Tag Archives: loan

A HOUSE DIVIDED: The Family Home in a Divorce

27 Friday Sep 2013

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , ,

“When we divorced we split the house 50/50 – she got the inside and I got the outside.”

 “Have you seen the new “Divorcing Barbie” doll? She comes with Ken’s house.”

House Divided

             Joking aside, the family home is sometimes the greatest asset to divide in a divorce – so let’s look at how to handle this crucial asset.

It is advisable to call a Realtor early on, when you’re analyzing what assets you have and don’t have.  I often get called in to look at the home and give an assessment of its value in today’s market.  It makes sense to call a Realtor at this point – we typically are more familiar with the neighborhood and have been in the homes that are for sale and have sold, and are accustomed to pricing properties for sale.

There are online tools you can use as well – zillow.com, for instance, which gives you a “zestimate” of what your home is worth, or trulia.com.  However, these services have obviously not been inside your home or the other homes – so they are very general and cannot necessarily be relied upon.  Tax records are also notoriously unreliable.

A crucial consideration at this point may be whether or not the couple is “underwater”; that is, whether you owe more on the property than the property is worth.   If so, to sell the home you would have to bring money to the table.  In other words, in some instances it may not be possible to sell the home.

Also consider early on whether or not you want to fight to keep the home.  Can you afford the monthly carrying costs?  It might not be worth fighting for if it’s something you cannot keep up.

If one party does end up staying in and keeping the home, however, that party may be buying the other party out.  In that instance, professional appraisals are probably in order – each side getting their own appraisal and then perhaps a third appraisal if the two vary widely.  Know that appraisals are an ART as well as a science – while appraisers are bound by the Uniform Appraisal Guidelines and professional dictates, there is some subjectivity in the process.  When you hire an appraiser, you might wish to share with them the comparable sales that you think are most applicable and why they should be used.  Most appraisers are happy to consider the information, although of course they are not bound to use it.

But say the decision is that the home needs to be SOLD.  It’s great if you can both agree on a Realtor.  That actually happens much more often than you might think.  Maybe you both liked the Realtor who sold you the home.  Or know a Realtor jointly who you respect.  Another tactic is to interview three Realtors and see if there’s a clear front runner who you can agree upon.  If not, one way this is sometimes handled is that one party will choose the Realtor for a specified period of time and the other party will choose for the next period – be it 3 months or 6 months.

Several considerations arise here.  Keep in mind that there are various expenses involved in getting the home ready for sale and keeping it maintained while it is on the market.  How those expenses are handled should be decided upon in advance.  You might also want to decide in advance how much the list price will be decreased and when – and what offers should be acceptable (i.e., you can agree that any offer within five percent of list price must be accepted, that sort of thing).

Then there are some very practical showing considerations.  An example will illustrate this point.  We had one client where the wife left with all the nice furniture.  We were left showing a home with very little furniture and a “divorce feel.”  Try to agree to keep enough nice things in the home to make it show well.  Like it or not, buyers are swayed by these things.  Most buyers choose emotionally and THEN justify the purchase logically.  If they walk in and the home feels forlorn and empty, they will not feel great about the home – or may think the seller is in desperate circumstances and thus make a lower offer.  It pays off to have the home nice for showings.  If nothing else, the parties can agree to borrow or rent furniture or to have the home staged for showings.

The home must also be AVAILABLE for showings.  This becomes an issue when the person staying in the home doesn’t necessarily want the home to sell.  Perhaps the other party is paying the bills, and so once the home sells the occupying party loses that support AND must move to a lesser home.

When an offer comes in, keep in mind that your net is less the Broker’s commissions, the mortgage payoff(s) and any repairs that will be necessitated during the inspection period.  Your Realtor can help you figure your net from a given offer.  Again, it is sometimes helpful here to have agreed what amount and type of offer should be acceptable.

A note here if one party stays in the home.  Be aware of title issues.  When you sell the home, a title search is performed.  If there are any liens against the property, these must be paid off before closing.  Even if you do not sell the home, if you are the one keeping the home you want to have a title search before all is finalized.  That way you can be sure the departing spouse didn’t borrow money against the house or otherwise create liens that you will be responsible for when you sell the house and which effect its value.

The final issue – housing options once you leave the family home.  This is for you and your Realtor to decide, but just a few things to keep in mind: do you need to stay in the same school district for the kids?  Do you need to stay close to the other spouse for the children’s sake?  Even the priciest zip codes have affordable options that your Realtor can help you find.  And keep in mind that emotionally you may want to stay in a familiar area; the one you’ve lived in or an area with friends and family near.

MULTIPLE OFFER SITUATIONS

26 Monday Aug 2013

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , , , ,

Sellers Market

Our Atlanta real estate market is currently a strong “seller’s market”. We define a seller’s (vs. buyer’s) market in terms of available inventory.  If there is six months or less of housing inventory on the market, it’s a seller’s market – more than six months of inventory is a buyer’s market.

When we say “six months” worth of inventory, that means that if nothing new were to come on the market (hypothetically, of course), it would take six months to sell everything that it currently listed.  This is calculated this way

  • We compute the total number of active listings on the market last month in the area under consideration;
  •  Then compute the total number of sold homes for the that month;
  •  Then divide the number of current active listings by the number of total sales for the month, which gives you the months of inventory which remain.

Using this formula, the Atlanta Metro area has less than five months of active listings (in some areas, less than three).  So listings are often going under contract within the first day or two they are available, with multiple offers.  A seller who gets multiple offers may pick the best one and respond to it OR may decide to contact all bidders and request their “highest and best” bid and go with the bid the seller finds most advantageous to them.

If you are a buyer trying to “win” in a multiple offer situation, it goes without saying that you should place your HIGHEST offer – the most amount of money that you are willing to pay for the property.  The seller will usually go with the highest bid, but not always.  There are other factors important to the seller: how likely a buyer is to get to the closing table, for instance (so a buyer with cash is “king” – because loans can fall through, of course).  This is why the seller asks not only for your “highest” offer, but for your “highest and BEST” offer.  Let’s look as some of the factors that will help your offer be the “best” offer.

First, if you can avoid asking the seller to pay closing costs, I would recommend that.  A seller will perceive a buyer who is asking for closing costs as not as strong a buyer.  A strong buyer has enough cash on hand to pay their own closing costs and can avoid rolling those closing costs into the loan by asking the seller to pay for them.  (What the seller cares about is the seller’s “net” – contract price minus closing costs paid.  By asking the seller to pay closing costs you are offering them “less” than the contract price and perhaps indicating that you are not as strong  a buyer).

Another seller consideration is how difficult the seller perceives that the buyer is going to be during the contract to close process.  A buyer who asks for too much in the opening bid may be perceived as a scared buyer who is more likely to terminate the contract during the due diligence period.  Or one who is likely to ask for excessive seller concessions during due diligence.

Here are some other pointers if you are the buyer placing a bid against other offers:

  • Make your offer a CLEAN AS POSSIBLE; meaning avoid stipulations.  Keep those stipulations you do include as simple as possible.
  • For instance, we will sometimes insert a stipulation asking for a professional cleaning of the property from the seller prior to transfer of possession.  If there are multiple bids, LEAVE THAT OUT.  That stipulation is sometimes taken the wrong way by sellers who think that they are indicating that the property is less than clean, and that may be the thing that prevents you from getting the property.  You can pay for your own move in cleaning if the seller doesn’t (and many, if not most, sellers will have the property professionally cleaned without you asking for it)– but don’t risk losing the property by asking for this when there are other offers.
  • The same thing goes for other items you might otherwise ask for: a survey, condo documents, etc.  You can pay  for a survey yourself and still *ask* for the condo documents (or have your agent get them) during the due diligence period. Asking for them in the initial offer may, all other things being equal, cause a seller to choose another offer that is simpler for the seller.
  • You may be competing against other offers that DO NOT HAVE a financing or appraisal contingency.  If you need financing, you must have those contingencies (unless you have enough cash to cover if the property ends up not appraising for full contract price and are willing to take that chance). But keep this in mind – know that some buyers will pay cash without a loan OR appraisal contingency for a hot property.  So you may be beat out not on price but by a buyer in that position.
  • So if you must have a loan and appraisal contingency, make them as clean and enticing as possible.  Here are some guidelines: indicate in the contingency how much money you are putting down – more is better to the seller, of course.  If you are putting fifty percent down,  you are a stronger buyer than someone putting twenty percent down, for instance.  Keep the loan and financing contingencies as tight as possible – 21 to 25 days is the norm, but go shorter if you can in order to present your offer in the best light.
  • HAVE A PREAPPROVAL LETTER (or proof of funds if you are paying cash).  Most sellers won’t even consider an offer with a prequal or proof of funds.  It is best if that preapproval letter is from a recognized lender who regularly does mortgage loans so that the seller is reasonably certain that the lender will not botch the deal.
  • You may also be competing against an “AS IS” offer; that is, one in which the buyer says that they will purchase the property without asking for any repairs.  (In an “as is” contract, the buyer still has a right to inspections, but has agreed not to ask the seller for any repairs). Therefore, if you do want a due diligence period, keep that period as short a possible (typical is 7 to 10 days – in multiple offer situations, I definitely recommend not going over 10 days).

Finally, it sometimes helps to use a “personal touch”.  Tell the seller something about yourself.  We call this a “buyer’s letter” and I will often write them for clients in situations where I think it would be helpful.  Tell them what you like about the home and give them information so that they know you’ll be a good neighbor.  Not all, but many sellers care very much about what type of person is purchasing their home and what type of neighbor that person will be for the friends that they are leaving behind.

Put your best foot forward when there are multiple offers – remember that you are competing not only on price; and good luck!  If your bid is NOT the winning bid, consider asking the seller to hold on to it as a “back up offer” in case the winning offer falls through.

Obtaining a Mortgage: 3 Steps to Improve Your Credit Score

19 Thursday Apr 2012

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , ,

Right after the mortgage meltdown, it was very difficult to obtain a mortgage.  It is still not especially easy, and I find that some buyers have credit scores that either prohibit them from getting a mortgage or make it difficult to get a good rate.

The first step to improving your credit score is to get a current copy of your credit report. There are three nationwide consumer credit reporting companies that provide reliable credit reports. Those companies are: Equifax- www.investigate.equifax.com, Experian – www.experian.com and TransUnion – www.transunion.com.  At AnnualCreditReport.com you can get a copy of your credit report from one of these companies absolutely free. To report false information that appears on your report you may contact the nationwide consumer credit reporting company that provided the credit report. The time it will take to correct your report depends on the specific error contained in your report, but no matter the length of time, getting your credit information corrected is your best and only option because your credit is at stake.

The second step to improving your credit score is to take control of your monthly debt. Your credit score reflects what you owed at the time of your last billing cycle and the amount of credit that you have available. People with the highest credit scores only use 10% of their total available credit each month. To maintain good credit you must keep your monthly debt under 25% and not utilize more than 25% of your available credit each month.

The third step to improving your credit score is to remember that “credit” cards don’t always benefit your credit. Paying off the balance on your credit card every month will not always improve your credit score. At the end of each billing cycle the full amount that you owe on that card is posted on your credit score, even if you paid your monthly charge. Once you have paid off the full balance on a credit card, do not cancel it. Canceling a credit card will lower your credit score, even if you have paid it off. Mortgage companies suggest that if you plan to purchase a home, you should not make any purchases with your credit card 3 to 6 months before you plan to secure financing for your new home. Instead, use cash or debit to pay for purchases during those months so you can enhance your credit worthiness.

Overall, your credit score is only a small part of your complete financial standing, but it is one of the most important because it proves your responsibility for paying off your debt. Don’t miss out on the historically low mortgage interest rates that are being offered. There’s no requirement for you to have outstanding income and a high down payment if you have good credit. Improving your credit score will give you an opportunity to take advantage of a low interest rate. Follow these 3 easy steps to improving your credit score and be on your way to owning a new home!

Buying a Short Sale can be a Tall Order

09 Friday Mar 2012

Posted by in real estate

≈ 1 Comment

Tags

, , , , , , , , , , , , , ,

A short sale is usually anything but short.  Sort of like the attorney’s “legal brief” which is never brief, a short sale is very rarely “short”.  The term refers to the situation when the seller OWES more on the property than the property is worth, and is attempting to persuade the lender to take less than is owed on the property in full satisfaction of the loan.  You have probably heard the term “underwater” – a short sale seller is underwater on the house (has borrowed more against it than is supported by its current market value) and is trying to sell the home without having to cough up the difference at closing. 

A short sale can take MONTHS and MONTHS (although I HAVE had one approved in two weeks – that is very unusual).  The lender generally doesn’t WANT to take less than is owed, as you might imagine.  Therefore it’s somewhat of a fight, and if/when there are multiple lenders and lienholders (as there often are) it is often next to impossible to get them all to agree.  We agents sometimes say that it’s the THIRD short sale buyer who actually gets the house, meaning that most buyers who make an offer on a short sale get tired of waiting for the approval and just go on and buy something else.  Of course, the short sale may or may not EVER happen.  The seller may just stay and pay – or it may end up as a foreclosure.

Even when the short sale lender or lenders approve the short sale, they will sometimes reserve the right to disapprove the short sale at any time before closing – which poses another problem; it could fall through at the last minute.  In fact, you can be sitting at the closing table when the word comes that the lender has decided to withdraw approval and foreclose instead.

Other potential snafus are that the seller usually wants a release from any and all liability with respect to the loan, while the short sale lender(s) will often require that the seller sign a personal note back to the lender for the remainder owed.  Another problem I have seen is when the seller does not realize that they may be TAXED on the forgiveness of debt (why the seller’s agent did not bring up this issue to the seller prior to getting a contract is beyond me, but it happens).  The IRS considers forgiveness of debt taxable income, and the seller will be responsible for paying that tax.  A side note – if you are the seller, please consult your accountant on this one – because if it is your personal residence you are selling, the forgiveness may be excludable, much as GAIN from the sale is excludable if you have lived in the house as your main residence for two of the past five years.

In other words, short sales are a PAIN, but you CAN get a great deal.  It’s best to look for PREAPPROVED short sales where only one lender is involved.  Pre-approved means the lender has already agreed to accept a short pay-off, and these deals are much more likely to go through.  In any event, I usually counsel buyers to go ahead and make an offer on a short sale if that is the property that they really like, but the to KEEP LOOKING.  You can always terminate your short sale offer if you find something better in the interim. 

We agents are all ready for the day when regular sales again outnumber foreclosures and short sales, but I am also glad to see those sales moving through the system.  The quicker we turn over the troubled properties to buyers who can handle the payments, the faster the housing market will recover.

WHAT I LEARNED FROM BUYING A HOME – GETTING A MORTGAGE LOAN

20 Friday Jan 2012

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , ,

Image

I vaguely recall getting a loan when I purchased my first home.  And what I remember is that it did not seem all that difficult, but that the closing was a nightmare.  The loan officer did not show up for closing, there were charges on the closing statement that hadn’t been revealed to me previously, and the loan officer was nowhere to be found.  As a result, the closing was much more arduous and took a lot longer than it should have.

And while I work with clients every day who are getting a loan to purchase their homes, most of my clients work with my favorite lender.  He makes the process appear seamless to me as a Realtor.  He is patient, explains everything carefully to them, and always answers the phone or returns calls promptly.  So in recent years I have been less aware of what getting a loan is really like.

So when I convinced my husband that buying another home was a great idea, I was not really sure exactly what to expect.  I called my favorite loan officer.  And even though he made the process as easy as possible for me – I had forgotten all the information you need to provide for the loan – recent pay stubs, W-2 statements, tax returns for the last few years.  You will need to get with your lender and fill out forms, provide the documents, and then provide more documents as issues come up.  For instance, my husband was divorced from his first wife, but continued to pay alimony for a period of time after the divorce.  The lending underwriter needed to see the divorce settlement to determine when those obligations ended.  Why, I am not really sure.  But that is how it goes in the lending world these days.  The best advice I can give is to get all your important tax, account and legal papers together and organized and have them ready.  Some documents you may not even know that you need until the very last minute, when the loan goes through final underwriting.  Luckily, although the call came for that divorce document at the last minute and while my husband was overseas, I was able to locate it quickly in his organized files.

So, lesson one – have all important papers ready and handy and make sure that you have filed your income taxes regularly, particularly for the most current year.  I already knew not to make any large purchases between applying for the loan and closing.  Lenders do not like to see large sums of money going OUT of your account(s) during that time.  Now, lots of buyers purchase appliances, furniture, that sort of thing – if it is a large purchase, just run it by your loan officer before you do it.

The other part of this lesson is something I already knew: HAVE A LOAN OFFICER WHO IS ACCESSIBLE, AVAILABLE, AND RETURNS YOUR PHONE CALLS PROMPTLY.  Loans are more difficult these days.  You want someone who can guide you through the process and make sure everything goes great at closing.  Have what I had the second time – a seamless, efficient closing with no surprises that was over in less than an hour.  Do not have a closing like my first one – and you can avoid that by finding the right lender.