Wednesday, May 30, 2012

Are your home-loan chances better at a smaller bank? (cont.)

Are your home-loan chances better at a smaller bank? (© Exactostock/SuperStock)Smaller banks try to distinguish themselves from the behemoths in two ways: by offering more personal service and by making at least some mortgages outside the standard mold.
With small banks, the emphasis is on relationships. As automation takes over many daily transactions, smaller banks offer the prospect of dealing with a human who can conduct conversations, recognize a face and listen to an appeal when a transaction goes awry.
Lenders commonly sell the mortgages they write, making their profit from the origination fees. They may separately sell contracts to "service" the mortgages. Servicers send statements and collect payments and late fees from customers.
Sometimes banks do their own servicing, but most often they outsource the job. Frustration with servicers is common. Many have been overwhelmed by the workload from foreclosures.
Read:  Can banks hide foreclosure info?
Servicers are huge operations that use mathematical models for decision-making. They apply the same criteria to everyone. There's no room for personal judgments.
Big versus small
Community banks are benefiting from public anger over big banks' fee increases and Wall Street excesses. They're picking up new customers at an accelerated pace, according to a survey by J.D. Power and Associates.
After the activist group Move Your Money urged customers to transfer accounts from big banks to community institutions, The Wall Street Journal reported that the four largest U.S. banks lost $59 million in deposits. While that tipped the balance a bit, bear in mind that Bank of America alone had $417 billion in deposits in 2011.
All that aside, a community bank could be an excellent alternative if you are searching for more personal service or for individualized treatment of a difficult mortgage application.

Tuesday, May 29, 2012

Are your home-loan chances better at a smaller bank?

Are your home-loan chances better at a smaller bank? (© Exactostock/SuperStock)
A community bank may have a solution
If your mortgage application can't meet conventional rules, a community bank may have a solution.
Hurricane Ike barreled through Texas in 2008, leaving homes on low-lying Galveston Island sitting in as much as 10 feet of water. When evacuated residents were allowed to come back 10 days later, they found four of Galveston's community banks there ahead of them, ready to loan money to repair or rebuild homes.
"Big megabanks" would not have touched the mess. The banks made 90-day loans at the then-low rate of 5%, so homeowners could get cash while waiting for insurance checks to come through.
In the month after the storm, the four banks loaned out $40 million using standard mortgage applications. But lenders did bend the rules in some instances, if they were satisfied that a borrower would repay the loan. That meant occasionally waiving strict requirements on credit scores, loan-to-value requirements or even debt-to-income ratios.
Banks were looking at homes that were destroyed, or had 7 feet of water in them. If you were going to get them appraised, they were not going to be worth much money. A lot of it was unsecured money to our customers, where we knew their characters and we knew they were going to pay us back.
Borrowers returned nearly 100% of loans from HomeTown Bank in that period.
Human touch
Community banks take pride in this kind of flexibility and local decision-making. There's at least one in nearly every town — 7,000 of them in the U.S., each with assets from $10 million to $10 billion, according to the Independent Community Bankers of America, a trade group.
Typically, those assets are a lot lower than $10 billion. In Texas, for example, the average community bank has $170 million in assets, says Chris Williston, president and CEO of the Independent Bankers Association of Texas. For comparison, J.P. Morgan Chase, the nation's largest bank, has $2.3 trillion in assets; the next biggest, Bank of America, has $2.1 trillion.

Monday, May 28, 2012

6 worst home fixes for the money

Bathroom Addition
Unless you're a hermit who never entertains, you've probably wished for an extra bathroom now and then. Upscale master suite additionBut bathroom additions require serious coin. For a moderately outfitted addition with synthetic stone or plastic laminate surfaces, figure parting with about $21,695, according to the Remodeling report. Go upscale, with finishes like premium marble or fine tile, and you can easily spend in the neighborhood of $40,710.
Either way, you get about the same return: 53 cents on the dollar. In the buyer's mind, the additional bathroom isn't worth that additional $20,000 to $40,000.
Investigate a less-expensive way to get the same result without flushing quite as much cash. While additions usually cost more, pros might be able to reconfigure your existing space to add a bathroom for less.

Sunday, May 27, 2012

6 worst home fixes for the money

Upscale master suite addition
Upscale master suite addition

Who doesn't want to wake up in a five-star-hotel-quality suite with an attached spa bathroom and a kitchenette that affords you coffee and pastries before facing the world?
Once you see the price tag, it won't just be the coffee keeping you up at night.
For a super-deluxe master suite addition -- which adds square footage and uses only top-dollar materials -- the average cost is about $232,062, according to the report.
That's 460 nights at a posh resort with enough left over to raid the minibar.
In years past, this project was "sort of a trend in vacation homes" that migrated to primary dwellings. Sellers can expect to recover about 52.7 percent at resale.
Your buyer can purchase a newer house with the same features as part of the original floor plan that "probably lays out better anyway," says Loren Keim, author of "How to Sell Your Home in Any Market."
So while the next buyer may appreciate your luxury accommodations (which could even tip their decision in your home's favor), chances are they won't want to pay the full tab for your remodel.

Saturday, May 26, 2012

6 worst home fixes for the money

Sunroom additionSunroom Addition
Real estate agents will tell you that potential buyers want square footage, pristine condition and lots of light. So a brand-new room that has the word "sun" in it, it has to be great for resale value, right?
Not necessarily.
Your first clue: The word "addition" -- which means expanding the footprint of your home -- indicates that this is not a renovation for the faint of heart (or wallet). It's one of the more expensive projects.
While it seems simple enough, the national average for a sunroom addition is $75,224, according to the report. Homeowners can expect to recoup about 48.6 percent when they sell.
That doesn't mean that adding a sunroom is always a bad move.
If your home needs another common area, a sunroom could be the answer. An addition is best considered in the context of the whole home, she says. The doctor has to treat the whole patient. You have to look at the house and say "What's out of balance?"

Friday, May 25, 2012

6 worst home fixes for the money

Home office remodelBackup power generator

You see a backup generator and imagine all of the comforts no matter what the weather.
But potential buyers hailing from outside your local area may not share that vision. (And a handful of those who do might have watched too many zombie movies.)
On average, when homeowners have a heavy-duty backup power generator installed, they spend about $14,718, according to the report. Going with a slightly less expensive model or having a less complicated installation could cut the costs significantly.
Average amount of the price recovered at resale time: 48.5 percent.

Thursday, May 24, 2012

6 worst home fixes for the money

Home office remodelWant to get an idea what today's office-away-from-the-office looks like? Walk into Starbucks.
These days, a home office consists of a multiple-choice combination of wireless laptops, smartphones, PDAs and touch-screen tablets. And that worker bee might be toiling anywhere from a home patio or a favorite restaurant to a park bench.
The standard home office renovation, meanwhile -- complete with plenty of built-in storage and high-tech wiring -- is this year's biggest loser in the resale value sweepstakes. Nationally, homeowners spent an average of $28,888 and can expect to recoup about 45.8 percent at resale, according to the report.
Return on investment doesn't reflect your enjoyment of the space.
He offers two tips for home-office remodelers when they sell. First, opt for something that can be easily converted back into a bedroom or den for (or by) the next buyer.
Second, when you're selling, call it a study, den or hobby room. There's lots of call for multipurpose space. Don't lock yourself into that one use. Don't use words that invoke images of actual work. Or the office.

Wednesday, May 23, 2012

6 worst home fixes for the money

6 worst home fixes for the money
It's the magic phrase uttered by almost anyone who's ever considered the cost of home remodeling: "We'll get it back when we sell."
Unless you keep those projects practical, though, you might just be kidding yourself.
For example:
  • Steel front door: Good.
  • Master suite addition costing more than the average American home: Bad.
Every year, Remodeling magazine looks at the hottest home upgrades and renovations and calculates just how much owners get back with they sell.
Upkeep is more popular than upgrades these days. These are the projects that often recoup the biggest slice of expenses at resale. But prices and returns do vary regionally, he says.
Ever wonder what brings the lowest return when you plant that "for sale" sign? Think high-dollar, high-end and highly personalized add-ons that make you drool. Like a totally tricked-out garage built from the ground up. Or a super luxe master suite addition. Or the home office redo designed just for you.
Here are the six improvements that, in their 2010 report, ranked dead last nationally when it comes to getting those renovation dollars back at resale.

Tuesday, May 22, 2012

Buying Advice: What questions should you ask at the open house? (conclusion)

June Buying Advice (© Corbis)Home-sales update
Existing-home sales dipped 0.8% in April from the previous month and 12.9% from the previous year, when the homebuyer tax credit was in effect, according to data from the National Association of Realtors. The national median home price declined 5% from last April to $163,700. Tight credit and low appraisals are putting the brakes on many home purchases.
Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 25% to 20% due to the very restrictive loan-underwriting standards.
Moreover, distressed homes, which trade at double-digit discounts to traditional listings,  are still weighing heavily on the market. Distressed homes made up 37% of sales in April, down from 40% in March, but well above the 33% posted at the same time last year.
Investors are the most excited about the still-floundering market. All-cash deals accounted for 31% of transactions in April, down from a record 35% in March.
Mortgage rates drop
The one bright spot for buyers is that mortgage rates continue to drop, increasing affordability. Fixed-rate mortgages declined for the fifth straight week, as of May 19, Freddie Mac said in its Primary Mortgage Market Survey, with a 30-year fixed averaging 4.61% and the 15-year averaging 3.8%.
Economists versus consumers: The outlook
Just don't look for that investment to appreciate in value immediately. Economists don't predict a return to home-price gains until early to mid 2012.
Fannie Mae, for one, expects the median home price to decline 6% in the second quarter of this year from the same time in 2010, with those losses slowly tapering off this year, until the market hits bottom in the first quarter of 2012.
Analysts at J.P. Morgan expect an additional 6% decline in prices from where the market stands today.
But perhaps most bearish are consumers themselves.
In a joint housing survey conducted by Trulia and RealtyTrac, released in mid-May, 54% of those polled said they don't expect the housing market to recover until 2014 or beyond. Twenty-four percent expect a recovery in 2013.
It's clear that despite low prices, low interest rates and improving job numbers, consumer attitudes have yet to rebound in a way that will really push the needle up on home sales.
In spite of the positives surrounding the housing market, we see that consumers are still hesitant to take on a large financial obligation.
Still, home sales are expected to rise some this year, as the economy gets on surer footing.
And for many, it might begin to make more sense to buy. According to Trulia's most recent data, it is now more affordable to buy a home than rent a similar home in 78% of major U.S. cities.

Monday, May 21, 2012

Buying Advice: What questions should you ask at the open house?

June Buying Advice (© Corbis)Open houses can be a wonderful way to find your next house. They can be just as helpful in gathering intelligence about a neighborhood, getting a feel for its housing stock or simply scoping out real-estate agents with whom you might like to work.
But what should you ask when you pay a visit? In this month's "Buying Advice," we consulted agents and other real-estate experts for their insights on how to navigate open houses.
We'll also update you on the latest housing and mortgage stats, and see how most people are feeling about the housing market's prospects.
Open-house questions

If you play your cards right, an open house can tell you a lot more about a property than its floor plan or the condition of its floors. The key is asking the right questions, agents say. (Or if you're looking with your agent, making sure she does it for you.)
Here are some questions to ask the listing agent and how these questions might help you in your purchase of the home:
Have you had any offers on the property? That lets you know if you have competition for the property. You'd also want to know if the sellers had rejected any offers and why, agents say. It could help you better craft an offer that will meet with their approval.
Has this house been in escrow? If it has, and didn't sell, you'd want to know why. Was it an appraisal issue? Did a home inspection turn up some major damage? If it has been in escrow, ask if any inspections were done on the house. If there were, ask for copies of these reports, so you know what you're dealing with, and what kind of secondary inspections you might need should you decide to make an offer.
How long has the property been on the market? If it's getting a little stale, it might be ripe for a lower offer, experts say. Likewise, find out if there's been a price reduction and when it happened.
Why are the owners selling? The agent showing the house is likely to remain mum on this one. But, then again, she might also let it slip if they are moving soon, are under financial pressure or are building another house and might need more time in the house if she's a little desperate to move the property. Any information you can glean can help you decide how much to offer, when to close, etc.
Are there any liens on this property? You don't want any surprises, so make sure there aren't any construction liens, tax liens or other claims on the property resulting from unpaid debt, such as unpaid homeowners association dues.
Is the home going to meet a lender's appraisal expectations? Do you have comparable sales in the last 90 days? These days, with prices on the decline, and more and more properties getting taken back by banks, appraisal at the listing price isn't always a sure thing. Take a look at the recent comps and have your agent check pending sales to make sure you won't get stuck once you've starting spending money on inspections and other aspects of the process.
Are there any other costs of ownership? Here again you want to make sure there's nothing to surprise you after closing.  If it's in a condominium complex or other planned community, ask about association dues and additional taxes or assessments, especially if it's a newer community. And if there is a homeowners association, get its phone number and call it to make sure there aren't any rules that conflict with your lifestyle, pets, etc. You don't want to find out, after the fact, that your husband can't park his work truck in the driveway of your new home.
Have your agent follow up with the listing agent via fax or email to get it all on paper. Make sure everything is in writing. And, as always, make sure you have your own home inspection done, even if you have been assured there are no problems with termites, plumbing, etc.

Saturday, May 19, 2012

Rates dropping and refis hopping

30 year fixed rate mortgage – 3 month trendMortgage rates dipped again, for the sixth week in a row, pushing the rate on the most common type of mortgage below 4 percent for the first time in the history of Bankrate's survey.
30 year fixed rate mortgage – 3 month trend
The benchmark 30-year fixed-rate mortgage fell to 3.97 percent, compared to 4.02 percent the previous week, according to the national survey of large lenders. The mortgages in this week's survey had an average total of 0.44 discount and origination points. One year ago, the mortgage index was 4.77 percent; four weeks ago, it was 4.1 percent.
The first time Bankrate did the survey, Sept. 25, 1985, the 30-year fixed rate was 12.31 percent. That's the highest it has been.
The benchmark 15-year fixed-rate mortgage stayed at 3.2 percent, and the benchmark 5/1 adjustable-rate mortgage rose to 3 percent from 2.99 percent.
That's the lowest the 15-year rate has reached since Bankrate started the weekly survey.
Mortgage professionals say they are shocked by the low levels mortgage rates reached in the last few weeks and also how long these rock-bottom rates have lasted.

Thank the Greeks

As political chaos unfolds in Greece, investors fear the country will be forced out of the eurozone. Amid the uncertainty, these investors are seeking safety in U.S. Treasury bonds. The yield on the 10-year Treasury note reached 1.75 percent Tuesday, the lowest level since October. Mortgage rates tend to follow the Treasury yield's direction.

Friday, May 18, 2012

Sellers: 6 Disclosures That You Must Make- Conclusion

6. Infamous past
Even a home's notorious past must be disclosed. One New York case many years ago involved a home that reportedly was haunted and was the subject of many articles and tours. When that ghoulish past wasn't disclosed to the new buyer, the seller was successfully sued for nondisclosure, because that notoriety was likely to diminish its resale value.
The same holds true for a home's criminal past. Some states require disclosure of murders on the property, others do not. But since these horrific events tend to lower the value of a property, most real-estate agents choose to disclose them rather than risk legal action. In fact, the NAR even published a field guide for agents to deal with these "stigmatized" properties.
Other special disclosures might include a historical designation that restricts remodeling, or any other special zoning or local environmental concerns.
The bottom line is that if there's a question in your mind about whether or not you should disclose something, you probably should. Anything that the buyer would feel misled by is something that you should disclose.
However, disclosure does not mean sellers are obligated to fix a home's problems. Rather, the disclosed issues can merely become a point of negotiation between buyer and seller.

How can sellers protect themselves without blowing a sale?
To find out which disclosures your state requires, you can contact its department of real estate. Sellers get a home inspection before listing the home. It's not required, but it can help you figure out what to disclose.

If repairs must be done, get bids from a few contractors so you can negotiate more effectively. If a problem was fixed, disclose it and let people know what you have done to resolve it.
Preparing a binder for potential buyers of repairs, permits and warranties. It makes you look like a conscientious seller. And if you're not disclosing something on a form, remember to document it in writing, even it's just an email copied to a witness.
It might seem strange, but sometimes a heavy dose of disclosure can actually make a buyer more ready to act.They will say, 'This is an upfront person that I can work with'.
In a depressed housing market, no one wants to give up money from the purchase price, but full disclosure is one way to make sure you're not giving up a lot more of it later on.

Thursday, May 17, 2012

Sellers: 6 Disclosures That You Must Make 2-5

2. Termites
One such invisible problem is termites. If your home has a history of termite infestation, especially if it has been treated more than once, it should be disclosed to the buyer, because it can greatly affect the value of the home.

To lessen the impact of this disclosure, sellers can get another termite inspection before listing their home that shows it to be clear of the pests. This disclosure, along with any information about treatment warranties that could be transferred, should be given to the buyer at closing.

3. Water damage/mold
If the home has had a leaky roof, a flooded basement or dampness and mold in certain areas, these water issues must be disclosed.

A good home inspector can often spot the signs of water damage, even if they have been painted or plastered over. But it's no sure thing. That's why water damage is one of the biggest causes of disclosure-related lawsuits.

One buyer had to call out a plumber soon after the purchase for some serious flooding in the basement. Once there, the plumber told the buyer, "I was just out here six months ago for the same thing." The sellers were successfully sued for not disclosing this fact.

4. Lead
If you are selling a house built before 1978, you must comply with a federal law that requires disclosure of all known lead-based paint and hazards in the house.

Buyers must receive a copy of the Environmental Protection Agency pamphlet "Protect Your Family from Lead in Your Home" and they must be allowed a 10-day window to test the house for lead.
The contract must include that warning as well as signed statements from all parties verifying that the requirements for disclosure were met. If a seller doesn't comply with these requirements, the buyer can sue for triple the amount of damages suffered. More information from the EPA on lead disclosure is available here.

5. Natural hazards
Some states, such as California, require sellers to disclose any risk of natural disasters such as a flood plain or earthquake zone or susceptibility to wildfires. This disclosure is meant to warn buyers of the financial risk and danger they face from these catastrophes, as well as alert them to trouble they may face in getting insurance for a home in that location.

Tuesday, May 15, 2012

Sellers: 6 Disclosures That You Must Make

These days, the trend among cash-strapped home sellers seems to be to say less in hopes of getting more at closing. But in the long run, this less-than-full disclosure can prove costly. Lawsuits stemming from nondisclosure of a property's problems are becoming a bigger issue, according to respondents in the National Association of Realtors 2011 Legal Scan survey. Of the agents who responded, about 75% ranked this issue among their "top three current and future issues."

While the rule with homebuying was once "caveat emptor," or "buyer beware," an increasing number of sellers are finding themselves on the hook for nondisclosure. A lot of sellers don't have a full understanding of what the seller disclosure statement means when they fill it out. You can often tell there has been work done, but these fixes don't show up anywhere on paper. Sellers must disclose anything that could affect the property's value or desirability, from big problems such as a compromised foundation to — in some states — simple neighborhood nuisances such as that dog next door that barks every night.

Disclosure laws vary. Some states require sellers to look for and cite certain problems even if they are not aware of them. No one gets out of these disclosures: Even those marketing a home "as is" have to obey state disclosure laws. As-is sellers are simply advertising that they're not going to negotiate on price because of these issues.

Here are the six things that a seller must reveal about a home to avoid legal trouble down the road.

1. Repairs
This is a pretty broad category but one that a lot of buyers seem confused about. If you have made repairs to your property, you should disclose them, even if the problem has been resolved.

That could be something as major as a crack you had sealed in the foundation, or something as minor as snaking your sewer line every year to clear tree roots. Any repairs to the roof, plumbing, electrical system or heating and cooling unit that you are aware of — including any repairs disclosed to you by previous owners — should be laid bare, as well as any drywall or structural repairs to remedy water damage. If you knew that there had been hail on the roof and it was leaking, you should disclose that. If you knew last fall that the A/C didn't work, that's something you should disclose to a buyer.

The bottom line is that sellers should disclose anything that is not readily identifiable by the buyer.

Monday, May 14, 2012

The Benefits of Buying a First Home

Buying your first home has many benefits. You’ll become part of a community, experience the security of owning the roof over your head, and have the opportunity to create a home that meets your needs and style.

Your first-time homebuyer benefits also include opportunities to:
  • Build home equity - Unlike rent, the principal portion of every mortgage payment you make has the potential to grow your asset.
  • Gain potential tax benefits - Your mortgage interest and real estate property taxes are usually tax deductible when you file your income tax returns. (Consult a tax advisor regarding the deductibility of interest.)
  • Build your credit - Making on-time mortgage payments can help you create and keep up a strong credit history.
  • Trust Robyn Seymour to ensure your first purchase is the right one
  • Take control - Rent increases, cancelled leases and other unexpected tenant hassles will be things of the past.

Sunday, May 13, 2012

5 Bad Financial Decisions And How To Recover

Taking a 401(k) loan
Taking a 401(k) loan
There are some good reasons to take a loan from your 401(k) -- for instance, when you have absolutely no other options and the repo men are on their way to your house.
Other reasons may just be elaborate rationalizations.
People justify to themselves why they're taking the loan by saying, 'I'm paying myself back.' You're not making back all the interest. There are administrative costs and fees that come out of the interest.
How to recover: Recovering from a 401(k) loan takes time. Pay back your loan and save for the next big purchase or fund an emergency savings account rather than falling back on money that should be untouchable.
Savings accounts are too accessible for the average American today. My suggestion and solution is create an account that is not accessible at your local bank or ATM and then save systematically on a monthly basis.
Very few people have three to six months' of living expenses in a savings account because they say, "Oh, but I had to go on vacation". Save up for a rainy day to avoid raiding your retirement account.

Saturday, May 12, 2012

5 Bad Financial Decisions And How To Recover

Don't let yourself fall into a black hole of credit card debt
Falling Into A Black Hole of Credit Card Debt
Buying on credit means you are agreeing to spend your future money on today's impulse buy. Often it's a decision your future self will regret and it propagates a cycle of debt.
People keep making choices today that make it so that their current income to the household keeps paying for past choices.
How to recover: Discontinuing all purchases and living off rice and beans until the credit card debt has been paid seems like a solution, but it rarely works.
If they take all their money today and don't live in the present moment and don't plan for the future, then they're only going to keep recreating that financial past over and over again.
Instead, she recommends finding a balance among paying off the past, enjoying your present and saving for the future.
If you deny yourself something you want today, in the future you're going to act out and jack up your credit cards again. I've watched it again and again.
You can still splurge, but save up first. It will be much less costly in the long run.

Friday, May 11, 2012

How Foreclosures Affect Buyers And Sellers

How foreclosures affect buyers and sellers (© moodboard/Corbis)

If anything is certain about the foreclosure crisis, it's that it isn't over. That has important implications, not only for people losing their homes but also for those planning to sell or buy a home this year.
As of January, about 3 million properties were in foreclosure, headed that way or already owned by banks, according to the latest report from CoreLogic, an information, analytics and business-services company in Santa Ana, Calif.
About 1.6 million of those homes were believed to be in the so-called shadow inventory, a supply of foreclosure properties not yet listed for sale. It's a major stumbling block to a housing recovery. It puts downward pressure on home prices, which hurts home sales and building activity.
Here are some areas for sellers and buyers to watch when dealing with a foreclosure property.

Foreclosures and short sales have widened the gap between sellers' and buyers' perceptions of prices. Sellers think their home is worth more than it really is" and buyers think the prices are too high. One cause of that gap is real-estate brokers scrubbing foreclosures and short sales from comparable-sales data that are used to set sellers' asking prices. While sellers might feel a moral justification for that approach, it's "disingenuous" because the status of the seller's mortgage isn't important to buyers.
Just because you happen to be paying your mortgage, that doesn't mean the buyer has to step into your shoes and pay your inflated price.

Interest rates
Traditionally, mortgage rates have been a wild card for homebuyers. That's not the case today because the Federal Reserve says it will keep rates low at least through late 2014. That's not a guarantee, but it has taken some of the urgency out of homebuying and put more buyers into a wait-and-see pattern.
The perception that prices could go lower, a lot of foreclosures (are) in the pipeline and (the expectation) that rates will remain low — that's certainly keeping some people on the sidelines
Buyers might be reluctant to purchase a home in a neighborhood plagued by foreclosures and short sales. But Stephen Israel, president of Buyer's Edge Co., a real-estate brokerage in Bethesda, Md., says buyers can learn from real-estate investors who are looking at areas that have been hit hard but might be prime for a turnaround.
Investors are interested in neighborhoods that were beat up by foreclosures and that have other redeeming features that they then believe will be the first to bounce back.Those redeeming features might include easy access to public transportation, well-regarded schools, attractive shopping centers and other positive infrastructure elements. Neighborhoods that have these amenities can be really interesting pockets, where there could be some very good values.

Foreclosure and short-sale homes are sometimes in worse shape than other homes on the market. That's especially problematic for buyers if a home has been vacant a long time. Neglect can result in problems in plumbing, heating, cooling, electrical and other systems.

Professional Services
There is a big difference between a property that has been vacant a few weeks and one that has been vacant a year or more. A home that's in poor shape might not be a bad buy if the buyer understands the risks. Sometimes, though, those risks can be difficult to assess if the length of vacancy is unknown or the water, sewer, electricity and gas have been shut off. The utilities not being in service is an interesting part of this equation that people miss all the time.

Buy or sell?
The bottom line for buyers is that they must "buy smart," by researching neighborhoods and knowing a home's actual condition beyond its cosmetic appearance. The bottom line for sellers, is that they must get serious about pricing, cleaning, decluttering, staging and improving the value and desirability of their home.

Wednesday, May 9, 2012

5 Bad Financial Decisions And How To Recover

Hanging on to an investment for too long
Hanging on to an investment for too long

Just like a boxer needs to learn how to take a punch, investors must eventually learn to take a loss. Not every investment will be a winner. It takes emotional discipline to recognize the mistake and cut your losses.

If it just stinks and is never coming back, don't hold onto it for 10 years trying to make your money back, because you may never get it.

How to recover: Instead of hanging onto a dead investment, take the tax write-off provided by a capital loss when it makes sense for your overall tax picture. Use capital losses to cut taxes explains the tax considerations of deciding when to sell a security.

If people are taking a risk on an investment, they may as well do it in a taxable account where they can take advantage of the tax write-off. If it goes screaming up you might get taxed on it, but I don't think you'll mind if you make a ton of money. On the downside, you don't want to have it tank and miss the write-off because it's in an IRA.

Tuesday, May 8, 2012

5 Bad Financial Decisions And How To Recover

Confusing long term with short term
Confusing long term with short term
There are active management strategies in which a preset event triggers a decision to buy or sell. And then there is random flailing. That would be the strategy in which investors randomly sell positions after losing money and then buy back in after the market recovers.
One of the biggest mistakes is when you start looking at your long-term investments as short term, according to The Navigation Group in Redwood Shores, Calif.
That's most likely to happen "when people decide I'll get out (of the market) until things look better. But by the time things look better, the market has already recovered."
How to recover: If you've jumped out of the market, dollar-cost average your way back in. Dollar-cost averaging involves investing a set amount of money on a regular schedule, regardless of market moves.
Put in a little bit every month over 12 or 24 months. If the market goes up, you'll get some of the upside. And if it goes down, you'll buy it cheaper.
If market volatility will worry you in the future, meet with an investment adviser to devise a plan for the next time the market tanks.

Monday, May 7, 2012

5 bad financial decisions and how to recover

textEveryone makes a bad financial decision at some point. Whether your mistake is hanging onto a stinker of a stock for too long or stumbling into a black hole of credit card debt, recovery is possible.
One of the most important aspects of the salvage mission is having the ability to learn from past mistakes.
Though this list is far from comprehensive, it outlines some frequent missteps consumers make as they navigate their finances.

1. Confusing long term with short term

There are active management strategies in which a preset event triggers a decision to buy or sell. And then there is random flailing. That would be the strategy in which investors randomly sell positions after losing money and then buy back in after the market recovers.
One of the biggest mistakes is when you start looking at your long-term investments as short term.
That's most likely to happen when people decide I'll get out (of the market) until things look better. But by the time things look better, the market has already recovered.
How to recover: If you've jumped out of the market, dollar-cost average your way back in. Dollar-cost averaging involves investing a set amount of money on a regular schedule, regardless of market moves.
Put in a little bit every month over 12 or 24 months. If the market goes up, you'll get some of the upside. And if it goes down, you'll buy it cheaper. If market volatility will worry you in the future, meet with an investment adviser to devise a plan for the next time the market tanks.

Sunday, May 6, 2012

6 Tips For A Painless Closing - 4, 5 & 6

4. Take a check
Another reason to review the loan documents in advance is so you know how much money you must bring to closing. And yes, you will need a check at closing, most likely a certified one.

Many buyers are so anxious and excited that they forget they need to stop at the bank to get the check.Using a wire transfer is an option, but it may delay the closing. Some people think a wire transfer is faster, but the closing won't happen until they have actual confirmation that the wire hit. Depending on the time the transfer was made, it could be a huge problem.

The buyer must also bring photo identification and a copy of the homeowners-insurance policy, as well as the good-faith estimate, the HUD-1 statement or both, in case there are discrepancies.

5. Take the day off
A smooth closing may take less than 30 minutes, but you won't know for sure if your closing will go as planned until it's done.

There may be delays, especially if you are closing at the end of the month. Sometimes, people have to sit there for hours and say, 'I've got to get back to work.Trying to close during your lunch break is a bad idea.Imagine you get these delays, and you are on your lunch hour. Now you're hungry, you're frustrated and you're late. That's a pretty bad combination.

6. Expect the unexpected — including typos
Robyn Seymour will close your escrow painlessly
You're at the closing table. You're told everything is good to go. All you need to do is sign.

You must double-check the numbers on the mortgage note you are signing, even if you have received the HUD-1 form before closing.

One of the biggest holdups in closing is when the mortgage documents are incorrect. Sometimes, you have to correct the interest rate, or the amount is wrong and you need to fix it. Because of a simple typo, your loan documents may need to be sent back to the lender to be redone.

To prepare for these unexpected delays, borrowers should try to schedule their closings for earlier in the day. And don't wait until the last day on the contract to close.

Saturday, May 5, 2012

6 Tips For A Painless Closing - 2 & 3

Anticipate human error
2. Anticipate human error
A buyer whose closing failed because of missing loan documents. The buyer was a co-signer on his brother's mortgage, and the lender had requested 12 canceled checks showing that the brother, not the buyer, was paying the old mortgage. The buyer could come up with only eight checks, and the loan officer said that would be enough. That was weeks before closing.

Three days before closing, the lender said it couldn't issue the loan without the 12 checks, and the deal was canceled. Sometimes people don't know as well.

3. Review loan documents in advance
One way to ensure all is going as planned is to tell the lender that you want to review the documents before closing, or ask your attorney to do so.
By law, you have the right to review the closing-settlement statement, or the HUD-1 form, at least 24 hours before closing. Compare that form to the good-faith estimate you received when you applied for the loan.
You should have everything you are going to sign before you sign it. A lot of people don't do that. When they get to closing, they are nervous, and they just want to sign and get the keys. That's how people get in trouble.

Friday, May 4, 2012

6 Tips For A Painless Closing

6 tips for a painless closing (© Tim O'Hara/Corbis)
Don't be afraid to bother your loan officer or your real-estate agent.
You finally found the house of your dreams. You signed a contract and got approved for a mortgage. You've even hired the movers. Now comes the most important part: the closing.
In an ideal world, closing should be a mere formality, where homebuyer and seller sign on the dotted lines, exchange checks for the keys and shake hands. But this isn't an ideal world, which means that if you and the professionals you hired don't prepare, your closing could be a disaster.

Here are six tips for ensuring your closing goes smoothly.
1. Ask questions
Knowing what to expect and communicating with all parties involved in the deal are key to a successful closing.

A week before closing, talk to the people who are representing you, and tell them you'd like to spend a couple of minutes to discuss what to expect. Don't be afraid to bother your loan officer or your real-estate agent.

Thursday, May 3, 2012

What You Need To Know About Comps

If you've bought or sold property, you've certainly heard the term "comps." While most homebuyers and sellers know that "comps" is shorthand for "comparables," not everyone understands what comps really are or how real estate professionals use them.

What are comps?

The terms "comps," "comparables" and "comparable sales" refer to prices paid for recently sold homes that are comparable in size, style and location.
Comparable sales are a critical part of assessing the current market value of a property.
To determine the current market value of a property, agents and appraisers analyze recent comparable sales in the area. But simply choosing which sales to include, or even defining the area, can be subjects of debate.
Take, for example, the word "recent." That could mean 90 days or fewer. But according to others, "recent" can look back as far as six months, depending on the activity in the local market.
Whether a nearby property is in fact comparable raises more questions. Ideally, we'd like to find at least three properties with identical characteristics.
In a planned housing development or condo, finding identical homes is a possibility. But elsewhere, even houses on the same street can vary greatly. In those instances, look for properties with similar square footage and the same number of bedrooms and bathrooms. Choose homes where the square footage is not more than 10 percent higher or lower than that of unit being priced.
And as always with real estate, location matters. Proximity is a key component of comps but so is the neighborhood, and they aren't always the same thing.
Knowledge of the neighborhood and the school district are critical for determining comps. So while a comp might be close in terms of distance, it might not be appropriate if the two properties straddle opposite sides of a neighborhood dividing line.

Real estate agent versus appraisers

Real estate agents and appraisers often arrive at different comps.
Real estate agents will want sales that help to close their transaction. That's their job. Appraisers are an objective participant in the transaction and are being asked to provide an understanding for the lender of the true market value.
Having a stake in the game means agents are more likely to come up with a higher price. But they are also more likely to find value in a property's intangible qualities. That could mean considering recent upgrades, quality of workmanship and other factors likely to motivate buyers.
A real estate agent is much more likely to know if recent sellers were motivated to accept a lower price because of financial hardship or divorce. On the other hand, appraisers may drive through a neighborhood to verify a comparable sale, but they are not likely to have physically walked through those properties.
Regulations add to the gulf between comps generated by real estate agents and those generated by appraisers. New regulations are designed to keep lenders and mortgage brokers from influencing appraisers. But while appraiser independence is good in theory, appraisers often are hired to evaluate properties in places they're not familiar with.

What about foreclosures and short sales?

For the last few years, foreclosures and short sales have shaped the national real estate market. But distressed sales present problems when picking comps.
Traditionally, appraisers looked into the market and selected a sample from whatever sales had occurred in a neighborhood. That worked during a normal or stable market, (but) this market is different, because there are so many short sales and foreclosures.
Should these distressed sales influence prices for all sales in an area or only for other short sales and foreclosures? Your answer depends upon whether you're buying or selling.
It's definitely tricky. From the buyer's perspective, all sales, including bank-owned and short sales, should count to establish market value. However, standard sellers with equity should consider the lower, distressed sale comps. (But they) should also realize that prospective buyers may be willing to pay market, or above market, price for a standard sale.
Appraisers pay attention to the ratio of distressed to nondistressed sales.
If traditional sales make up the majority of the sales in a given neighborhood, then it is those sales that an appraiser will likely select. But if a neighborhood is dominated by foreclosure sales, then the appraiser will have to make a decision on which group of sales best represents the market.

Wednesday, May 2, 2012

How To Challenge A Low Appraisal (cont.)

A challenge should be based on specific errors rather than opinions.
2. Negotiate a new deal. Buyers are allowed to challenge a low appraisal, but usually they prefer to renegotiate the contract. A lot of buyers are actually excited if an appraisal comes in for $20,000 less than they offered because they assume they can negotiate to buy the house they want for less money. But that's only if sellers are willing to accept the lower price, which many times they're not.
3. Pay extra. Every negotiation is specific to the individual circumstances of the contract, how much the buyers want the house and whether the sellers are willing to drop the price or assist with the financing.
Not all sellers are willing to negotiate, however. So sometimes after an appraisal comes in low, buyers must pay additional cash in order to meet the agreed-upon sale price. Negotiations should be as creative as possible, including seller financing or other concessions.
4. Challenge the paperwork. The individual who pays for the appraisal, typically the buyer, can request a copy of the appraisal and review it. Real-estate agents and buyers would need to provide additional facts about comps or point out mistakes regarding such items as the number of square feet or the number of bedrooms.
You should check the comps to be sure they have geographic relevance and the same interior and exterior features. You can also hire another appraiser to do a review of the appraisal for an additional cost.
5. Request a second appraisal. If a challenge or a review doesn't change the appraisal, then a buyer can ask their lender to hire another appraiser. Be sure to request someone with geographical knowledge and someone competent and explain why you are asking for a second appraisal. Either the buyer or the seller can challenge an appraisal or even request a second appraisal. A challenge should be based on specific errors rather than opinions.