Sales Tips: How to Seal the Deal
Money isn’t the only important aspect in the negotiation of a home sale. What makes a deal a good one for both the buyer and the seller depends on their individual situations — and it can make the situation go more smoothly if everyone, including the real estate professionals, remember that.
Here are some key factors that real estate professionals in Silicon Valley, Calif., say can determine whether a deal will succeed or fail:
Contingency period. Even if there are no other offers, sellers should think twice about accepting an offer contingent on the sale of another home, especially in today’s market where some homes aren’t selling quickly. If buyers really want the home, they should consider other financing alternatives.
Closing date. Extending the close of escrow beyond a couple of months is risky. A lot can change in today’s market, including interest rates and the buyer’s personal situation.
Repairs. Taking the house “as is” and adjusting the price to reflect needed repairs is commonplace in a hot market, but it is also the most expedient way for both buyers and sellers in a slower one.
Lender approval. A buyer with actual approval from a reliable lender is the best kind of buyer to have.
Flexibility. When the seller has already left the area or is facing death in the family or divorce, buyers can sometimes earn themselves concessions or just good will if they are willing to accept property that hasn’t been totally cleaned, adjust the closing date to reflect travel time, or agree to other compromises that make the transaction more convenient.
Source: San Jose Mercury News, Margaret Steen (01/19/08)
House OKs Lift on Fannie, Freddie Loan Limits
The economic stimulus package hammered out between the White House and Congress on Thursday lifts the size of home loans that may be bought or insured by Fannie Mae and Freddie Mac.
The Fannie/Freddie cap would rise to $729,750 for one year. Currently Fannie and Freddie are capped at $417,000.
The measure also would permit the Federal Housing Administration to indefinitely insure loans up to that same level. Currently, FHA loans may not exceed $367,000.
“The stimulus package announced today is a positive step toward strengthening the housing market and our economy,” NAR President Dick Gaylord said in a public statement. “The increase in loan limits should provide liquidity to the mortgage market in all parts of the country allowing qualified home buyers who may have been on the sidelines to enter the market.”
The measure is also expected to make jumbo loans more affordable because it will make them more attractive to investors, who since summer have shunned home loans that don’t pass through Freddie or Fannie.
“In high-cost states, many home buyers with good credit could save $3,000 to $5,000 per year by not being forced into the current jumbo mortgage market,” Gaylord said. “Currently, only families in lower cost areas are able to qualify for these types of affordable loans. Such a move would stimulate home sales and help stem the rise in foreclosures, reducing the number of foreclosures by as much as 210,000.”
In particular, prospective home buyers in costly regions like California, Northern Virginia, and New York have faced higher mortgage rates and tougher loan terms, and those areas would get relief under the plan, says Susan Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania.
“This is meaningful because the mortgage crisis and meltdown is geographically concentrated,” she says. “This response will assist the stressed areas.”
Source: Reuters, Patrick Rucker (01/24/08) and REALTOR Magazine Online
2nd Post - Auction stuff
Have been working very hard on my auction program. Everyone wants a great deal but let’s define what that is OK? The trick is to know the seller’s bottom line of course. In December I attended a big auction where 200+ homes were sold in 2 days. I couldn’t believe the pricing. Went with a friend and his wife, she being in the business for 25 years, and kept on nodding my head as the gavel struck the podium. “No way!” The thought here was that there was no way the bank would accept the bid. And I was dead on for the most part. Soon I’ll continue this story and also will share some strategy in using you friendly Realtor to find that great deal….
Lenders Increasingly Write Off Home Equity Loans
Mortgage companies are handling home equity loans carefully, moving away from delinquent loans for fear that calling the loan will drive borrowers into foreclosures.
At the same time, they are scaling back lines of credit on borrowers who are still paying but who look like they might be risky. And they are making fewer home-equity loans.
Lenders extended an estimated $456 billion of new home-equity loans and lines of credit in 2007, down from a peak of $504 billion in 2006, according to SMR Research.
Writing off the loans doesn’t let the borrower off the hook, says Bob Caruso, Bank of America Corp.’s national servicing executive. The lender keeps the lien in place in the hopes that it will receive some money when the property is sold.
Source: The Wall Street Journal, Ruth Simon (01/16/08)
NAR Campaign Talks Up Value of Homeownership
Beginning today, the National Association of REALTORS® is reaching out to consumers with the facts about homeownership and the value of real estate as a long-term investment.
Would-be home owners who are uncertain about their home buying plans can learn more about the options available to them and the long-term benefits of owning a home through a new advertising campaign that will provide current, relevant housing data to help them make informed decisions about buying a home.
Over the past 30 years, the median price of existing homes has increased an average of more than 6 percent every year, and home values nearly double every 10 years, according to historical data from NAR’s existing-home sales series.
What’s more, a Federal Reserve study has shown that the average home owner’s net worth is 46 times the net worth of the average renter.
Despite this and other research, some potential homebuyers are being kept on the sidelines as they react to national media reports about the housing market.
“Nobody buys a home in the national real estate market,” says NAR President Dick Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. “All real estate markets are local. … It’s also advisable to look beyond the immediate horizon — real estate has proven itself to be a good long-term investment and a safe, secure way to build long-term wealth.”
Give Them the Facts
According to NAR’s most recent forecast, existing-home sales are likely to total 5.66 million in 2007, the fifth highest on record, rising to 5.7 million in 2008 and 5.91 million in 2009.
Existing-home prices are likely to be down 1.9 percent to a median of $217,600 for all of 2007 which is good news for buyers; prices are expected to hold steady in 2008, and then rise 3.1 percent in 2009 to $224,400.
The campaign includes a new Web site, www.HousingMarketFacts.com, which provides more information about the benefits and value of owning a home, identifies current public policy issues of importance to consumers in the real estate transaction, and allows visitors to link directly to www.REALTOR.com to find a REALTOR®.
The ads are part of NAR’s Public Awareness Campaign. For more than a decade, the Public Awareness Campaign has helped millions of consumers realize the value of using a REALTOR® to help them buy or sell real estate, and is now educating consumers about the value of housing as a long-term investment.
Campaign ads will be broadcast nationwide from January through November and will air more than 10,000 times on national TV and radio outlets. Local and state REALTOR® associations are encouraged to coordinate with the campaign in their markets with local radio, TV, and print buys.
Foreclosures Offer Opportunities for the Savvy
The foreclosure arena presents opportunities for real estate professionals who know what lenders expect of them and can deliver first-rate performance, speakers agreed at Thursday’s panel, “Working with Foreclosures,” during an Inman News-sponsored conference, Real Estate Connect, in New York.
Home foreclosures were averaging 200,000 a month nationally during the last six months of 2007 and show no signs of slowing this year, said Rick Sharga, vice president of marketing with RealtyTrac, which compiles national foreclosure statistics.
Roughly half of all foreclosures end up being taken back by their banks and lenders, meaning that of the roughly 2 million foreclosures expected this year, 1 million could be back in the for-sale market, he said.
The lag time between foreclosure and attempts to resell the homes nationally is roughly three months, although in some states such as New York, local laws stretch the process out over a much longer period of time, noted Sharga and other speakers.
The REO Niche
The country’s troubled subprime borrowers are facing two waves of interest rate resets this year that will spur more defaults and subsequent foreclosures, Sharga said. The first wave of resets is underway now with the second coming in the May-June period.
Bank real-estate-owned (REO) staffers want to work with real estate pros who know their markets and know what banks expect of them, said Rupi Rupwani, a director of the Connecticut MLS and owner of Rupwani Associates, a real estate company in Naugatuck, Conn.
“If you want to handle REOs you have to believe in service,” he said. “Seventy percent of the people in real estate don’t know how to handle REOs.”
Banks being flooded with REOs won’t be patient if you approach them and don’t know the basics of what they expect, he said.
Rupwani said service includes knowing:
How to prepare estimates of what an REO will sell for.
How to work with potential buyers to disclose details of the property
How to navigate through the sale of a home that may have multiple lenders, including a first mortgage holder and home equity line of credit holders, all hoping to get some of their funds back.
Presidential Campaign Tackles Housing Issues
Presidential contenders are wooing voters in rustbelt and other states hard hit by the foreclosure crisis with plans to ease the financial drain on pocketbooks.
The top three Democratic candidates all offer similar plans, including the creation of a federal fund to help home owners refinance onerous mortgages, legal protections for lenders to free them to alter individual mortgage terms, and tighter regulation of lenders to prevent future crises.
Republicans for the most part support President Bush’s approach on the issue, to get lenders and mortgage-bond investors to agree voluntarily to modify some troubled loans.
Political adviser Elizabeth Warren, a Harvard Law School professor, says candidates must be careful in pitching housing proposals to avoid offering solutions that are illegal or offend business.
“The candidates need to thread a very small needle, showing they have sympathy for those cheated out of homes, but not offering a government handout to businesses or individuals who deliberately took on huge risks,” she says.
Source: The Wall Street Journal, Alex Frangos (01/11/08)
Bank of America to Buy Countrywide
Bank of America Corp. announced today that it has agreed to buy Countrywide Financial for $4 billion in stock.
The purchase will make Bank of America the nation’s largest mortgage lender and loan servicer.
“Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation’s premier lender to consumers,” Bank of America Chief Executive Ken Lewis said in a statement.
The sale will place the responsibility of sorting out the payment issues surrounding millions of dollars worth of troubled loans on Bank of America.
“There’s still plenty of risk involved,” says Bart Narter, senior analyst at Celent, a Boston-based financial research and consulting firm. “[Lewis] is brave to do it. But I think that it’s very likely down the road to be profitable, maybe not immediately, but long-term.”
The agreement has been approved by both companies’ boards and is subject to regulatory and Countrywide’s shareholders approval.
Source: The Associated Press, Ieva M. Augstums (01/11/08)
How to Get a Quick Sale in a Slower Market
An analysis of the real estate market in the Baltimore area shows that even in a slow market some houses sell quickly — for the same reasons they do in a booming market.
In November, when the average time on the market was 105 days, 13 percent of the 1,892 homes that sold in Baltimore and five surrounding counties had contracts in two weeks or less, according to data from Metropolitan Regional Information Systems Inc.
Those 251 homes went from listing to selling in an average of seven days. They were typically older, three-bedroom, two-bath houses that sold at an average of $304,355 — about $4,000 under the overall average sale price.
An analysis shows that fast sellers in a slow market have three common denominators:
They’re priced better than comparable listings.
They show like model homes.
They have a full force of marketing, including enticing Internet photos, behind them.
Source: The Baltimore Sun, Lorraine Mirabella (01/10/08)
Existing-Home Sales to Hold Steady in Early 2008
Over the next few months, existing-home sales are expected to hold fairly steady as indicated by pending sales activity, and then rise later in the year and continue to improve in 2009, according to the latest forecast by the National Association of REALTORS®.
Lawrence Yun, NAR chief economist, says there is a pull and tug exerting itself on the market.
“On the one hand, we have a pent-up demand from the four million jobs added to our economy over the past two years of sales decline,” he says. “On the other, consumers continue to wait for additional signs of market stabilization. There are more people with financial capacity now than in 2005, but many are trying to market-time their purchase. As a result, the exact timing and the strength of a home sales recovery is a bit uncertain. A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008.”
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 2.6 percent to a reading of 87.6 from a strong upward revision of 89.9 in October, but remains above the August and September readings and indicates a broad stabilization. The index was 19.2 percent below the November 2006 level of 108.4.
“Although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up,” Yun says.
Across the Region
Regionally, the PHSI showed the following:
South: rose 2.3 percent in November to 100.7 but is 19.8 percent below a year ago.
West: slipped 2.1 percent to 86.6 but is 18.5 percent lower than November 2006.
Midwest: fell 4.1 percent in November to 82.1 and is 18.6 percent below a year ago.
Northeast: dropped 13 percent in November to 70.1 from a spike in October, and is 19.1 percent below November 2006.
Existing-Home Sales Forecast
Existing-home sales for 2007 will probably total 5.66 million, the fifth highest on record, then edge up to 5.7 million this year and 5.91 million in 2009, compared with 6.48 million in 2006. Existing-home prices for 2007 are likely to be down 1.9 percent to a median of $217,600, hold even this year and then rise 3.1 percent in 2009 to $224,400.
“Rising home prices in the affordable midsection of the country are likely to offset declines in some of the previously hot markets,” Yun says.
There are wide variations in housing market conditions around the country, with nearly two-thirds of the metropolitan areas showing price gains. Healthy increases in metro prices are occurring in places such as Pittsburgh; Beaumont-Port Arthur, Texas; San Jose, Calif.; and Bismarck, N.D.
“Our consumer survey shows buyers today are in it for the long-haul, planning to stay in their home for a median of 10 years,” Yun says. “This is a wise approach to housing because the data shows the longer you own, the better your investment.”
New-home sales are projected at 773,000 for 2007, and declining to 669,000 this year before rising to 730,000 in 2009. However, that is well below the 1.05 million 2006.
With an appropriate slowdown in production, housing starts — including multifamily units — are forecast at 1.36 million for 2007 and 1.09 million this year before edging up to 1.1 million in 2009. Starts totaled 1.8 million in 2006.
The median new-home price should drop 2.1 percent to $241,400 for 2007, and then rise 0.4 percent to $242,200 this year and gain another 5.9 percent in 2009.
Call for Legislative Action
“Some policy changes, such as raising the loan limit on conventional mortgages, would provide a significant boost to home sales, increase liquidity, strengthen home prices and lessen foreclosures, but it is unclear as to if and when the measure will be implemented,” Yun says.
NAR strongly supports raising the Government-Sponsored Enterprise loan limit to at least $625,000 from the current $417,000 so that more consumers will have access to lower interest rates on safe conforming mortgages.
“NAR estimates that raising the GSE loan limit will result in interest rates savings for an additional 330,000 home owners,” Yun adds.
NAR also encourages the Fed to make a single lump-sum cut in the Fed funds rate to 3.5 percent at the January Federal Open Market Committee meeting, rather than a series of modest cuts throughout the year.
“Consumers are also looking to market-time interest rates, and the expectations of further rate cuts are pushing some home buyers to delay,” Yun says. “Monetary policy will be much more effective with a one-time large cut, rather than a series of small cuts.”
The 30-year fixed-rate mortgage is expected to rise slowly to the 6.3 percent range by the end of this year, but an additional cut in the Fed funds rate would lower short-term interest rates.
Meanwhile, growth in the U.S. gross domestic product (GDP) is seen at 2.1 percent in 2007, below the 2.9 percent growth rate in 2006; GDP growth will probably be 2 percent this year.
After averaging 4.6 percent for both 2006 and 2007, the unemployment rate is estimated to rise to 5.3 percent in the second half of 2008. Inflation, as measured by the Consumer Price Index, is projected at 2.9 percent for 2007 and 3.1 percent this year; it was 3.2 percent in 2006. Inflation-adjusted disposable personal income is forecast to grow 3.1 percent for 2007, the same as in 2006, and then grow 1.6 percent this year.
— REALTOR® Magazine Online
