New Year's Resolutions?

Now that we are at the end of January, are you on track with your New Year's Resolutions?

Did you, like many others, decide that this year, for sure, you are going to purchase a home and stop renting?

Oh, yeah. ;)

I know, I know. Fortunately, I have a link to get you started, compliments of CNN Money: The Top 10 Things ou Need to Know When Buying A House. And they are easy to start today!

It's Official: It's Now Cheaper to Own a Home Than to Rent It

Sometimes what happens in Vegas doesn't stay in Vegas.

This Wall Street Journal article out last week compiles information from Reis, Inc, a real estate research firm, a Deutsche Bank housing analyst, Zelman & Associates and brokers across the country.

"Conditions are "overwhelming in the favor of buying now. It is unequivocal."

Locally, we are finding the same trending. Are you currently renting and finding the same pressure of higher rents, especially probably in the 2 bedroom price ranges? Perhaps it's time to consider all your options.

http://online.wsj.com/article/SB10001424052702304750404577322011443831768.html?mod=residential_real_estate&utm_source=twitterfeed&utm_medium=twitter 

The Pitfalls of Self-Representation

About three weeks ago, a buyer came to me for assistance in buying the home she is currently renting. She had negotiated a price with the seller already, but was stuck as to how to proceed. I agreed to help her with the process and to provide the Idaho forms for a small fee, as she is the sister of a client of mine. The negotiated price was $105,000.

Fast forward to last week, and a message from the bank: the appraiser cannot support the purchase price value of the home! Can I please come by to see the home and perhaps find some additional comparable sales that would help? Of course.

While the complete appraisal has not been submitted to the lender yet, after seeing the home and the comparable sales, the purchase price agreed between the buyer and seller appears to be about $80-85,000: about $20-25,000 lower than the price the buyer agreed to! What to do? The options: 1) the seller can agree to negotiate down to the appraised value, as any future buyer will also likely need to finance the home and will have the same issue with the appraisal; 2) the deal falls. In this case, if the deal falls, because the buyer had agreed to making the earnest money non-refundable she will be out about $885 for the lost earnest money and the appraisal, which the buyer will still have to pay for as the appraisal work was done. Her credit has been accessed by the bank for the purpose of purchasing a home. Depending on the timeline until she begins a new search, she could loose a few points in her credit score, which could impact her ability to qualify for financing going forward. And should she decide to purchase another home, she needs to decide whether she will fulfill her lease or pay an additional cost to break it and move out early.

How could a buyer's representative have helped? First, while the buyer was pre-qualified, it seems the home was over priced. The buyer would have previewed more homes in the price range and have had a better feel for the market and how much house her money could buy. Secondly, prior to making any offer on a home, comparable sales should be pulled to ensure the offer was within the proper price range and would likely appraise. Thirdly, having a guide throughout the process, from choosing homes to viewing them, pointing out features and potential issues (including financing issues), and having an expert to assist in negotiating the deal are all very valuable and sometimes under considered benefits of being represented.

And what is the cost? Ironically, because the buyer had agreed to pay me a small fee for my time, she actually paid MORE to not be represented! When a property is listed in an MLS, the Seller has already agreed to pay a brokerage fee, so there is no cost to the Buyer. When a property is a For Sale By Owner (FSBO), more often than not, the Seller will agree to pay a Buyers Agent because agents sell homes! And the FSBO still "saves" a percentage by not listing the home and paying two agents. I have yet to have to have to ask a Buyer client for payment because a Seller will not pay a Buyer's Agent.

Now, this particular first-time buyer may be starting the home buying process over....with less cash in her pocket to boot.

How much is a Buyer's Agent worth to you?

Tax Credit Ends Friday!

ATTENTION ALL PROCRASTINATORS!
If you are a potential tax credit Buyer, or know someone who is, here is your friendly tap-on-the-shoulder reminder: You must be have an accepted contract by this Friday, April 30th to qualify.

If you have not yet completed your property identification and negotations, you must act now! Don't risk losing out on a potential $8000 cash from Uncle Sam - contact me today~! 208-201-2034.

Chris

Homebuyer Deadline Looms

Homebuyers Deadline Looms
There are only 6 weeks remaining for homebuyers who plan to take advantage of the Federal tax credits to identify their next home and successfully negotiate a contract!

The extended 1st-Time Buyer Tax Credit and the expanded "Move-up" Credit both require qualified Buyers to be in contract by April 30, 2010 in order to qualify for the credits, according to the bill signed into law by President Obama in November 2009.

Do you have a roadmap?
Buying a home is no small matter. Besides being the largest financial transaction you may ever undertake, it’s probably also the most complex. It’s essential to learn more about the process and seek out qualified assistance.

Let me be your guide! As an Accredited Buyer's Representative (ABR®), I have the training and experience to guide you through the process, assist in negotiating the transaction and developing a negotiation strategy, provide vendor referrals and keep track of all the details throughout the transaction.

Time is running out!
Call me today for more information and a free consultation!

Chris Pelkola Lee, REALTOR®
ABR, CDPE, GRI, ePRO

208.201.2034
Chris@IFListings.com
http://www.iflistings.com/
www.Twitter.com/IFListings
www.Facebook.com/IFListings

February Financing Updates

Good news for our local market!

For those of you that do not follow me on Twitter, here is a recap of financing changes over the last week designed to help move some inventory.

Last Friday, Jan 29th, Fannie Mae announced it would pay up to 3.5% of Buyers closing costs for purchases of foreclosed homes in it’s inventory. You must close on the purchase between January 28th and April 30th, 2010 and Buyers must be owner-occupants (investors are excluded). If you do not use the entire amount for closing costs, they may also be used towards the purchase of Whirlpool appliances purchased by Fannie Mae, but however you use the credit, the limit is 3.5% of the final purchase price. For more information, visit http://www.homepath.com./

In related news, as of February 1st, FHA suspended it’s anti-flipping rules, opening the FHA-backed foreclosure market to investors. The rules were that you could not buy a home and flip it within 90 days if it was purchased with FHA insurance, in order to stem fraud losses at FHA. However, many foreclosures are in need of repair, and the reality is that investors can purchase these homes, fix them quickly and resell the renovated homes to first-time buyers and other purchasers who might not otherwise buy a home in need of repair. It should also help stabilize values in neighborhoods that have been hard-hit by foreclosures where homes have been sitting vacant and uncared for. The rule suspension is expected to be in effect for at least a year. For more information, read this Washington Post article or the press release on HUD’s website.

If you are interested in foreclosures or short sales in our area, please contact me today!

10 Things to Take the Trauma Out Of Homebuying - Installment 3

Why should I get pre-qualified?
One of the questions I often address up-front with my Buyer clients is the importance of being pre-qualified by a local lender. While you may have an idea of what you would qualify for by using online calculators or by speaking with friends, there are several reasons to go ahead and take the hour to meet with a local lender before beginning your home shopping.

• Determine how much home (and mortgage payments) you can afford and how much you want to afford – these may be different numbers! You may find you qualify for a much larger mortgage and payment than you are willing to make or comfortable making each month. It is okay to be conservative here!

• You will also be given an estimate of your down payment and closing costs, which you will need in the form of a cashier’s check at closing. Have you saved enough? Will you need to structure an offer that requires or requests the Seller contribute toward your closing costs (for which a higher offer must be considered to cover the difference)?

• With the lending changes the last year or so, your credit score now factors in significantly as far as the program you can qualify for and the interest rate. Some programs and rates are not available unless the borrowers’ credit score is over 740. That’s not to say that if you are under 740 you cannot get a loan. However, it may affect your monthly payment and, by extension to some extent, the price range in which you decide to shop. You do not want to begin to shop only to find out that the home you just fell in love with is just beyond your payment’s reach!

• Similarly, if you find the best product for you is a Rural Development (RD) loan, this will affect the location in which you may purchase, as RD has fixed physical boundaries in which they will invest and in which the property must lie. If you determine that an IHFA loan is best for you, you will need to complete the Finally Home! borrower education class prior to the loan closing. These are typically offered only once to twice a month locally; not having it completed will delay your closing.

• Once you are pre-qualified with a local lender, as you shop with your REALTOR® you are ready to move on a home when you find one you would like to buy. And if you are competing with other Buyers, you will be better prepared to write a thoughtful offer, putting you in a stronger negotiating position (a Buyer who has already taken the time to personally pre-qualify shows to a Seller to be a serious Buyer – not one that might change their minds and try to back out). The idea of competing Buyers seems silly on the onset in this market, but consider: if the majority of Buyers looking right now are first-time homebuyers due to the tax credit, they are largely looking in the same price range and they ALL have the same deadline to be in contract to qualify, therefore they are creating competition by the laws of supply and demand. (Another way to lessen your competition is to not wait until April to get into contract, but beat the majority of the Buyers to the market.)

• You may find that REALTORS® are less willing to spend their time showing you homes if you have not shown the personal commitment to at least get pre-qualified. With all the recent lending changes and constrictions, Agents can no longer assume a Buyer will qualify for some kind of loan, and are reluctant to spend time showing homes to Buyers who, in the end, may not actually qualify. While it is a service business, Agents are finding they need to be more certain their potential clients are actually potential clients. Future clients are always welcome and advice is always free, but unless a client is actually in the market to buy, REALTORS® have a fiduciary responsibility to the Seller to not inconvenience them and show their home to people who have not been properly vetted and are not active Buyers (it’s not an open tour to the general public, which I’m sure you can appreciate).

• Lastly, but not least, getting pre-qualified will help you to determine your true costs of homeownership, including property taxes, insurance, homeowner/association fees (if applicable), etc. Do remember, as your eyes glaze over with the initial sticker shock, the financial BENEFITS of homeownership as well, which will not be shown to you by the bank – the tax deductions available to you through your mortgage interest paid, property taxes paid, etc (contact a tax advisor for details and tax advice).


NEXT: The Perfect Home?

10 Things to Take the Trauma Out Of Homebuying - Installment 2

So after only a *short* break from my new blog series, here is the second installment. I know you are all loyal readers and fans, and will forward this to anyone you know who might benefit from it. Hopefully, I have all the *math* right!

2. The Right Time to Buy?

While in most price ranges home prices have fallen locally over the last two years, I am seeing signs that Buyers are still afraid to buy. Mortgage rates remain at the lowest rates in decades, first-time Buyers and now qualified “move-up” Buyers can benefit from an $8000 and $6500 tax credit respectively, and yet Buyers are still leery to pull the trigger. How will they know when to buy?

The tax credit for first-time Buyers has enough media coverage and Buyer attention to get the word out on the financial benefits of homeownership: not only the potential of equity growth over time, but the ability to deduct mortgage interest and property taxes and that any gains made on sale are tax-free if you occupied the home two of the last five years.

Even with the recent value drop, the common consensus among investors is that real estate remains one of the best performing long-term investments. Yet what about the near-term? No one wants to feel like they made one of the largest purchases of their life only to wonder if they could have gotten the same home for $10,000 less in six months!

So, let’s create a scenario. Say you are looking to buy a home for $200,000 with 3.5% down. Your loan amount would be $193,000 and your down payment $7000, your Principal and Interest Payment $1036/mo.

But you were not sure it was the right time, so you waited. Six months later the Seller reduced the price to $190,000 (a 5% price reduction). Your loan amount now is $183,350 and your down payment $6650 (saving you $350). But the rate in the mean time has gone up to 5.5%. Still incredibly low! However, your payment now is $1041/mo.

Yes, it’s only $5/mo more, and you saved $350 in down payment. But if you plan to live in the home 5 years, that is an extra $300 in payments, and while you were waiting the six months for the price to drop, you were still paying rent! If your rent is $500/mo – that’s $3000 out of your pocket that you could have used for a down payment! Or to build equity in YOUR home instead of someone else’s. And you cannot deduct ANY of that $3000, while if it was being applied to your mortgage payment, the bulk of that would be deductible on your Federal Taxes (please consult a tax advisor for information). Is it possible rates won't rise 0.5%? Yes. But what is more likely: a Seller reduces the asking price by 5% or rates rise 0.5%?


Consider further the chart to the right, as provided by the National Association of REALTORS®. This assumes a purchase price of $200,000 with 10% down at a rate of 5.5% vs $1000/mo in rent (a bit high for this area, but comparable to a mortgage payment in this price range). Not considering any equity gain from payments made toward the principal, in a year of no growth the annual cost of the loan is $9,673 vs $12,000 renting. That means even with no market value growth, the homeowner would still have an extra $2327 in his pocketbook vs. renting. Who couldn’t use that? Even at a 1% depreciation in value, the homeowner would be up $327 on the investment vs. renting. And obviously even better off with below trend growth.

So is it a good time to buy? Yes! Most price ranges currently have increased inventory to choose from. And if you are a first-time or “move-up” buyer, the scenario above does not even take into account the added tax credit available – which is refundable – cash in hand! And this time, it is NOT likely to be extended again.

Think you are interested in more? Call me today!

NEXT: Why Should I Get Pre-qualified?

10 Things to Take the Trauma Out of Homebuying - Installment 1

You a first-time buyer, or perhaps it's just been awhile since you've been in the market. Buying a home is one of the largest financial transactions you will likely undertake in your life. Knowing this can create a cloud of fear and hesitation in your mind and around the transaction; it is only natural.

How do you work through it and fulfill your plans to reach your goal of homeownership?

Consider these points below to help focus your search and set your goals within your financial plan for 2010.


1. The Inside Scoop to Hiring a REALTOR

Find a REALTOR that will represent you as a Buyer, and consider a Buyer's Representative contract to align your interests; The Argument for a Buyer's Representative Agreement Contract

In Idaho, without a Buyer's Rep Contract (Buyer Agency), your information does not need to be held confidential by your agent in negotiating...which can certainly work against you in the wrong situation! It guarantees the Buyer their personal information will be held confidential, surviving the transaction itself, and allows the REALTOR to negotiate on behalf of the Buyer. For example, when the REALTOR presents an offer to a Seller without a Buyer’s Rep in place, if the Seller’s Agent asks, “Can they offer more?” and the Agent knows they can and their circumstances, the Agent can respond, “Yes, I believe so, they have just received a large inheritance!” This obviously does not help the Buyer in negotiating! (More details of the Agency relationships in Idaho are in the Agency Disclosure Brochure, which may be found on my website here.)

Have you been in touch with a REALTOR and wondered why they stopped communicating with you? It may be they will not work without a Buyer's Rep contract in place. In addition to protecting the Buyer, the Buyer’s Rep contract also assures the REALTOR that the Buyer has committed to working with them, and is not still shopping other Agents or working with more than one. When an Agent puts the time into finding and showing homes to a Buyer and advising them along the way, the Agent is not going to be compensated for his/her time unless a transaction closes.

The Buyers Rep also sets out a clear set of expectations for both parties. If either party is dissatisfied with the service, typically either party may cancel the contract in writing. Confirm with your REALTOR that they have and support this policy.


Will I have to pay my Buyer's Agent?

If the home you are buying is listed in the MLS, the Buyer's Agent's commission is being paid by the Seller; therein, FREE to you, the Buyer. Sellers agree to pay this fee because this assures the Seller that the Buyer is represented, will be appropriately advised and pre-qualified, and once an offer is accepted it will be less likely to fall through as all the appropriate steps are being taken along the way. It also reassures them that the people who come into their home are “real” potential Buyers, that the Sellers are not taking the time to clean and prepare their home (disrupting their schedules) for a showing that is in fact just a curious looky-loo. Even For Sale by Owners are almost always willing to pay a Buyer’s Agent, as often they aren’t educated about the entire process anyway, and do not know the laws about what they are required to disclose about their home, etc, where to find forms, etc. 

Check for any designations the REALTOR has earned.


For example, are they an Accredited Buyer’s Representative (ABR)? Designations are additional education pursued by the REALTOR beyond the minimum continuing education credits required by the State of Idaho. The quality of their knowledge and education is an asset to you!


Consider your personality and your comunication style
 
Be sure you find a REALTOR with whom you are compatible. Homebuying is not only a big financial commitment, but also an emotional one. Do you prefer frequent phonecalls? Are you email and text only? Are you a numbers and charts person?
 
It’s critical that the agent you chose is both skilled and a good fit with your personality and that you bond with your agent in a way that you feel you can trust them. Remember, your agent has guided many transactions in his/her career, and will likely have some insight into the transaction options for you along the way.
 
NEXT: The Right Time to Buy?

Home for the Holidays SALE!!!

Calling all Buyers!!

I have today some exciting news!

Local REALTORS(r) and Sellers from Shelley to Ashton have teamed up to offer the "Home for the Holidays" home sale featuring over 260 price-reduced homes and an astounding $3 million plus in savings. This is the largest home sale in Southeast Idaho history and it runs from Monday, November 17th through Sunday, November 23rd. This is a great opportunity to find the home of your dreams or your perfect starter home!

If you were waiting for the right time to buy, don’t delay! Several local banks are also offering incentives in conjunction with this sale.

If you have a friend or family member who is interested in getting into the market but is unsure how, please pass this note along ~ I am happy to work with all your referrals!

Additionally, if you know of a first-time homebuyer (or have a family member who is considering it - or should be), there is an additional tax credit available (up to $7500 and is REFUNDABLE!) from the Federal government if the home is purchased prior to July 1, 2009. Ask me for details! DO NOT PASS THIS ONE UP!

Are you a Seller? There are ways to target your marketing to today's home buyers. Are you?

Contact me today to find out more about these exciting opportunities!