Aaaarghh! I Just Can't Decide!!! Let Me Ride On a Helicopter...

As inventory increased in the years following the "sub-prime meltdown" and we switched from a "seller's market" to a "buyer's market", many buyers experienced MORE DIFFICULTY in making a puchase decision.

(OK, hold it, wasn't it supposed to be easier, now that there are more choices available...??)

The fact is that having MANY options sometimes OVERWHELMS buyers and causes BUYER PARALYSIS!

Buyers are comparing different types of homes (private sales, short sales, lender-owned, foreclosure auctions) that have different advantages and disadvantages, features. special prices, incentives and gimmicks.

To keep the buying process organized and prevent confusion, I suggest that my buyer clients follow a process which starts with them pretending to be RIDING ON A HELICOPTER:

1. First, they need to pretend they are HIGH ABOVE THE CITY - so they only focus on choosing their PREFERRED AREAS, using criteria such as commute time, property taxes, school districts, etc.
2. Once they have chosen their preferred areas, they can "ask the pilot (i.e. me, their agent) to go down" and choose their PREFERRED NEIGHBORHOODS within those areas they selected. Choosing preferred neighborhoods may include riding around at different times of the day, researching demographic and crime statistics, engaging in conversations with neighbors, visiting the schools, asking people they know, etc. NOTE: There are a few questions - such as racial mix, quality of public schools. registered sex offenders, etc. - which South Carolina Realtors are not allowed to answer by law. But we can always give our clients the information sources for them to find the answers.
3. Once they choose the NEIGHBORHOODS, they can now focus on picking the RIGHT HOME! This may involve comparing VALUE including size (square footage, acreage), number of bedrooms/bathrooms, age, construction, style, upgrades, curb appeal, price, terms, condition, etc.

By following this simple 3-step process, buyers find it a lot easier to pick the right property among the hundreds of available homes - and therefore avoiding confusion and paralysis.

Remember that you can always replace the roof, repaint the walls or fix the air conditioning system. But you will not be able to change the location, the character of the neighborhood or the distance from the work place. By using this narrowing approach, buyers are able to compare one home to another, knowing that all the BASIC FACTS about all of them (area, neighborhood, schools, crime, etc.) are no longer in the mix...!

Happy House Hunting!

Alan Donald is a REALTOR with BuyHomesInCharleston.com and Keller Williams Realty in Charleston-Mt. Pleasant, SC.

Yesterday I heard on the radio that the Obama administration is thinking about increasing their support to lenders so that they consider more short sales instead of foreclosures.

However, the program said that what the government has in mind is to provide an "incentive" payment of $1,000 to the primary lienholder, $1,000 to the second lienholder and $1,500 to the homeowner to encourage short sales.

Well, let me tell you: This is NOT going to help much! We are talking about tens (or hundreds) of thousands of shortfall in most cases. In a $300,000 home that was originally sold at $400,000 and financed with an 80/20 mortgage loan combo ("normal" practice to avoid PMI during the 2003-2006 boom), where we are talking a shortfall of approximately $110,000. Will $3,500 in incentives spread across the three stakeholders help convince them to take the hit? I seriously doubt it! Not only because the size of the incentive is but a drop in a bucket, but also because lenders (and investors who are holding the loans) will not like the idea that the defaulting homeowner is getting some of THEIR money. 

In my opinion, the government should try to assist banks in a different way:

1. Lend money to banks at a very preferential rate to cover the deficit created by a short sale. This way lenders can turn around and lend this money out to the public, earn a larger spread on these loans and make up the lost profit in the long run.

2. Encourage the creation of an "Amnesty Program" for homeowners who saw their credit seriously affected by foreclosures, short sales, deed-en-lieu or loan modifications during this crisis. Lenders, credit agencies and the government should look into regulating the EFFECT that Short Sales and Foreclosures have on the homeowner's CREDIT SCORES. 

Currently it is PERCEIVED that short sales affect credit scores (but no so much and for so long as a foreclosure or a bankruptcy). The fact is that NO ONE KNOWS exactly what kind of impact these situations have on our scores. This must change: The IMPACT of each choice should be clear and transparent to the homeowner!. A short sale should have MUCH LESS of an impact on credit scores than a foreclosure, so that sellers are more motivated to pursue them. As it stands today, the ONLY incentive for homeowners to pursue a Short Sale instead of letting their home go to foreclosure (apart from "trying to do the right thing) is to salvage their credit score, but no one is really sure how much better off they will be! 

In fact, some homeowners who stop paying their mortgage can stay in the home many months before the foreclosure happens, saving considerable money in mortgage payments/rent, which makes foreclosure a more attractive option than a short sale from an economic standpoint. 

Lenders need to lend money (that's their business). If they don't change the way the credit agencies report short sales and foreclosures, they will be left with a much smaller pool of candidates for future business! 

Alan Donald, MBA, REALTOR, e-PRO
BuyHomesInCharleston.com
Keller Williams Realty
Charleston-Mt. Pleasant, SC

(Note: I use BluePrint to manage my database and track my business productivity. You can too - get a free one month trial by writing "blog" as promo code)

In this "whacky" market that distressed sales are creating, it is sometimes very challenging to sell a home in a timely fashion. Short sales, REOs, foreclosures and "normal" listings are all competing for a share of the shrinking "buyer pie".

If a homeowner has a substantial amount of equity and wants to sell a home quickly, a PUBLIC AUCTION is a viable way of marketing a property, create URGENCY and obtain the MAXIMUM price that the market will bear. Auctioned properties are normally sold "no-contingency, as-is, where-is", which means that sellers usually don't need to deal with contracts that fall through over and over because of buyer financing, nor they have to perform any repairs.

The only catch is that the success of an auction depends on competitive bidding from different interested bidders. If the auction fails to attract a significant number of qualified, interested buyers it is probably going to fail. 

So - how do you attract a "significant number" of qualified and interested bidders? The answer, in this "soft" real estate market is simple. The ONLY auctions that WORK are:

• ABSOLUTE AUCTIONS - where the property is guaranteed to be sold the day of the auction to the HIGHEST BIDDER - REGARDLESS OF THE AMOUNT OF THE BID. This potential "bargain opportunity" normally attracts many bargain-hunters banking on paying cents on the dollar, creates a competitive bidding environment and normally pushes the price up (sometimes even beyond "perceived market" price). The risk to the seller is controlled by monitoring the amount of registered, qualified buyers BEFORE the auction. If this number is not conducive to a competitive bidding situation, the auction can be PULLED OFF at the last minute to avoid disaster. Absolute auctions cannot be performed if the seller has a mortgage on the property, unless the LIEN HOLDER pre-approves it.
• DISCLOSED RESERVE (i.e. "minimum acceptable price") AUCTIONS - only work well when the disclosed reserve is a VERY ATTRACTIVE number (i.e. "half-price"). Again, this attracts bargain-hunters and stimulates competitive bidding which normally pushes the price up to a "market" price. For these auctions to work, the seller must either own the property outright, or owe an amount lower than the disclosed reserve. If the reserve amount is not reached at bidding, the property is not sold. Once the reserve is reached, it becomes ABSOLUTE - it will be sold to the highest bidder.

Most auctions normally work with pre-qualified, pre-registered bidders. The winning bidder normally needs to pay a 10% deposit the day of the auction, and the balance in 30 days.

The good thing about auctions is that it only takes 4-6 weeks to find out the outcome. If the property is not sold at auction, the seller always has the option of offering it for sale as a "traditional" MLS listing, without becoming "stale" by virtue of waiting for months for an offer...

LOWCOUNTRY HOME AUCTIONS, LLC is a company that provides auction marketing services to home sellers, agents and institutions needing to sell homes in South Carolina. If you have any questions or wish to receive a proposal to sell your SC property, please send us an email with your contact information.

I don't see any RSS feeds or subscription management settings for the AR featured blogs... would like to receive notifications when new blog entries are posted...

Any suggestions?

Alan Donald
BuyHomesInCharleston.com
Keller Williams Realty
Charleston-Mt. Pleasant, SC

Snowfall in the South

Do you think we had fun with our (rare) weekend snowfall? You bet! And hundreds of snowmen decorated our yards.

CLICK HERE to see lots of pictures, and to VOTE for your favorite snowman!

The Charleston, SC Area real estate market has experienced an important change in sales momentum. Fueled by low mortgage interest rates, improved housing affordability (lower home prices), the $8,000 Tax Credit for first-time home buyers and the prospect of increased employment with the future Boeing plant being built near the Charleston International Airport, year-over-year monthly sales (i.e. October 2009/October 2008) have shown increases for the past four months, for the first time since October of 2006!

As this chart shows, this "turn" in the market trend signals positive things to come for our real estate market. Higher monthly sales = accelerated inventory reduction = shorter time to market supply/demand stabilization.

What does this mean for any potential buyer or homeowner? While in the short term (Fall/Winter 09) the market may still look it is declining, this change of momentum means that next year there will be increased demand for homes in the area. As a buyer this means increased competition, which will prevent them from negotiating "incredible deals". As a seller, this is good news in the long term. The market will return to a "balanced" market once we hit 5-7 months' inventory, which will place sellers in a more balanced negotiating position (right now buyers have a notable advantage).

Of course, market momentum may shift again if any of the underlying variables shift. For example, the market may slow down again if interest rates shift upwards dramatically. However, at this point this seems unlikely, given that inflation is not yet on the Fed's radar screen. But you never know...

My advice for buyers: Don't wait! Take advantage of this window of opportunity now!

My advice for sellers: Can you hang in there for another 9-16 months? You may be able to get a better price for your home if you can wait...

One of my pet peeves while viewing properties on the MLS is to find listings with NO picture or pictures that frankly are SO POOR in quality, that even a teenager with a cell phone would take a better shot.

So I am going to establish the "WORST PICTURE OF THE MONTH AWARD" - I invite your contributions! (please make sure no names or addresses are included in the file name or description).

Here is my pick for this month's award candidates:

It's only 116 x 76 pixels in size *you need a magnifyng glass to see it*, AND it's blurry!

I'm sure you will find other contenders in your MLS...

The A-Z of Buying a Home (Part 5)

By Alan Donald, BuyHomesInCharleston.com

This is the last part of our brief guide for first-time home buyers in South Carolina. Once you have closed on the purchase of your home, you will still need to take care of some very important details (in addition to your move):

1.Change all the utilities in your name. Usually sellers stop their accounts as of the closing date, sometimes they give you 1-2 days grace. The last thing you want is to get to your newly purchased home and find the power is off, and the temperature outside is 98F...

2.Re-key all exterior doors. Although the sellers may have seemed very nice, you never know who else has keys for the home. Don't forget to re-program the garage door openers!

3.If there was a transferable termite bond, make sure you transfer it in your name so you can actually file a claim, if necessary.

4.Once a property changes hands, two things change with respect to property taxes: The first, is that the home "assessed value" will change to reflect the purchase price. And the second, it that the home will be taxed at a 6% assessment ratio. This could bring a nasty surprise in the shape of a letter from your bank, announcing you that your monthly payment needs to be substantially higher to be able to cover the anticipated costs of taxes and insurance in their escrow account. If you intend to liv e in this home as your primary residence, South Carolina residents are entitled to a PRIMARY RESIDENCE EXEMPTION that decreases the assessment ratio from 6% to 4% (which will bring the tax more in line to what your lender initially estimated in their Good Faith Estimate, since the lender probably assumed that this was going to be your primary residence and estimated the property tax at the 4% assessment ratio)...to claim the primary residence exemption, you will most probably need to change your home address on your driver's license, and bring the new license, copy of your closing documents (the HUD-1 statement and/or deed, if you already received it back from the attorney) and a utility bill in your name to the new address to request the change at the County Tax Assessor's Office.

5.Remember to change your address at the post office (better yet, pay for their 6-month forwarding service) and notify all your creditors (credit cards, stores, etc.), friends and family. The last thing you want is to damage your credit because you did not get the bills.

6.Get involved in the HOA as a property owner. This is a right you did not have when you were renting. Now you can actively participate in the democratic process of your homeowners' association.

7.Send a copy of all closing documents and expense receipts associated with the purchase to your accountant. Some closing costs and expenses may be tax-deductible. 

8.If you are a first time home buyer and purchased your home in late 2008 or in 2009, you may be eligible for the Tax Credit offered by the Federal Government. You don't have to wait to file taxes to claim this credit. All you need to do is to ask your accountant to submit the required form and, if you are eligible, you will get a check in the mail from Uncle Sam! 

WE HOPE THAT YOU HAVE ENJOYED THIS SERIES. If you are thinking about buying a home ANYWHERE IN NORTH AMERICA, we can gladly help you find a local, experienced REALTOR who can assist you in your quest. If you are planning to move to the Charleston area, or live here already, WE WOULD WELCOME THE OPPORTUNITY TO EARN YOUR BUSINESS. Contact us today to start the process - we will help you every step of the way - from A to Z!

Alan Donald, Team Leader
BuyHomesInCharleston.com

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By Alan Donald
www.BuyHomesInCharleston.com

You have finished performing your Buyer's Due Diligence and everything's lined up for a closing on a specific date and time (usually at the attorney's office). What happens at this "closing"?

A "real estate closing" is the name given to a completion of the real estate transaction, including legal (title) and financial (loans & mortgages) aspects. It is an event that normally takes about an hour, in which normally all the parties are present (the sellers and their listing agent, the buyers and their buyer's agent, the closing attorney, and in some instances the loan originator). The parties each sit facing each other, and the attorney will explain the process and start sending papers their way to have them signed.

Be warned! By the time you finish, your signature hand will be tired! Buyers may sign 50-100 times (depending on the complexity of the financing and the lender). By contract, the Sellers only need to sign very few documents - so the Buyers have the most work...

The attorney will first start by reviewing the HUD-1 Statement to make sure that all the financials are correct. These include: Purchase price, earnest money, down payment, seller concessions, lender origination costs, agents' commissions, homeowners/wind & hail/flood/title insurance premiums, attorney's fees, taxes (i.e. deed stamps), prepaid items to create the escrow account, and any service providers' bills related to the real estate transaction (for example, the CL-100 - termite letter - is normally paid out of closing).

When everyone is in agreement, the attorney will normally ask everyone to sign several copies, and will also ask the Buyers for the balance owing for their downpayment (note that the Buyers' agent or closing attorney should have told the Buyers in advance how much they needed to bring to closing, since these funds need to be either wired in advance into the attorney's escrow account, of paid by Cashier's Check at the closing).

Next, Buyers and Sellers will normally sign all kinds of disclaimers and certifications (to make sure their identities, Social Security Numbers and information is right). The Buyers will also be asked to provide  picture IDs (normally driver's licenses or passports), and the attorney's paralegal will make copies of those documents to comply with the Patriot Act.  The Buyers will also sign a copy of the CL100 Termite Letter.

Following this, the attorney will usually ask the Sellers to sign the transfer of the deed and their mortgage discharge documents. 

Now the fun part starts for the Buyers: Signing the loan(s) notes and their corresponding mortgage documents. The amount of paperwork varies depending on the lender, but this can take some time and effort, since the lenders will want the Buyers to sign and initial every document and affidavit in their closing package. Some lenders are very bureaucratic, others are not.

After all the paperwork has been signed, the attorney normally checks to verify if the funds from the new mortgage loans have arrived in his escrow account. If they have (the transaction is "funded"), the attorney will proceeed to disburse checks to all the parties, and the Sellers will hand over the keys of the home (and the garage door openers, pool keys, etc.) to the Buyers.

If the funds did not arrive on time, the parties can agree to do a "Dry Closing", in which case it is a good idea that the attorney holds all the paperwork and the house keys until the funds arrive (it may take just a few hours, or up to a couple of days!)

Now it's done! The home is officially the Buyers' (although the deed may take a few weeks to be registered in their name).

Next: Post-Closing - What Needs to Be Done?

Copyright 2009 Alan Donald - all rights reserved