Archive for the ‘Real Estate’ Category

You Can Do It!! Part 3

July 27, 2015

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Let’s finalize our mortgage myth busting process right now.  We have previously exploded myths regarding the character and capital criteria in mortgage lending.  Now let’s deal with myths regarding your “capacity” to obtain a mortgage.

When it comes to loans, the term “capacity” is your ability to make your monthly payments.  To determine your capacity to pay your mortgage, underwriters will compare your monthly gross income (before taxes, retirement, and other deductions) to all of your monthly debt payments.  If your debt payments are not too high relative to your income, you are deemed to have sufficient capacity to obtain the loan.

A surprising percentage of people believe that if they simply have a student loan – regardless of the amount – they cannot qualify for a mortgage.  The TRUTH here is that you can still qualify for a mortgage even if you do have a student loan (or an auto loan, or an auto lease, or credit cards, or other types of debt).

The critical question here is not IF you have a student loan, instead it is, “How large are your payments relative to your income?”  Underwriters will scrutinize your “back ratio,” which is the sum of all your monthly debt payments – student loans, auto loans, the new mortgage payment on that house you want, etc. – divided by your monthly gross income.

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As long as your back ratio is not too high, say 45% or less for a conventional loan and 50% or less for a FHA loan, you will likely have your loan approved (assuming no other underwriting “issues,” of course).

So let’s summarize the mortgage myth destroying logic with this:  if your credit score is 620 or higher, and you have (or can get from relatives) enough cash for a 3% or more down payment, and if your current monthly debt payments are not excessive, and you want to buy a house, then remember, “You can do it!”

Actually, I’ll correct this as you will need help from someone licensed to originate loans, so let’s just say, “We Can Do It!”  If you dream of owning your own home in the state of Georgia, give me a call and let’s discuss your situation.  I’ll be honest and tell you what the real situation is.  Don’t believe the myths and then wait to take action.  The TRUTH is we might be able to get you into your dream home sooner than you think.

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Relaxing Criteria for Condo Mortgages

June 19, 2015

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Considering buying a condo now?  Your timing is good then.  In recent months, mortgage market makers Fannie Mae and Freddie Mac have loosened the lending requirements for condo purchases.  You can buy a condo with a credit score as low as 620 and a down payment of 5% or more.

Understand that the underwriting process is still different for a condo purchase, but the standards are being relaxed now.  As with single family home purchasers, underwriters will review the credit score, available assets, income, and debt of condo purchasers.

In addition, underwriters review the financial stability of the complex in which the condo is being purchased.  Condo complexes assess HOA (home owners association) dues to fund expenses such as maintenance for buildings and common areas, utilities, insurance, reserves for replacing large items like roofs and parking lots, etc.  When the economic crisis hit, owners at many condo complexes became delinquent on their dues payments, causing financial difficulties for the complexes themselves.  In reaction to this, lenders imposed tighter restrictions on condo underwriting.  Now lenders are relaxing these standards.

When underwriting the condo complex, the lender will require documentation from the complex management as follows:

  1. A completed condo questionnaire reporting details about the complex.
  2. Current year HOA budget.
  3. Master insurance policy.

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Below are some key condo criteria that the underwriters consider.  The underwriters will likely deny your condo loan if the complex fails to meet any one of these items:

  1. At least 10% of the annual HOA budget set aside for reserves.
  2. No more than 10% of the units owned by a single individual or corporation.
  3. No more than 20% of the units used for commercial space.
  4. No more than 15% of the homeowners more than 60 days past due on their monthly HOA dues.

Bottom line, if you want to buy a condo in a well-managed complex that meets the above criteria, it has a good possibility of being approved; but it will require some extra work as compared to buying a single family home.  I have financed multiple condos in the last few months and we have not experienced any issues with underwriting.  If you are looking to buy a condo in Georgia, I can help you get started!

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Why are we not having a faster housing recovery?

September 25, 2014
blog-author-paulbusino
Earlier this week, we focused on why the economy was sluggishly turning around. In that post, we touched on how the economy is directly tied to the housing market. The better question to ask could be “why are we not having a faster housing recover?”
Lending guidelines are stricter now compared to five to six years ago. I think we all agree we needed to tighten lending guidelines, but many feel we have over corrected. The biggest problem I see that exists are although Fannie Mae, Freddie Mac and FHA have one set of requirements, many lenders will not lend on those standards because of the concern of a buy back.
A buy back is when a loan is deemed not to conform to the guidelines and the lender is required to purchase  the loan back from Fannie Mae, Freddie Mac, or FHA. This tends to be more prevalent when a loan defaults.
A good example… a lender makes a loan and the loan defaults 9 months later because the buyer loses his job. The agency that owns that loan will audit to see if anything is not correct in the loan package, and I mean anything. If any small thing is found, they will require the lender to purchase the loan back. This happens even if the mistake in the loan file (such as a typo or missed signature) does not correlate to the reason for default. This has caused many lenders to put additional requirements to help mitigate the risk. This creates a tight credit environment, even more so when you add all the government regulation into the mix.
Some feel that if buyers put 20% down to buy a home, it would eliminate foreclosures. The idea is if a buyer has that much “skin in the game,” they would not stop making their mortgage payment.
This is not true. VA loans are 100% financing. It has the lowest default of any loan program available. Perhaps we should take a closer look at the requirements of the VA loan and us this as our standard.
Another area of concern is indications from the government that they want to shut down Fannie Mae and Freddie Mac. Many bills have been introduced to privatize this part of the mortgage industry. It may sound good, but if the mortgage industry privatizes expect interest rates to be roughly 2% higher than government backs the mortgages.
It remains to be seen how this will all unfold, but hopefully the overregulation will come to an end soon.
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Why is the economy now recovering faster?

September 23, 2014

blog-author-paulbusino

Many ask themselves this question every day. It seems that the economy is starting to turn around but appears to be sluggish or slowly improving. I believe there are a few components that are causing a seemingly slow recovery.

 

  1. The Government: Washington continues to battle over the debt limit, and fears of a fiscal cliff have hurt the growth of the economy. There is also a point when excessive regulation creates an environment for companies to keep excessive capital reserves. When things like this occur, it has an impact on the economy. The liquid requirements, stress tests, and capital requirements on banks have created less capital in the market to invest in business. Let’s face it, it is harder now than before to be an entrepreneur or live the American dream. Over regulation is as damaging as under regulation. Many feel we have gone from one extreme to the other.

 

  1. Housing market: Our  country thrives during a strong housing market. It always has and always will. When new construction is booming everyone benefits. It has a trickledown effect on the economy that either directly or indirectly effects everyone in our country. While new home starts have been up in 2014, even that has slowed as we enter the second half of the year.

 

With the housing market impacting the economic recovery, maybe the better question to ask is “why are we not having a faster housing recovery?” That leads us into the third factor – lending guidelines – which will get its own post later this week.

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The possible end of short sales – an annual tradition

December 16, 2013

blog-author-clayjeffreys3

It seems like a year ago this scenario was making rounds in headlines. Well, that is because it was in the headlines.

When a home is sold as a short sale, the seller (former homeowner) receives a 1099 for the difference of what is owed on the home they just sold versus the amount they sold the home for in the short sale. For example… a seller owes $300,000 on a home that sells as a short sale for $200,000. The seller receives a 1099 from the bank for the difference of $100,000. That difference of $100,000 is taxable income due to the IRS. The seller could have a tax liability around $25,000 owed to the IRS.

This nightmare scenario for homeowners underwater and attempting to short sale their home has not been a problem over the past several years. The Mortgage Debt Forgiveness Act passed in 2007 allowed short selling homeowners to not be liable for the difference of what is owed from the sale of their former home. This Act expired at the end of 2012, but was extended by Congress for an additional year.

Since Congress is basically done for 2013, and didn’t agree on a lot over the course of the year, this Act will expire at the end of the year. The one hope homeowners still in the short sale process have is that Congress will reconvene in 2014 and extend the Mortgage Debt Forgiveness Act retroactively for another year. If Congress fails to do this, then the debt forgiven by the bank on short sales becomes taxable income for the seller on their next tax return.

Since short sellers already face financial hardships (thus the reason for the short sale in the first place), this would not be welcome news as their choices would be a short sale with a tax liability OR foreclosure/bankruptcy.

Hopefully Congress can begin agreeing and working together a little better in the coming year. Extending the Mortgage Debt Forgiveness Act seems like a “win” for both sides. Let’s see how it all unfolds in 2014.

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Brave New (Real Esate) World

July 10, 2013

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In case you haven’t noticed – the housing market is much different in 2013 than 2012. Over the past several years, the real estate market has been a buyer’s market due to fewer people looking to buy and a record number of foreclosed properties available to purchase. In short – too many homes and too few buyers.

That is definitely not the case now – the market shifted back in favor of sellers.

There were a few events that got us to this point:

  1. As normally happens toward the end of a year, the number of homes for sale declines. That happened at the end of 2012 like any other year. One thing that was new compared to recent years…
  2. Foreclosure rates have decreased and the number of foreclosed homes for sale dropped dramatically. Now there are far fewer homes on the market to buy than there has been in previous years.
  3. Interest rates are rising. They have been slowly edging up all year, and had a dramatic rise over the past couple of months. This has motivated buyers to get out there and find a home.

With fewer homes available, it is now a seller’s market. You can tell this because sellers are now receiving multiple offers on their homes, receiving above asking price offers, and are paying less money toward a buyer’s closing costs.

How should a buyer respond?

First – buyers need to be prequalified. If you are looking to buy a home in the state of Georgia, I’d be happy to help! Contact me, and we’ll get the process started.

Second – buyers must make offers quickly. The most common statement I hear from my clients right now is “the home is no longer available.” Good homes are not staying on the market long. When you find a home you like, instead of taking a few days to consider making an offer, go ahead and make the offer. While waiting on a response from the seller, you can debate whether or not this is THE home you want.

Waiting a day or two to make an offer on a home you like in the current market may mean you have to go out and find another home. To be ready, get prequalified and make offers quickly. Over the past few years, buyers had days (sometimes weeks) to make an offer. That is no longer the case in this brave new real estate world.

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Junk Mail

March 25, 2013

blog-author-clayjeffreys2

Whether you own a home or rent a home, you can’t escape junk mail. That said, when you get a new mortgage, you are opened up to new and different types of junk mail. I first blogged about this in 2011. Since the home buying market has picked up this year, I’ve been receiving more calls and emails from clients wondering why they are getting so much junk mail. I figured it was time for an update to the post.

Can you stop junk mail? Yes and no. You can opt out all you want, but you can’t stop companies from sending you junk mail offers from the information found in public records. This is where these types of companies find your information.

The type of junk mail I’m talking about here can be deceptive. The text on the envelopes say “complete and return”. Once you open the letter, the top of the letter will say things like “You are not protected”… “last chance”… phrases that cause people to react instead of read and respond.

On top of the words being used, the letters appear official. They will have your lenders name on it. Some of them even have your loan officers name on it. Somewhere on there, you’ll see an “*”. If you find the details that correspond with the “*”, it is usually at the very bottom or on the back of the letter. The text after the “*” usually reads something like this:

“Our Company is in no way connected to INSERT YOUR LENDER NAME HERE.”

Unless you specifically looked for this information, you probably wouldn’t have found it. This doesn’t even get into other offers you’ll receive such as handwritten postcards telling you a parcel has arrived for you but couldn’t be delivered at your new address (yet the postcard could be delivered?!?).

The moral of the story is this – When you buy a new home, a public record of your deed is recorded at the court house. Companies pay people to go through and get the information on new deeds in public records. Then junk mail will begin heading your way. Legitimate mail will come from your lender telling you how and where to send your mortgage payment. You’ll also receive junk mail appearing like it is coming from your lender.

Take your time when going through the mail as you don’t want to respond to the wrong letter!

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Guidelines for a Successful Home Inspection

June 20, 2011

You would think that once a buyer and seller have agreed on the price and terms of the sale of a home that the hard part would be over.  This is not always the case.  Home inspections if not handled correctly can sometimes cause more anxiety than negotiating the price and terms of the home.  Knowing a few simple guidelines will help in working through inspection issues.

Inspection Period aka Due Diligence Period

In Georgia this period is usually called the Due Diligence Period.  It is during this time, which is agreed to by both buyer and seller, that the buyer has the right at their own expense to inspect the property for defects.  The most common types of inspections are Home Inspections, Termite Inspections, Radon Inspections, Septic System Inspections and HVAC Inspections.  These and any other inspections that a buyer would like to have performed on the property must be concluded during the Due Diligence Period.

During The Inspection

In most cases a buyer, or their agent, will arrange to have all required inspections scheduled during the same times.  With the exception of the Radon Test, which takes several days, all other inspections could be conducted at the same time.  By scheduling inspections this way it cuts down on the amount of time required which provides more time to resolve any issues that may need to be addressed.

It is a good idea for the buyer to attend the inspections so that they can see first hand what is being reported.  It is never a good idea for the seller to be present during inspections.  Some agents attend inspections, while others may stop in near the end of the inspection, while others do neither.  I personally like to receive the inspection report from the inspector and after evaluating it, go back out to the house to view each item of concern.   This equips me to properly advise my client on what is involved in addressing the inspection issues.

Evaluating the Inspection Report

Once the report is received, generally via email from the inspector, it is important to go through the report with your agent.  Generally the inspection will identify items as “Serviceable” or “In Need of Repair”.  The ability of the agent to assist in the evaluation will depend on whether they attended the inspection and whether they understand what is needed to address the items identified in the inspection report.  Each item should be considered individually and should reflect the seriousness of the defect, resulting in whether a buyer will request that the seller correct the defect; or whether the seller will consider agreeing to correct the defect.

Writing the Amendment to Address Inspection Concerns

Once evaluated it is now time to prepare the Amendment to Address Inspection Concerns.  Although there are numerous ways to accomplish this; there are some that I would advise against due to the effects it has on the seller.  One method to avoid is to merely reference in the amendment the item number in the inspection report that needs to be corrected.  This is the easiest for the agent because it requires little, if any, effort in drafting a corrective action for the items to be addressed.  It is also difficult for the seller to convey to a contractor exactly what needs to be done.  The best way to handle it is to categorize the items being requested.  Here are a couple of examples that will provide greater clarity and will increase the likelihood of a successful resolution to the Inspection Amendment.

Exterior Deficiencies

1. Seller agrees to replace the existing LP siding, and prime, seal, caulk and paint it to match the existing siding at the following locations.

Both sides of the chimney, where the siding meets the deck.
The bottom courses of siding behind the AC unit.
2. Additionally seller agrees to caulk and paint to match all rusting nail heads installed in the siding.

Electrical Deficiencies

1. Seller shall cause the electrical outlet to the right of the refrigerator in the kitchen to be GFCI protected.

2. Seller shall replace the GFCI outlet on the rear deck and cause it to be operational.

3. Seller shall remove the exiting fixture above the master bath tub and dispose of it at their discretion.

4. All electrical repairs shall be performed by a licensed electrical contractor.

Plumbing Deficiencies

1. Seller shall cause the water pressure to be adjusted to a PSI of between 35 and 80.

2. Seller shall have a licensed plumber evaluate the moisture in the combustion chamber of the hot water heater, and to repair and or replace the hot water unit as recommended.

3. Seller shall cause the toilet in the main level full bath to be properly secured at the floor.

4. All plumbing repairs shall be performed by a licensed plumbing contractor.

In Conclusion

By following these simple guidelines many problems and misunderstandings associated with Inspections can be avoided, and anxiety will be reduced.  Buyers should require that receipts for work be provided prior to closing and sellers should not be offended by being asked to provide them.

Van Purser is a licensed real estate broker in Georgia.  Since 1981 he has successfully purchased and renovated over 400 homes.  His expertise is in the area of foreclosures, rehabs and fixer-uppers.  Additionally, he has represented hundreds of clients over the years as a broker with Metro Brokers, RE/Max and now with his own firm.  He and his wife, Jeanne, who is also a broker, have been married since 1977.  Van can be reached at 770-623-3313 or by email VanPurser@VanPurser.com

Flip this Alpharetta Foreclosure

May 3, 2011

I – Clay Jeffreys and overseer of this blog 🙂 – thought it would be great to include this post from regular guest contributor Van Purser. While this blog details flipping a home, it also provides some insight into work that can be done on a home as a primary residence or investment property using the Fannie Mae HomeStyle loan I discussed in an earlier post.

In our last newsletter we reported on the status of a HUD foreclosure we were planning on purchasing to renovate and sell.  Since that time the renovation was completed and the property was resold and closed on April 12th.

We felt that this particular home, located in The Hunters Forest subdivision, off of Jones Bridge Rd, should sell for the mid to upper $140’s.  We had originally planned on adding a sunroom to elevate the price to the mid $150’s, but decided not to.  We felt that with our purchase price of $71,000 we would still be able to make a profit without adding the sunroom.

Our plans were to close just before Christmas, and to begin the renovation shortly after the beginning of the year, so that we would have it ready to return to market by March.  Instead we closed on November 30th, and started the renovation immediately, in order to provide work for our crew in advance of Christmas.  It worked out great. We finished on Christmas Eve.  Three weeks, and over $32,000 later we were finished and ready to put property on the market.

We started out $154,900, but after a month realized that the market would not support it and reduced the price to $149,900.  This increased activity, but did not yield a contract.  We continued to monitor the market and decided to reduce the price again to $144,900 after a couple more weeks.  Within a few days we were under contract at $142,000.  Not exactly what we had hoped for, but still worth the effort.

We were so please with the renovation, and the BEFORE & AFTERS show the transformation that took place.  One thing we did differently on this home was re-trim the entire home.  This added a lot of character to the home.  Another thing we did was add the dividing wall between the living room and dining area, to provide some separation.  Also, we had to add a new deck and start over in the bathrooms.

Homes like these are available for purchase, and will provide an opportunity to improve the neighborhood and to make a profit.  If you would like to try one, let me know.

When Considering a Real Estate Broker…

April 19, 2011

Many people incorrectly assume that real estate agents are all basically alike and that having a real estate license is the sole qualification necessary to represent the interests of a buyer or seller. This misunderstanding has resulted in incorrect advice, unmet expectations, financial misfortunes, and broken friendships. There is a better way.

In Georgia, anyone who successfully attends an approved 75-hour real estate course and makes a minimum grade of 75 on the state exam may secure a real estate salesperson license. If they remain in the business for three years, take another 75-hour course, and complete additional continuing education, they may take the brokers exam. This results in a total of 175 to 200 hours of classroom training for brokers. But 80% of all new real estate sales licensees don’t make it to the third year.  Additionally with the turmoil of the real estate industry over the last several years, many agents have left the industry in search of other professions, leaving behind the most experienced,  qualified and tenacious agents and brokers.

Few people realize that in the state of Georgia, the relationship between a broker, their licensed salespeople, and the clients they represent are modeled after the same laws of agency that apply to attorneys and accountants. This means that you should select your real estate professional in much the same way you would an attorney or accountant. If you were facing a life-defining legal issue or a financially-defining tax issue, would you want someone with little or no experience representing you or someone with a proven track record? The answer is obvious: You would want the most qualified, experienced person you could afford. By securing the most qualified person, you will increase the likelihood of achieving your desired outcome. In fact, experienced real estate professionals pay for themselves.