photo credit: The-Lane-Team

REALTOR® magazine reports that Fannie Mae is going after homeowners who choose “strategic defaults”.  A strategic default is one in which the homeowner is able to pay but decides not to.  Usually this is due to them being “underwater” (the value of the home dropped below the amount of the mortgage).  In some cases the owner decides to just walk away and let the bank have it back.

Homeowners who choose such a move will be ineligible for a Fannie Mae backed loan for the following 7 years.  The fact that Fannie Mae backs about 75% of the loans originated means that you could be blocked from buying if you walk away from your home just because its value dropped.

Furthermore, in states they are allowed, Fannie Mae is going to seek deficiency judgments against homeowners who walk away.  I read a recent blog about a REALTOR’s® client who did a strategic default and ended up having to rent a house in the same neighborhood for more than their house payment was in the beginning.

If you are one of the thousands of people underwater in your home, think twice before you decide to walk away.  It may not be as simple a decision as you believe.

Banks will only lend money on the value of the house “as-is” .  But if you are like me, you wouldn’t live in the “as-is” version of most of these bank-owned houses on the market.  And if you have to get FHA backing on your loan they will do an inspection and give a list of repairs that will have to be made before you can buy the house.  But the bank that owns the house won’t make any repairs.   By now you may be wondering how you can still get a good deal and still be able to make it our dream home.

There is an FHA loan program that could be your solution.  It’s called the 203(k).  This loan will give you the money to both buy the home and fix it up–all in one package.

The 203(k) loan is based on the value of the home after repairs are completed.  So part of the process is to line up a contractor who will submit a detailed proposal of the work to be completed and the cost of the project.  An appraiser then  looks at the house and the contractor’s proposal and determines whether the work will bring up the value to meet the program’s guidelines.

There are a select few real estate agents and lenders willing to work with these loans.  Many agents and lenders shy away from working with 203(k) loans because they require a lot of work.  But for those agents and lenders willing to work hard for their clients it is a great benefit for everyone.

If you want to consider looking for a good deal on a fixer-upper house, consider working with an agent experienced in rehab properties and the 203(k) loan process.

photo credit: TheTruthAbout…

I believe that buying a house is a good plan for almost everyone.  I’m a REALTOR®.  If I didn’t believe in my product I’d be a hypocrite.  But you need to ask yourself, “Is now the time for me to buy?”  Here are some things to consider.

Does buying a house fit into my financial and life plans?

If one of your life goals is to travel overseas or get more education then consider whether the cost and responsibilities of home ownership fit into those plans.  Will you be able to keep your budget in balance while maintaining a home?  Will you be able to sell your home quickly if you encounter an opportunity you want to grab?

What can I comfortably afford?

This question is the one you should ask yourself.  Many people ask, “How much can I borrow?”.  Whenever I’ve applied for a loan they usually were willing to loan me more than I could comfortably afford.  It’s better to have less house and extra money for emergencies.

What kind of down payment will I need?

FHA is presently lending 96.5% of the value of a home if you have a credit score of over 620.  For conventional loans banks are looking for a down payment of 20%.  In general, the more you have to put down the stronger position you have in purchasing.  And the ability of a buyer to close the deal is something sellers are starting to consider when accepting an offer.  Often a seller will take a lower price from a buyer with solid financing in place.

If you decide that your time is now, find a REALTOR® who will listen to you and help you find the best value in a home.  As the saying goes, “It’s always a good time to buy real estate.”

This story has been around since the recession of the 1980s.  If you were old enough back then you will remember that people thought they were lucky to get a mortgage rate of 17%.  This story is a good reminder that we can choose not to participate in this recession.

The Hot Dog Vendor

“On the side of a road lived a man who sold hot dogs. He was an uncommon man. This man was hard of hearing and so he could not to listen to his radio. He also had difficulty with his vision so he could not read the newspaper or for that matter watch TV. But he did know how to sell….hot dogs….great hot dogs.

He set up signs about his great hot dogs and pitched them by the highway. He also stood by the side of the road and announced and asked people, ‘Hey Mister…Ms., do you want to buy great hot dogs?’

The beauty is that crowds formed just to buy from this man. So, he had to increase the meat and bun order to take care of the loads of people. Imagine he had to buy a bigger hot dog stand. Business was certainly booming.

His son even came home from college to help him out with his business. It was at this point that his son said, ‘Dad, haven’t you heard we’re in a bad economic recession. The job market is horrid, and our country is in really dire straits.’ The father was surprised but thought….’Geez, my son has been to university, and he listens to the radio, reads newspaper, and watches TV. The kid should know. ‘

So, the father then decides to cut down his meat and bun order. He traded his big hot dog stand for a smaller one, and proceeded to reduce his advertisement on the highway. Instantly sales dropped like lead. Reflecting on this situation, he turns to his son and says, ‘You’re right son. We’re definitely in the middle of a big recession.’”

In the last few months I’ve become much more careful about what I put in my head.  “You become like what you focus your eyes upon.”– Bill Johnson, pastor.  Another great quote:

If you think you can or if you think you can’t, you are right.

photo credit: TheTruthAbout…

“It’s always a good time to buy real estate.” It’s a Realtor’s® favorite line.  But if you talk to a true real estate professional he may tell you that it’s not a good time for you to buy real estate.  Owning your own home is part of the American Dream.  It’s a great way to build personal wealth.  And home ownership has a lot of intangible benefits as well.  But you need to be sure it’s the right decision for you now.

Here are a few things to consider when deciding whether to rent rather than buy.

Are you going to be in the house for only a short time?

If your job or life situation is likely to cause you to move in a couple of years then you might be better off renting.  Back in the real estate bubble you could expect the price of a house to go up enough to resell in a couple of years and you’d make some money on the equity increase.  But those days are gone and prices will probably stay flat for the foreseeable future.  Renting may be the smart choice because you can quickly make a transition to a new neighborhood or city.

Does it make financial sense to buy?

You can find rent vs. buy calculators online.  Keep in mind that most of these are put there by mortgage companies to sell you a loan.  Again, you are best to talk to a professional real estate agent who will give you the straight scoop for your situation.  One method you can use to get an idea of renting vs buying is to use the price to rent ratio.  You take the price of a home you’d try to buy and divide it by the amount of rent you pay for a year for a comparable home.  If the number is higher than the average of 15, you might be better off to rent.

Sometimes the intangibles will outweigh the financial part of renting.  When you rent you’re subject to the whim of the landlord about home improvements and painting.  So find a good Realtor® who will listen to what you want and will help you make a plan on how to get it done.

photo credit: SFTHQ

As with the residential real estate market, some areas are suffering more than others.  In the Kansas City metro we have been fortunate in that our market for both commercial and residential real estate hasn’t taken the drastic hits that have happened in other parts of the country.

Investors in both residential and commercial real estate have a great buying opportunity.  The market will recover.  Now is a great time to buy if you can.

To read full article click HERE

photo credit: *Sally M*

Article From BuyAndSell.HouseLogic.com

By: G. M. Filisko
Published: March 19, 2010

While you’d like to get the best price for your home, consider our six reasons to reduce your home price.

Home not selling? That could happen for a number of reasons you can’t control, like a unique home layout or having one of the few homes in the neighborhood without a garage. There is one factor you can control: your home price.

These six signs may be telling you it’s time to lower your price.

1. You’re drawing few lookers

You get the most interest in your home right after you put it on the market because buyers want to catch a great new home before anybody else takes it. If your real estate agent reports there have been fewer buyers calling about and asking to tour your home than there have been for other homes in your area, that may be a sign buyers think it’s overpriced and are waiting for the price to fall before viewing it.

2. You’re drawing lots of lookers but have no offers

If you’ve had 30 sets of potential buyers come through your home and not a single one has made an offer, something is off. What are other agents telling your agent about your home? An overly high price may be discouraging buyers from making an offer.

3. Your home’s been on the market longer than similar homes

Ask your real estate agent about the average number of days it takes to sell a home in your market. If the answer is 30 and you’re pushing 45, your price may be affecting buyer interest. When a home sits on the market, buyers can begin to wonder if there’s something wrong with it, which can delay a sale even further. At least consider lowering your asking price.

4. You have a deadline

If you’ve got to sell soon because of a job transfer or you’ve already purchased another home, it may be necessary to generate buyer interest by dropping your price so your home is a little lower priced than comparable homes in your area. Remember: It’s not how much money you need that determines the sale price of your home, it’s how much money a buyer is willing to spend.

5. You can’t make upgrades

Maybe you’re plum out of cash and don’t have the funds to put fresh paint on the walls, clean the carpets, and add curb appeal. But the feedback your agent is reporting from buyers is that your home isn’t as well-appointed as similarly priced homes. When your home has been on the market longer than comparable homes in better condition, it’s time to accept that buyers expect to pay less for a home that doesn’t show as well as others.

6. The competition has changed

If weeks go by with no offers, continue to check out the competition. What have comparable homes sold for and what’s still on the market? What new listings have been added since you listed your home for sale? If comparable home sales or new listings show your price is too steep, consider a price reduction.

More from HouseLogic

How to ready your home for sale at little cost (http://buyandsell.houselogic.com/articles/5-tips-prepare-your-home-sale/)

How to review offers on your home (http://buyandsell.houselogic.com/articles/6-tips-choosing-best-offer-your-home/)

Other web resources

Setting the right price

More on setting the right price (http://public.findlaw.com/abaflg/flg-4-4a-1.html)

G.M. Filisko is an attorney and award-winning writer who made strategic price reductions that led to the sale of a Wisconsin property. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics

photo credit: spaceamoeba

Article From BuyAndSell.HouseLogic.com

By: G. M. Filisko
Published: February 10, 2010

Have a plan for reviewing purchase offers so you don’t let the best slip through your fingers.

You’ve worked hard to get your home ready for sale and to price it properly. With any luck, offers will come quickly. You’ll need to review each carefully to determine its strengths and drawbacks and pick one to accept. Here’s a plan for evaluating offers.

1. Understand the process

All offers are negotiable, as your agent will tell you. When you receive an offer, you can accept it, reject it, or respond by asking that terms be modified, which is called making a counteroffer.

2. Set baselines

Decide in advance what terms are most important to you. For instance, if price is most important, you may need to be flexible on your closing date. Or if you want certainty that the transaction won’t fall apart because the buyer can’t get a mortgage, require a prequalified or cash buyer.

3. Create an offer review process

If you think your home will receive multiple offers, work with your agent to establish a time frame during which buyers must submit offers. That gives your agent time to market your home to as many potential buyers as possible, and you time to review all the offers you receive.

4. Don’t take offers personally

Selling your home can be emotional. But it’s simply a business transaction, and you should treat it that way. If your agent tells you a buyer complained that your kitchen is horribly outdated, justifying a lowball offer, don’t be offended. Consider it a sign the buyer is interested and understand that those comments are a negotiating tactic. Negotiate in kind.

5. Review every term

Carefully evaluate all the terms of each offer. Price is important, but so are other terms. Is the buyer asking for property or fixtures-such as appliances, furniture, or window treatments-to be included in the sale that you plan to take with you?

Is the amount of earnest money the buyer proposes to deposit toward the downpayment sufficient? The lower the earnest money, the less painful it will be for the buyer to forfeit those funds by walking away from the purchase if problems arise.

Have the buyers attached a prequalification or pre-approval letter, which means they’ve already been approved for financing? Or does the offer include a financing or other contingency? If so, the buyers can walk away from the deal if they can’t get a mortgage, and they’ll take their earnest money back, too. Are you comfortable with that uncertainty?

Is the buyer asking you to make concessions, like covering some closing costs? Are you willing, and can you afford to do that? Does the buyer’s proposed closing date mesh with your timeline?

With each factor, ask yourself: Is this a deal breaker, or can I compromise to achieve my ultimate goal of closing the sale?

6. Be creative

If you’ve received an unacceptable offer through your agent, ask questions to determine what’s most important to the buyer and see if you can meet that need. You may learn the buyer has to move quickly. That may allow you to stand firm on price but offer to close quickly. The key to successfully negotiating the sale is to remain flexible.

G.M. Filisko is an attorney and award-winning writer who has survived several closings. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

photo credit: rightbraining

Article From BuyAndSell.HouseLogic.com

By: Marcie Geffner
Published: June 10, 2010

Consider before you ignore or outright refuse a very low purchase offer for your home. A counteroffer and negotiation could turn that low purchase offer into a sale.

You just received a purchase offer from someone who wants to buy your home. You’re excited and relieved, until you realize the purchase offer is much lower than your asking price. How should you respond? Set aside your emotions, focus on the facts, and prepare a counteroffer that keeps the buyers involved in the deal.

Check your emotions

A purchase offer, even a very low one, means someone wants to purchase your home. Unless the offer is laughably low, it deserves a cordial response, whether that’s a counteroffer or an outright rejection. Remain calm and discuss with your real estate agent the many ways you can respond to a lowball purchase offer.

Counter the purchase offer

Unless you’ve received multiple purchase offers, the best response is to counter the low offer with a price and terms you’re willing to accept. Some buyers make a low offer because they think that’s customary, they’re afraid they’ll overpay, or they want to test your limits.

A counteroffer signals that you’re willing to negotiate. One strategy for your counteroffer is to lower your price, but remove any concessions such as seller assistance with closing costs, or features such as kitchen appliances that you’d like to take with you.

Consider the terms

Price is paramount for most buyers and sellers, but it’s not the only deal point. A low purchase offer might make sense if the contingencies are reasonable, the closing date meets your needs, and the buyer is preapproved for a mortgage. Consider what terms you might change in a counteroffer to make the deal work.

Review your comps

Ask your REALTOR® whether any homes that are comparable to yours (known as “comps”) have been sold or put on the market since your home was listed for sale. If those new comps are at lower prices, you might have to lower your price to match them if you want to sell.

Consider the buyer’s comps

Buyers sometimes attach comps to a low offer to try to convince the seller to accept a lower purchase offer. Take a look at those comps. Are the homes similar to yours? If so, your asking price might be unrealistic. If not, you might want to include in your counteroffer information about those homes and your own comps that justify your asking price.

If the buyers don’t include comps to justify their low purchase offer, have your real estate agent ask the buyers’ agent for those comps.

Get the agents together

If the purchase offer is too low to counter, but you don’t have a better option, ask your real estate agent to call the buyer’s agent and try to narrow the price gap so that a counteroffer would make sense. Also, ask your real estate agent whether the buyer (or buyer’s agent) has a reputation for lowball purchase offers. If that’s the case, you might feel freer to reject the offer.

Don’t signal desperation

Buyers are sensitive to signs that a seller may be receptive to a low purchase offer. If your home is vacant or your home’s listing describes you as a “motivated” seller, you’re signaling you’re open to a low offer.

If you can remedy the situation, maybe by renting furniture or asking your agent not to mention in your home listing that you’re motivated, the next purchase offer you get might be more to your liking.

More from HouseLogic

6 Tips for Choosing the Best Purchase Offer for Your Home (http://buyandsell.houselogic.com/articles/6-tips-choosing-best-offer-your-home/)

6 Reasons to Reduce Your Home Price (http://buyandsell.houselogic.com/articles/6-Reasons-To-Reduce-Your-Home-Price/)

Marcie Geffner is a freelance reporter who has been writing about real estate, homeownership and mortgages for 20 years. She owns a ranch-style house built in 1941 and updated in the 1990s

The best way to get a better price from a contractor is to let him know that you want to work with him.  Ask him if the price you received is the best he can give.  Ask if there are ideas he has to be able to be more efficient or use other materials or fixtures to save costs.  Ask these questions in a friendly way so that you aren’t creating an adversarial relationship.  You want your contractor to feel like you’re treating him as an ally or partner to find a workable solution for your project.

Another way to approach the negotiation is to give your contractor your budget.  If you’ve found your contractor by way of referral, you might want to do this up front.  The conversation then centers around the scope of the work and how you can get the best value for the money.

My wife, Brenda, and I saw this first hand in our faux painting business.  The clients who called and gave us their budget got more for their money than those who just had us give them a bid proposal.  Brenda could take a working budget and match it to the finish that gave the best result.  Sometimes she could adapt her technique to give a similar look in 1 layer instead of 2.

And speaking from a contractor’s perspective, a client that starts a conversation and treats us as a partner is easier to work with than those who start off with confrontation and making demands.  The good clients will get extra services and things done for free.

Remember to ask for references and follow up.  But once you find a contractor you want to work with, give him a budget and let your negotiations be a friendly conversation.