Short Sales and Foreclosures

It happens more often than we would like. A homeowner starts off making payments on their house with the best of intentions. But over time, they find out that they can no longer keep up with their mortgage.

When homeowners are unable to pay their mortgage, they can end up going through a short sale or a foreclosure.

What exactly is a short sale and a foreclosure and how do they differ from one another? Read on to find out.

Short Sales vs. Foreclosures

Short sales and foreclosures are last-resort options for homeowners that can no longer afford to pay their mortgages. A short sale is a bank approved sale while a foreclosure is the bank repossessing the collateral of their loan (the house). Here are some differences between them.

Process: Short sales are when lenders allow homeowners to sell their houses for less than the amount owed on the house. Foreclosures are when the lender repossesses the house.

Timing: A short sale is much longer than a foreclosure. The process can last up to a year. Foreclosures are faster because the lender is anxious to recoup the money they are owed.

Credit Damage: Short sales and foreclosures will damage your credit but a short sale will do a lot less damage than a foreclosure will. If you went through a short sale, it is likely you will be able to turn around and buy another home, although getting a second mortgage can be difficult.

Foreclosure, on the other hand, will stay on your record seven years and it will be five years before you are able to buy another house.

Should I Buy a Home That is in Foreclosure or Being Sold in a Short Sale?

Buyers who buy houses in a foreclosure or short sale will be getting quite a bargain, but these options could come with a headache as well.

In a short sale in particular, the main setback is the amount of time a buyer will have to wait until the sale actually goes through.

The sales can take 3-4 months or more. This is because the lenders won’t approve the sale unless sellers agree to pay for things like wire transfers, repairs and closing costs.

Because the bank is stuck with the bill, it will try to negotiate with the buyer to get them to absorb some of these expenses.

Foreclosures come with a faster and easier selling process. However, buyers will need to buy the homes in cash. They will not be able to get a loan so they can pay for the house over time. They will need to do a “refinance” after the purchase.

Also, when buying a foreclosed house, buyers agree to buy in ‘as-is’ condition. The home is not inspected for damage and if there is damage existing in the home it will be the owner’s responsibility to repair it.

Short sales and foreclosures are not pleasant for homeowners but they do happen. On the bright side, they provide a way for buyers to get great deals on their homes.

Title Insurance

Explaining Title Insurance

Most people understand what a title is. It’s a claim to ownership. Owning your own home means you have rights to the property and you can modify it as you see fit.

What is a Title?

A title is a document given to the owner of a house. It shows the property legally belongs to the owner and there are no outstanding claims or liens on it or any fraud or error in the history of the ownership. It also shows any non-ownership rights, like easements for example. Common easements are those put in place for utilities (company access) or driveways (neighbor access).   

What is Title Insurance?

Title insurance comes with the title of the house. It is a way to protect yourself from financial loss and related expenses if there is a defect in the title that is covered by the policy.

Title insurance differs from other types of insurance in that there are no monthly payments required. There is just a one time premium that’s paid at closing.

There are several ways title insurance can help you.

For one, if work is done on the house and the homeowner refuses to pay the contractor and then sells the home, the new owner may now be liable to pay for the work. However, if the new owner has the title insurance to prove they now own the house, the contractor will be unable to come after them for the debt.

Title insurance also proves you own the home no matter what. Some sellers are not entirely honest and may try to sell the property to someone else even after it has been sold to you. When someone comes to the door with a deed saying they own your home, you will have no recourse, unless you have the insurance to back it up.

Or say you buy a home whose last owner is now deceased. You think all is well and good so you don’t bother with title insurance. Then you find out that the deceased actually left the home to a relative and they would like to claim it. You will have trouble holding on to the home unless you have the insurance.

Different Types of Policies

There are two different types of title insurance policies and it’s a good idea to know the difference between them. Real estate agents can even get confused so knowing the difference as a homeowner can help things run more smoothly.

One type of title insurance is a lender’s policy. This policy only covers mortgage lenders from unforeseen liens, defects and frauds. It does not cover homeowners.

The owner’s policy is the one that will protect the buyer if an issue occurs.

The seller or buyer will pick which insurance company they use depending on who pays for the policy.

Title insurance is not necessary but paying this one time fee can go a long way when it comes to protecting your property rights.

Escrow

Explaining Escrow

If you are at all familiar with the homebuying process, it is likely you have heard the term ‘escrow’ being used often. But it can be difficult to grasp this term until you go through it yourself, and even then it may be quite confusing!

Well, this article will give you an explanation of what escrow means in simple terms anyone can understand.

Escrow is the neutral third party assigned with the role of holding funds and distributing them in accordance with the contract. If there is a breach in contract, funds can be frozen in escrow until the dispute is resolved.  

Escrow Before You Buy Your Home

Once your offer is accepted, you are required to come up with earnest money. This is money that is deposited into the escrow account to show you are serious about buying. It is usually 1-5% of the home’s purchase price.

Once the deal closes, the earnest money is returned to the buyer. It is then typically applied toward the down payment.

If the deal falls through because the buyer changes their mind, the seller gets to keep the earnest money. If the deal falls through due to a seller not coming through on repairs or damage that is found during inspection, the buyer will get their money back.

Escrow After You Buy Your Home

After you buy your home and get your earnest money back, a second escrow account is opened. This will be used through the life of your loan.

The amount of money put into this account will be calculated by the lender based on the money required to maintain your mortgage. The lender will dip into this fund to pay property taxes and home insurance premiums to ensure you don’t get a lien on your home.

Despite the loan, you will still have to make some upfront payments. For instance, you may have to pay for your first year of insurance. Then your lender will take all subsequent payments from the account.

You also may have to make a few property tax payments up front. After that the escrow account will take over.

The amount you pay into your escrow account will depend on your insurance and property tax rates. For instance, if you are paying a total of $7200 a year on property tax and insurance, you will have to pay $600 a month into your account to cover these payments.

Because rates can fluctuate, your lender will do an annual escrow analysis to make sure you’re paying the right amount. In some cases, your payments may increase. In other cases, they may decrease.

If your payment amount decreases, the lender may keep an amount equal to two extra payments plus $50 in your account. The rest will be refunded to you.

This sums up escrow and will hopefully make your home buying experience go as smoothly as possible.

Should I Buy New?

Should I Buy New?

If you are getting ready to buy a home, you might think it’s a good idea to buy a new property. After all a newer property has a newer structure and newer appliances and is likely to have less repairs in the short term.

Old homes are less expensive. There is more potential for you to fix them up and increase the value. They can also have charming architecture and other features that you won’t find in modern builds.

Here are some things you should consider when making your decision.

Budget

Older homes have older fixtures and appliances that can break down over time making up for any money you saved when buying the home. They are also less energy efficient so you will be spending more on heating and cooling unless you update your home to add eco-friendly features.

Maintenance

Maintenance on an older home can be quite costly. If you are handy and can do some of these repairs yourself, but you need to have money set aside for “projects” that will come up.

If you are buying an older home, it’s important to get a home inspection in advance. A home inspection will reveal any problems the home has to give you an idea of what you can expect moving forward. You also may be able to negotiate the price based on any repairs you will have to deal with.

Builder Warranty and Customization

Builders (on new homes) will often let you customize finishes and certain design elements. Building new allows you to personalize your house to your needs and tastes.

Builders and supply manufacturers will often warranty their products and work. As a new homeowner, this will give you piece of mind for the short term that you are covered and will have limited costs.

Condition of the house

Not all old homes are in bad condition and not all new construction is well built. It is important that you know what you’re buying, age doesn’t mean everything!

Modern vs. Vintage

The design of your home will be another deciding factor. With a vintage home, you may enjoy features like crown moldings and attention to detail. However, a modern home will have interiors with open living spaces, accessible hallways and eco-friendly appliances.

The one you prefer will be a matter of personal tastes and there is no saying which is better or worse.

There are pros and cons to buying old and buying new. Once you start the search, you may fall in love with a property and forget about how old it is. Just be sure to take repairs into consideration when calculating your budget.

Good luck finding the home that’s right for you!

Finding your Dream Home

For most people buying a house requires some amount of sacrifices. When working within a budget, it can be hard to find a home that has everything you are looking for when considering space, location, amenities and more.

And while finding the perfect home may not be realistic, if you have a bit of time, you may be able to build a strategy that allows you to find a home that is pretty terrific. With that in mind, here are some ways you can get into the home you’ve always dreamed of.

Think of What You Need and What You Can Do Without

Start by making a list of what you absolutely need in your home and what you can do without. For instance, you may absolutely need a two car garage and a large yard for your pets. However, you may be able to do without that fourth bedroom you wanted to convert into a weight room and that patio in the back of your house.

Base your needs on your lifestyle for the next five years. You can always sell to upsize or downsize after that initial period of homeownership.

That way you won’t be paying for things you won’t be using. This will get you lower payments and more money to reinvest in your new home or pay for other things you enjoy doing.

Be on Top of the Market

The early bird gets the worm.

You may be relying on your agent to let you know when new properties you are interested pop up on the market. But remember, you and your agent are a team and there are many resources for you to see new homes on the market. Discussing the pros and cons of new listings with your partner and your agent allow you to hone in on 1) Value 2) What is truly important to you.

Therefore, you should make it your responsibility to keep on top of the latest listings. You can do this be setting up alerts on real estate listing sites or just keep hitting the refresh button when you’re sitting at your desk and logged in. Many sites update as often as every 15 minutes.

Present Yourself as an Attractive Buyer

You may think you have found your dream home, but guess what? It’s probably someone else’s dream home too. In order to ensure your seller picks you instead of all the other buyers making offers, it’s important to make yourself look as attractive as possible.

When you submit your offer, include a personal touch that will make you stand out from other buyers. Think of including a letter that lets the seller know that they are making a good choice by selling their home to you.

Your agent will guide you through what to include in your offer and how to best negotiate:

Should you attempt to lowball the sellers? Or make an offer that is close to the selling price? Should you add stipulations and requests to your offer. How do you keep the offer as “clean” as possible? 

Most of all, be sure to get preapproved. This lets the seller know you are a serious buyer with the funds to go through with the purchase.

A dream home can make your life complete. Hopefully these tips will help you find a home that is ideal for you and limit the chances of sellers going with different buyers. We wish you the best of luck finding a place you really love.

What Lender is Right for Me?

What Type of Mortgage Lender is Right for Me?

If you are thinking of buying a home, one of the most important steps you will take is finding the right lender. Before you go comparing rates and reputations, you should consider that there are different types of mortgage lenders available. This article will review the different types of mortgage lenders so you can find one that is right for you.

Banks and Mortgage Bankers

Banks are the first place most homeowners will turn to when they need a loan. Banks get their money from their own investors and customers and they can offer different types of mortgage loans to their borrowers. Many people won’t do business with any other type of lender.

Credit Unions

Credit unions are similar to banks but they are owned by account holders, also known as members. Members are required to sign up for membership with the credit union. Credit unions offer members checking, savings and retirement accounts and they provide mortgage loans as well.

Mortgage Lenders

Mortgage lenders are similar to a bank but they originate and fund their own loans. Unlike banks and credit unions, they exist solely to fund loans for real estate purposes. They get their money from banks or investors.

Another difference between lenders and banks, mortgage lenders do their own underwriting, processing and closing in house. Once the process is completed, they sell the loan to a bank or servicing company and it is up to that company or institution to collect the payments.

Mortgage Broker

A mortgage broker works as the middleman between a homeowner and a bank. They do not lend the money directly. They have access to many loan programs and lenders and take a commission when connecting lender to borrower.

If you’re credit isn’t great, a mortgage broker may be able to help you find a loan that isn’t being offered by a bank, credit union or even a lender. For this reason, mortgage brokers are ideal for those who don’t have the best financial histories.

Which Lender is Best for Me?

There is no right answer to this question. The ideal lender varies from borrower to borrower and depends on their individual situations. However, here are some things you will want to consider.

If Time is a Factor: A lender that does loans in-house may be the best option.

If Money is a Factor: Credit unions tend to offer lower closing costs and interest rates to their members.

Do You Need a Government Backed Loan: Government backed loans are loans subsidized by the government. They protect lenders against defaults on payments making it easier for lenders to offer buyers lower interest rates. Lenders and brokers are more likely to offer government backed loans as opposed to banks and credit unions.

Bad Credit: If you have bad credit or a high debt to income ratio, lenders or brokers will be more flexible than banks and credit unions.

Convenience: If you already have an account with a bank or credit union, you may choose to get a loan with them for the convenience of having all your accounts in one place.

Finding the right lender starts with determining the type of lender that is right for you. While your personal circumstances will be a factor, costs and interest rates will also come into play. Good luck finding a lender that provides you with the best service possible.

Real Estate Coronavirus Tipsheet

Here are some tips for home buyers and their realtors on how to house hunt during the pandemic.

For Buyers:

1) Refine your search criteria. Of course you've already talked about the features you want in a house, now is a chance to redefine what you need. What is most important? What are deal breakers?

2) Get a floor plan. For some this isn't the most intuitive way to understand a space- it's a great time to learn!

3) Ask for a video walk through. If your realtor can Facetime you through, that's even better.

4) Don't go house touring if not all decision makers are present.

5) Use your realtor! Ask them their impressions and advice.

For Realtors:

1) Video walk through of house (either live or recorded). Move slowly. Narrate what you are seeing. Tell the audience what they can't see- for example, is the yard flat, is there street noise, natural vs artificial light.

2) Bring a tape measure!

3) Get your clients as much information as possible ahead of time. Information on: the neighborhood, previous ownership, easements or restrictions, etc.

4) Challenge and guide your clients. Make sure that the house they are interested in seeing really fits their needs.

5) Use a Matterport 3D camera. This allows someone to virtually tour the home at their own pace, looking in all directions. It also creates a digital floorplan allowing clients to understand the full house layout.