Hi Folks! I just put these packets of FAQs in real estate together this weekend. If you're a first time buyer, or haven't been actively involved in real estate for awhile, I think this information is great and TREMENDOUSLY informative.
For my clients who are actively in the market now, this is a great resource and a MUST READ! Click on the links below:
First Time Buyer FAQ's
Highlights
"Five Common First Time Home Buyer Mistakes"
"Ten Questions to Ask Your Home Inspector"
"Five Property Tax Questions You Need to Ask"
Mortgage and Escrow FAQ's
Highlights
"Ten Questions to Ask Your Lender"
"Five Things to Understand About Title Insurance"
"Common Closing Costs for Buyer"
10 FAQ's in Real Estate
Highlights
"Tips on Buying in a Tight Market"
"Questions to Ask when Choosing a Realtor"
"Ten Steps to Prepare for Homeownership"
Stay tuned next week. I am going to talk about foreclosures and will explain the differences to you, the buyer, between buying a home from a bank vs. a private party(normal seller).
-Jerry
Jerry & Rachel Hsieh Real Estate Team - Keller Williams Realty in Los Angeles
IF YOU WANT THE LATEST INFORMATION ON THE LOCAL LOS ANGELES REAL ESTATE MARKET, FOLLOW THIS BLOG! FEEL FREE TO SEND OUR TEAM A REQUEST FOR ANY PROPERTY ON THE MARKET YOU'D LIKE TO VIEW BY CALLING US AT 310.623.1359. Our Cell: 424.242.8856 Email: jerryandrachel@newhomesLA.com DRE #: 01701809
Tuesday, January 20, 2009
Monday, January 12, 2009
"Mortgage Rate Relief Might not Last Long" from REUTERS, published Jan 8, 2009
" 'The downward trend we have seen in mortgage rates will not last beyond the first half of this year,' said Celia Chen, senior director of housing economics at Moody's Economy.com in West Chester, Pennsylvania..."
Hello again folks! Passing along an article regarding mortgage rates for 2009. This was just released last week on Reuters.com and it echoes the sentiments of most of the mortgage brokers I've been in touch with in the past couple of months. The general consensus I'm hearing is that there is a possiblity (keyword: POSSIBILITY) mortgage rates could get as low as 4.5%, but once that bottom hits, rates will start creeping up sooner than most buyers who are currently stradling the fence will realize.
-Jerry
Mortgage Rate Relief Might Not Last Long
Thu Jan 8, 2009 4:50pm EST
By Julie Haviv - Analysis
Direct Link
NEW YORK (Reuters) - Massive efforts by the Federal Reserve to bring down mortgage rates have so far been a success, but homeowners had better act fast because analysts say record low rates could be gone as soon as this summer.
Thirty-year mortgage rates dropped to a low of 5.01 percent this week -- their lowest since 1971 -- after the Federal Reserve unveiled a plan in late November to buy as much as $500 billion of securities backed by Fannie Mae (FNM.P), Freddie Mac (FRE.P) and Ginnie Mae. They could touch as low as 4.50 percent, but the cheap loans will not last long, mortgage experts warned.
"The downward trend we have seen in mortgage rates will not last beyond the first half of this year," said Celia Chen, senior director of housing economics at Moody's Economy.com in West Chester, Pennsylvania.
"By then, the Federal Reserve's program will have run its course and other issues will move to the forefront that could push mortgage rates higher," she said.
The Fed has also embarked on a program to buy up to $100 billion in unsecured debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks in a move also aimed at lowering interest rates on mortgages.The prospect of affordable home financing has provided a glimmer of hope for the U.S. economy with the housing market in the worst downturn since the Great Depression. But if mortgage rates rise, they will further paralyze a housing market already beset by plunging home prices, an unwieldy supply of homes for sale, tighter lending standards by risk-shy banks and surging foreclosures.
Even if the Fed extends its mortgage bond buying program past the summer, its other efforts to flood financial markets with cash will work against low rates. They include the inflationary impact of both the Federal Reserve's near-zero interest rate policy and the massive looming fiscal stimulus from the government which must be paid for by more government debt, pushing up interest rates. A 30-year fixed-rate mortgage at 4.50 percent is a level apparently targeted by policy makers.
Moody's Economy.com forecasts interest rates hitting 4.50 percent by the middle of 2009 after dropping to a low of 4.37 percent in the second quarter. But, by the third quarter and fourth quarter interest rates will be climbing to 4.57 percent and 5.18 percent, respectively. By the first quarter of 2010, rates should be at 5.87 percent, Chen said.
"Low mortgage rates are important, but there is no evidence that lenders are lending and that is crucial," she said.
Treasury yields, which move inversely to price, are linked to mortgage rates. The Treasury is seeking to fund an estimated deficit of $1 trillion or more over the coming year.
TOO LOFTY A GOAL
Cameron Findlay, chief economist at online loan broker LendingTree.com in Charlotte, North Carolina, said mortgage rates at 4.50 percent remained possible, but not probable. "For now the Fed has implemented change to entice rates to decline and are in a holding pattern to see the impact," he said.
"Up until a few weeks ago, people thought 4.50 percent was a realistic target for rates within 60-90 days, but that idea has dissolved," he said.
What has changed since November is the Fed's decision to ax interest rates to almost zero to help revive the economy, leaving the central bank with fewer options to cut rates. Findlay said mortgage rates should stay in a range between 5.00 percent and 5.50 percent for the next eight weeks or so barring any additional Federal Reserve action. Expectations of a 30-year fixed-rate mortgage at 4.50 percent are too ambitious, said Greg McBride, senior financial analyst at Bankrate, Inc, in North Palm Beach, Florida.
"Inflation worries may begin to spook investors and that could send Treasury yields higher, which would cause a corresponding move higher in mortgage rates," he said.
Hello again folks! Passing along an article regarding mortgage rates for 2009. This was just released last week on Reuters.com and it echoes the sentiments of most of the mortgage brokers I've been in touch with in the past couple of months. The general consensus I'm hearing is that there is a possiblity (keyword: POSSIBILITY) mortgage rates could get as low as 4.5%, but once that bottom hits, rates will start creeping up sooner than most buyers who are currently stradling the fence will realize.
-Jerry
Mortgage Rate Relief Might Not Last Long
Thu Jan 8, 2009 4:50pm EST
By Julie Haviv - Analysis
Direct Link
NEW YORK (Reuters) - Massive efforts by the Federal Reserve to bring down mortgage rates have so far been a success, but homeowners had better act fast because analysts say record low rates could be gone as soon as this summer.
Thirty-year mortgage rates dropped to a low of 5.01 percent this week -- their lowest since 1971 -- after the Federal Reserve unveiled a plan in late November to buy as much as $500 billion of securities backed by Fannie Mae (FNM.P), Freddie Mac (FRE.P) and Ginnie Mae. They could touch as low as 4.50 percent, but the cheap loans will not last long, mortgage experts warned.
"The downward trend we have seen in mortgage rates will not last beyond the first half of this year," said Celia Chen, senior director of housing economics at Moody's Economy.com in West Chester, Pennsylvania.
"By then, the Federal Reserve's program will have run its course and other issues will move to the forefront that could push mortgage rates higher," she said.
The Fed has also embarked on a program to buy up to $100 billion in unsecured debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks in a move also aimed at lowering interest rates on mortgages.The prospect of affordable home financing has provided a glimmer of hope for the U.S. economy with the housing market in the worst downturn since the Great Depression. But if mortgage rates rise, they will further paralyze a housing market already beset by plunging home prices, an unwieldy supply of homes for sale, tighter lending standards by risk-shy banks and surging foreclosures.
Even if the Fed extends its mortgage bond buying program past the summer, its other efforts to flood financial markets with cash will work against low rates. They include the inflationary impact of both the Federal Reserve's near-zero interest rate policy and the massive looming fiscal stimulus from the government which must be paid for by more government debt, pushing up interest rates. A 30-year fixed-rate mortgage at 4.50 percent is a level apparently targeted by policy makers.
Moody's Economy.com forecasts interest rates hitting 4.50 percent by the middle of 2009 after dropping to a low of 4.37 percent in the second quarter. But, by the third quarter and fourth quarter interest rates will be climbing to 4.57 percent and 5.18 percent, respectively. By the first quarter of 2010, rates should be at 5.87 percent, Chen said.
"Low mortgage rates are important, but there is no evidence that lenders are lending and that is crucial," she said.
Treasury yields, which move inversely to price, are linked to mortgage rates. The Treasury is seeking to fund an estimated deficit of $1 trillion or more over the coming year.
TOO LOFTY A GOAL
Cameron Findlay, chief economist at online loan broker LendingTree.com in Charlotte, North Carolina, said mortgage rates at 4.50 percent remained possible, but not probable. "For now the Fed has implemented change to entice rates to decline and are in a holding pattern to see the impact," he said.
"Up until a few weeks ago, people thought 4.50 percent was a realistic target for rates within 60-90 days, but that idea has dissolved," he said.
What has changed since November is the Fed's decision to ax interest rates to almost zero to help revive the economy, leaving the central bank with fewer options to cut rates. Findlay said mortgage rates should stay in a range between 5.00 percent and 5.50 percent for the next eight weeks or so barring any additional Federal Reserve action. Expectations of a 30-year fixed-rate mortgage at 4.50 percent are too ambitious, said Greg McBride, senior financial analyst at Bankrate, Inc, in North Palm Beach, Florida.
"Inflation worries may begin to spook investors and that could send Treasury yields higher, which would cause a corresponding move higher in mortgage rates," he said.
"Real Estate Resurrection Begins in California" from Forbes.com on Jan 8, 2009. "U.S. Treasury May Look to Take Rates down to 4.5%"
"In some of the hardest-hit areas, like California, Florida and Nevada, sales in some areas have been rising in recent months..."
I admit, this is an optimistic article. There are just as many articles that are saying 2009 will be another very depressing year. I will update my blog weekly, and will try to be as even handed as possible about including real estate articles from both perspectives, and most importantly, passing along relevant statistics for the Los Angeles Market.
FYI, this article is in line with what I'm seeing so far this year. My current clients as well as the buyers I meet out in the field, all seem to be of the mindset that 2008 was their time to wait, but now that the new year (2009) is here, they want to be more aggressive about finding something.
-Jerry
Real Estate Resurrection Begins
Hugh Bromma, Entrust Group, 01.08.09, 03:45 PM EST
Direct Link
While the data on prices and sales are still awful on a nationwide basis, there are rays of hope emerging for real estate.
Sales of new and existing homes continue to decline in the U.S., as assets of all stripes are re-priced lower and consumers become more risk averse. But the news in real estate is not all bad, and in some of the hardest-hit areas, like California, Florida and Nevada, sales in some areas have been rising in recent months.
While the national real estate figures show the country continues to be mired in a downturn that started more than two years ago, there are increasingly pockets of hope out there. It's true that much of the recent uptick in real estate activity reflects distressed sales, such as foreclosures. But the fact is that drastically lower home prices and more attractive mortgage rates--rates are down almost a full percentage point on a 30-year loan--are creating more buying interest, especially in the areas that have been hurt the most.
In fact, October existing-home sales surged more than 37% in the West, primarily because of the rise in sales in California and Nevada. And in Florida, existing-home sales jumped 15%, the second straight month of rising sales in the Sunshine State. Meanwhile, mortgage applications more than doubled during the week of Thanksgiving because of the rapid decline in rates.
Adding to the budding sense of optimism are reports that the U.S. Treasury will look to take mortgage rates all the way down to 4.5%, which would provide a huge boost to would-be home buyers across the country. Of course, real estate, even more than politics, is all about understanding the local area, which is precisely where astute investors are finding extraordinary opportunities.
Experienced real estate investors who have been able to keep some powder dry and understand their local markets are now able to buy properties for 50 cents on the dollar, or even less than just a year ago. In many cases, these are the kind of prices that represent once-in-a-lifetime opportunities, where the downside is now very limited and the upside is incredibly compelling.
Comment On This Story
One of the keys to finding a great real estate investment is understanding the importance of cash flow. We recently had a client utilize his self-directed IRA to purchase a brand new property just outside of Los Angeles. The property, a three-bedroom, two-bath single family home, was purchased for about $150,000, half what the exact same home would have cost a year earlier.
The purchaser had about $60,000 in the IRA and put down about 30% of the purchase price, making his monthly mortgage payment approximately $1,100 per month. In this area, similar properties rent for at least $1,400, so the property should have no problem showing positive cash flow right from the start. In addition, if there is a pick-up in the real estate market, the purchaser should be able to sell it outright for a handsome profit.
This is the kind of activity we are seeing more of in what were the hardest-hit areas. The key, of course, is having available cash--if you're buying real estate in a self-directed retirement account, you will need to put down 30% of the purchase price--and understanding the unique dynamics of the market you are buying in.
Dugg on Forbes.com
As a large administrator of self-directed IRAs, we've witnessed thousands of investors use their self-directed retirement plans to buy properties and realize excellent returns by selling them at a later date or renting them and allowing them to cash flow, as discussed earlier.
If you do decide to explore some of the more downtrodden areas, do your due diligence and understand the market in which you plan to invest. How is the local job market there? How has the area done in previous economic downturns? There's no substitute for knowing your market and doing your homework.
I admit, this is an optimistic article. There are just as many articles that are saying 2009 will be another very depressing year. I will update my blog weekly, and will try to be as even handed as possible about including real estate articles from both perspectives, and most importantly, passing along relevant statistics for the Los Angeles Market.
FYI, this article is in line with what I'm seeing so far this year. My current clients as well as the buyers I meet out in the field, all seem to be of the mindset that 2008 was their time to wait, but now that the new year (2009) is here, they want to be more aggressive about finding something.
-Jerry
Real Estate Resurrection Begins
Hugh Bromma, Entrust Group, 01.08.09, 03:45 PM EST
Direct Link
While the data on prices and sales are still awful on a nationwide basis, there are rays of hope emerging for real estate.
Sales of new and existing homes continue to decline in the U.S., as assets of all stripes are re-priced lower and consumers become more risk averse. But the news in real estate is not all bad, and in some of the hardest-hit areas, like California, Florida and Nevada, sales in some areas have been rising in recent months.
While the national real estate figures show the country continues to be mired in a downturn that started more than two years ago, there are increasingly pockets of hope out there. It's true that much of the recent uptick in real estate activity reflects distressed sales, such as foreclosures. But the fact is that drastically lower home prices and more attractive mortgage rates--rates are down almost a full percentage point on a 30-year loan--are creating more buying interest, especially in the areas that have been hurt the most.
In fact, October existing-home sales surged more than 37% in the West, primarily because of the rise in sales in California and Nevada. And in Florida, existing-home sales jumped 15%, the second straight month of rising sales in the Sunshine State. Meanwhile, mortgage applications more than doubled during the week of Thanksgiving because of the rapid decline in rates.
Adding to the budding sense of optimism are reports that the U.S. Treasury will look to take mortgage rates all the way down to 4.5%, which would provide a huge boost to would-be home buyers across the country. Of course, real estate, even more than politics, is all about understanding the local area, which is precisely where astute investors are finding extraordinary opportunities.
Experienced real estate investors who have been able to keep some powder dry and understand their local markets are now able to buy properties for 50 cents on the dollar, or even less than just a year ago. In many cases, these are the kind of prices that represent once-in-a-lifetime opportunities, where the downside is now very limited and the upside is incredibly compelling.
Comment On This Story
One of the keys to finding a great real estate investment is understanding the importance of cash flow. We recently had a client utilize his self-directed IRA to purchase a brand new property just outside of Los Angeles. The property, a three-bedroom, two-bath single family home, was purchased for about $150,000, half what the exact same home would have cost a year earlier.
The purchaser had about $60,000 in the IRA and put down about 30% of the purchase price, making his monthly mortgage payment approximately $1,100 per month. In this area, similar properties rent for at least $1,400, so the property should have no problem showing positive cash flow right from the start. In addition, if there is a pick-up in the real estate market, the purchaser should be able to sell it outright for a handsome profit.
This is the kind of activity we are seeing more of in what were the hardest-hit areas. The key, of course, is having available cash--if you're buying real estate in a self-directed retirement account, you will need to put down 30% of the purchase price--and understanding the unique dynamics of the market you are buying in.
Dugg on Forbes.com
As a large administrator of self-directed IRAs, we've witnessed thousands of investors use their self-directed retirement plans to buy properties and realize excellent returns by selling them at a later date or renting them and allowing them to cash flow, as discussed earlier.
If you do decide to explore some of the more downtrodden areas, do your due diligence and understand the market in which you plan to invest. How is the local job market there? How has the area done in previous economic downturns? There's no substitute for knowing your market and doing your homework.
Thursday, January 8, 2009
Q & A with Jerry: When should I get pre-qualified? How do I get realtors to stop soliciting me?
Happy New Year folks! My new years resolutions regarding my real estate business was to find a more efficient way to keep my clients and friends informed about real estate. So with that, i present to you....ta da...My new blog. :)
Last week I was talking to two friends of mine who are dating and looking to buy their first home in the Brentwood and Pacific Palisades soon. They asked a lot of questions, but there were two that stood out. I followed up with them through email and here are the responses:
Question: So we've started looking at open houses, but we don't really have a time frame. We are mainly looking for the right deal, so we don't feel like we need to be in a rush to meet with a mortgage broker as we both have stable, well-paying incomes. At what point in the process do we need to get pre-qualified? Also, how hard it the pre-qual process?
The process in and of itself is quite easy, I have no doubt you two will qualify. Pre-qualification is the easier first phase. Pre-approval requires a bit more, but is also fairly painless. In real estate, any good agent will tell you that any offer you write should always be accompanied by a pre-approval letter…no exception. Usually, the pre-qual process when you first meet with a mortgage broker goes like this: (1) You fill out a one page form stating how much money you make per month and year, what your expenses are, and what your savings are, (2) They will run your credit, (3) they will probably ask for your last 2 check stubs. From this, they should be able to pre-qualify you. To move forward to full pre-approval, they may ask to see more verification of income and probably will want to see your last years tax returns. There’s really not much more than that. Your mortgage broker can advise you on what program will suit your needs best, everyone has different needs.
As far as when to get pre-approved, I would advise you do it sooner rather than later. It’s a fairly easy process that really requires no further obligation, and I’ve always felt it’s better to know exactly what to expect before getting your wheels turning. From a professional standpoint as a realtor, I have found that the best properties come on the market and get swept up within the first week (yes, even in this market, a deal is still a deal, and buyers will recognize it.), and I’ve had clients that missed out on homes because they had a delay getting their pre-approval together. Good agents will generally have their clients pre-approved as early as possible so there won’t be any delay when the right home comes along.
Finally, find someone you can trust. Referrals from friends and family are a good way to go. I have a great lender I work with, and am happy to pass his information along.
Question: So, I think someone told me that realtors make 6% on a deal, split between the agents, but if the listing agent represents both sides, he gets the entire 6%. So is there any discount for working without an agent?
As we discussed yesterday, the seller will pay a commission on the sale of a home that is agreed upon at the time of listing. When the home sells, the buyer’s agent and listing agent split that commission. Usually it’s 6%, but for homes over a million it is often 5%. The buyer never pays any commission. If you are a buyer, you should probably find your own agent. Someone you can trust and will work for you. The idea of working without an agent is one that is often misunderstood. When you go through the listing agent, the listing agent then becomes your agent and gets the entire commission. Furthermore, it is important to understand that it is hard, if not impossible, to simultaneously represent two opposing interests, in this case, the seller and the buyer.
In the end, most listing agents loyalty, as you could understand, will lie with the seller first. They will do what you ask, but will not proactively fight for you. That is not what the seller would want. That said, it is possible for a listing agent representing both sides to discount his commission, however, this is all a little grey. What I mean is, in the end, who knows if this money benefitted the buyer or the seller. Furthermore, a good buyers agent will fight for a better deal for you and fight to get you credits in escrow. Having a buyer's agent is FREE. Think about that. It's free. Why would you not want to choose someone you know specifically will give you the best representation if it does not cost you anything, right?
Question: Since we've started looking at homes, I swear I get about 4 calls a day from realtors. At this point, if I don't recognize the number, i just let it go to voice mail. I think I had 3 calls already today! Is there a different way we should be going about this?
The ONE piece of advice I would give you as a first timer ABOVE all else is this: It is much better to have one agent working for you diligently than to have a few or more agents working for you on a haphazard basis. Per our conversation yesterday, I think you are already starting to feel what it feels like to be bombarded by realtors trying to become your agent. It’s annoying. You might as well find someone who really willing to go all out for you and just stick with them. As mentioned before, all agents have access to the same information. In the end, what sets agents apart are (1) the legwork they put in behind the scenes (previewing properties, making calls, going to broker’s opens for you) and (2) Their negotiation expertise and how hard they are willing to fight for you for credits in escrow.
For me personally, once I know you want me to be your guy, I would definitely start doing a lot more research behind the scenes for your benefit. In laymans terms, that means I will start previewing properties for you all the time, looking for the “deal” properties/opportunities, and letting you know about them as quickly as possible. That’s it in a nutshell.
The other advice I would give is, stop signing in at open houses. That’s like an invitation for solicitation. When you decide that you have found your agent, call all those other agents, and tell them “Thank you, but could you please stop contacting me as I’m working with a Realtor.” Any good agent will respect that. No more explanation needed. Keep in mind, if you don't communicate to realtors to stop contacting you, don't blame them if they continue contacting you. It's their job to put buyers and sellers together, and contacting people like you is part of the job description!
There’s a lot more information about stuff like this at my website’s Frequently Asked Question section: http://www.newhomesla.com/frequently_asked_questions-c4986.html
-Jerry
Last week I was talking to two friends of mine who are dating and looking to buy their first home in the Brentwood and Pacific Palisades soon. They asked a lot of questions, but there were two that stood out. I followed up with them through email and here are the responses:
Question: So we've started looking at open houses, but we don't really have a time frame. We are mainly looking for the right deal, so we don't feel like we need to be in a rush to meet with a mortgage broker as we both have stable, well-paying incomes. At what point in the process do we need to get pre-qualified? Also, how hard it the pre-qual process?
The process in and of itself is quite easy, I have no doubt you two will qualify. Pre-qualification is the easier first phase. Pre-approval requires a bit more, but is also fairly painless. In real estate, any good agent will tell you that any offer you write should always be accompanied by a pre-approval letter…no exception. Usually, the pre-qual process when you first meet with a mortgage broker goes like this: (1) You fill out a one page form stating how much money you make per month and year, what your expenses are, and what your savings are, (2) They will run your credit, (3) they will probably ask for your last 2 check stubs. From this, they should be able to pre-qualify you. To move forward to full pre-approval, they may ask to see more verification of income and probably will want to see your last years tax returns. There’s really not much more than that. Your mortgage broker can advise you on what program will suit your needs best, everyone has different needs.
As far as when to get pre-approved, I would advise you do it sooner rather than later. It’s a fairly easy process that really requires no further obligation, and I’ve always felt it’s better to know exactly what to expect before getting your wheels turning. From a professional standpoint as a realtor, I have found that the best properties come on the market and get swept up within the first week (yes, even in this market, a deal is still a deal, and buyers will recognize it.), and I’ve had clients that missed out on homes because they had a delay getting their pre-approval together. Good agents will generally have their clients pre-approved as early as possible so there won’t be any delay when the right home comes along.
Finally, find someone you can trust. Referrals from friends and family are a good way to go. I have a great lender I work with, and am happy to pass his information along.
Question: So, I think someone told me that realtors make 6% on a deal, split between the agents, but if the listing agent represents both sides, he gets the entire 6%. So is there any discount for working without an agent?
As we discussed yesterday, the seller will pay a commission on the sale of a home that is agreed upon at the time of listing. When the home sells, the buyer’s agent and listing agent split that commission. Usually it’s 6%, but for homes over a million it is often 5%. The buyer never pays any commission. If you are a buyer, you should probably find your own agent. Someone you can trust and will work for you. The idea of working without an agent is one that is often misunderstood. When you go through the listing agent, the listing agent then becomes your agent and gets the entire commission. Furthermore, it is important to understand that it is hard, if not impossible, to simultaneously represent two opposing interests, in this case, the seller and the buyer.
In the end, most listing agents loyalty, as you could understand, will lie with the seller first. They will do what you ask, but will not proactively fight for you. That is not what the seller would want. That said, it is possible for a listing agent representing both sides to discount his commission, however, this is all a little grey. What I mean is, in the end, who knows if this money benefitted the buyer or the seller. Furthermore, a good buyers agent will fight for a better deal for you and fight to get you credits in escrow. Having a buyer's agent is FREE. Think about that. It's free. Why would you not want to choose someone you know specifically will give you the best representation if it does not cost you anything, right?
Question: Since we've started looking at homes, I swear I get about 4 calls a day from realtors. At this point, if I don't recognize the number, i just let it go to voice mail. I think I had 3 calls already today! Is there a different way we should be going about this?
The ONE piece of advice I would give you as a first timer ABOVE all else is this: It is much better to have one agent working for you diligently than to have a few or more agents working for you on a haphazard basis. Per our conversation yesterday, I think you are already starting to feel what it feels like to be bombarded by realtors trying to become your agent. It’s annoying. You might as well find someone who really willing to go all out for you and just stick with them. As mentioned before, all agents have access to the same information. In the end, what sets agents apart are (1) the legwork they put in behind the scenes (previewing properties, making calls, going to broker’s opens for you) and (2) Their negotiation expertise and how hard they are willing to fight for you for credits in escrow.
For me personally, once I know you want me to be your guy, I would definitely start doing a lot more research behind the scenes for your benefit. In laymans terms, that means I will start previewing properties for you all the time, looking for the “deal” properties/opportunities, and letting you know about them as quickly as possible. That’s it in a nutshell.
The other advice I would give is, stop signing in at open houses. That’s like an invitation for solicitation. When you decide that you have found your agent, call all those other agents, and tell them “Thank you, but could you please stop contacting me as I’m working with a Realtor.” Any good agent will respect that. No more explanation needed. Keep in mind, if you don't communicate to realtors to stop contacting you, don't blame them if they continue contacting you. It's their job to put buyers and sellers together, and contacting people like you is part of the job description!
There’s a lot more information about stuff like this at my website’s Frequently Asked Question section: http://www.newhomesla.com/frequently_asked_questions-c4986.html
-Jerry
Sunday, December 7, 2008
From New York Times: "It May Be Time to Think About Buying That House" - Dec 5th
Season's Greetings! Hope your Holiday Season is off to a great start. :) Here's a great article for FIRST TIME BUYERS that was published in the New York Times last Friday. Enjoy and Happy Holidays!
-Jerry
It May Be Time to Think About Buying a House
By RON LIEBER
Published: December 5, 2008
Direct Link
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.
Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.
Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.
That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.
Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.
If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.
But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.
As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas. This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.
Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms. When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450- square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”
The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord. Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.
You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.
John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors. While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.” For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.
Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”
One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.
Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.
Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.
Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.
“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
-Jerry
It May Be Time to Think About Buying a House
By RON LIEBER
Published: December 5, 2008
Direct Link
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.
Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.
Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.
That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.
Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.
If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.
But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.
As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas. This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.
Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms. When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450- square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”
The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord. Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.
You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.
John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors. While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.” For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.
Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”
One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.
Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.
Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.
Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.
“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
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