Daily Archives: October 24, 2012

Top reasons to opt for seller financing | South Salem NY Realtor

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The son of a longtime friend recently caught me at a Friday night high-school game and informed me he and his wife had turned down an older home in the neighborhood they always wanted, for a new home in a subdivision.

They also declined the possibility of no-cost seller financing from the owner of the older home because the builder offered a slightly lower rate on the new home.

“We just felt like we wouldn’t have to do anything on the home for years,” Patrick said. “We couldn’t afford any expensive surprises.”

While I disagreed with him on both topics, I kept my opinions to myself because he had already made his decision and was looking forward to moving into his new home. Here’s why I would have chosen differently.

First and foremost, you can always repair or remodel a home, but you can never single-handedly fix a neighborhood. If you know the schools, churches and streets that are important to you, it’s usually best to buy where you have done your primary research. And, new homeowners often underestimate upkeep.

But just as important are the credit and cash needed to get a loan today. Lenders are being more cautious and are demanding more skin in the game.

Recently, Fair Isaac Co., the developer of FICO scores, revealed that 78.5 percent of all consumers have scores that fall between 300 and 749. The FICO score ranges from 300 to 850. So only about one in five American have a FICO score of 750 or higher.

Ellie Mae Inc., a provider of mortgage origination software to lenders, reports that borrowers approved for mortgages in September had an average FICO score of 750. What message does that send to prospective homebuyers?

Besides high credit scores, borrowers are coming in with higher down payments to satisfy lender requirements. According to Ellie Mae, homebuyers who used a Fannie or Freddie loan had, on average, a 21 percent down payment. Homeowners who refinanced had average equity in their homes of 30 percent.

Doug Duncan, Fannie Mae’s chief economist, recently said he thought that loan standards will eventually ease as banks reduce some extra risk-based fees that they have added to benchmark quotes since the mortgage meltdown.

But is there a viable plan B? What if you didn’t have to go to a lender for a home loan?

Seller financing is an underestimated benefit not only because of today’s increased lender scrutiny, but also because the buyer dodges most all the fees associated with the loan. For example, in Patrick’s case, he decided on a 3.5 percent loan from a lender rather than a 4 percent loan from the homeowner.

Let’s say the total costs of a $200,000 loan come to 2 percent of the loan amount, or $4,000. The monthly difference between a 3.5 percent loan and 4 percent loan is approximately $57 a month. Not only would Patrick have to borrow more or come out of pocket with the extra funds (in addition to the down payment needed on the house), but he would also need more than seven years to make up the monthly difference.

While many owners make “cash-out, conventional” financing a requirement when selling a home, others are more than willing to negotiate price and terms. Homes are selling quickly in many neighborhoods, but others continue to sit. It’s those owners who can be “all ears” if it means closing a deal and moving on with their lives.

And, some sellers, particularly seniors with no high-rate place to park their cash, are not opposed to accepting a healthy down payment and “carrying the paper” on their real estate as long as they are guaranteed 4 percent interest on their money. In most cases, it’s difficult to get that rate in non-risk accounts.

Buyers and sellers can build in safety features to make carrying the paper palatable for both sides. If you are a buyer, there’s no harm in asking. You could save time, anxiety and a lot of cash — an inexpensive surprise.

via inman.com

New-home sales up 27 percent from a year ago | Armonk New Homes

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Sales of new single-family homes were up 5.7 percent from August to September and 27.1 percent from a year ago, to a seasonally adjusted annual rate of 389,000 — the strongest pace of sales since April 2010, the Census Bureau reported today.

The picture varied widely by region, with new-home sales up 75 percent from a year ago in the Northeast, 62.1 percent in the West and 24.3 percent in the South, but falling 31.9 percent in the Midwest.

Nationwide, there were 145,000 new homes on the market at the end of September, which represented 4.5 months of supply at the current sales rate, down from a record 12.1 months in January 2009, Bill McBride noted on the blog Calculated Risk.

The median sales price of new homes sold in September 2012 was $242,400, up nearly 12 percent from a year ago.


Source: Calculated Risk blog.

New homes include “not started,” “under construction” and “completed.”

At 38,000, the number of completed new homes for sale in September was the lowest level since the Census Bureau started tracking the stat in 1973, according to McBride.

Last week, the Census Bureau reported that housing starts increased 24.5 percent from September 2011 to September 2012.

via inman.com

5 Reasons Why Do-it-Yourself Marketing Can Actually Hurt Your Business | Katonah NY Homes

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Entrepreneurs, by nature, are do-it-yourself people. Not a bad thing. While that trait may serve you in many areas there’s one where it actually works against you: Marketing. Here’s five reasons why.

1) You Don’t Know What You Don’t Know.

While you might feel savvy after reading a couple marketing books or listening to a savvy marketing guru, it doesn’t compare to working with a qualified team or consultant with great experience and a great record. You simply don’t know what you don’t know, and if you do it yourself, what you don’t know will hurt you. Like having a tag-line that makes no sense, or sends a wrong message. Like pouring money into SEO or your website when the better focus is Content Marketing and improved organic search. Like not realizing you need video. Or having a self-produced video that’s so unprofessional it works against you. The list goes on.

2) A Business Owner Can’t Be Objective.

Passionate business owners tend to be absorbed by their business—an advantage when it comes to DIY marketing, right? Not really. Effective marketing starts with an unbiased perspective. To be successful at marketing, business blemishes must be seen clearly. As a business owner you just don’t have that objectivity. If you read Ken Segall’s book Insanely Simple, about his working with Apple, you’ll read how Steve Jobs was proven wrong time and time again by his more objective and talented outside team who created some of the most iconic and successful marketing ever done.

3) The Best Marketing Isn’t About A System or Formula.

As more small business owners attempt to save money by trying to do their own thing, more self-proclaimed marketing gurus are popping up on the Internet with their “Amazing Profit-Making Marketing” systems. They all sound amazing and they all claim amazing results. They even have amazing testimonials. But every business is different, and a cookie-cutter, systematic approach is not the most effective way to market a business or product. While an “Amazing Profit-Making Marketing System” sounds amazing, the ones making the most money from them are usually the ones getting you to spend money on them.

4) Great Marketing Requires Talent.

Great marketing is part science, part art. Yet, the creative part often gets lost or diminished in this ever-advancing tech world. Focused, creative talent is the ingredient that helps communicate your message and persuade your prospects to buy. It’s not easy to find, but if you do it’ll make a huge difference.

5) DIY  Doesn’t Really Save Money.

Because you’re not spending money on outside resources you might think you’re saving tons of money with a DIY approach. Just remember this…it’s not just what you spend, it’s what you spend and get back on what you spend.

Great marketing will get you back more, and sometimes significantly more, than what you spend. So, how do you get great marketing? You find and hire great marketing people, like Steve Jobs did, like Nike’s Phil Knight did, and like every successful business owner does. And, they didn’t just do it when they were big successful companies with huge marketing budgets. They did it from the very beginning of their companies, only months after they incorporated.

You also have to factor in what your time is worth. It’s not cheap. If you kept track of every minute you spent trying to do it yourself and applied a dollar value to that, you’d be surprised at the expense. Also realize that every expensive minute you spend fumbling with something you don’t do great is taking away valuable time and talent from something you do do great. That’s another expense.

To sum up I’ll end with a simple quote from someone who’s interviewed hundreds of small business owners and knows what it takes to be successful:

“Business success is all about finding the right outside service providers and using them wisely. You can’t do it all yourself.” — Anita Campbell, Founder of Small Business Trends

via smallbiztrends.com

Must I compensate my agent if I don’t buy? | Pound Ridge NY Homes

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DEAR BENNY: Could you advise me of the appropriate (and legal) way to compensate the buyer’s agent we used for our unsuccessful house hunt?

After a stressful summer spent engaged in multiple bidding wars and a short sale that fell through due to a surprise judgment, we’re taking a break. We are happy with our agent’s performance, and we plan to utilize her services in the future.

Should I offer a simple thank-you note and reassurance that we will recommend her to family and friends, or do we owe her cash for real estate services rendered? Does she or her brokerage keep the money we placed in escrow for the short sale? –Lisa

DEAR LISA: Yours is an interesting question. I know a lot of real estate agents and brokers read my column so I welcome input from out there.

Did you sign an agreement with the agent? Presumably you did, because to my knowledge most states require agents and brokers to enter into a written agreement with a potential client before any actual work is done. Read that agreement carefully; it may obligate you to pay, even if you did not buy a house.

I would ask the agent directly: “We are very pleased and will use your services when we resume our search. We would like to give you a little gift; do you have to share it with your brokerage firm?”

One suggestion: Give her a gift card for a dinner for two at a nice restaurant or at an upscale clothing store. I think such a gesture plus a nice thank-you card would be appreciated and appropriate.

Since the agent did actually do work on your behalf, I am not concerned about anyone claiming this will be a “kickback” in violation of the Real Estate Settlement Procedures Act (RESPA). It is only when money is given for no services that RESPA can kick in.

I welcome any and all suggestions on this question.

DEAR BENNY: I refinanced in January (3.85 percent) and a friend advised me to inquire about a “direct reduction loan schedule.” He tells me it is a method to pay down principal significantly faster than overpaying the monthly installment. I have asked my mortgage banker about this, but so far no response. Can you clarify if there is such a thing and explain how it works? –Jim

DEAR JIM: Many lenders (but apparently not all) have a biweekly payment arrangement, whereby you make two payments a month instead of just one. The net result is that your principal balance is reduced every two weeks, thereby requiring you to pay less mortgage interest in the long run as well as paying off the loan faster.

My understanding is that lenders have to create a new computer program payment schedule, and not all lenders are prepared, or even willing, to do this.

Of course, you could add a little extra to your monthly payment and basically pay off the loan early. If you do this, however, make sure that each check you send in (and the coupon that accompanies the payment) specifically states “extra principal in the amount of $XXX.” If you are making a direct, automatic bank payment, make sure your lender understands this and properly credits the additional payment to principal.

DEAR BENNY: My husband and I are separated, but we own a condo together. I live in the condo and have paid all the costs, mortgage, taxes, upkeep and homeowners association (HOA) fees. Our incomes are separate. I want to pay off the condo, thus owing only taxes and HOA fees. My income is very low and the lower I can keep my monthly costs the better.

I’m 65 and eligible for a tax break on the condo, but I will get only half the amount because it is jointly owned. I was unable to purchase on my own because of my small income. I want the full tax break, so do I pay off the condo, thus clearing the deed? At that point, how can the property be in my name only so I can have only my name on the relevant documents and then apply for the full tax break? –Sally

DEAR SALLY: You are facing a dilemma that many divorced couples encounter: how to take title in your name. Unfortunately, in my experience, the only way is to refinance the existing loan, but in your name only. That means that you will have to have sufficient credit to qualify for the new loan.

Do you have any relatives or friends who can assist you? Your ex can (should he decide to be agreeable) convey his interest in the property to you, but he will still be legally obligated on the existing mortgage.

There may be some state or local government programs in your area that will assist low-income homeowners obtain a mortgage. You should contact your local state representative or senator for additional information. They have been elected by you and should be responsive.

DEAR BENNY: I inherited a house from a friend who passed away six months ago. I have not yet taken title to the property and will not until the estate’s trustee finishes settling the estate, which will be in about a month. The mortgage is currently being paid from the interest generated in a CD account.

Once the trustee finishes her duties, the trust provides that the money remaining in this account be used to pay down the mortgage. Once the title is transferred to me, can I take over the home’s mortgage until I can get refinancing with a different lender?

I know that if I were a relative, I would have protection, but because I am not, I am worried that the mortgage company will call in the loan.

The loan has a prepayment penalty, which the mortgage company says it will waive for a short period of time (for the paydown), although it has not put this in writing. The prepayment penalty expires in six to seven months and would have been applicable, prior to expiration, even if the house was sold, although there were no stipulations regarding death of the borrower.

Ideally, I’d like to have the paydown and the refinancing happen at the same time; however, I have heard from a lender that my name must be on the title for six months before I can seek to refinance. Any suggestions on how to proceed? –Donna

DEAR DONNA: While state law will differ, my experience is that typically in probate situations, the personal representative is required to pay off all outstanding debts of the deceased, including the mortgage.

However, since you want the house, you will have to pay off the mortgage with your own funds over and above what is available from the trust.

I did not know the answer to your financing question so I discussed it with a friend who is in the mortgage business. He advised me that it is his understanding (perhaps misunderstanding) that the six months refers only to situations where a borrower wants cash out from the financing.

So I recommend that you consider shopping around for another lender who makes it clear that his bank really wants to lend money.

via inman.com

Beware of inspection advice in snow country | Bedford Corners NY Homes

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DEAR BARRY: I bought a second home in the mountains to use as a ski lodge and summer getaway. It has a flat roof, so I asked my home inspector if that would be OK in snow country. He assured me it was more than capable of draining and holding the snow.

After we moved in, there was a big snowstorm. The roof sagged, ice formed over the roof drains, and we had major leakage and interior wall damage. My homeowners insurance covered the interior damage but not replacement of the faulty roof.

The home inspector has insurance for errors and omissions, but the insurer denied my claim, saying the inspector could not have known the roof would leak. If the insurance companies won’t cover the faulty roof, what recourse do I have? –John

DEAR JOHN: The purpose of a roof inspection is not simply to determine if a roof will leak. There are many roof issues that warrant attention regardless of whether there is leakage. Among these are conditions that involve potential leakage or inadequate construction, such as a flat roof in snow country. That is where your home inspector took a wrong turn.

A home inspector, like the licensed ones as shown on Gutterilla`s website, who is truly qualified would not give carte blanche approval to a flat roof where snow is involved. According to experts from roofscapesdfw.com/services/roofing/mesquite/ home inspectors, unless they are licensed structural engineers, are not qualified to determine whether a roof structure is capable of withstanding snow loads. Your inspector should have indicated that this condition was questionable and should have recommended further evaluation by a structural engineer and a licensed roofing contractor.

What’s more, the inspector’s insurance company is wrong in acquitting the inspector. Yes, he could not have known the roof would leak, but he definitely should have known that this was a compromised condition that warranted further evaluation by qualified experts.

You should have an attorney write a forceful letter to the insurance company and to the inspector.

DEAR BARRY: We recently sold our townhome to a couple who rented it back to us while our house was being built. Prior to the sale, they did several walk-throughs, including a home inspection, and we fixed everything they asked for.

Now that we’ve moved out, they are holding our security deposit because of defects they say were not disclosed. These include some carpet stains, a door that rubs against the jamb, a kitchen drawer that sometimes comes off the track, and unpainted walls in the closets. Are these things that should have been included in our disclosure statement, or are they being unreasonable? –Tammy

DEAR TAMMY: Sellers are supposed to disclose all known defects, but when you live in a home, it is easy to become so used to minor defects, such as a rubbing door or a faulty drawer, that they don’t come to mind when filling out a disclosure statement. Reasonable buyers don’t make issues about typical wear-and-tear conditions and minor defects such as these. But you may have to give in since they are holding your deposit.

A handyman is not likely to charge very much to plane a door and adjust a drawer. Likewise, carpet cleaning is not that expensive. They should be embarrassed, however, to make an issue over unpainted closets.