Why Buy Now?

March 22, 2013

Real estate…. it’s been such a dirty word for the past few years. We were told that the housing bubble caused all of our economic problems and you couldn’t point enough fingers at bankers, federal regulators, appraisers, and yes, even we Realtors had our share of the blame.

Truth is, it happened. We survived it. Record foreclosures…. Years ago (16 to be exact) when I started in real estate you almost never heard of a foreclosure. Then all of the sudden, it was our life. Now we are faced with short sales, foreclosures and … my favorite… the traditional sale. It’s wonderful to engage in a transaction that closes with an actual, live Seller sitting at the closing table with the buyer!

I speak about the past few years in past-tense more for the sake of trying to get a historical perspective about it. We’re not completely out of the woods yet, but we’re on our way. The pace of sales and pricing is trending favorably, for a few months in a row, now. There is more confidence and optimism on behalf of buyers and sellers alike. Perhaps it’s because every time they turn on their tv, radio or computer, they aren’t being bombarded with negative messages about real estate!

It’s BEEN the perfect time to buy for a long time, now. Inventory was high, and mortgage interest rates have been so low for so long!

What I’ve noticed is that buyers fear the real estate transaction a little because of a lack of information about how loans work. While we seem to be wanting less, and want to save more, nobody is giving advice on how much of a down payment you need to buy a home.

The magic answer: 0-20% down or more. Obviously, the more money you have down the better as it will qualify you to avoid things like private mortgage insurance or lower interest rates. However, let’s say that you’re going to buy a foreclosure that’s already marked well under it’s fair market value for a quick sale, but it needs some tlc. Assuming it will pass inspection and other criteria, why not look into a USDA Rural Housing loan or FHA or WHEDA loan that will allow you to purchase with 0 to 3.5% down? More people qualify for these types of loans than you realize.

Here’s the secret to mortgage shopping: You HAVE to shop around! You have to know what’s out there because not every bank offers every type of loan. Ask questions. Don’t know where to start? Here are some sample questions that if I was buying a home the first time, I’d want to ask:

1) What types of loans do you offer to first-time homebuyers?

2) How much down payment do I need to purchase a home?

3) How long does it take to process my loan?

4) What are the best terms I can get for a loan (consider 15 yr mortgage vs 30 yr mortgage)?

5) What do I have to do to get pre-approved?

6) For how long is my pre-approval good?

7) What fees will I be charged for getting pre-approved?

8) What fees will I be charged for getting my loan through you?

9) What hours are you available? Will I get your cell phone number? What if I need to get in touch with you on nites or weekends?

Buyers, here’s what I’m seeing: Inventory is still about where it’s always been in terms of how many homes are on the market, but we are down slightly. This is the time of year when we traditionally list a lot of homes and add to the inventory. Homes that are priced well and are in good condition go fairly quickly. You MUST be pre-approved so that you know with confidence the offer you are making is going to stick, and that gives the seller confidence, as well. If they are comparing your offer with a pre-approval letter against another offer where they have no reassurance of the buyer’s financing, guess who they are going to favor?

Don’t play games: Watch the market and know what pricing is in your market; a buyer’s agent will help you with pricing. If you want to throw low-ball offers at everybody, even your agent will become discouraged and stop working with you. Not everybody is in distress and you have to know who you’re negotiating with and what you’re negotiating on. There is no magic rule: Make a fair offer and see what the seller does with it. Most sellers will counter a fair offer but reject a low-ball offer.

Remember that getting the offer accepted is just one part of the process; you have to get through a 30-60 day period in which you will have an inspection (with possibly more negotiation), loan approval and appraisal, at the very least. Create good will; the seller has probably already taken a hit on the equity in their home. If you need to negotiate an inspection issue, you want cooperation from the seller, and that is earned in the early negotiation of the offer.

Get yourself to a Home Buyer Seminar. Learn the ropes. Find a real estate agent that you trust and discuss Buyer Agency or Buyer Representation. Then let them guide you through this process. You won’t be sorry! And soon, you won’t be paying rent anymore!

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Whoa! Things are crazy-busy in this real estate market! The past two weeks have given me many opportunities to work with both buyers and sellers and our listings have gotten lots of showings, lately. (I currently do not have any listings that are short sales nor foreclosures, so all of my listings are traditional sellers.)

With so much inventory on the market, traditional home sales are enjoying a boost of activity. Short sales and foreclosures are still very much a part of the picture, but buyers still want the convenience and “less strings” of a traditional sale.

As a buyer, you should keep in mind the level of activity and increased competition. If you find a property you really like, that information should be in the back of your mind as you draft your offer. Here are some other things to contemplate:

  • Representation — In Wisconsin, buyers have an opportunity to be represented by an agent, known as a Buyer’s Agent. There is a contract for this type of representation. Discuss this with the agent you are working with so that you know what is available. It’s best to have this conversation BEFORE you begin searching for homes. Ask which party the agent is representing in the transaction.
  • Strategy — Is there a lot of competition for this home? It’s ok to ask if there have been offers and showings, but it shouldn’t be the sole deciding factor that determines the strength of your offer.
  • Earnest money — Will you provide earnest money with your offer or after acceptance of your offer, and how much? Different markets have different expectations depending on price range. Ask your agent for guidance on this. There are some – albeit few – offers that don’t have earnest money at all.
  • Personal property — What items of personal property will be included in the sale? Do you want all of it? Do you want things that the seller didn’t mention would be included? It is common to see appliances left at the home but not all sellers want to leave them.
  • Pre-approval letter — This is almost a “must have” before you start looking at homes anymore but sometimes the process takes a different direction. If you are making an offer on a short sale or foreclosure home, you WILL need a letter of pre-approval before you make your offer. Other sellers are learning about this, and they want to see them, too – preferably at the submission of your offer. Ask your agent for direction on this topic.
  • Contingencies — Every offer has contingencies, and the most popular ones are for financing and inspection. However, what about other issues: zoning, rules and regulations, covenants and deed restrictions, surveys or maps, marking of lot boundaries, etc. Discuss your concerns with your agent before drafting your offer.
  • Closing costs — Many of the offers in my area will be financed through FHA or Rural Development. These programs are intended to help buyers who have less than 20% down to make their purchase. Consequently, these offers will often include a contingency for the seller to provide a credit at closing to cover some of the buyers’ closing costs and pre-paid expenses like appraisal, etc. Check with your lender before the offer is drafted so that you know if you will need a contingency for this in your offer.
  • Buyer’s use of the property — I always ask my buyers: “Will you use this property in the same way as the current owner is using it?” In other words, do you plan to purchase a single family home and then after closing run a business from your home? Do you plan to convert a duplex to a single family residence or vice versa? Do you plan to install a fence or shed or put up a new garage in place of an existing one? Your agent needs to know that so that contingencies can be put in place to check out those options. Sometimes people investigate these details prior to making an offer. Check the zoning of the property to be sure that it is in sync with how you will use the property.
  • Inspections and tests — Have any been done by the seller? In our market it is traditional for buyers to have a home inspection, but on a rural property they will also be doing a well and septic inspection, as well as water tests, at a minimum. Other types of tests can include lead based paint, radon, mold, or pest inspections. Ask your agent what is typical in your market. If one of the new occupants of the home has allergies, consider what contingencies you might need in your offer.

These are just some of the more common issues that I review with my buyers. Every offer is different: That’s one of the exciting things about working in real estate!  When possible, I recommend doing as much research as you can prior to making an offer, but don’t let indecision weigh you down and stop you from getting your dream home! Get as much information as you can in writing, from the source of the “decision:” In other words, if you want to put up a fence, get a copy of the covenants and deed restrictions (if any) and municipal ordinance, if applicable, to see if you can do what you want to do. Also note that detail is important: A subdivision may not allow a privacy fence, but they will allow a chain link fence.

A final word about contingencies: Contingencies, when agreed upon between the buyer and seller, give the buyer (or seller) the opportunity to do something or check on something and if it isn’t acceptable to them, this can be a reason why the offer may not go to closing (every situation is different and you may need legal advice). If you ask for a radon test and the seller approves that contingency in your offer, you don’t have to do the test: You can waive contingencies at your discretion but if I were your agent, I’d want to see that in writing to document that you changed your mind.

I’ll let you in on a little secret: Some real estate agents think that real estate is weather-driven. As a manager, I frequently hear from agents that “this is a bad time of year” for real estate because of the cold, ice and snow. Then, in spring, they tell me “this is a bad time of year” for real estate because of the spring thaw, mud, no flowers or trees in full bloom yet, allergies, etc. Along comes summer and guess what: “This is a bad time of year” for real estate because of family vacations, allergies (again!), summer rec programs for the kids, and so on. By August, I’m told, buyers and sellers are focused on getting their kids back to school. Here comes fall and guess what: “This is a bad time of year” for real estate because of high school sports kicking off. And then, well, it’s the holidays.

So, here’s the even bigger secret: HOMES SELL ALL YEAR ‘ROUND!

Not every potential buyer or seller follows the same calendar. In fact, given the above excuses, I’m not sure I could even be convinced to make this my career! According to my calculations I might have a month or two out of 12 to make my living!

So, Buyers, when IS the best time to buy?

Answer: The best time to buy is when you’re ready. We live in Wisconsin. There will always be snow and ice in winter, rain and mud in the spring, heat in the summer, holidays, school activities, etc.

Be realistic: In the summer we want to know how well the home holds heat and how sound the foundation is come the spring thaw. Serious buyers ask serious questions: They want to see the heating and electric bills for the prior 12 months of the home’s occupancy (many utility companies now make some general information available on-line). Buyers want to see the property condition report provided by the sellers. Serious buyers hire a certified home inspector to review the property and assess it’s condition.

Here’s another tip: Ask your insurance agent for a CLUE report* on the property to see if there have been claims filed for water intrusion. This is a particularly good strategy when purchasing a foreclosure property. (There may be a fee for such a report.)

By the way, no matter how bad the economy was, there were always lenders approving buyers for home mortgages.

No more excuses! Get out there and get looking!

* C.L.U.E. (Comprehensive Loss Underwriting Exchange) is a claims history database created by ChoicePoint that enables insurance companies to access consumer claims information when they are underwriting or rating an insurance policy. (information courtesy of http://oci.wi.gov/pub_list/pi-207.htm , from the Wisconsin Office of the Commissioner of Insurance).

If you are the “average” buyer, you’ve been looking online at homes for about 2 years. You’ve wandered into occasional open houses but you’ve never felt an urgency to buy anything and you’ve been pretty nervous about what you’ve been hearing about real estate. It sounds scary, doesn’t it? So many people that you know losing their homes: friends, family members, former classmates, neighbors, and co-workers.

The first thing that you need to know is this: The water is safe! It’s OK to buy a home!

  • Interest rates are starting to rise, but they’re still very much in a “safe” zone. However, don’t make the mistake of playing a waiting game, hoping for them to fall. Odds are the rates will rise, instead, causing your monthly payment to increase.
  • Lenders want to make good investments, so they carefully screen and qualify buyers who want mortgages.
  • While we all like to feel like “it’s all about us,” when you are dealing with a foreclosure or short sale, you relinquish control; the lien holders have more control over the transaction.
  • Sometimes buyers have added cost when working with a foreclosure property; a common expense  is the buyer’s policy of title insurance.
  • As more buyers gain confidence in the economy, you will have more competition in your search. Eventually, competition is likely to lead to multiple counter offers for the same property, and rising prices.
  • Most showings are going to require appointments for viewing; be prepared to provide 24-48 hrs notice minimum when you want to see a home.

If you plan to buy a home within the next 6 months, it’s time to interview agents. Be honest and tell them your timeline. Be pre-approved and be prepared to update your pre-approval letter when you make an offer. Know what you’re looking for so you can describe your “needs” and “wants.”

In Wisconsin, you do not have to have a buyer’s agent to make an offer on a property. The state does require that an agent provide you with a disclosure about how they will work with you in the transaction. A buyer’s agent will ask you to sign a contract (in Wisconsin, you aren’t represented in a transaction unless you have a contract with a buyer’s agent, much like what a seller has signed with a listing agent). Here are some questions you might want to ask when interviewing agents to represent you:

  • Do you provide Buyer Agency services?
  • How long is a Buyer Agency contract in effect?
  • How do you get paid?
  • How will you search for properties for me?
  • Do you think that what I am looking for is realistic, given the price range I’ve given you?
  • Do you have experience in the area(s) I’m searching in?
  • Are you a full-time agent?
  • When will you be available to work with me: days, evenings, weekends?
  • What should I expect, from start to finish, in this process of buying a home?

Of course, these are just suggestions; feel free to tailor questions to your needs.

Some Realtors have undergone additional training and earn what are known as “designations.” For example, if an agent has an “ABR” after their name, that is a designation for Accredited Buyer’s Representative. The agent has fulfilled educational and sales requirements to qualify for this designation. Please note that the ABR designation is not required in order for an agent to provide buyer agency services.

Hello world!

December 22, 2008

Welcome to Wisconsin real estate! Dodgeville is the county seat for this rural southwestern Wisconsin Community; the county’s population is about 22,000 and we’re about halfway between Madison, Wis., and Dubuque, Iowa (my hometown!). Winter here is cold, snowy and … COLD! Last year we received over 100 inches of snow and we’re ahead of that schedule already this year! More snow and ice is forecast for later this week. Our market is just like that of any other market right now: We have short sales, foreclosures, and other properties on the market. Homes are listed and sold and the world hasn’t come to an end. We are fortunate because our local lenders are pretty conservative and careful about lending practices, which means we have more good loans than bad!

We are home to the corporate campus of Lands End, now a part of the Sears/K-Mart family. We also have Walnut Hollow, a wood craft factory, and many other employers, businesses, and entrepreneurs. There is always a reason to buy or sell real estate in Dodgeville!