As A Buyer…. Do I NEED A Realtor?

Does a buyer “need” a Realtor when buying a home?  Sounds like a simple enough question; however, it’s not just a yes or no type of thing.  Really, to make this as cut and dry as possible, it’s the equivalent of asking, “When riding a motorcycle, do I need to wear a helmet?

In Pennsylvania, there’s no law that requires you to wear a helmet; however, if you want to be properly protected, you’ll choose to.  After all, it may not be your ability to negotiate turns and navigate the bike – it could be the one on the other side of this collision that you need to be protecting yourself from.

People often walk into open houses unaccompanied by a Realtor.  This gets into a sort of sticky situation in what the selling agent will refer to as “procuring cause.”  After all – in Pennsylvania, contrary to popular belief, the seller doesn’t pay a commission for the Buyer Agent to represent the Buyer – they pay for the act of bringing the buyer to the transaction – or what is called “Procuring Cause.”  Just because you walked in unaccompanied doesn’t mean you’re on your own.  Make sure you’re clear with the agent at the open house that you’re (1) working with an agent currently, or (2) you will be using an agent for the transaction.  Most importantly, when you attend an open house, DO NOT SIGN ANYTHING.  I would even encourage you to decline signing the “Consumer Notice.”

The first step in buying a home is often looking for one; however, I would argue that your best bet, to make sure you’re properly protected, is to look first for an agent.  Understand that you don’t pay the commission – the Seller pays the commission.  So, you’re actually hiring someone to work with you, advise you, and really, work FOR you… and all of this is free – to you.  Now as a disclaimer, you may be charged a conveyancing fee by the brokerage you select – so take that into account.  However, you don’t pay anything until settlement – and the amount it would cost you for an agent to look out for your best interest is typically $300 – $500.

One should also understand that nothing you say is confidential until you have a signed Buyer Agency agreement with the agent.  I am uber-competitive, and I look at every buying opportunity for my clients as a win-loss proposition.  It’s a good feeling to have an agent on your side that you can tell “I’ll pay up to $150k for this home,” and know that he/she will do everything they can to make sure you’ll pay less.

When considering a move, I would encourage you to do the following:

  1. Interview Realtors as soon as you think you may be interested in moving.  It’s never to early to have a strategy and timeline.
  2. Identify the Realtor you’d like to work with, and sign a contract you’re comfortable with (typically 3-6 months).  Make sure you’re given the option of terminating the agreement with no penalty should the pairing not be a good fit.
  3. Put your Realtor to work.  Ask your Realtor to identify homes based on your interests and have them accompany you to showings.
  4. Always carry your Realtor’s card in the event you go past an open house you’d like to peak in.
  5. Don’t sign anything without reviewing with your Realtor.

So, in summary, to have a Realtor as a buyer is akin to having a wireless force-field around your head when motorcycling.  You’ll get to feel the wind in your hair, while still having the protection you need.

Posted in Uncategorized | Leave a comment

The Art of the Referral….

We all remember Wayne’s World… you know the scene… “and they told two friends, and they told two friends, and so on, and so on.”  Referrals can be a great positive thing – and an even worse negative drag.  Did you know, when someone has a positive experience they typically tell 3 other people?  Sounds great!  However, with a negative experience, they’ll often tell 7 people!

In my business, referrals are my lifeblood.  I am fortunate that about 90% of my business comes from referrals of people I know, or have done business with in the past.  I am flattered by this, and truly believe that it clearly illustrates my professionalism and credibility as an expert in Real Estate.

I will be honest and say that the way some handle the business of referrals is disappointing.  We all know the someone who’s posting on Facebook – or tweeting on Twitter – the “think globally, act locally” attitude.  I do find that while most think this is an enviable attitude and really portrays the altruistic side of society; I also find that when it gets close to home, these “morals” are often abandoned.

“When something becomes personal, it becomes important.”

Let’s think about this comment.  There is nothing more personal than someone’s financial affairs – and there are few businesses that don’t delve somewhat into your finances during a transaction.  From home repair, dog grooming, and landscaping to financial planning, home financing/refinance and car purchases – there’s always that moment of “if I do this, what will they think?”

First and foremost, understand that more often than not, you’re dealing with a professional – or at least, you should be.  From a Real Estate perspective, I would ask yourself, “am I dealing with someone who does this full-time, or someone that does this as a hobby and is looking for an easy windfall off my transaction?“  Is the person you’re choosing to work with dedicated to the industry?  Is this truly their expertise?  I think it’s a clear line in the area of Real Estate; however, I wouldn’t say that any other industry is any different.  When you buy your car – is it from a friend that dabbles in the business – or from a dealership that has invested millions in their business?  The contractor you’re looking to have replace your roof – has he done this before, or is it something a friend thinks they can do?  You’re not going to have an acquaintance put down your $20k paver patio, simply because you know them – are you?

Pennsylvania – and Berks County for that matter – is a notorious Do-It-Yourself state.  I know this from my days as a Regional Sales Director with an IT service provider.  If I had a nickle for every account who’s IT Director told me “I have a friend that does some of this at a much lower rate,” I wouldn’t be selling houses!

I understand that saving money is a MUST in today’s economy – and should be pretty darn important at any other time as well.  But, are you saving money – or just paying less?  There’s a difference.

“You get what you pay for.”

I don’t know about you -but I am pretty analytical when it comes to spending money, from advertising for my business to getting an oil change.  Here’s an example of paying less without saving money…

I have an old Volvo.  It’s basic transportation at this point, and I would rather keep it on life support rather than have a car payment… much to my wife’s chagrin.  I had a lot of problems with it for a long time.  I took it to a friend that works on cars, spent less money, but saw the same issues.  I then took it to a franchise repair shop, and they told me they could do it.  The bonus here is that when they couldn’t – they had to tell me…. turns out my friend, nor the franchise shop, had the equipment to “talk” to the car.  I was told by both that I would need a new turbo because that seemed to be leaking some oil, and was likely the cause.  This would run me into the couple of thousands…  Around that time, I had a friend that worked in Toyota service go to Performance Toyota – which has a Volvo dealership as well.  I talked to him – he openly told me he didn’t know anything about Volvo’s – but to bring it in.  $1300 later the issue was fixed (which wasn’t the turbo – that was fine).  I would have spent $1300 (more than I was quoted at the other two options I tried) and been done.  Instead, I payed less and ended up needing it fixed properly anyway.

How about home purchases – since that’s what this blog is about.  I have seen time and again other agents that aren’t “experts” in the field.  When I say an expert in Real Estate, I don’t mean someone that can just price your home to sell – or get you a good price on one.  Does this expert have knowledge in financing?  Home Inspection? New Construction AND re-sale? Property Tax Assessment/Appeal?  These are all facets of every transaction.  For example, I don’t even know how many homes were built in Berk County from 2002 – 2006; however, I know the builder that I worked for was exceeding 300 homes per year in that time frame.  I also know that when I do property tax appeals, the homeowners want to know why no one told them about the appeals process and want to know why their taxes are so high.

You see, as a professional and as an expert, one should be consistently be providing services.  I often tell prospective clients that buying or selling a home is WHEN I get paid – not WHY I get paid.

So – what I am saying is not give business to me – or another acquaintance – because I am a friend… I am saying give us the opportunity to earn your business because of our relationship.  I am not concerned with discussing your finances.  Most often in my career as a Realtor, I have referred any financing issues to my lender.  I would much rather have you speak to the lender, get a definitive “Yes” or “No” instead of me speculating what I can, based on a fraction of the picture.

I refer to my lender because she is an expert.  I love her tagline “No surprises.”  That’s how she operates.  I also refer to her because she has referred to me.  That brings me to the most frustrating part of the referral dichotomy….

I often have people tell me that they’ve referred people to me (given my name or card) and I never hear from them.  They tell me it’s “frustrating” that they didn’t call.  I can empathize with that; however, these are the same people that chose not to use who I referred them to because they didn’t want someone to know their finances – or they already had a pre-approval from another lender.

Well, I can’t change it – but I can voice it.  Think about it… why would/should someone heed your advice when you’ve turned a deaf ear on the advice given to you?  It happens every day.  What I would like to see is more people “thinking locally.”  My lender, title, home inspector, auto repair, etc are all LOCAL.  They’re not just local – but they’re people.  People that can help you – professionals who will help you.  And guess what, they need auto repair… they need home services…. they need landscaping…. etc.

How many referrals for appliance repair will Wachovia give you?   How many landscaping jobs have you gotten from Wells Fargo?  Not much I suspect.

I can’t stress this enough… I am not a good fit to help you buy/sell your home because I am your friend.  I am a good fit to do so because I am a professional dedicated to my industry.

I won’t refer you to someone just because I have a personal relationship with them.  I will refer you to an expert that I have a professional relationship with…. that because of their performance has led to a personal relationship.

I won’t discount my services because you’re a friend of mine.  I will provide you with unparalleled service that you would pay a stranger the same fee for.

I won’t dismiss you after settlement.   I won’t assume everything is OK because I haven’t heard from you.  I will continue to communicate with you and serve as a resource that will continue to pay dividends on an ongoing basis.

Basically, if you need your car serviced… if you need a car… if you need landscaping, fishing guides, a gun made, a mortgage, an equity line, an attorney, a general contractor, IT services, a painter, a plumber, an electrician, a mover, a builder, a photographer, a designer, an interior designer, a vacation, or anything else…. ask me, ask another friend… there is great power in numbers.

“Once in a while you can get shown the light, in the strangest of places if you look at it right.”

Posted in Assessment, Berks County, Boyertown, Chester County, Daniel Boone, Distressed Property, Exeter Township, Foreclosure, Governor Mifflin, Home Staging, Montgomery County, New Construction, Oley Valley, Pennsylvania, Property Taxes, Real Estate, Short Sale, Tax Appeal, Twin Valley, Uncategorized, Wyomissing | Leave a comment

Home Equity Lines of Credit and Your Credit Score

What You Need to Know and Do

Credit reports have always been important, but they’ve grown even more important in recent years. Now more than ever, you need to make sure you understand what’s on your credit report – and you need to know what steps you can take to improve your score.

For example, did you know that a Home Equity Line of Credit (HELOC) can impact your credit score quite dramatically… and sometimes unfairly… depending on how it is reported?

Here’s What You Need to Know… and Do!

First, you need to know that HELOC’s are commonly reported by the three credit bureaus as revolving accounts. In reality however, they do not fall under the typical revolving terms, even though they are set up in the same way as a revolving account. That’s because HELOC’s are secured by an asset.

Here’s the Good News…

The Fair Credit Reporting act requires reporting agencies to report true and accurate information. So when a HELOC is reported as a revolving account, you can actually send a letter to the three credit bureaus asking them to change the type of account from “Revolving” to “Line of Credit” or “Other.”

This way, the account will not be rated by the scoring system using the “Balance to Limit” ratio scenario – which can drop a credit score by as much as 75 points if the HELOC is maxed out to the limit of the available credit line.

A Final Word of Advice

If you do decide to send a letter, you should send it as a Certified Letter, along with a copy of the HELOC agreement. You may have to send the letters more than once, but persistence is the key to accomplishing a positive result with the bureaus.

This article was adapted from information provided by national credit expert Linda Ferrari, author of “THE BIG SCORE: Getting It and Keeping It, Buying Power for Life.” Learn more and check out her credit resources at www.lindaferrari.com

Posted in Assessment, Berks County, Boyertown, Chester County, Daniel Boone, Distressed Property, Exeter Township, Foreclosure, Governor Mifflin, Home Staging, Montgomery County, New Construction, Oley Valley, Pennsylvania, Property Taxes, Real Estate, Short Sale, Tax Appeal, Twin Valley, Uncategorized, Wyomissing | Leave a comment

TOP 10 QUESTIONS TO ASK THE SHORT SALE LISTING AGENT BEFORE MAKING AN OFFER

HOW TO EVALUATE A LISTING AGENT IF YOU ARE REPRESENTING A BUYER

1. What is your experience representing sellers in short sales?

Dealing with a knowledgeable and experienced agent who has successfully closed many short sales is imperative for a successful short sale.

Thousands of agents are now taking short sale certification programs and presenting themselves as short sale specialists. Many of these agents have never closed a short sale in their lives. In fact many of the people teaching certification classes have themselves never closed a short sale.

Knowing the mechanics of a short sale is not enough. Lots of agents now have this information from taking one of the many certification classes now prevalent. It will not get the job done.

Ask the agent how many short sales they have closed representing sellers in the last year. I would also ask them if they have closed any representing a seller with the particular loan servicer who is the third party approver(s).

(Representation of buyers in a short sale counts for nothing in terms of short sale experience since all the approval action goes on with the listing side.)

The listing agent needs to know how to escalate a deal to get an approval. Some loan servicers – BOA immediately comes to mind – reflexively decline short sales and, I believe, manufacture values, notwithstanding what their appraisal or BPO says, hoping to extract the maximum dollars from the buyer and agents.

(Understandable perhaps, but if they really wanted to get the most money from the short sale, they should provide a target number up front, not spend months jerking buyers and sellers around).

The agent needs to know how to get to management to get an approval with Servicers like this. In fact the listing agent needs to know how to do this just as reflexively as the servicer who is going to reflexively decline the deal.

Negotiating price prior to getting to the Management level is going to prolong the process, not shorten it. But the listing agent has to know how to get around the lower level negotiators.

2. How many liens are there on the property?

First or first and second or HELOC, HOA, Condo, Special Assessment, Tax?

Second lien holders and HELOC holders can be extremely difficult and are very adept at killing deals and cutting commissions.

3. Who is/are the servicer(s)?

BOA, for example is extremely difficult to deal with. Much more so than Wells Fargo. So unless you just get lucky it will take a much more experienced and savvy agent to get an approval from BOA than WF.

4. Who is the investor or insurer on the loan?

Fannie Mae, Freddie Mac, FHA or VA or Conventional or PMI

Conventional loans are the Wild West for servicers since they can approve or deny anything they want.

Fannie Mae loans frequently have PMI which means, nothing is happening without the PMI companies approval, so even if there is only one lien, there may be two approvals required.

FHA has a proscribed process which allows servicers little latitude for game playing.

5. Is the listing agent going to have one contract signed and submitted or do they say they are going to submit the offers to the servicer to decide which one they want?

I would personally advise my buyers to run away from any deal where the agent says they are going to submit multiple offers to a servicer. That tells me the listing agent is clueless. Why would you send multiple offers to a loan servicer who takes months to approve one deal? If the agent can’t figure out which is the best deal in a multiple offer situation, they should get out of this business completely.

6. Has the servicer previously approved a deal which the buyer walked away from or has the servicer disclosed an acceptable price?

This may shorten the process, but not necessarily. Some servicers will force the agent to start all over from square one again with a new buyer, including ordering a new appraisal.

7. Does the agent have any financial modeling program to determine whether the offer is going to yield more cash to the investor than foreclosing?

This is how the lenders ultimately decide whether or not to approve a deal. Absence of this is means you are pretty much throwing darts with a blindfold on.

8. Has the property been priced appropriately?

I still see short sale listings where it is obvious the property is priced at a number which would pay off all of the liens. Ridiculous. Don’t even think about showing your buyers this property.

9. Do the agent comments say something like “commission paid on net sales price” or “50% to selling agent of approved commission”?

Either this agent is clueless or they don’t know how to handle commission negotiations with the lender. This is a run away, don’t walk situation.

10. Does the agent purport to be an expert?

I would be very, very wary of anyone who purports to be an expert. The only experts I am aware of are the guys sworn in as such in court rooms. We have 10 to 15 short sales in various stages of approval all the time and I see new twists on servicer tactics and processes every day – and there are dozens of servicer representing hundreds if not thousands of different investors. And don’t forget HAMP or HAFA.

Bonus Question:

11. Will an Attorney get you a better deal on a Short Sale?

Think about it. Until this year, most attorneys would have turned their noses up at dealing with loan servicers on short sales. Suddenly, they’re experts in short sales.
Posted in Assessment, Berks County, Boyertown, Chester County, Daniel Boone, Distressed Property, Exeter Township, Foreclosure, Governor Mifflin, Home Staging, Montgomery County, New Construction, Oley Valley, Pennsylvania, Property Taxes, Real Estate, Short Sale, Tax Appeal, Twin Valley, Uncategorized, Wyomissing | Leave a comment

For Sale By Owner (FSBO)… Fact or Fiction

With the deterioration of equity in homes over the past 3-4 years, many people look to go at it on their own to offset their losses by saving commission.  Those that know me understand that I fully support giving everything a go – as long as you go hard.  Many FSBO’s are misinformed and make many mistakes that ultimately cost them in the long run.  Here are some of the misconceptions and mistakes I see frequently in today’s market by the FSBO enthusiast.

First, more often than not, homeowner’s have an inflated view of the value of their property.  This is common among all homeowners.  Whether they intend to use an agent or not, their home is “their home.”  There is a sentimental value that the market just doesn’t appreciate.  The best question I have to combat this is – “Would you pay X for your home today?”  Many homeowners get the message right there.  No, they wouldn’t.  They’re aware of the market conditions, the changes that are constant, and the fluctuations you read about in the news today.  Basically, what one wants for their home and what they themselves would pay for it are too completely different numbers.  Take the lower, and begin to deduct.  Where do FSBO’s get their pricing from?  Zillow.com?  Realtor.com?  I can’t begin to tell you the misinformation that is out there – or the general lack of details that come with the information on those sites.  Zillow.com often goes off of assessed values.  That can give you a higher or lower number, depending on the age of the home, how and when it was assessed, whether or not permits were issued for all improvements, etc.   Assessments are so rarely accurate, that I enjoy the “art of the appeal.”  I have appealed taxes for 60 people, getting all 60 a reduction.  One was over-assessed by $162k – and the home was purchased for less than $400k!   Realtor.com will give you information on what’s on the market – but not what’s sold, how long the active listings have been on, what price they started at, or – perhaps most importantly – what has sold, and how long it took to get there.

Overpricing a home is a mistake on so many levels.  The pricing of the home is one of the most important acts of getting a home to sell.  Even in “today’s market” homes properly priced are selling in a reasonable amount of time.  The price of a home should be one that (A) generates traffic and interest and (B) produces offers.  If your home is not getting shown, or hasn’t gotten any offers – you’re overpriced.

Next, FSBO’s are slow to respond.  I call FSBO’s to try and get them to list with me.  Now, I would love to think that my name is so well known that when I leave a message they know who I am… but, I am simply a legend in my own mind.  They don’t know who I am – yet, I called 3 this week, and I haven’t received a call back.  Why?  I don’t know – maybe because they’re selling their home Part-Time… In real estate, you sell part-time, full-time or BIG TIME.  Part-timers and full-timers go simply by their hours.  The BIG TIMERS go by volume, numbers, and results.  Unless you’re willing to answer the phone when it rings, or call back the person within 15 minutes, FSBO is not for you.

On the line of responses – follow-up is typically nonexistent with FSBO’s.  Selling your home is a “Sales Job.”  You need to prospect, follow-up, and close.  Most people think selling is easy, but it’s a wonder that more of them are not in it.  It takes a unique personality to be persistent, no matter how many “no’s” one hears.  Every “no” is one step closer to the “yes.”  Also, the sales personality is comfortable asking the uncomfortable questions.  Your home may be the greatest purchase you make – but it’s also the largest sale you’ll make.  Do you really want to gamble on the sale of your greatest posession without using a professional?

Another fact in the marketplace is one that is simply staggering.  17% of all agents sell their listing themselves.  What that means to a FSBO?  Simply put… I – as a full-time/BIG TIME real estate professional, that has dedicated myself to marketing property, knowing the market, and networking with the other 900 realtors in my marketplace – have a 17% chance that I will find your buyer on my own.  What are the chances that the FSBO homeowner, that is busy with their full-time job, family, kids, etc. and is not “connected” in the community will find the seller on their own?  I am no math whiz – but I am guessing that the odds are stacked against them.  Now, in fairness to all – I will say that selling in 2004 was a different world.  You could likely walk out your front door and scream “FOR SALE” at the top of your lungs and at least get one appointment out of it.  Not anymore.

Yet another fact… print advertising is dead.  I don’t advertise in the paper – unless I am advertising myself (meaning JOE).  People don’t look in the paper anymore.  Don’t believe me?  Then I insist you stop reading and crumble up this blog and throw it in the nearest trashcan.  Oh wait… got it?

About 32% of buyers are shopping on the internet.  So – is your property on Realtor.com?  Craig’s List?  Trulia?  How about 50 different websites?  And… oh yeah… is it in the MLS?  The MLS is a big deal.  There are over 900 agents in Berks County alone.  Ask them to look up a FSBO for you to get the price – oops… they can’t – it’s not in there.  So, as a FSBO, you’ve lost 900 of the top producing property salespeople in the county.

Finally, the biggest thing is right along the lines of the MLS issue.  I recently had a conversation with a FSBO that went this way… he insisted that he wanted to give it a go on his own, because he didn’t really think his agent did much when he bought his home.  “I mean, she showed me homes that I wanted to see…. but that’s really all she did.  She found some homes and took me through them.”  OK… I responded, “Sure, I can understand how you feel (buffer… sales 101), but, can I ask you a question?…. How many For Sale by Owner’s did she take you through?”  The phone went silent – but I think I heard a light bulb go on.  I always ask a FSBO if they’d pay me a commission if I were to bring a buyer.  Typically, most would.  So, most are willing to pay an approximate 3% for a buyer to come – but they don’t want to pay 3% to market the property.

FSBO sounds like a great idea to save money.  So does coupon clipping and the barter system.  It’s just not very efficient.  Most FSBO’s will tell you they won’t do it again – unless they did it during the boom.

The bottom line is that selling a home can be work… believe me… it’s my JOB!

Posted in Assessment, Berks County, Boyertown, Chester County, Daniel Boone, Distressed Property, Exeter Township, Foreclosure, Governor Mifflin, Home Staging, Montgomery County, New Construction, Oley Valley, Pennsylvania, Property Taxes, Real Estate, Short Sale, Tax Appeal, Twin Valley, Uncategorized, Wyomissing | Leave a comment

Property Tax Appeals Are In!

First, let me confess…. as I sit down to write this blog, I have ransacked my son’s Halloween bag to muster up the energy…  Now, that that is off my chest, I can move on with things…. wow, don’t I feel better!

Tax appeal results have been mailed out – and should have been received by now.  If you didn’t receive them, reach out to me, and I will let you know how you did.  First and foremost, if I did your appeal you got some sort of relief.  The appeals I did resulted in reductions of anywhere from $2600 in assessed value, to $162,000 in reduced tax assessment.  I think that’s pretty incredible.  On average, there was a 19% reduction in taxes for the upcoming year, and an average savings of about $1900 per client.  A total of 60 appeals with a total reduction of $3,249,000!

If you missed out on the tax appeal this year, we can give it a shot next year.  You can appeal every year (if it makes financial sense) between July 1 and August 15.  At this point, I plan on offering this service for free again next year.

The market seems to be picking up – and if you know someone that should be buying – push them.  PHFA has a program that has rates as low as 3.75%!  That’s just plain ridiculous!  There are some income requirements and purchase price limits ($216k in Berks, $290k in Montgomery County).  Beyond that, you can still get a conventional mortgage in the 4′s!

Buyers seem to be moving now – I actually had two offers on one property, and recently lost a property because it sold the day of our scheduled second showing.

Please, keep in mind that buying or selling isn’t the only time you need a Realtor – just ask my 60 clients who got their taxes lowered!!!

Posted in Assessment, Berks County, Boyertown, Chester County, Daniel Boone, Distressed Property, Exeter Township, Foreclosure, Governor Mifflin, Home Staging, Montgomery County, New Construction, Oley Valley, Pennsylvania, Property Taxes, Real Estate, Short Sale, Tax Appeal, Twin Valley, Uncategorized, Wyomissing | Leave a comment

Is Buying A Short Sale Right For You?

With the recent Foreclosure Freeze, as a result of the “Robo-Signing” scandals, it is anticipated that Short Sales will become increasingly more popular. Much of this is just speculation, as experts are guessing that a bank will have increased incentive to work out a short sale, rather than have to deal with the costly foreclosure process.

A lot of expense is incurred by the bank going through a foreclosure proceeding. It is estimated that it can be as expensive as 40% of the loan value. I believe this to be an extreme example; however, in many cases it can easily grow in excess of $40,000. It’s not as simple as just kicking someone out, and taking the home back to sell it. There are the legal fees, for one. Anyone that’s dealt with an attorney for anything – even a phone call – can understand how quickly this number can grow. However, a foreclosure is considered a “distressed property” for good reason. More often than not, the property is in serious disrepair. In some situations, homeowners have destroyed the interior of the home – going as far as removing the copper plumbing and wiring in order to sell for cash. So, when the bank takes the home back (after incurring the hard costs of the foreclosure process) they have a real estate professional complete a BPO (Broker Price Opinion). This is similar to an appraisal – however, in the case of a foreclosure, an “As-Is” value is given in addition to a Repair Estimate and Future Value (once repairs are completed). The bank then needs to determine what the return is for those repairs, and decide if it’s worth doing. Then, they have the “Marketing Expense” to get the home sold… So, I don’t know if the experts are right here – since it seems like they should have already had enough motivation to work out short sales in lieu of foreclosure. Only time will tell.
If you’re a buyer in the market, and you’re considering submitting an offer on a short sale – be informed before you do! To start with the simplest detail – What is a short sale? A short sale is when the home is sold for less than the payoff balance of the liens against the property. The bank is agreeing to take a lower amount than what’s owed – commonplace today since many properties have come down significantly in value from their peaks of 2006.

The Short Sale Process – A Buyer’s Perspective
1. Submit the Offer
2. Lender orders a BPO/Appraisal
3. Lender reviews offer
4. Negotiator assigned to file
5. Offer is accepted or rejected

Now, some people would attach time frames to these steps – however, nailing down a timeline for a short sale is about as easy as herding cats. So, why purchase a short sale? Well, simply put, you can get a deal if you act quickly, and wait patiently. To get a deal on a short sale, you really need to “Hurry Up and Wait.”

Short sales are not for everyone. Who shouldn’t buy a short sale? What are some considerations every buyer should evaluate with their agent?

TIME
What is your motivating factor? Do you need to be in the home by a certain date? If so, as I mentioned before, these are so hard to pinpoint, it’s likely not in your best interest to pursue. You will likely incur some sort of expenses related to the timing of the transaction – such as interim housing, storage fees, etc.


NO GUARANTEE BANK WILL ACCEPT HOME AS SHORT SALE

A little rule of thumb I received from a negotiator is that Fannie Mae (FNMA) – a major investor in the secondary market – will typically accept a $60k loss and 85% of the property value. So, a home that has a payoff of $125k and is currently worth $100k could be had for $85k (85% and $40k loss); however, a $400k valued home that has a mortgage of $450k may or may not be had for $385k – even though it’s about as good as the offer will get. I have come to the conclusion that just because the deal makes sound business sense, it doesn’t mean the bank will accept it.

NOT ALWAYS A BARGAIN – OFTEN AS-IS
Have you ever seen the movie “Money Pit”? That could be what you’re getting into. Often times, the bank will not permit repairs or repair credits as part of the offer. Again, just because it makes business sense to the rest of us – you’re dealing with the red tape of a large institution, and while a $200k purchase may be the largest of your lifetime, it means nothing to a bank.


LENDER WILL REJECT LOW OFFERS AND/OR CHANGE CONDITIONS

The lender – from a desk across the country – believes they know more about the property value than anyone else. They’re not familiar with individual markets and the economic factors within that specific marketplace, and they can deem an offer too low… “just because”. Additionally, they can change the conditions of the sale. For example, a buyer that needs 6% seller’s assistance to close on the property will likely see that changed to 3% – because they “just don’t allow for 6%”. However, they will typically allow you to reduce the purchase price by 3% – in other words, the end doesn’t justify the means, the means justify the end… confused? If so, then you’re getting it…

INCREASE TO CLOSING COSTS
Banks will not typically pay transfer tax (1%), notary fees, overnight fees, or wire fees. That doesn’t mean they just go away… it means the buyer has to pay them. This is something that won’t be known until the bank reviews the file.

Buying a home can be an overwhelming process – no matter how many times you’ve done it. Loss of control in this situation, combined with an “unmotivated seller” can just be too much for some to take. Add to this that you’re going to need to come up with a little more money out of pocket, it just isn’t for everyone.

The biggest thing is the seller – they can get nothing from a short sale. So, there is no motivation on their end to make this happen, other than being somewhat socially responsible for their debt, and trying to do things the right way…

I would recommend that a buyer of a short sale be:
 Patient
 Have Financing Lined Up
 Submit an offer with no contingencies
 Has verified that all liens on the property are being disclosed

Finally, be prepared for out of pocket expenses to make the home “livable” for your family. Stay away from high risk loan programs, and if paying cash, make sure you have the proof of funds. Consider the resale value of the property – emotions can kill profit quickly. Have an exit strategy to avoid being financially burdened by this from the start. Always get a home inspection. This could be the best $300-$500 you will spend. Even if the contract isn’t contingent on a home inspection, that doesn’t mean you can’t conduct one.

Posted in Assessment, Berks County, Boyertown, Chester County, Daniel Boone, Distressed Property, Exeter Township, Foreclosure, Governor Mifflin, Home Staging, Montgomery County, New Construction, Oley Valley, Pennsylvania, Property Taxes, Real Estate, Short Sale, Tax Appeal, Twin Valley, Uncategorized, Wyomissing | Leave a comment

The Long and Short of a Short Sale

Wow… today marks the first day in over six months that I don’t have to deal with Bank of America on a Short Sale… I feel eerily lonely for some reason. The agent representing the buyer and I have joked about the depression of a “break-up” as we’ve talked, texted, emailed, and vented together for 6 months.

In the beginning…. Yes, it was that long ago that this tale is deserved of a start like this… we had a home that was in disarray. And this isn’t the typical short sale where a buyer has come across some unexpected financial hardship, or simply overextended themselves on a mortgage that was doomed from the beginning. This is a sad story of sorts. The “seller” wasn’t even the borrower… or co-borrower… in fact, she had nothing to do with the loan itself. The unfortunate circumstances that brought us together are worthy of a prime time special. The borrower was her brother. A young, seemingly healthy man that died unexpectedly of a blood clot in January of 2009. The home was shared between he and his parents. Upon his death, his mother went into a deep depression, understandably. Her depression was ultimately ended by a sudden heart attack in June of 2009. She and her husband had been trying to keep up with the mortgage, and were seeking a modification under the Making Home Affordable plan. Less than a month later, the father was tragically killed in a car accident.

It was March of 2010 when the young woman came to my office in need of help and direction. We immediately began to look at what the options were; however, she cautioned me that before we even thought about the value of the home, we should visit the property, as it hadn’t been maintained in nearly 9 months by this time. We set an appointment to go out to the home and walk through. She met me there accompanied by her aunt, and profusely apologized – embarrassed – for the condition of the home.

The home looked as if it had been ransacked – as in some ways it had been. There were burns in the carpet from cigarettes, stains, no appliances, no utilities. There was no way that the home would sell in this condition – let alone make any kind of profit for her to start anew. I immediately began to think who could help and how… As the Assistant High School Wrestling Coach, I knew that the strength of my team, and the wrestling community is where I had to lay my hopes. And, they delivered!

Within one week of listing the property, we had the team out with a 3-ton dumpster and removed EVERYTHING from the home. When I say everything, I mean carpet and all remaining personal affects. We did this in one day. Over the next weeks, I continued to go out, strip wallpaper, mow the grass, turn on utilities, and get the home ready to show for the right buyers.

Prior to listing the home, I contacted Bank of America and got a verbal payoff. We priced the home so that the payoff would be satisfied, and the seller could walk with about $5k for her and her 18-month old daughter. After about one month, we got our offer! We accepted the offer and began planning for settlement at the end of May.

I ordered the payoff from the bank to find out that Vacancy Insurance had been placed on the home back to March of 2010, at the rate of $500 per month. The payoff came back at $149k; however, after prorating the taxes, insurance, etc, we were looking at about $142k. My heart sank. I called the bank and asked how the number they had given me had gone up $17,000, only to be give an “Oops.” Sick to my stomach I went and informed the seller that there was no equity in the home, and we’re looking at a short sale. However, we should get this done, because to the best of my ability, I calculated the sale was only $4200 short.

This is where it imploded… the bank ordered a BPO (Broker Price Opinion) which is basically an appraisal. The due date for the appraisal to be completed was June 2. On June 14, I received a call from the bank that they needed to go back out and take interior photos, due to a “camera malfunction.” The BPO was finally completed promptly on, or about, July 6. Now, with a $25 per diem interest charge, and $500 per month insurance – on top of the $300 per month in taxes. And, let’s note for the record, this was scheduled to settle on May 30, and then moved to June 15. So, at the point of the appraisal being completed, the bank and investor (Fannie Mae) had incurred an additional $1,500+ in costs (or about 35% of the “short”).

Negotiations began in early July and continued until the end of August – at which time the offer from the lender “expired” as the negotiator failed to answer questions pertinent to the deal. So, we start over… but luckily, the BPO is good for 90 days! However, everything needed to be initiated from the beginning and it took until the middle of August until we were assigned a negotiator – Diane Keen. I only use her name here because she is solely responsible for getting this done. The stumbling blocks on the previous negotiation were the amount of Seller’s Assistance (6% – only 3% is permitted by Fannie Mae) and repairs paid for by the buyer ($5100 in flooring). The sum of the “obstacle” at this time – $10k.

Diane Keen contacted us to say, “We can get this done!” They reduced the Seller Assist to 3% and kept the repairs at $5100. Therefore, the bank is getting $4950 more than originally offered – however, if this had been the original offer, it wouldn’t have been a short sale (originally $4200 short). All of the sudden, Bank of America pulled this from Diane and put it in their HAFA program. We were in this program for about a week before someone spoke to me on the phone. Turns out, the property wasn’t eligible due to it not being the primary residence of the seller (recall THEY had put vacancy insurance on this in March…).

We were then assigned a new negotiator who was… hmmm….. let’s say, not nice. She was adamant that Fannie Mae did not allow for repairs and that Diane Keen was a “temp” and didn’t know what she was talking about. At the end of August, she deactivated the file because “we” were unwilling to listen to her, and we were insisting on the repair money.

In September, Diane got the file assigned back to her… we got the approvals after weeks of run around and promises of “tomorrow” from the Bank. Fast forward to October 6th – we got all of the approvals (thanks to Diane) and got the deal closed Friday the 8th – WITH the $5100 allowance.

The bank ended up walking with $145,050, instead of the $140,100 we had originally offered. They “made” another $4,950. REWIND – the carrying cost of the home was about $50 per day with Interest, Tax, Insurance. So, after about 4.5 months (135 days), the bank cost themselves $6,750 to save $4950… I don’t know what kind of math that is – but it is now increasingly clearer how these banks continue to get themselves into trouble… and even more evident how Fannie Mae is failing.

On top of all this – as I said, this wouldn’t have been a short sale at these numbers in May/June. One would ask then, why not just make that offer then… well, the bank lucked out here – yes, lucked out that they ONLY lost $1800. Had interest rates not dropped from 5.25% in May to the low 4′s in September/October – this wouldn’t have happened. You see, the borrowers “bought up” the rate to get cash back from the lender…. confused, then you need to ask me about buy-downs and buy-ups with mortgage rates.

So, in summary – the only thing short in a short sale are tempers.

Posted in Berks County, Boyertown, Chester County, Daniel Boone, Distressed Property, Exeter Township, Foreclosure, Governor Mifflin, Home Staging, Montgomery County, New Construction, Oley Valley, Pennsylvania, Property Taxes, Real Estate, Short Sale, Tax Appeal, Twin Valley, Uncategorized, Wyomissing | Leave a comment

Berks County Real Estate Market Update

Berks County Real Estate has weathered the storm – fairly well.  This may be some dry material, but I am hoping to provide you with real statistics in the local market, in order to give you some insight as to what the future may hold.

What are some of the factors that Realtors, Bankers, Appraisers, Buyers, and Sellers look at when making decisions?  Some of them are dramatically different – but I will try to give you some perspectives.

From the Buyer’s side, and yes they’re first because in this market they are top dog.  Four years ago, most companies didn’t care about what the buyer had to say – including the buyer.  It was all about what the bank said and what the seller wanted – if they worked out, it was a deal.  One of the first things I look at when advising a buyer on a property is the DOM – Days On Market.  Days on Market can be very telling.  Have there been any price reductions?  If so, when were they?  If a reduction was done at 30, 60, or 90 days, how many days are we at – so when can we expect the next one?  If there haven’t been any reductions and we’re coming up on a benchmark of 30 days or so – maybe we hold on to see if one comes – or if really interested force their hand by using the “we’d be interested in making an offer if the price came down a bit.”

A property will garner the most attention during it’s initial introduction to the marketplace.  From a Seller’s perspective, you need to be very aware of what your property is doing, where it’s priced, and when it can be expected to sell.  It’s all gotten more difficult of late; however, properly priced homes sell within the average time frames in most cases.  Pricing is difficult – but not the solution to the real estate recovery – we’ll talk about that later.

In Berks County, the average number of DOM is 58 Days – as of the end of August.  This is an improvement of 6 days from 2009′s 63 DOM at the same time last year.  OK – so, 6 days doesn’t spell much, right?  Well, it’s about a 10% drop – and if you don’t think that’s significant, then pay 10% more (or less) and see what kind of impact that makes!

What is the reason for the reduction?  OK, you’re right, you don’t need to be a real estate professional to figure out that the tax credit had something to do with it – but you’d be wrong to think it was something significant.  Consider this – as of the end of April (expiration of the tax credit) the average DOM for Berks County was 62 days!  The real reason, in my opinion, is that Seller’s have become more realistic with their pricing.  We, as Realtors, and others (Seller’s) don’t set the price/value – the market does.  In the past 12 months, there’s been a nominal increase in the amount of the asking price that Sellers are getting (92.74% in 2010 vs. 92.41% in 2009).  I think that better pricing, in conjunction with lower interest rates have led to a bump in activity.

Next – what is the average price in Berks County?  Well, it’s about $150k year-to-date.  The average pending sale right now is $154k – consistent with the headlines showing modest increases in many markets.  This number I find extremely misleading – and honestly, I don’t even know how they’re calculating this – but it must include commercial property.  The Residential Activity result is an average sale of $163k.  Break this down further – the average 3 Bedroom home in Berks is just over $15ok – while the average 4 Bedroom is nearly $190k.  Pending Sales show mixed results, with a small drop in the average for 3 Bedrooms, while 4 Bedrooms are creeping closer to $190k.  To give you a frame of reference, YTD numbers for August for the last few years showed 4 Bedroom Average values to be $195k (09), $225k (08), $227 (07) and $217 (06).  So, we are about 18% down off the high’s of the peak – which occurred in 2006/2007.

Those who are still supporting another tax credit, in Berks County, we’ve only sold 142 more homes this year with the tax credit – in comparison to the same time last year.  That’s a pretty expensive price tag for 142 homes.  We’ve seen a 6% increase in sales this year.  The really cool coincidence… April 2009 there were 384 homes that went “Pending” that month, and in April 2010, 526 homes went “Pending.”  Hmmm… if my math is right that’s 142 homes!  However, we did see 179 more homes settle January – April of 2010 in comparison to the year before.

The inventory number is hard to nail down – but we’re looking at about 11 months of inventory – which still labels this as a “Buyer’s Market.”  With 4,800 homes for sale – and just under 2,500 sold this year  – and an additional 300+ pending, we’re not looking at a Seller’s Market any time soon – but I do believe there to be a boom on the way (keep reading, I will explain).

So, interest rates are at or near record lows.  We’ve basically seen property values bottom, and if not, they can’t go too much lower.  It would appear to be the “Perfect Storm” for the buyer.  However, there is a shortage of buyers.  Why?  Unemployment.  Turns out that banks aren’t too pumped to loan money to people without jobs… I guess they learned from all the “No-Doc” fun of the boom.  They actually want people to be employed and (get this) verify their income before giving the money out now.  Interesting concept.

So, where’s the boom?  Agree or not – there is pent up demand in the marketplace.  People move every 5-7 years on average – and they will continue to do so.  Once unemployment begins to subside, people will be nomadic.  They’re going to be upsizing – as they’ve weathered the storm of layoffs and have gained valuable experience and trust within their company and a promotion is their reward.  They’re going to downsize – they can finally get out from under the home they’ve been floating day to day because someone else has a job and can buy it – they’ve put off retirement for 5 years due to the DOW’s dump, and now they can get that one-story, low maintenance home.  They’re going to be relocating.  They’ve been offered a job out of state because their company/competitor/previous employer has reorganized after the plummet in the economy and they’ve consolidated resources to a more centralized set-up.

With all of that moving going on… what will that do to prices?  I am not sure, but I once heard this story about a guy named Supply and his nemesis Demand… sounds familiar.  It’s a long road – but there’s light at the end of the tunnel – and best I can tell, it’s not a train.

Posted in Assessment, Berks County, Chester County, Home Staging, Montgomery County, New Construction, Pennsylvania, Property Taxes, Real Estate, Tax Appeal | Tagged , , , , , , | Leave a comment

What's left for 2010?

Let’s just start by saying, July and August are two of the longest months for anyone in the Real Estate profession.  This combined with the expiration of the tax credit – which likely pushed some summer buyer’s timelines ahead – resulted in a lot of fishing, boating, camping, and family time.

With the summer now behind us, Labor Day marks the start of the Fall Selling Season in real estate.  You can ask agents anywhere, and they’ll likely let you know that they’ve seen an uptick in the market.  Let’s face it, would you rather be doing the whole pool/camp/beach/etc. thing in the summer – or, driving around looking at houses – with and without A/C?

Kids are back in school, and parents are starting to remember the depressing features of their home, as they see that Father Winter is around the corner.   Do you recall the FEET of snow last winter?  Unless you LOVE YOUR HOME, you likely didn’t love being snowed into it.  So, it’s time for that fall migration – just as you’re seeing the birds head south, you’re beginning to see the elusive home buyer come out of summer hibernation and begin hunting.

As a home seller – what can you expect from the upcoming months?  You can expect a watered down spring market, with regular showings.  If you’re not seeing activity on your home by the end of September, and you’re motivated to get it sold, look at a price reduction at the end of the month.  Too often sellers don’t want to reduce their price because no one has been through, and no one has told them it’s overpriced.  NEWSFLASH – if no ones been through – they have told you it’s overpriced.  You have a window of opportunity here – from Labor Day through Halloween – and if you’re lucky a week or two into November.  Once Halloween passes though, you’ll start to hear holiday songs in stores, malls, and on radios.  Scary, I know!  So, I have advised my sellers to prepare for this – let’s see what September brings, and make our move at the end of the month – if necessary.

As a homebuyer – you should clearly wait, right?  I mean I just said that all the houses should be dropping prices come September 30, so, let’s wait…. WRONG!  Let’s look at it this way… All of the homes that are worth the money that you want to spend will start to go under contract as early as yesterday…  It’s still a “Buyers Market” for many – and speaking of Holidays, consider Labor Day the “Black Friday” of the housing market.  Now, assuming you love your family and want the best for them, do you want the holiday with the thoughtful gifts that were purchased throughout the year, or the one’s that we left over the week before Christmas and in the clearance bin?  So, I would advise you to start looking and looking hard.  There are deals to be had – and with interest rates in the mid 4% range – how much lower do you really think they’ll go?

Another update for hombuyers – it is only a “Buyer’s Market” if your home is sold.  If you go into a contract with a Home Sale Contingency, you have about as much influence as a “one-legged man in a butt kicking contest” (one of my favorite Dukes of Hazzard lines).  Once you submit a home sale contingency with your agreement you become a seller looking to become a buyer – as opposed to a buyer looking to buy.

For listings in your area – check out www.BerksListings.com!

Whether you want to stay local, or move your Asterino, I can help!

Posted in Assessment, Berks County, Chester County, Home Staging, Montgomery County, New Construction, Pennsylvania, Property Taxes, Real Estate | Leave a comment