Tag Archives: home buyers

Real Estate

Black Monday’ Rattles Housing Market

Chinese home buyers, in particular, may be more cautious in entering the U.S. housing market following Monday’s massive stock market sell-off that sent stocks tumbling, according to housing analysts. The sell-off began in Beijing on Monday and sent shares plunging by record amounts across the globe. Chinese media dubbed it “Black Monday” as markets fell nearly 8.5 percent there.

Read more: Chinese Dominate as Buyers of US Real Estate

In the U.S., the Dow Jones industrial average plunged more than 1,000 points just minutes after the opening bell alone on Monday. The Dow made up some ground later in the afternoon but still closed nearly 600 points in the red.

John Burns, CEO and owner of John Burns Real Estate Consulting, explained in a blog post that Chinese home buying will likely be under a cloud of uncertainty.

“While the recent Chinese stock market correction has caused a decline in sales (one of my builder clients has noticed a sharp pullback, another just told me about a home sale cancelation specifically due to the buyer’s stock market losses, and one publicly traded home builder even mentioned the pullback on their earnings call), our research has convinced us of tremendous Chinese demand to buy US real estate for their families and as investments,” Burns says.

However, Burns says there is some doubt over whether the Chinese will continue their big U.S. buying spree. He questions the number of people who will still be able to afford to purchase a home in the U.S. after the stock market correction and currency devaluation.

Chinese home buyers have been strong in the U.S. market lately. Sixteen percent of international home buyers come from China, according to the National Association of REALTORS®. The Chinese spent $29 billion last year on U.S. real estate, surpassing Canada as the top spenders.

Source: “Betting on Chinese Home Buyers in the U.S.,” LinkedIn Blog (Aug. 24, 2015); “Stock Market Slide Continues Across Asia,” The Washington Post (Aug. 24, 2015); and “Black Monday Hits Housing, Mortgage Finance Worse Than Dow, Nasdaq,”

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Real Estate

Buying a Home During the Holiday?


Once Thanksgiving is over, the real estate world typically starts to wind down for the holidays and doesn’t usually reawaken until after New Year’s.  But potential home buyers who are prepared to close in today’s competitive market may want to keep house hunting while everyone else is waiting for spring.

 

  • REALTORS® especially recommend that serious home buyers continue shopping if they have repeatedly lost out on deals because of a limited and continually decreasing supply of homes.  Buying intensity typically cools down at the start of fall through early January, which could increase the odds for those with more patience.
  • Would-be buyers historically have bowed out during the winter season because they are overwhelmed by holiday spending and commitments.  There’s also the aversion of moving in the middle of a school year.  Consumer interest typically picks back up again in the New Year and peaks in the spring.
  • Certain buyers may be well-served to buy during the winter because of sellers who must move for various reasons including a job change or transfer or the possible sunsetting of the Mortgage Forgiveness Debt Relief Act, which lets certain home sellers get tax relief on mortgage debt forgiven by lenders.  The possible expiration has pushed home sellers to list and short sell their homes before year’s end.

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Real Estate

Home Buyers Grow Frustrated by Low Inventories

Photo Credit: http://www.chriahcorp.com/
Photo Credit: http://www.chriahcorp.com/

Low inventories of homes for-sale are becoming troubling to home buyers, Inman News reports. Almost every major market in the U.S. has posted double-digit decreases in for-sale listings.

“The buyers tend to become a little frustrated as they are seeing homes that they want to ‘think about’ and before they can even get home to discuss it there are already multiple offers on the property,” Sheri Moritz, a real estate broker with Keller Williams’ Wake Home Team in Raleigh, N.C., told Inman News. In Raleigh, inventories have fallen 21 percent in the past year, according to Realtor.com data.

“I counsel buyers to be patient, and not get discouraged, that it may take extra time to find the suitable property,” adds Tom Avent, broker-owner at Tom Avent Real Estate in Fresno, Calif., which has posted a 43.1 percent drop in inventories in the past year. “I have also seen some buyers give up looking, frustrated with low inventory and losing out in multiple-offer bidding.”

Multiple bid situations are a common occurrence in many markets. But surveys show that home buyers lose their enthusiasm when faced with competition for a property, according to a recent survey by Redfin. Seven in 10 of home buyers surveyed reported that they’ve faced competition on at least one of their offers recently, but  31 percent say they would back off when faced with a multiple offer situation for a home, according to the Redfin survey.

Charles Roberts, a director at the Denver Board of REALTORS® and co-owner of Your Castle Real Estate, says that “urgency” is the new landscape greeting home buyers.

“Gone are the days of looking at 50 homes and taking months to make a decision,” Roberts told Inman News. “If there’s a good property on the market, buyers need to act quickly, and yes, sometimes bid above asking price. The educated, thoughtful clients are getting great deals with astoundingly low interest rates. The clients that are still insisting on putting offers at 80 cents on the dollar are getting shut out of the market. They either learn that that strategy doesn’t work anymore or they keep on renting. Our job as real estate agents is to teach them what the market looks like and guide them in their decision-making.”

Source: “Low Inventories Thwarting Buyers,” Inman News (Oct. 1, 2012)

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Real Estate

Fighting Back Against Lowball Home Appraisals

Photo courtesy of Atlas Real Estate Appraisals
Photo courtesy of Atlas Real Estate Appraisals

Record-low interest rates are a boon for home buyers and for homeowners seeking to refinance.  But low appraisals are making it difficult or even impossible for some borrowers to take advantage.

  • Lenders report that “overly pessimistic appraisals caused by appraisers using distressed sales as ‘comparables’ are a key reason why deals are falling through.
  • Part of the problem is that home prices have plummeted further than many people would like to believe.
  • Another key factor is the appraisal changes enacted in the wake of the financial crisis that were designed to eliminate improper pressure on appraisers that often led to inflated valuations during the housing boom.  However, critics say those changes resulted in unnecessarily conservative valuations and the greater use of appraisers with little knowledge of local market conditions.
  • Additionally, accurate valuations can be difficult to come by when sales are thin and prices are just beginning to edge upward after prolonged declines.  Many borrowers are “in a holding pattern for extended periods” because it’s difficult to find comparable sales to support the appraisal value.
  • Despite these issues, there are ways consumers can improve their odds of getting a deal done.  For example, borrowers can look at comparable sales from the last three to six months before seeking a mortgage to know the range of home values in the area.
  • Secondly, although borrowers cannot choose their appraiser, they can accompany the appraiser during the inspection, pointing out improvements that add to the home’s value.  They also can provide the appraiser with comparable sales that can be used to support the valuation.
  • Borrowers also can request that the lender review the appraiser’s findings, though the chances of success are slim.  If the borrow thinks the value is unreasonably low, they should first look for factual errors, such as an erroneous number of bedrooms or miscalculated square footage.

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Real Estate

Lots of Home Bargains, But Few Willing Lenders

Bank of America Nevada City Photo by John J. O'Dell
Bank of America Nevada City Closing in 2012 Photo by John J. O'Dell

Faced with finicky lenders, would-be home buyers are increasingly turning to family members, friends, and even strangers they meet online.  While this is understandable, given the abundant bargains on the market, they also present significant risks.

  • So-called peer-to-peer lending sites, such as Prosper and Lending Club, say demand for home-related financing is on the rise.  In September, Weemba, a social-networking site, launched a platform to connect lenders directly with prospective home buyers and other borrowers.
  • Despite historically low mortgage rates, traditional lenders remain reluctant to provide mortgages to anyone with less than stellar credit.  And, in certain markets, lenders are requiring down payments of more than 20 percent of the home’s purchase price.
  • Borrowers taking loans from family members – so-called intrafamily loans – save on interest since family members are likely to charge less than the banks.  Additionally, parent lenders can earn a higher return from their child’s interest payments than they would on a certificate of deposit or money-market fund.  Under federal law, on a loan of more than nine years, parents must charge at least roughly 2.8 percent, in most cases.
  • Consumers who prefer to look for loans beyond the family can apply at peer-to-peer lending sites.  If approved for a loan after a screening by the companies, applicants may then receive money from investors.
  • However, these alternative routes to financing can be expensive for borrowers.  Rates at Lending Club run from around 7 percent to 28 percent.  At Prosper, rates run roughly 7 percent to 35 percent.  The companies say these rates, which are fixed, are higher than traditional mortgage rates in part because their loans are unsecured.

Real Estate

Getting A Real Estate Loan If You Are Freelancing


After the financial market downturn in 2008, getting approved for a mortgage loan became even more difficult.  Combine that with the fledgling economy, which left many people turning to freelance work, and the challenges involved in qualifying for a home mortgage increase exponentially.  However, with a little extra work, home buyers using freelance work as proof of income still can qualify for a new lo

  • Borrowers who earn most of their income on 1099s should be prepared for extra preparation, paperwork, and discussion of their financial standing when applying for a mortgage.
  • It’s important that independent contractors show that their income is stable and increasing. For some, that may mean declaring all their income on their tax returns, and not, say, carrying anything over to the next year, even if it means paying more taxes.
  • Consistency in income is key, so those applying for a mortgage this fall or winter should be prepared to provide proof for year-to-date income.
  • To increase the chances of getting a mortgage approval, borrowers should pay off other debts, including balances on credit cards.
  • Pinpointing the source of the down payment also is helpful.  If the down payment will be a gift from a relative, borrowers are advised to submit an account statement showing the funds are available and awaiting the home purchase.  Same goes for borrowing from a 401(k).
  • Freelancers also should be prepared for a more in-depth analysis of their ability to repay the debt.  Submitting tax returns from the last three years and explaining any significant differences in income is advised.

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Real Estate

Co-signing Or Not To Co-sign?


Tighter lender standards and an unstable job market have made it tougher for some people, especially those just starting out, to qualify for a home mortgage on their own.  So, some home buyers are turning to family members or close friends with good credit to co-sign a home loan.

Making sense of the story

  • While becoming a co-signer may seem like a good solution, money manager and lenders caution against those who are asked to be the cosigner.
  • A cosigner, even if not living in the house, is really a co-borrower, meaning he or she still is responsible for payments if the occupant is unable to meet his or her obligations.  In other words, if the principal party defaults on the loan, the cosigner is on the hook.
  • One financial planner suggests potential co-signers take a less risky alternative, such as providing a cash gift for the down payment.  Under current tax laws, a person can give as much as $13,000 to a person, free of gift taxes, or $26,000 per person, if a married couple filing jointly is giving the money.
  • Those considering co-signing a mortgage must conduct due diligence.  First, the cosigner must understand why the family member or friend is asking for help.  Potential co-signers shouldn’t be afraid to look into the requester personal finances to help determine whether he or she will be able to repay the loan.  Perusing credit reports also will show the track record he or she has for paying off debts.
  • A discussion about worst-case scenarios also should take place before signing on the dotted line.  Working out a written contract containing an agreement about what would happen in the event of a default, also is recommended.
  • Cosigners also should keep in mind that the mortgage will show up on their credit report, and could affect their own ability to borrow money or buy a second home.  If the principal borrower makes a late payment, that also will show up on the co-signer’s report.

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John J. O’Dell Realtor® GRI
O’Dell Realty
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Real Estate

Home Buyers Lack Mortgage Know-How

A new survey indicates that home buyers are ill-prepared to take out a mortgage, answering basic questions about mortgage information incorrectly nearly half (46 percent) of the time, according to a Zillow Mortgage Marketplace.
 

  • More than 1,000 home buyers were asked to respond true or false to eight mortgage-related statements, including “The rates of 5/1 adjustable-rates mortgages always increase after years.”  Although the correct answer is false, because 5/1 ARMs do adjust after five years, but the rates could go up or down, 57 percent of people surveyed answered this question incorrectly.
  • Forty-five percent of home buyers surveyed also incorrectly stated that home buyers should always buy mortgage discount points. The fact is, the decision hinges on how long the borrower plans to own the property, and in some situations, buying mortgage discount points is not worthwhile.
  • An additional one-third of respondents do not understand that lender fees are negotiable and vary by lender, incorrectly thinking lenders are required by law to charge the same fees for credit reports and appraisals.
  • Survey respondents also believe that pre-qualifying for a loan means they have secured financing.  With a pre-qualification, which is the earliest step in the mortgage process when a lender approximates the amount the borrower can afford, the lender does not run the borrower’s credit or request any documentation to verify the information provided by the borrower.
  • Slightly less than half of the polled prospective home buyers also do not understand that Federal Housing Administration (FHA) loans are available to all buyers, but instead believe only first-time buyers qualify.  In reality, FHA loans can cost less for many buyers, including repeat buyers with low to average credit scores and with down payments of less than 20 percent.

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Real Estate

Careful When You Show Your Home to Potential Buyers, Don’t Become A Crime Victim!


Safety should always be a top concern for both real estate agents and home sellers.  While holding an open house and allowing potential home buyers to tour the property is an effective means of selling a home, home sellers should be aware of the risks.

  • While most criminals will seek small items and anything they can fit into their pockets, sometimes these “buyers” are actually scoping the home for a future burglary.
  • According to a safety expert who has worked with the NATIONAL ASSOCIATION OF REALTORS® and other groups, first and foremost, people should trust their instincts, so if someone or something is making one uncomfortable, be extra alert and extremely careful.
  • If a potential buyer or unknown agent arrives at the house unexpectedly, the homeowner should tell him to call their agent to schedule an appointment.
  • Before allowing anyone to enter the house, all lights should be turned on and all blinds, shades, and curtains opened.  Homes are safer for showing when someone outside can see inside.
  • In advance of an open house, homeowners should remove all valuables, including jewelry, artwork, and electronic equipment.
  • Additionally, money, mail, bank statements, credit cards and keys should never be kept lying around, or even in a drawer with easy access.
  • Prescription drugs should be kept in locked cabinets, to prevent anyone from stealing them or using the information on the label.
  • Professional burglars often linger in rooms, looking for items they can dispose of quickly.  They also search for ways to get in and out, scouting possible escape routes and checking for security devices.  Couples up to no good often split up so one can check out the house and its belongings, while the other keeps the agent and/or seller occupied.

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Real Estate

Online Mortgage Shopping Made Easier

Moss on Rocks Photo by John J. O'Dell
Moss on Rocks Photo by John J. O'Dell


The vast amount of information available online about mortgages – such as interest rates, loan benchmarks, prepayment penalties, and the like – can cause home buyers to feel confused and overwhelmed when shopping for a mortgage.  Most surprisingly, a recent survey found that only 61 percent of homeowners surveyed said they comparison shopped for a mortgage, and 39 percent said they took out a home loan based on just one quote.

MAKING SENSE OF THE STORY

  • Resulting from consumer feedback about lending Web sites being unhelpful or difficult to navigate, some of the nation’s leading mortgage sites have responded by working to become more consumer-friendly.  The revamped sites allow borrowers to not only browse lender rates and terms, but also learn about market trends and read comments from other loan shoppers.
  • One of the challenges borrowers have, according to Keith T. Gumbinger, the vice president of HSH Association, is that while there is plenty of mortgage information available, consumers often have difficulty understanding the technical aspects of a mortgage, such as when an adjustable rate mortgage actually adjusts, and when a prepayment penalty applies.
  • One site, LendingTree, allows consumers to browse quotes from various lenders, read an array of industry articles, use research tools and calculators, and peruse consumer-generated ratings and reviews of lenders.  In December, the company created an online feature in which borrowers can post a mortgage-related question to be answered by a LendingTree loan specialist.
  • Online direct lender, Quicken Loans, offers an expanding number of customer-written reviews on buying and refinancing.  Beginning in March, consumers can download Quicken Loan’s iPhone app and track when appraisals come in, closing dates are set, and when other time-sensitive hurdles in the home-buying process are reached.
  • Some major lenders also are making changes, including Bank of America, which offers articles and tools specifically for first-time buyers, and another set for more experienced borrowers.
  • Of course, borrowers also can forgo the online aspect of mortgage shopping, and instead work with an experienced mortgage broker who can help guide the buyer through the process, including locking in the best rates available for their situation.

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