More Mortgage Changes!

Having just missed Halloween, I may be a little late to try to scare you with a horror story or two. But hey! There’s never a moment when a good story to shake things up isn’t welcome.  Today, I wanted to share a potential trend that a few of us have experienced in the “wonderful world of real estate”: the lenders becoming involved in the home inspection negotiation process. If that doesn’t scare the living daylights out of you, maybe it should.

At the risk of redundancy, I’ll say it again. Home sellers REALLY need to have a home inspection prior to putting their home on the market. The little quirks and irks you’ve lived with for the last 5 – 15 years will show up on the inspection.  I know you don’t think the way the dryer vent exits the house right next to the outside air condition unit is an issue, but your buyer will. It’s been that way since the house was built in 1983. Doesn’t matter. It will show up on the report. 

I have already gone on about how this inspection portion of the purchase process can spook a nervous buyer and irk a seller who feels as though he has gone as low as he can go in this market, and he can’t be bothered with $300 roof repairs, $500 worth of broken window seals and a fireplace cap that needs replaced.  Knowing this information up front and having already made the necessary repairs, puts this seller in better negotiating position. And in this “buyer’s market”, wouldn’t you, as a home seller, want to find SOME advantageous position? And buyers, wouldn’t you like to buy a well maintained home that isn’t fraught with “surprise” issues? Just buy the home, bring your toothbrush, and move in!

A couple of lenders in the area have begun to ask for a copy of the home inspection summary page, and the addendum between buyer and seller outlining how any repairs will be handled.  One lender insisted on a physical re-inspection of the property prior to closing on what most of us would consider a “typical” FHA purchase.  Because the majority of home buyers do not care to pay for a 2nd home inspection, generally speaking, a walk-through prior to closing and collecting receipts for the work performed will insure compliance of the addendum. This issue arose: who pays for the inspection, and who is now the inspector’s client?

Another problem to consider is this:  the lenders are now telling buyers they want a “sign off” on the repairs, a statement of satisfaction with the work performed, well in advance of our contractual opportunity to complete our  “…within  48 hours prior to closing…” examination of the property. Generally about 5 days prior to closing so the paperwork can be processed in time for the appointed closing date.  Moving is a busy time, and most sellers wait until the last minute to complete repairs, especially if the luxury of a few days of occupancy after closing is negotiated into the contract.  We need to know that this is a possibility, and amend the wording of our purchase contract and / or addendum, to insure the buyers can comfortably sign off on repairs that they have had the opportunity to inspect. In other words: Sellers be ready because my buyers and I are coming over sooner!

Not to be an alarmist, but I am concerned a bit that if underwriters or loan processors 4 states away review an inspection report, and the agreement between buyer and seller on certain repairs, then decide they don’t like the agreement made between buyer and seller, are they now opening up the opportunity to insert their opinion on the resolution?  I don’t know. That is a little scary to me.  If your eyes are rolling at me right now, I understand. But loan processing is a very different scenario than it has been in the past.  I’ve had this discussion with agents and loan officers who all wonder if this is a passing fad, or harbinger of even more changes to come. 

Personally, I think much of this issue could be resolved by sellers taking the bull by the horns and just getting their homes in order prior to putting them on the market.  Make sure the GFCI plugs are where they need to be. Have a fireplace? Get it cleaned and inspected. Make sure it’s been deemed safe to use by a pro. Clean the gutters and tighten the wobbly ceiling fans. I know. Those are not “material defects”, but trust me on this one: they will be on the report.  Have the HVAC cleaned and inspected. It will show up on the report if you don’t have receipts to show it’s been done.

Do you have a list of things to do prior to closing? Please complete those items ASAP.  Not all buyers have their “backs against the wall” and will be certainly in a position to delay closing until they are satisfied that all work has been completed as contractually agreed.  A delay in closing may not be in your best interest either, so fix those windows, and clean those gutters because we are coming over to re-inspect!

More Cincinnati real estate information can be found at RealCincy.com

One of the most important elements of the Cincinnati home buying experience, and perhaps the most stress inducing portion of the process, is the home inspection.  In Part One of this series, I shared with you this thought: Just because the inspector wrote down a “problem”, that doesn’t make it so. Some “problems” are nothing more than items that can be fixed with a screw driver or by pushing the re-set button on the GFCI outlet. An inspection report that lists 5 or 6 of these types of “problems” nearly inevitably causes a nervous home buyer to doubt his purchase decision. Look objectively at the report. Dirty gas fireplaces can be easily cleaned by a homeowner. Smoke detectors can be installed after you move in. Wobbly banisters serve no real threat to your health. Just get out the screwdriver.

The purpose of the inspection is to determine if the home has any material defects that were not immediately visible when we toured the home together. What are we concerned with?  Roof condition, termites, radon, non-functioning windows that may prevent an escape in case of fire are good examples. A good inspector should be able to help you understand the difference between real issues, and items that should probably be done at some point….like adding an extra smoke detector in the upstairs hall for example.

Your home inspector is not supposed to be there looking for little bits of problems. He is there to identify major fixes, and major problems.  The purpose of writing down wobbling ceiling fans and loose banisters is to help you “perfect” the imperfect home.  These are not written down to give you a list of items to present to the seller. A wobbling ceiling fan should not affect your decision to buy your home.

Now that we have wrapped our heads around the purpose of the report, and the very real fact that we will need to go line item by line item, making a clear determination between fact, opinion, safety and a weekend minor chore list, let’s talk about what else can happen.

Why Didn’t He Find This Problem?

During the 2 or 3 hours that you and your inspector are together, your inspector may miss a few things. Why? Some problems can not be found unless you actually live in the home. A good example is  hot water distribution in the home if two showers are being run. Drippy faucets can materialize at any time. Leaks can develop after you move in and certain conditions arise…..like a wind storm a month after you buy the home.

The “Last Man In” Theory

It has happened that an inspector discovered a leak in the roof that could be fixed with securing shingles, or correcting a problem with flashing. Bring in the roofer that recommends a new roof. Why? The “Last Man In”.

The “Last Man In” theory is this: The last guy to work on a problem is reluctant to just “fix”, he would rather replace. He doesn’t want the exposure of liability, real or imagined, because he was the last guy to touch it.

Just another thought: in the winter, your inspector can not test the air conditioner. If we are having a snowy winter, the roof may not be clear for weeks. When we are experiencing a hot, sticky summer day, the furnace will not be flipped on.  Problems can manifest later. Wind can be damaging and ground settles. Motors on garbage disposers and trash compacters can give out. I’ve never been able to make sense of the life span of a water heater.  I’ve had them last 20 years and I have seen them go in less than 10. Your inspector doesn’t have a crystal ball.

Different Opinions

There is more than one way to build a home. On the Cincinnati market today are homes built what we might call “Good”, “Better”, “Best”.  All are acceptable.  If you are purchasing a 10 year old $150,000 home, it’s probably “Good”. An inspector might call out something that is “Best” because it is his opinion that all homes should be constructed a certain way or contain a particular feature.   If your home is built to code, the seller doesn’t have to make design changes to make the home “Best”. Bring in a contractor and his opinion may differ on how something should be done that was not noted on an inspection report. Remember, you have two different opinions because the two sets of eyes are coming from different approaches.

You home inspector is giving your home a general, overall visual sweep.  He will not light the pilot light on water heaters, pull apart the furnace, or conduct an extensive mold test. He will generally recommend HVAC and fireplace cleaning.  He will not perform any invasive tests.

Remember that your inspection, even if no real material defects are found, is not going to eliminate any and all future issues. When I bought my home in 2000, my favorite inspector performed a very good inspection. However, within the first 12 – 14 months my dishwasher leaked, the ice maker stopped making ice, the A/C didn’t work the following summer, the water softener stopped working and the garbage disposal quit and needed to be replaced. 

I hope this helps you understand what to expect at your home inspection. The home inspectors that we can recommend will try to do a good job for you. They are here to help. Let’s just be sure to take the report, one item at a time, always keeping in mind the purchase contract language and intent of the inspection contingency, and keep the emotion out of it. I bet you’ll find that the stress just melts away and you will enjoy the home purchase process even more.

More Cincinnati real estate information can be found at RealCincy.com

Story #1

Let’s set the scene: 1st time buyers nervously moving forward on a purchase. They are doing things right. They have saved for the down payment, they have the money in the bank for emergencies, and they are buying well below their approved purchase price so they do not stretch themselves.  Enter the home inspector.  The home inspector convinced them that the electrical wiring in the 25 year old home “was shot”. His exact words. The sellers need to have an electrician re-wire the home. He could not get the front porch light to come on. The exterior plug on the porch didn’t work. It was “dead”.  There were major issues to address! The couple was scared to death of the “fire trap”. They wanted out of the contract….NOW!

Solution:  Burned out light bulb & a GFCI that just needed reset. Yep, that’s it. Seller replaced the light bulb and pushed the little red button on the GFCI, and problem solved.

Story #2

Let’s set the scene: Young executive moving to Cincinnati with his wife and baby. We select a beautiful, gently lived in one year old home. The sellers barely had time to unpack, when he was transferred so the home was sitting there empty, just waiting for my buyers.  For some reason that we don’t quite understand, the paint work is a bit “patch-y” & it really shows up in certain sunlight. Not the nicest touch up job I’ve ever viewed, but this is a great house, reduced in price to meet the market conditions. My customers decide this home is “the one”.  We draft an offer with the understanding that if the sellers accept our contract, we will take the home “as is” and not ask for the home to be re-painted. Offer accepted.  Enter the home inspector who notes on his report that the whole house needs repainted.  I explained to the buyers that our “best deal” included the fact that the home needed repainted, and the sellers are not even going to entertain that notion. And…AND….the purchase contract clearly states that we are not conducting an inspection to discuss cosmetic issues!!   I might add that the same home inspector made comments on his report about yard conditions, on the neighboring lot, in a new construction neighborhood, before there was even a house built!!  He also missed the giant sink hole in the front yard.

Solution:  Our purchase contract clearly states the following. “It is not the intent of this provision to permit the buyer to terminate this agreement for cosmetic or non-material defects or conditions.  Buyer agrees that minor repairs and routine maintenance items are not to be considered material defects with regard to this contingency”. If you sign it…you agree to it!!  Did the buyers ask for the paint job after the inspector said that they should? Yep. Were the sellers a bit, let’s say miffed? Yep.  Did it cause unnecessary anxiety as the buyers suddenly decided that because the home inspector “…said that we should put that in the contract and have them repaint the home….” that this normally respectful and calm Realtor ® didn’t want to put her foot in someone’s backside? Oh yes!!

Story #3

Let’s set the scene: A lovingly maintained 15 year old, custom built 2 story enters the market.  It goes under contract and the buyers send over their inspector.  The inspector notes a problem with the roof. A small leak is noted near the chimney.  It is his opinion the roof has lived a useful life, and that the sellers should spring for a new roof.  The seller disagrees. He understands the integrity of the roof, and knows that a new roof is not at all necessary. There is no curling, no flaking, no loose shingles, zero indication that this roof doesn’t have another 10 years of life. He hires his own roofing expert to examine the issue.  A $200 fix later, and the flashing is repaired, the water is now properly flowing as it should.  Would you rather spend $200 for a minor fix, or about $4000 – $5000 for a new roof? Just because an inspector said so?

Ok….I have collected plenty of stories over the years, but this should do it for now.  Here’s my point:  We absolutely, positively must keep home inspections as an integral part of our home buying and selling process. The guys generally do a good job, and I don’t for a minute think that any one of them are out to “trash” a contract, nor do they intend to make trouble with poor reports.  But they are human. Until the perfect humanoid home inspecting droid is invented, there will be mistakes.

The unintended consequences of the home inspection that notes every “this or that” is this: while it may sound “thorough” it scares the heck out of buyers! It causes buyers to question their purchase, and wonder if they should move forward on a home that is now “tainted”. Talk about buyer’s remorse!! Sorry, but there is no provision in a purchase contract to dump on a home because now you doubt your decision.   When you are handed your home inspection report, be objective. Really look at what is important on that report.

Let’s not bother to address cosmetics like paint, landscaping, carpet stains or what’s happening in the neighbor’s yard. We took that into consideration when we drafted our offer.  There is no perfect home and your inspector will certainly find something to jot down. Your inspector may note items like wobbling ceiling fans, loose banisters, stains on linoleum, etc.   That’s ok. The point of noting these items should be to help you have a running list of “to-do’s” and point out items that you just might want to take care of after you move in.

Don’t panic. Give the seller the opportunity to correct the “issues”.  Keep in mind there may not even BE an issue!  Sorry, but just because the inspector wrote it down does not make it so.

Yes, we can ask the seller to take care of these items. Many sellers who take pride in their home will be glad to address even a minor “to-do” list. Let’s just try to keep in mind the purpose of the inspection……material defects.

More Cincinnati real estate information can be found at RealCincy.com

There is a distressed market segment of foreclosures and short sales, but that needs realistic pricing to function as well. Overpriced listings don’t attract offers and unrealistically low offers don’t result in accepted sales contracts.
The question for the seller is; “Do I price my home higher than is realistic, acknowledging I’m going to get beat up when the offers come?”
The buyer’s question is; “I’ve found the home I really like and it seems priced well, should I make a low ball offer?”
For the seller, if you’ve priced your home well, you needn’t accept bad offers. Leaving a little negotiating room has always been wise but pricing too high by building in too large a buffer will preclude offers coming in the first place. You’ll end up lowering your price, possibly several times and settling for a sale at a lower price than if you had priced the home correctly in the first place. By pricing competitively when your home is fresh on the market, you maximize your advantage versus stale and/or overpriced listings. Testing this market by pricing high and thinking, “we can always come down”, is a disastrous strategy. It will cost you thousands after you’ve missed the real buyers for your home and the vultures start circling.
For buyer’s, unless you’re one of the aforementioned vultures who enjoys shopping the picked over remains of the market, new fresh listings are still the best opportunity to find a good home at a good price. If it’s priced well and offers the amenities you want, don’t treat the seller as if they have a stale overpriced listing. I’ve seen buyers, even in this market, lament “the one that got away” because they procrastinated or tendered a low offer and waited for the sellers to come down significantly, only to have someone else buy the home they really wanted. This is still a good market for good homes that are priced right.
If you enjoy playing the market, either as an unrealistic seller or as a low ball buyer, you’ll probably end up playing with each other. As a seller, you’ll end up in the picked over pile of stale listings in a declining market. As a buyer, you’ll be picking over those listings. So, you need to ask yourself, “Which market am I in?”

More Cincinnati real estate information can be found at RealCincy.com

There have been several key changes to the First Time Homebuyer Tax Credit; here are some of the highlights:

• The amount eligible for the tax credit is lesser of 10% of the cost of the home or $8,000. This is an increase from the July 2008 provision of $7,500

• Any single family residence will be eligible, as long as the homebuyer will be using it as his or her primary residence

• The tax credit reduces, or eliminates, the income tax liability for the year of the purchase. Any unused amount of tax credit is refunded to the homebuyer

• Be aware that there are income limits. The full amount of credit is available for individuals with adjusted gross income of no more than $75,000 annually. For those filing a joint return, the adjusted annual gross income can be no more than $150,000. This phases out above those caps at $95,000 and $170,000

• First time homebuyer (and homebuyer’s spouse) may not have owned a primary residence in the 3 years prior to purchasing the home in 2009

Here are some significant revisions to note:

• No repayment of the tax credit is required for home purchases on or after January 1, 2009 and before December 1, 2009.  This is a major difference from the tax credit offered to first time homebuyers in 2008

• If the home is sold within 3 years of the purchase, the entire amount of credit is recaptured on sale. This will apply only to homes purchased in 2009

• Home buyers can use state and local bond funding and still take advantage of tax credit

• All revisions are effective as of January 1, 2009

As always, it is essential to discuss your potential or impending home purchase with your tax advisor.

There are many fantastic reasons to purchase your first home – now you can add another one to the list: a sensible tax credit!  So give us a call or shoot us an email, and we will refer to you a mortgage consultant that will help you to assess your purchase power. Then, let’s get out there and boost the economy!

More Cincinnati real estate information can be found at RealCincy.com

The FHA 203K is for owner occupied properties only. There is a down payment minimum of 3 ½%. Sorry, no investors will qualify for this specific program.  If you are shopping in the foreclosure market, be sure to address this with your lender during your pre-approval process. Now that you’re ready to home shop, let’s break it down so that if you find “the one” but it could use some sprucing up, you’ll be ready.

1. Get your pre-approval. Know your loan limits and comfort zone. View homes that may interest you, and identify which home is “the one”.
2. Prior to writing your purchase contract, you need to determine the following:
• The extent of the work necessary.
• Approximate costs
• Impact on market value.  After the work is complete, you want to make sure that the price you pay for the home, plus the costs of repairs, makes sense.  The two should add up to current market value (if in good condition) or less.  Certainly never more!
3. Make your best offer.  Be sure your agent writes in the financing section of the contract you will be applying for a 203K.  The contract should be contingent upon loan approval, and you, the buyer’s, acceptance of any additional required improvements as determined by the lender or HUD.
4. Prepare your write-up and cost estimate.  You’ll want a plan reviewer to assist you with the paperwork.  You’ll receive a HUD Case # and move onto appraisal and inspection.
5. Meet the plan reviewer and contractor if applicable, to make sure the plans are acceptable. The program requirements and all the paperwork is prepared accurately.
6. Appraisal is performed
7. The lender reviews the application, including the appraisal, to determine the maximum amount they will lend.  The issuance of Conditional Commitment/Statement of Appraised Value is issued.
8. You will now need to provide to your mortgage consultant all final documentation she requests to obtain full loan commitment: bank statements, paycheck stubs, W-2’s, etc.  Your employment will be verified. Once that is reviewed and accepted, the lender issues full loan commitment.
9. Day of Closing!  It’s yours!  The documents are drawn up stating the conditions the lender will release the funds for improvement from the Rehabilitation Escrow Account (REA).  You will be required to start making monthly payments on the entire principle amount of the mortgage, including the amount in the REA that has not yet been disbursed. There will be a 10%- 20% contingency reserve of the total remodeling costs. This is used to cover any extra work not originally included in your proposal.
10. Construction begins.  You have 6 months to complete the work.  Some lenders will require less than 6 months, depending on the amount of work to be performed.
11. Funds are released from the REA after work is inspected and approved by the HUD approved inspector.  There is a maximum of 4 draws plus a final inspection draw in that 6 month period.
12. Enjoy your new home, and start realizing the benefits of home ownership, and feel free to admire your handiwork.

I broke down the process into pretty easy steps.  There are more details that you need to know.  Not just single family homes will qualify, but 1 – 4 family units.  Condominiums will qualify with certain specifications.  There is a $5000 minimum requirement for eligible improvements.  Cosmetic repairs like replacing that ugly orange shag carpet and shiny wallpaper from the disco era don’t qualify under the rules of 203K.  If they need to be replaced as part of the total re-hab, they can be considered.  Structural alterations and repairs, like that block basement wall, do qualify. So do chimney repairs, roofing and gutters.

I’m going to send you to The Department of Housing and Urban Development’s website, so that you can get more detailed information. Read up on the 203K process, in detail, and you’ll be a more confident buyer as you move through the foreclosure market.  As always, if you see any homes that interest you, and you want to explore them, give the RealCincy Group a call. We’ll be glad to assist!

More Cincinnati real estate information can be found at RealCincy.com

To help get you comfortable with the Greater Cincinnati and Northern Kentucky area, The RealCincy Group with RE/MAX Unlimited would like to offer to you the latest copy of The Insider’s Guide to Cincinnati. This up to date, 400 + page book is full of really good information about the area that other incoming buyers have found extremely helpful! You’ll find information about shopping, local attractions, health care, senior services, and nightlife, where to find the libraries, tips on getting around town, and yes, plenty more. Go to our home page and place your secure order. IT’S FREE! And No Worries! No one but The RealCincy Group will see your information.

It’s a well known that most homebuyers, about 90%, begin their home search on the internet. Many homebuyers also find their trusted real estate advisor on the internet too. That number just keeps growing as time goes on! We want you to be comfortable with selecting the members of The RealCincy Group to assist you with your move to our city. Take the time to look through this website. Read the articles on Home Buying, Home Selling, Market Information, and see what we have to say about different areas around town. Use the links to read about what the city, and different suburbs, have to offer. You’ll get to know us as you read the articles. We can talk, in person, about your specific needs, the type of homes you prefer, whether you like a more urban or suburban setting, and anything else that concerns you.

Schools are a priority to many parents moving into the area. Understand that we want to be helpful. We can provide sources of information to you, so that you, as a parent, can decide if one system or another is “good” for your child.

You also probably want to make sure that we have experience taking care of incoming, relocation buyers. We have been trusted to work with Greater Cincinnati and N. Kentucky employers, large and small.

• Kroger • Procter & Gamble • Western & Southern Life Insurance • General Electric • Ford • Lens Crafter • Hill-Rom • Delta Airlines • Chiquita

This is just the start of a long, long list of companies that will read as a “Who’s Who” of Cincinnati employers. We’ve worked with Cendant Relocation, Wiechert Relocation, Sirva Relocation, Prudential, and Lexicon Relocation too. Don’t see your company here? That’s ok. We can meet or exceed ANY criteria that they would require. YOU DO have the right to request our services. We have never, ever, had requests for any of us denied.

Wouldn’t it be nice if you could just move the home you love here? Put it on a truck and bring it with you? Probably not going to happen right? So, it’s time to see what Cincinnati homes for sale look like.

You found our Real Estate search site to look for homes on your own at accesscincymls.com. That’s good….But we can do better than that!!  We can create your own personal “Market Monitor”, direct from the Greater Cincinnati or Northern Kentucky Multiple Listing Service that will show you all homes in the price range and areas of town that might interest you. You will have good, detailed information on each of the homes, including photos and a mapping function. The system will alert you via email when new listings enter the market, or if there are any price reductions. You can save the homes you like, and may want to tour. You can reject the homes you don’t like. Interesting???  You bet!  If a home happens to go under contract, once the sale is complete, you get to see the final sales price immediately! Just like we do! You will be a VERY  informed home buyer. Ready to get started? Give us a call, or send an email. We can talk about what type of home you may be looking for, and create your personal “Market Monitor”.

More Cincinnati real estate information can be found at RealCincy.com

A common misconception that potential buyers may have, especially first time buyers that know little about the process, is that working with several agents will get them better, faster results, and that they will see more homes.  Buyers want to make sure that they are not missing out on any homes that may be in their price range, in the areas of town they like. A buyer may not understand how the Multiple Listing Service works, and that all realtor® members have access to all listed properties. If a buyer has 2 or 3 agents that they decided they might like to work with keeping them informed about the market, and providing them with listings, the buyer should quickly see a duplication of efforts. That can become confusing and result in problems down the line about who is entitled to claim that they “threshold” the buyer, and ultimately represented the buyer at contract time.

Agents have a Standard of Practice, 16-9 in the REALTOR® Code of Ethics, that dictate that we must make every reasonable effort to ensure that the buyer we are getting ready to assist is not under a contractual obligation with another agent to provide the same service. That is why we ask if you’ve been working with anyone. Please let us know. We will make every effort to make sure you see our listing and work cooperatively with your agent if the answer is “yes”.

To ensure that you are receiving top-notch representation, and to make sure you are seeing all homes that could suit you and your family, commit to one agent.  Your agent should be a member of the Greater Cincinnati Multiple Listing service, like all members of The RealCincy Group.  Randy is also a member of The Northern Kentucky MLS, and can assist you in both Ohio and Kentucky.

You can tell if your agent is listening to your wants and needs, taking into consideration your preferences, and comfort price range, and providing listings to you that most closely meet your criteria.  You should expect updates as frequently as the market changes: immediate notification of new listings that match your criteria, and notification of price reductions. 

Your agent should be able to discuss with you market trends and analysis, and provide you with the information you need to make a good, solid home buying decision.  Your agent should provide you with information about how Agency Representation works in this area: buyer agency, seller agency and disclosed dual agency.  Your agent, in my opinion, should be a full time, dedicated real estate professional, not someone that sells “after my real job” or while the kids are in school. In this market, most of those “dabblers” have gone on to another job…..but they are still out there. Be careful!

Not all real estate agents are the same. I know realtors® that have been in the business for 15 – 20 years, but sell about 3 or 4 homes a year. Real Estate Agents pay big dues and fees. We buy all of our own equipment (lockboxes, keypads, signs, etc) and pay for continuing education, so that never made sense to me.  Anyway, is that person going to have the field experience necessary to guide you through the process? Is the agent that you choose to work with also holding down a full-time job elsewhere? How tapped into the market do you think they are when they don’t have the time to watch MLS, read trade publications, and perform trend analysis? How quick will she be to address any issues that arise during the day, when her boss doesn’t allow personal calls on the clock?

One great analogy I heard was this: many of us have a driver’s license, but do we all have the skills necessary to drive safely and negotiate difficult road conditions? One trip around I-275 on a rainy day in rush hour answers that question!

For outstanding service and representation, work with a RE/MAX agent.  RE/MAX agents sell 39% more homes than our fine competitors at other national franchises. That translates into experience. You need experience to guide you through the process.  Now, as if there were any question, I am going to recommend not just any RE/MAX agent, but a member of The RealCincy Group with RE/MAX Unlimited. 

Give us a call or send an email.  Don’t Call on Signs. Don’t Call on Ads…..Call one of Us!

More Cincinnati real estate information can be found at RealCincy.com

Before getting involved in the processing of making an offer to the bank, let’s take a deep breath…..hold it. Ok, release. Do it again. We are practicing relaxing, and gathering patience. We’re going to need it.

The seller/bank works Monday – Friday, 9 – 5. No evenings. No weekends. Expect about a week for an answer to your offer. Many agents have information for me in the MLS that I will share with you, if the response time will longer.  Don’t bother trying to “push” them into a 24 hour response time. It won’t happen. We will hear from the listing agent just as soon as he or she has an answer. I can call 10 times a day for a week. It won’t make a difference….so I won’t do it.
• Forget about Contingency offers.  The bank will not even consider them. If you have to sell your home before buying a bank owned home, this isn’t the scenario for you.
• Have a very strong Pre-Approval Letter attached to your offer. You MUST have your loan in place before writing an offer. Credit & Income MUST have been verified and noted on your letter.
• Have approximately $500 – $1000 Earnest Money. Earnest Money will be required by all lenders. Show your strength by making it as high as you can.
• Be Prepared to Re-Apply for a Loan. The seller/lender may want you to apply through their lender before they will consider your offer.
• You may not get a chance to counter-offer, so no “low balls” if you really want this place.  If a property is in decent shape, or in a good location, the seller/lender may collect offers.  They simply will not respond to those that they do not like. You may or may not be notified of multiple offers. Each does business differently.  They generally will not come back to you to see if you want to raise your bid. You may only have one shot at this home, so make it your “highest and best” at the beginning.
• You may only get an email that states that your offer is rejected.  It can take about 7 – 10 days to receive the rejection notice, unless they are collecting contracts. Generally it comes in the form of an email, sent to the listing agent from the seller, then forwarded to the buyer’s agent. You will not know why you were rejected.
• You’re the Winner! Great! Your contract was accepted. The REO/seller will expect you to sign an addendum that they will generate. They will expect you to sign all paperwork, send it to them, and then the seller will sign. The bank/seller will only sign after you do.
• If there are any price and term negotiations, those negotiations are performed via email or verbal communications between the two agents.  This would not generally be the normal process of negotiation between a private owner and prospective buyer.  The seller/bank is trying to deal with too many contracts to work any other way. 
• Don’t order your home inspection or appraisal until you have received copies of the contract with the seller’s signature.
• The seller/bank will provide a lengthy addendum that you must sign. They will not allow you to line item out anything that you don’t agree with. That will void the contract.  The addendum will state that they are a corporate seller, have never occupied the property, the sale is “as is”.  The buyer will be penalized financially for any delays in closing. You may read that the seller has the right to sell the property to another buyer up to the date of closing. Buyer is responsible for re-keying and any liens discovered after the date of closing. These are just a few examples. REO Lender addendums can vary.  They are not “buyer friendly”.  “Why should I sign it” you ask? Well, if you don’t, you don’t get the house, and someone else will.
• If your REO/seller agrees, you may have a home inspection to determine whether or not the home is in a condition that you can deal with. You need to know that most of these homes are in poor condition and have lengthy repair lists. Forget about asking for any repairs. Don’t waste the paper. They simply will not do them. They will move on to the next contract.
• Utilities may not be on. If you want them on for the inspection, you will probably be responsible for paying for that service. The REO/Seller may specify that you use their plumber to de-winterize the home.
• You may never have occupancy prior to closing. Never
• You will have pocession of the property generally same day as closing, however, be prepared to wait a day or two if the bank needs to verify fund transfers and disbursement.
• Occasionally a REO/seller will offer financing. Often they will consider paying closing costs as long as it works with their bottom line

To determine whether or not a foreclosure represents a good value, or is a good idea for you and your family, consider the financial risks, the timing issues, and the condition and location of the property.  Only you can make the final determination, but we at The RealCincy Group will be happy to answer any questions about the process you might have.

More Cincinnati real estate information can be found at RealCincy.com

What will my Interest Rate and Annual Percentage Rate Be?

Keeping in mind that interest rates fluctuate, ask the lender to quote an approximate rate, based on today’s published rate. Then ask about the APR, or Annual Percentage Rate.  The APR is the interest rate, combined with points, and any other charges, divided by the loan’s term (usually 30 years) to a give an annualized rate.  Your APR will be higher than your interest rate.   Some people have chosen their lender based solely on the quoted interest rate. This is a huge and costly mistake.  Your APR is the more accurate way to shop and compare.

Do You Charge Points?

Understanding Points: Points represent the lender saying  “pay me now or pay me later”. A point is one percent of the loan amount.  If you are charged points, you should be getting a lower interest rate. You are buying down your interest rate up front.  Depending on how long you expect to live in your home, points may or may not be a good idea. Consult with your real estate and lending professional, to discuss whether you should consider paying points.

What are your Total Closing Cost Fees?

Ask your lender to “aim high”. It’s best to have the worst case scenario than be too far into the process to turn back, after learning the fees have increased.  All lenders charge fees for the services that they provide to process and close your mortgage.  Closing costs must be disclosed within 3 days of the loan application process. It is the law to protect you, the consumer. Be aware though, that some brokers will initially disclose low figures, which tempt you into working with them, only to “find” and charge higher fees closer to the date of closing.

What is the Charge to “Lock-in” My Rate?

Often you will be offered a “lock-in” policy that guarantees you a certain interest rate.  There are frequently points associated with a lock-in.  There is also a time limit associated with this lock-in.  Without a lock-in, you are agreeing to prevailing rates as your closing approaches. Since rates can change daily, sometimes within the day if the market is particularly active, this one time lock-in fee may be able to lock you into an excellent rate.

Are you a Broker or a Bank?

There is a difference.  A broker is independent and can work with a variety of lender/investors.  They generally have more opportunity to find you loan programs that fit your needs.  The fees may be slightly higher, but they do provide more loan programs and buying opportunities.  The bank may have slightly lower rates and fees, but generally provide very limited lending programs.

FHA Direct Endorsement, or VA Automatic Endorsement. Is it Available if Needed?

Automatic and direct endorsement means a lender has met the government requirements for working FHA/VA lending programs. The underwriters have completed mandatory classes.  This saves you, the borrower, time if you qualify for a VA or FHA loan.

Private Mortgage Insurance, or PMI. Can I Finance PMI into the Loan?

Your lender may allow you to finance the first year’s premium into the loan amount.  PMI will be charged if your down payment is under 20% of the sales price.  This insurance premium is to protect the lender, who is carrying the bulk of the risk on this loan, in case you or someone who assumes the loan defaults.

Can I Pay Off the Loan Early Without Penalty?

Generally, the answer will be yes. There are some exceptions.  Make sure to be certain that your lender has not placed you in a loan program with a pre-payment penalty without discussing this with you, and why your situation would call for such a clause.

How Does the Mortgage Consultant’s Resume Read? Any Referrals?

Not all mortgage consultants work the same, even within the same company. Make sure you have a “good fit” and that your consultant understands the level of communication you expect.  Does your lender have a solid reputation for processing in a timely manner? Is he knowledgeable about the lending programs currently available and the latest industry changes?  Will she return your calls within the day, or the next morning at a minimum? Maybe she can provide you with a referral or two to speak with.

Are There Any First Time Buyer Programs You Can Offer?

If you are a first time buyer, ask!  This process of buying a home is exciting, and is one of the largest, most significant financial decisions you will make.  As a first time buyer, you may have questions and concerns that need addressed.  Many lenders can provide loan programs tailored to the first time buyer.  There are some programs that may require you to take an online class…..but it’s worth the time to obtain the loan!

I hope that helped to take some of the mystery out of the process. Now that you have your lender, and your loan, give us a call!

More Cincinnati real estate information can be found at RealCincy.com