The Mortgage Lender/REALTOR® Relationship
As a mortgage lender, I have worked with both REALTORS® and Real Estate Agents, but I prefer and always recommend working with REALTORS®, as they adhere to a very strict set of guidelines and code of ethics. But do you know the difference between the two? This article explains the difference in detail, read on for more information!
Expect a Shift in Building Trends
When home building comes back, it will look much different than it does today as trends and needs have shifted. By 2015, housing development will see the following changes:
- Master planned communities will look different and be styled to appeal to more buyers.
- How planned communities look will depend on their location in the country.
- Builders will think more in terms of life style rather than type of buyer (first-time, move-up). Things to consider or multi-generational living, baby boomers that might want single floor living, low maintenance, and lots of amenities,
etc. - The bigger is better trend is declining and the median size of new homes is either holding steady or declining.
- A home that has a smaller lot with less landscaping and room for vegetable plots is more appealing.
- People want flexible, open spaces that are energy efficient.
The Revised Estate Tax
The tax cuts in 2001 by Bush lowered estate taxes over 10 years. These cuts brought the existing estate tax rate from a high of 55% to 35% over a 10-year period. The 35% estate tax rate was to stay in effect through the end of 2009. Then, estate taxes were set to disappear in 2010 and finally return to pre-tax cut levels at the start of 2011.
Now, there are changes that have taken place for tax years 2011 and 2012. The new law sets the federal estate tax rate at a flat 35%. In addition to this lowered rate, there are additional benefits:
- The number of people affected by the estate tax are reduced as estates under $5 million are not subject to any taxation. The limit was previously $3.5 million.
- The $5 million estate tax exemption is now portable, which allows for easier post-death planning.
- After the death of the first spouse, any unused portion of the spouse’s $5 million exemption may go into the other spouse’s estate.
- The bill now increases the total lifetime exclusion for gift giving to $5 million (previously $1 million), but unifies the estate gift and generation skipping taxes.
- This revision also gives estates of 2010 the choice of whether to use 2010 or 2011 estate tax rules. This is important because even though in 2010 there was no estate tax, there was a change in the capital gains tax of the estate. Prior to 2010, estates got a stepped-up cost basis (value to current market) for any assets in the estate. Thus, a property bought 20 years ago for $100,000 that is worth $500,000 today, would go into the estate as $500,000. But, in 2010, it would go into the estate
at $100,000 and the heirs would have to pay a capital gains tax on the difference.
House Hunting: 3 Ls and 4 Cs
While house hunting, keep in mind the 3 Ls and 4 Cs.
The 3 Ls
- Location, location, location. You can redo the house, but you can never change the location. What’s important in this area is commute time, schools/parks, shopping, and community events.
- Land or lot size. This is another thing that you cannot change. Also, is flat important? Is a large lot necessary? What if it slopes or has an odd shape? These could all affect adding on, putting in a pool, etc.
- Layout. Does the layout work for your needs? Are there enough bedrooms? Are they together or do you want them on separate floors? Is the kitchen an open space? Layouts can be changed somewhat, but they are costly.
The 4 Cs
- Condition. Is it in mint condition or is a redo needed? Will a redo be major or minor,/li>
- Color. This is simply a cosmetic issue. Don’t run from pink décor or flocked wallpaper if the house a good location and good bones. Color can easily be changed.
- Clutter. Don’t let a homeowner’s clutter stop you from visualizing your furniture in the house. Focus on the architecture, layout, and style of the home. Sellers take their clutter with them.
- Cleanliness. A dirty home means sellers will get lower offers. That might be a plus for you. You get a bargain and can then paint, clean up, redo floors, etc.
Buying a Short Sale — The Need for Speed
Short sales offer not just a lifeline to homeowners in over their heads, but an opportunity for homebuyers seeking an amazing deal. Better yet, thanks to new regulations, the once lengthy process has recently become considerably more streamlined.
In a short sale, a homeowner that cannot afford to pay the mortgage and the lender that loaned them the money enter into an agreement in which the home will be sold for less than the balance of the loan. This is generally because the homeowner has incurred a financial hardship — such as unemployment, an unforeseen medical expense or divorce — that is going to make it impossible to continue paying the loan.
So, the homeowner and the lender enter a short sale agreement as a win-win, and the buyer makes that a triple win. For the seller, a short sale enables them to start rebuilding their credit rating sooner than a foreclosure would allow. For the lender, a short sale lets them sidestep the often-sizable costs that they must bear in a foreclosure. And, of course, for the buyer, they benefit with a price often below market value.
However, short sales differ from standard real estate transactions. Buyers should understand the elements of a short sale so that they know what to expect and how to work with the seller. Cooperation is key between all parties in the short sale: the seller, the lender and the buyer, so you want to know the ins and outs.
Short Sale Process
A short sale involves an agreement between a lender and a borrower to sell the home for a price below the loan amount. Every lender has its process for a short sale, and it also has its own criteria for approving a short sale agreement.
The initial stages of a short sale will seem very much like a regular real estate process. You will want to get pre-approved for your loan, work with a real estate agent to find the short sale opportunities in your area, view the properties, research the ones you like, and begin negotiating with the sellers. But at a certain point, the lender will need to be brought into the process to approve the short sale terms. In other words, not only is the seller negotiating with you, but he or she must then negotiate with his or her lender to get its blessing on the deal.
Because of that negotiation with the lender, the seller will work with a real estate agent that is qualified to work on his or her behalf. The seller’s agent often holds a short sales certification from the National Association of REALTORS®. This agent will be an expert in shaping the agreement with the seller’s lender, and his or her expertise will help ensure that both the seller and you succeed in making a deal that the lender will be happy with and approve.
The short sale process used to be lengthy, and could go on for many months, while ultimately ending in disappointment. Thanks to new rules that recently went into effect under the Department of Treasury’s Home Affordable Foreclosure Alternatives Program (HAFA), the process has become more streamlined, which works to everyone’s advantage.
Previously, the lender could take months to review and consider offers put in by potential homebuyers. Under HAFA, sellers are now required to respond to a bid within 10 days. However, be warned that lenders will generally counteroffer your bid, which will stretch out the approval process. They can also take their time when accepting the final offer and completing the paperwork, which means a short sale can still take months to complete. When you consider the great deal you’re getting, though, that extra time may be well worth it.
Sometimes a property may be listed as an approved short sale on the MLS. This means the lender has agreed to a selling price that is lower that the balance of the loan. In general, the approved short sale price is non-negotiable; however, you can reasonably expect an approved short sale to move faster than the other type of short sale.
As you can see, the short sale process offers homebuyers a tremendous opportunity to get into a good property at a bargain price. Better yet, HAFA has eased the process considerably and streamlined an ordeal that previously took up to a year into a realistic process for all parties concerned.
If you or any of your friends or family are looking to find out more about the short sale process, I’d be happy to provide you with more information, as well as put you in contact with a real estate agent that can help you explore the short sales opportunities in your area. With home prices and interest rates still low, now is a great time to consider buying a new home. You may be able to afford a bigger home than you thought possible.
Contact me today to learn more.
© 2011 W.J. Bradley Mortgage Capital Corp., 201 Columbine Street Suite 300, Denver, CO 80206. Phone #303-825-5670. NMLS ID 3233. Trade/service marks are the property of W.J. Bradley Mortgage Capital Corp. This is not a commitment to lend. Restrictions apply. All rights reserved. Some products may not be available in all states.
Alabama Consumer Credit License MC 20878; AZ License # BK-0903998; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act RML# 4131002; To check the license status of your CO Mortgage Broker, visit www.dora.state.co.us/real-estate/index.htm; Florida Mortgage Lender license #ML.100000098; ID Mortgage Broker License No. MBL-2803; IL Residential Mortgage Licensee – License #MB.6760738, 201 Columbine Street, Suite 300, Denver, CO 80206; MI First Mortgage License No. FL0011392; MN Residential Mortgage Originator License No. 20447094; NV Mortgage Banker License No. 2061; NV Mortgage Broker License No. 504; NM Mortgage Loan Company and Loan Broker Act Reg. No. 01856; OK Mortgage Broker- License No. MB001365; OR Mortgage Lender License No. ML-776; TX Mortgage Banker Reg. No. 74182; UT Mortgage Lender Company License No. 5495659-MLCO; Vermont Broker License #0995MB; Vermont Lender License #6141; WA Consumer Loan License No. CL-3233; Wisconsin Mortgage Banker License No. 699991.
Recasting – A New Way to Cut a Mortgage
Whether you have a jumbo loan or a conforming loan, you might be able to use a little-known strategy called recasting to lower your payments for a small fee. Recasting or re-amortizing allows a borrower to lower their monthly payment on an existing fixed-rate loan without having to apply for a new loan and without having to pay a reappraisal fee. Here’s how it works:
The borrower asks the loan service if he/she can put a large sum of money against the existing mortgage. Ordinarily, this allows a borrower to pay down the loan, but he/she would still have the same monthly payment. With recasting, the mortgage payment would be reduced to match the new lower principal balance. Each lender sets their own fees and requirements to recast. The loan must also be in good standing and permission must be secured from the loan service.
Mortgage recasting resembles a “cash-in” refinancing, which is a newly popular strategy in which a borrower pays down principal on an existing loan in order to qualify for a new loan with a lower interest rate. In recasting, the borrower pays down the principal, but the interest rate and number of payments remains the same.
So, what is the advantage to recasting? Unlike a refinance, there are almost no fees or costs.
Home Staging Color Challenge
After five years in the home staging business I can tell you that almost every house presents itself with a unique design challenge. It might be a difficult floor plan, an outdated appearance or a color challenge that leaves me particularly perplexed. My job, after all, is to accentuate the best of a home’s features and downplay its worst. With 92% of buyers previewing homes on the internet, having a beautifully staged home for a virtual tour is essential in a home marketing plan.
Now, in many cases of home staging I can paint beautiful colors on the walls, update kitchens and bath or replace old flooring, as seen in some of my other projects. However, in some cases, such as the one on 809 Pinon Ave Millbrae I am left to design around an existing color challenge.
Color challenges of a home might be a rustic brick fireplace surround in an otherwise contemporary space. The dark red brick color against creamy neutral walls with white crown moldings appear in sharp contrast to one another and draw the eye toward the stronger color. Or, a color challenge might be a strong accent wall color that cannot be painted over for a variety of reasons.
As you will see in the before and after pictures of the 809 Pinon Ave house one wall in the living room as well as the entry were painted a strong salmon color. At the opposite end of the room is a sunroom, which was painted a soft, green. My color challenge in this home staging was to incorporate both of these colors into one harmonious design. I want to downplay the stark contrast between the dark salmon and the white wall by placing either color on the contrasting wall. The secret to the success of the design was color balancing the space with a rug that incorporated all of the colors as well as the black of the fireplace surround. A lighter colored rug would have left the space “floating” and off kilter. This darker rug draws the eye away from the wall and into the seating area.
An additional color challenge was in the dining room with the terra cotta tile floor. The color balance was achieved with the art and floral arrangement complimenting all three colors.
Sometimes in my home staging I need to purchase a specific design element to successfully complete my project. In this home staging color challenge I purchased the art and rug, both of which had the salmon color as well as the green tones.
Color increases the memory of a property by 60%. People viewing this property will remember it by it’s living room color. Professionally home staging this property helped neutralize a strong accent color by blending the color around the room. It also created more appealing photographs for a virtual tour.
Please give me a call or send me a message if you have any questions about home staging and/or color challenges.
The Right Professionals Makes the Difference!
Property type: Two-bedroom, two bath in Burlingame
Appraised value: $480,000
Loan amount: $369,000
Loan type: 30yr fixed
Rate: 4.5%
Back story:
This one, while ending with happy clients, was a lesson in working with the right professionals to get the job done. This client and their realtor had troubles with their appraiser and actually had to have a few different discussions with them to get them to reconsider comps in the area in the overall home value. Being sure that your Realtor, Mortgage Lender, Appraiser, Insurance Agent, and every other person involved in the process is on top of their job and able to troubleshoot situations is so important!
And, as always, it closed in less than 30 days!
Refinance and change your financial outlook.
Property type: Four-bedroom, two bath in Stinson Beach
Appraised value: $795,000
Loan amount: $270,000
Loan type: 30yr fixed
Rate: 4.5%
Back story:
This client was working on a fixed income and had many loans and investments. They needed to refinance to get cash out to put in a new septic system on their home and consolidate some of their consumer debt. We were able to do both and increase their cash flow by $450/mo.!
And, as always, it closed in less than 30 days!
You keep talking about your team, how did you find them and why are they the best?
The first person on my team is Jerry Hsiang and we have been working together for almost 5 years now. We started working together at Citibank, briefly moved to Chase, and are now here at W.J. Bradley. He is my right hand and does a lot of client interaction covering the details of processing and underwriting.
Then there is Clare Nishikawa who is my processor and we’ve been working together for about six months now. She is extremely attentive to detail and makes sure our clients stay fully up-to-date with what is happening on their loans.
Our underwriters are thorough and by-the-book, but are always looking for ways to approve clients, where at other companies I’ve seen underwriters trying to find any reason not to approve a client!
And lastly, there’s Renee Pelton, who handles my marketing and online communications and we’ve been working together for almost a year now. She keeps the website current, helps with social media, and makes sure that the blog is kept up-to-date with useful information.
All together my team and I bring together the skill, knowledge, and experience to make sure your financing needs are met, your expectations exceeded and the process happens smoothly and efficiently!
