.  Put a sign in the yard and wait for the multiple offers to come in. Today, it’s not so easy.  You have to price your home aggressively to get a buyer interested and if your existing mortgage is too close to actual market value.  Well, you’re screwed, too.

Many times, if an existing home owner wants to purchase another house or “move up”  they’ll need to get the Seller of the “move up” house to take a home sale contingency which ain’t very likely.  Sure.  You might get lucky and a good Realtor (such as myself) will most definitely go to the mat for you in order to get the home sale contingency approved by the Seller through their listing agent but it won’t be easy.  Meanwhile, if you get a buyer for your home you have to cross your fingers and pray that the buyer’s mortgage will go all the way through to the day of settlement and you get your check so you can buy your “move up” house*.

*note: existing home owners don’t really need to “move up”.  They can move down like from a single family home to a condo or whatever.  They can move sideways like from one area to another but the same type of house.  It really doesn’t matter what type of house you buy.  If you have owned a house for five consecutive years out of the last eight years you may qualify for the $6.500 tax credit (until April 30th).

It’s All About The Mortgage

So if home sellers all around the nation are wondering, “Where in the world are all these home buyers?”  The sad answer is that they may want to buy your house but not be able to get a mortgage which means they aren’t buying squat and there will be no tax credit, either.  This, unfortunately, is the dirty little secret about the housing stimulus.

It’s tough out there. Give me a call at 240-417-9100 or e-mail me and let’s see if we can “get it done”.

I suppose that after ten years of helping people buy and sell homes that I shouldn’t be surprised at anything. But, I am.

Even though, a house, town house, condo, duplex or whatever you want to call your home is probably the single largest investment of time and money most people will ever make, I find that there are tons of people who think the process is similar to buying a car from the used car lot or a pair of jeans at the local WalMart.

I’d Like That Home Over There. Is It On Sale?

Potential Home Buyer — this gentleman found my name somewhere. It could have been the Internet. He is calling about a home I have listed. This means I represent the Seller and the Seller’s interests. Anyway, this potential buyer really isn’t sure who I am. He asks if I live there or I’m the owner or what. I let him know I’m the Realtor for the Sellers of the home who still are living in the home. The guy starts to ask all kinds of questions like:

1. What’s the home “worth”? Answer: the listed price.

2. How much did the owners pay for it? Answer: that doesn’t matter because only today’s market value matters.

3. Will the owners help with down payment and/or closing costs? Answer: The Sellers will consider any written offer. Perhaps, Mr. Buyer, you should find a Buyer’s agent to represent your interests and prepare an offer.

The conversation went on for about two more sentences before I really needed to politely but firmly disengage. You see, in this case, I represent the Seller. I don’t have the authorization to make guesses at what the Seller might or might not be willing to accept. Even if I did have some instructions from the Seller, verbal agreements are worth zilch.

1. What does the Buyer’s financing look like?
2. When does he want to settle?
3. What contingencies are likely to be included in the offer?
4. This particular Buyer asked about assisting with a down payment. That doesn’t exist anymore. Unless you’re eligible for a VA mortgage, you need a minimum of 3.5% cash for a down payment. It can come from a friend, relative, even your church but it can’t come from a home seller.

Long story short. This Buyer had no clue as to how to buy real estate. His ducks are not in a row.

The Sad Truth

The sad truth is that most home buyers have very little idea on what the process is to buy a home.  They go on the Internet.  They may even plug in  a few numbers in any number of mortgage calculators available on the Web. They look at homes and they think they’re ready.  They’re not.  Home buyers really need to focus on:

1. Where, exactly, they want to live.  “Anywhere” “Near Metro” “Anne Arundel County” are not good answers.  There are literally hundreds of homes even within micro categories.
2. How much of a mortgage do they qualify for. Mortgages are getting harder and harder to qualify for.  Sterling credit scores, cash reserves, massive documentation and verification of financial ability.  All this is required to get a mortgage.  If you’re short in any one area.  Fogedaboutit.
3. Once you’ve talked to a mortgage professional about how much you can qualify for, you need to think about exactly how much you want to pay per month.  The principal and interest are not the only things.  Property taxes are rolled into your mortgage payment. Home Owner’s insurance is rolled into your mortgage payment.  Are there Home Owner Association dues?  Condo Fees?  All this is considered.

Bottom line: buying a house is not like buying a car or going through the checkout line at WalMart.  You need to have your ducks in a row…or it ain’t gonna happen for you.

Would you like to get your ducks in a row?  Give me a call at 240-417-9100 or e-mail me and I’ll help make sure your ducks are lined up and you’re ready to purchase you next home.

There are two types of people in the world:

1. People who actively have their home on the market or are looking to purchasing a home.
2. People who are thinking about becoming #1 people.

In today’s world, the US Government is trying to help #1 people achieve their goals.  They have the Home Buyer Tax Credit in place — $8,000 for the first-time home buyer and $6, 500 for the current or “move up” home buyer.  Both first-time home buyer and current home owner are a little over simplified since there are loopholes in both definitions but you get the general idea.

The home buyer tax credit helps the home buyer by providing a financial incentive that makes home buying more affordable or, at the very least, provides a little cash back to make home improvements or buy a nice big flat screen TV.  On the home selling side, it provides the seller with a slightly larger buyer pool.  More buyers = better chance your home will sell.

So What Does Snow Have To Do With It?

The catch is that home buyers need to have a fully executed (i.e., ratified) Contract of Sale no later than April 30th.  They need to have settled on the home of their dreams no later than June 30th.  The monster snow storms that have paralyzed the MD Suburbs is taking up valuable time that might otherwise be used to look for homes and initiate the negotiations leading to a ratified Contract of Sale.  In short, every day that passes by is another day lost.  The great countdown clock continues to click.

After all, the tax credit applies nationally.  There are large parts of the country where our snow doesn’t matter.  I’m thinking Florida.  I’m thinking Arizona.  You get the picture.

So, whenever we get a chance to finally dig out and start looking for homes, again, it’ll be important to realize and fully accept that time is limited and there ain’t a damn thing you can do about it.  Wait.  I take that back.  You can get out there and make a decision: take the home buyer tax credit or blow it off.

Check out the Real Estate Market Trends for your area .  Just click here.  You will get a totally FREE report e-mailed to you.

Many a year ago, there was no such thing as Virtual Tours or multiple interior and exterior photos of homes on the Internet.  Of course, many a year ago there was no such thing as the Internet.  When people wanted to buy a house, they contacted a Realtor who would help them look for homes that matched their criteria.  They would get in the Realtor’s car and go a callin’.  That’s how people decided about which home they would buy.

Fast forward to today.  Now, if a house doesn’t have multiple photos of every room in the house and lots of photos of all the angles of the exterior of the house and a few pictures of the neighborhood it might get crossed off the list.  I’ve had lots of clients tell me that if a house didn’t have photos they could look at on the Internet, they didn’t go any farther.  It wasn’t even considered.

What About Houses in Bad Shape?

There are a lot of foreclosed homes and short sales in the marketplace today.  Most of those homes do not have more than one exterior photo showing the front of the house.  Why?

• listing agents for the banks that owned the foreclosed homes don’t have the time based on the quantity of homes they list
• listing agents for sellers of short sales don’t want to be bothered
• the home may be in such disrepair that showing a photo may actually deter someone from looking at the house in person

There are even homes that are not short sales or foreclosures that simply don’t look that great.  People who have been living in a home for decades may not have made any upgrades.  Lots of people are really not that tidy.  People die and the house is just filled to the brim with collected artifacts and knick knacks.  The kids (or the Estate of the deceased owner) need to sell the house but they have no strong interest in making it look like a picture from a magazine.

The Written Description

The truth is that many Realtors will write descriptive text about a home as if you might be buying the Taj Mahal.  When you get there you wonder what planet the Realtor was on when they wrote it.  We all know the  “code”.

• Cozy = cramped.
• Lots of potential = massive fixer upper.
• Near schools = the elementary school playground is right next door.
• Golf Course view = make sure you have safety plate glass windows to deflect the flying golf balls

Yet, when some Realtors really lay it on the line and talk about the need for TLC or major rehab, people  don’t want to believe it.  That’s where some photos might come in handy.  However, I can’t help but think it would be doing a disservice to the home seller to expose a home in a state of major disrepair simply for the convenience of the Internet home shopper.

What do you think?  Pictures….or no pictures with an honest written description?

As if selling your home wasn’t hard enough in this environment with hundreds of short sales and bank owned foreclosures depressing prices in your neighborhood. Add to that the fact that mortgage guidelines are becoming more and more restrictive.  It’s a downright challenge to sell your home even if you have tons of equity.

Now, we in the MD Suburbs are having one of the most challenging winters in memory.  Sure.  We’ve always had a snowfall or two and 2″ to 4″ is usually enough to shut down the schools and even many employers including the “non-essential” US Government workers. This year, though, we’ve already had a couple of dooseies and this weekend is shaping up to be the mother of all snow storms.  My quick check of weather.com indicates anywhere from a foot to 20″ depending on your location.  However, lots of people are saying, “Hey, have you heard? We’re going to get [insert really big amount of snow here]?”

No Showings

Of course, what this means more than anything else is that there aren’t going to be many people out looking at houses.  The roads are bad. Access tot he front door is iffy.  It’s a real mess.  Meanwhile the countdown clock is still ticking for the home buyer tax credit — $8,000 for first-time home buyers and $6,500 for current home owners.

Of course, the real bummer is that if the snow is really as bad as people and weather.com are making it out to be there will be a lot of people with a lot of chips and dip and beer.  Super Bowl parties are going to be mighty slim.  The bars might be a lot emptier than they hoped and people who have been planning the big Super Bowl spread and getting all the goodies together might have a lot of leftovers.

I’m calling it for the Saints by10.

I was looking into some ways to create some income from the Internet and found a pretty interesting system. Click Here! to check it out.

Yep.  It was another snow day in the beautiful MD Suburbs of DC. This time, though, it was only about 4″ to 5″ and it was light and powdery so it wasn’t hard to shovel except that my driveway if a little on the longish side.  Luckily, I have  a garage and that’s where I keep my car.  Sure.  I keep other things in there, too.  Lots of stuff I would really like to get rid of but my wife makes me keep and some stuff that I might use from time to time.

This (very) short video reminds you that, if your home is for sale, it would be a good decision to shovel our the driveway and sidewalk to allow easy access to your home.  Potential home buyers like to be able to actually see the house they’re planning on buying and if they can’t get to the door because of all the snow, they’ll pas it by.  It’s also about the joy of having a garage so there is at least one car I don’t have to brush off.

Check out the Real Estate Market Trends for your area .  Just click here.  You will get a totally FREE report e-mailed to you.

This is going to be a short post about how some people think about buying a house vs renting the apartment, town house, condo or even the single family home they’re renting.

First, there is nothing wrong with renting a place to live.  Lots of people do it.  In fact, I know people who have rented their entire lives.  There are people who have been home owners who, for a variety of reasons decided to give up on home ownership and went back to renting.

Does It Make Economic Sense to Own a Home?

Depending on your situation, it may also make good economic sense to own a home.  I have this cool spreadsheet that allows me to plug in some numbers and a few assumptions about how your home will increase in value over time.  At the bottom of the spreadsheet is a number which tells you the difference between renting and owning a home.  Sometimes the result is amazing.

Of course, from my point of view, the real benefit of owning a home is that you don’t have to worry about the landlord raising the rent or taking their sweet time to make repairs.  Sure. When you own a place, the responsibility is yours.  That also means you can do it yourself or hire in a contractor to take care of any problems.  You can paint whatever color you like, make some renovations, whatever. You can also take the opportunity to get involved in the neighborhood whether it’s with the schools or local civic association.

My point here is that when people look at the cost of buying a house vs what they’re paying for rent, they need to take a lot of things into consideration.  The monthly mortgage payment might seem higher, at first, but after looking at the tax deduction for the mortgage interest, the increase in the value of the house over time, and other factors you may find out that it is, in fact, cheaper to own than to rent.

Give me a call.  I can run some numbers for you.

Check out the Real Estate Market Trends for your area .  Just click here.  You will get a totally FREE report e-mailed to you.

The Federal Housing Administration (FHA) has announced plans to increase the amount of up-front cash paid by new borrowers and to require higher down payments from those with the poorest credit.

A Little History

Prior to 1983 FHA loans required the borrower to pay an annual mortgage insurance premium (MIP) of 0.50% of the principal balance per year. In 1983 President Reagan initiated an additional premium known as Up Front MIP (UFMIP), paid in a lump sum at closing. The premium equals 2.25% of the loan amount and is due at closing.  The premium could be financed into the loan. On January 1, 2001 the UFMIP was reduced to 1.50%. On October 1, 2008 the UFMIP was raised to 1.75% for purchase transactions.

FHA regulations required the borrower to invest 3% of the sales price which included a minimum 2.25% down payment. The seller was allowed to contribute up to 6% of sales price towards the borrowers settlement costs.

Fast Forward to Today

Effective January 1, 2009 the down payment requirement was raised to 3.5%.

The new policy changes would increase the UFMIP from the current 1.75% to 2.25% of the loan amount. Borrowers with a credit score of less than 580 will have to make a down payment of at least 10%. (note: It should be noted that the policy of most lenders is to require at least a 620 credit score to be approved for an FHA loan.) Under the proposal the amount the seller can contribute to the borrowers closing costs will be reduced from 6% to 3%.

The new polices are expected to be implemented starting this spring.

Before the “subprime crises” FHA’s loan volume had fallen substantially. FHA current backs 30 percent of all loans for home purchases and 20 percent of refinanced loans.

For more information go to the FHA Press Release

Thanks to Alan Gross of Prime Lending for providing this timely information

Check out the Real Estate Market Trends for your area .  Just click here.  You will get a totally FREE report e-mailed to you.