Just Real Estate Talk

Home Buyers: What Are You Waiting For?

David Fialk (Choice Realty Co.) — Sat, 05 Sep 2009 05:35:25 -0500

Sitting on the fence wondering if you should purchase a home?

Wondering if real estate values will drop futher?

Wondering if mortgage interest rates will drop further? Hoping to take advantage of the $8,000 First Time Buyer Tax Credit?

If the $8,000 First Time Buyer Credit is important , the time to act is quickly approaching. To qualify, a First Time Buyer must close on their purchase by November 30, 2009. Again, that is close title on the purchase, not be under contract to purchase. With the recent changes in mortgage processing, a time frame of two months to accomplish everything and close on a real estate purchase will be close.

Coincidently, August under contract sales were extremely robust. Coincidently, buyer activity, contract offers and sales have been very robust the last week of August and into this end of Summer Labor Day weekend. Apparently, many other First Time Buyers are realizing that the time to purchase is now!

As important, mortgage rates are very favorable, currently hovering around 5.25 %, based on the buyer's mortgage loan program. Opportunities to otain such favorable mortgage interest rate financing like this cannot last much longer. If real estate sales and mortgage applications increase, as they have been in the past 3 months, how much longer will it be before lenders increase the mortgage interest rate?

What about real estate values? Yes, they are much lower then they were in 2006. Too much attention is given to when they will hit bottom. The bottom will only be known when prices begin to increase. More attention needs to spent on affordability, and affordabilty is a combination of purchase price, interest rates and, yes, having the opportunity to receive the $8,000 First Time Buyer Credit.

If purchasing a home is in your plans, invest some time now and meet with a REALTOR in the area you would like to move to and meet with a Mortgage Representative to see what mortgage options are available to you and obtain a Mortgage Pre-Approval.

Interested in viewing real estate statistics in Iselin, New Jersey, Colonia, Edsion or any other town in Middlesex County? There's lots of information here.

Middlesex County, New Jersey Real Estate Values

David Fialk (Choice Realty Co.) — Mon, 22 Jun 2009 06:28:34 -0500

A Look at Real Estate in Middlesex County

Real estate values are local.

Home values differ from one neighborhood location to another. They differ from one Town to another, from one County to another and from State to State. Obtaining reliable local home sale real estate information is important, whether you are just curious about home values or are looking to buy or sell a home, whether the home is in Iselin, New Jersey, Colonia, Edsion, in Middlesex County or any other State.

Obtaining reliable local real estate home value information is important when looking to buy or sell a home. Real estate statistics are helpful, but they cannot provide market value estimates. When there is a need to obtain reliable information, contact a local REALTOR who can provide a detailed "Market Analysis"

I am providing real estate real estate sales information for one family homes and condos/townhouses in Middlesex County, New Jersey as provided by the Middlesex County Multiple Lisitng System.

View the May, 2009 Year to Date Sales Comparison Report for Middlesex County Real Estate.
For more detailed reports, visit www.RealEstateSalesData.DavidFialk.com.

Contract Offers: Buyers Need To Be Prepared_Part IV

David Fialk (Choice Realty Co.) — Sun, 24 May 2009 06:35:43 -0500

Conditions in the Contract Offer

A contract to purchase real estate includes a sale price, a mortgage amount to be obtained and a closing date whether the home being purchased is in Iselin, New Jersey, in Middlesex County or any other state.

However, there is more to a contract to purchase than these details, and that includes the content language in the contract document. The form of the real estate contract prepared by a REALTOR® or real estate licensee can be different from one real estate company to another, from county to county and from state to state.

While price and terms are important, the most overlooked aspect and perhaps a very important consideration for the seller are the conditions in the real estate contract offer, if any. All real estate contracts have conditions. A condition in a contract offer can be more easily explained as a subject to event.

The most common condition is that the contract is subject to the buyer obtaining mortgage approval and a written mortgage commitment within a certain time frame in the amount required to purchase the home.

Another very common condition is that the buyer performs a termite inspection, home inspection and perhaps a radon inspection within a certain time frame. These type inspections are so common that they are pre-printed and included in the real estate contract. Read More

Contract Offers: Buyers Need To Be Prepared_Part III

David Fialk (Choice Realty Co.) — Mon, 04 May 2009 07:30:19 -0500

Terms of the Contract Offer

Initial Deposit

Be prepared to write a deposit check when making a contract offer to purchase real estate. Commonly referred to as a Binder, more commonly known as the initial deposit, this is the check made out to the Selling Real Estate Office when submitting a contract offer. In simple terms, it is a good faith deposit to express interest in purchasing real estate.

What is the required amount of a binder deposit? There is no law as to a required amount, but local real estate practices may determine what is acceptable. Common sense should prevail in determining the amount of the Binder deposit however. Writing a check for $100.00 shows good faith, but what kind of statement is that making to the owner when the contract offer is presented to them?

Would a more substantial initial deposit, say $1,000.00, make a stronger statement? How about $5,000 as an initial deposit, or even more? Wouldn't a larger initial deposit check make a stronger impression with a seller in making a decision to accept a contract offer or in contract negotiations?

The Binder is generally not deposited by the Real Estate Broker until there is offer and acceptance, a signed contract of sale. However, there are State Real Estate Licensing Laws which regulate how long a Real Estate Broker can hold a deposit check without depositing it into the Company's Trust Account. In cases where contract negotiations are prolonged, perhaps beyond five business days, most Real Estate Brokers will either deposit the check into their Trust Account during contract negotiations, or ask the buyer to write a new check as contract negotiations continue.

If the contract offer is not accepted, the Binder is returned to the buyer. If the contract is accepted and signed by the owner, the Binder will be deposited in the Broker's Trust Account and will be applied to the buyer's down payment and the purchase price.

Earnest Money Deposit

Commonly referred to as the second deposit, this is the additional upfront deposit made in the purchase of real estate and is also part of the buyer's total down payment. The earnest money deposit could be 10% of the purchase price depending on the real estate market the home is being purchased in, the price range or the total amount of the down payment being used by the buyer.

It is quite common in many real estate markets that homes are purchased where the total down payment is less than 10% of the purchase price. In these type real estate transactions, the earnest money deposit will generally be some portion of the total down payment, or perhaps the entire amount of the down payment in a transaction where the buyer has a total down total payment of 3.5 % to purchase a home. The amount of earnest money deposit is something that may eventually be determined during contract negotiations.

The earnest money deposit is generally paid within a certain time frame or after completion of Attorney Review. It is generally paid to the Selling Broker, unless local real estate practices provide otherwise, or there is a change made to the contract of sale during the Attorney Review process where the Seller's Attorney requests to hold all deposit monies in their Trust Account.

There are times when a contract of sale is terminated after Attorney Review, such as home inspection problems, mortgage denial and others. In those situations where a contract to purchase is cancelled in accordance with the terms of the contract, all deposit monies previously paid by the buyer are refunded.

Many buyers, and buyer agents, under estimate the importance of these two aspects of contract preparation, and the benefits they can provide in contract negotiation. The Initial Deposit and Earnest Deposit can be the difference in whether a contract offer gets accepted and signed by the seller, especially in multi-contract presentations.

Read More

Contract Offers: Buyers Need To Be Prepared_Part II

David Fialk (Choice Realty Co.) — Sun, 03 May 2009 06:57:16 -0500

The Contract Offer: What Price to Start With

When a decision is made to make an offer to purchase a home, be sure to go back and take a second look. It is so much easier changing your mind about a home before a contract offer is made than after a contract offer is accepted and signed by the seller. This second appointment would be a perfect time to bring along others who may have an impact on a buying decision, such as parents, friend, contractor, etc.

Go through the home a second time and look beyond the owner's décor, whether it was the home just previewed, the first one seen earlier in the day or the one previewed last week. Why? There are many reasons, but most importantly is seeing if the second look creates the same good feeling as the first, and then taking a closer look to see if there are aspects of the home missed during the first preview which may alter the decision to submit a contract offer.

So what is the right price to start with?

Contract Offers: Buyers Need To Be Prepared

David Fialk (Choice Realty Co.) — Tue, 28 Apr 2009 05:44:23 -0500

Some Preliminary Information

Be it the real estate market in 2009 or any other real estate market for that matter, the structure of a real estate purchase contract offer can be the difference in it being accepted or rejected. No, the offering price is not the only factor in negotiating a contract to purchase a home.

Regardless of the number of pages in the sales contract, a contract offer can be broken down into 3 separate parts which can be important to the seller: price, terms and conditions. Each has to be satisfactory in order to obtain seller acceptance. In some situations, full price offers are not acceptable due to the buyer's terms and conditions in the contract offer. In other instances, contracts get accepted and signed even though the offer was much lower in price than other competing offers, but was more favorable for the seller in terms and conditions.

What then is the secret in preparing and submitting a contract offer to buy real estate? This is where the value of an experienced Buyer's Agent is with providing assistance in preparing the contract offer and structuring the contract offer to purchase in a manner that does not create questions or concerns for the seller and their listing agent when it is presented to them.

There is more to purchasing a home than just looking at houses, whether the home is in Iselin or Colonia, New Jersey, in Middlesex County or any other state for that matter.

Read More

Market Data Statistics Provide Valuable Information When Buying or Selling a Home

David Fialk (Choice Realty Co.) — Tue, 21 Apr 2009 04:48:40 -0500

Closed Real Estate Sales Data

Obtaining reliable current information is a very important aspect of searching for, or selling a home, in Iselin, New Jersey or any part of the County or State. I am providing Sales Data from the Middlesex County Multiple Listing System for one family homes and condos/townhouses comparing closed sales in 2009 to 2008.

This type of information can help you see the factual average trends of real estate sales and sale prices in particular Towns of interest as compared to reading about regional or national statistics.

Real estate is local. If you are thinking of buying or selling a home in Colonia, the real estate market there may not be same as in Edison or Woodbridge. Real estate values vary from Town to Town, and from one neighborhood or section of a Town to another.

Read More

Stimulus no-brainer as aid for ailing housing

David Fialk (Choice Realty Co.) — Wed, 01 Apr 2009 15:08:11 -0500

April 1, 2009
Home News & Tribune
By Jarrod C. Grasso, RCE
The writer is the executive vice president of the New Jersey Association of Realtors.

Pundits and partisans alike are fiercely debating the benefits of the recently enacted federal stimulus bill, formally known as the American Recovery and Reinvestment Act of 2009. There is one thing they can all agree upon: the stimulus bill provides enormous incentives for families looking to purchase a home, especially for first-time home buyers.

In fact, the provisions incorporated in the new stimulus bill coupled with the rock-bottom mortgage rates make this the most advantageous time to buy a home in recent memory.

The best-known and probably most-powerful provision of the stimulus program is the $8,000 federal income tax credit that the bill extends to families or individuals who purchase their first home before Dec. 1. This tax credit would wipe out nearly half of the entire federal income tax obligation for a family with a combined income in the range of $100,000.

Unlike the previous $7,500 tax credit, new home purchasers who take advantage of these tax benefits are not required to pay them back to the federal government. In short, the new tax credit is both larger and more taxpayer-friendly. Like the previous tax credit, however, its full benefits are limited to individuals earning as much as $75,000 and couples earning as much as $150,000. The credit is phased out for filers earning more than those amounts and is reduced to zero for individuals earning more than $95,000 and married couples earning more than $170,000. It is available for first-time buyers, anyone who has not owned a principal residence three years prior to their purchase. There are other important benefits included in the stimulus bill that are particularly helpful for home buyers.

The stimulus bill, thankfully, preserves the 2008 limits for loans issued through the FHA, Fannie Mae and Freddie Mac. The loan limits mean that these critical lending agencies are authorized to issue loans in most New Jersey counties of up to as much as $729,000 or $440,000, depending on the loan program. These loans are stable, too, as Fannie Mae and Freddie Mac are backed by the government. These generous lending limits are critically important in New Jersey, where housing values are typically above the national average.

A portion of the American Recovery and Reinvestment Act authorizes the expenditure of an additional $2 billion on programs to stabilize and preserve neighborhoods where foreclosures have taken place. The program provides grants to states and municipalities to address problems that can occur when entire neighborhoods are decimated by foreclosures. These funds can be used to purchase, repair and resell abandoned properties.

The neighborhood stabilization aspects of the stimulus bill would also allow state and local governments to make loans for the purchase of distressed properties by low- and moderate-income individuals. Neighborhood stabilization programs like this can help to bring qualified families and individuals into the housing market while at the same time guard against the blight that can occur when neighborhoods are plagued by abandonment and foreclosures.

The stimulus bill also provides vast incentives for energy conservation, weatherization and the use of other green technologies. The bill provides tax relief and accelerated depreciation for small businesses and others who invest in energy conservation and the use of alternative energy in commercial buildings.

Homeowners can also benefit from grants to state and local governments for energy audit programs and for retrofitting homes in order to make them more efficient. These grant programs can significantly lower the monthly utility costs of owning a home.

Although the national economy is perilous, the underlying principles of the real estate market remain strong. Congress and the president were right to focus on housing as a key driver for the American economy. A vibrant economy depends upon a vibrant housing market. Assuring that Americans can purchase, own and maintain the homes in which they live and raise their families is fundamental not only to our prosperity but to the essential American value of owning a home.

Choice Realty Co., Iselin, New Jersey Celebrates 35 Year Anniversary

David Fialk (Choice Realty Co.) — Fri, 20 Mar 2009 04:46:50 -0500

Choice Realty Co. Celebrates 35^th Anniversary

March, 2009
David Fialk, Broker Owner, is pleased to announce that Choice Realty Co. is celebrating its 35 Year Anniversary as a full service, independent, privately owned Real Estate Company. We would like to thank all of our clients for making the past 35 years as rewarding as they have been!

Established in 1974, Choice Realty Co. has been providing professional real estate services to home buyers and home sellers, with a commitment to service excellence since its inception.

Located at 1144 Green Street in Iselin, New Jersey, Choice Realty takes great pride in the ownership of real estate as evidenced by the “Beautification Award” given us by the Woodbridge Chamber of Commerce in 1998.

Choice Realty’s primary market area includes the towns of Iselin, Colonia, Woodbridge, Avenel, Fords, Port Reading, Sewaren, Keasbey, Carteret, Edison, Metuchen, Rahway and the surrounding areas.

The real estate business and real estate industry has witnessed many changes since 1974. The most profound change occurred in 1995 with the advent of the World Wide Web, now commonly referred to as the Internet.

Seeing the benefit of what technology could provide in the marketing and selling of real estate, Choice Realty Co. launched their Website, www.ChoiceRealty.com in the fall of 1995. Back then, with dial up Internet connections and no digital cameras, photos of homes for sale had to be mailed to the Website hosting company to be placed on the Company Website. With that came our first sale to an Internet based customer inquiry, and a real estate closing on a listed property in Iselin in February of 1996.

So much has changed! Consumers now have instant information readily available to them on the Internet, whether they are just curious about real estate or are in the process of buying or selling a home. It is the content and timely delivery of this information to the consumer which becomes the challenge of the successful Real Estate Company today.

Providing information to the consumer, in a format and a manner they prefer, has now become the standard by which many real estate agents and companies are compared. It is a real estate business where simply putting out a sign, putting a home for sale in the MLS and putting an ad in the newspaper does not provide the marketing results of years ago.

Adapting to constantly changing technology and staying abreast of the rules and regulations in the real estate industry are probably the two most important concerns a Real Estate Broker needs to focus on in today’s real estate industry in order to have continued success, and Choice Realty Co. is looking forward to continued success as a Market Leader in real estate for years to come.

A real estate company can be judged by the professionalism and ethics of their Sales Associates and we are proud of the support, professional experience and length of service of our REALTOR Associates.
* Jennie Esposito * Donald Bence * Thomas Wood * Michael Kertes * Maryann Crowley
* Marie Morrell * Susan Lasky * Robert Andersen * George Balboa * Maureen Balboa
* Robert Denton * Mahendra Kamdar * Adnan Yousaf * Peter Cantillo * Bart Flanzbaum
* Devakaran Hunt * Dawn Damatta * Janine Piscadlo, Administrative Assistant

You can contact any of our REALTOR Associates for assistance with your real estate needs.

Choice Realty is a Member of the Middlesex County Association of REALTORS, New Jersey Association of REALTORS and National Association Realtors and provides real estate services through membership in the Middlesex County Multiple Listing System, Garden State Multiple Listing System and the Monmouth County Multiple Listing System.

Info@ChoiceRealty.com 732-283-2100 www.ChoiceRealty.com

REALTORS Do More Than Just Sell Real Estate

David Fialk (Choice Realty Co.) — Sun, 15 Mar 2009 13:27:05 -0500

I am a REALTOR^®.

A REALTOR^® is a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS^® (NAR) and who abides by its Code of Ethics.

I am a Member of the Middlesex County Association of REALTORS^®, New Jersey Association of REALTORS^® (NJAR) and the National Association of REALTORS^®.

Equally important to the Code of Ethics that all REALTORS^® must abide by is the fact that these Trade Associations are the premier advocacy groups for private property rights for both the consumer and real estate licensees.

In case you missed some important news affecting private property ownership, I am providing Press Releases issued by the New Jersey Association of REALTORS^®.

February 27, 2009

New Jersey REALTOR^®Oppose Obama Plan To Slash Mortgage Interest Deduction

The New Jersey Association of REALTORS^® (NJAR^®) today said President Obama's budget proposal to reduce the amount of mortgage tax deductibility for families earning over $250,000 will negatively impact housing and economic recovery efforts in high cost areas like New Jersey.

"While New Jersey enjoys the second highest household median income in the nation, our taxpayers also bear the heaviest state and local tax burden in the country," said NJAR^® Executive Vice President Jarrod Grasso, RCE. "In a high cost state like ours, reducing the amount of mortgage interest a family can deduct from their taxes will have a devastating impact on housing recovery efforts and limit many people's ability to achieve the dream of homeownership."

President Obama's budget proposal would limit the tax rate at which high-income taxpayers, those whose family income is $250,000 ($200,000 for singles) or more, to 28 percent for itemized deductions. Even though the proposal would apply only to households earning $250,000 or more, home prices across the board would fall as home buyers discount the value of the deduction in their purchase offers. This will lead to a drop in all home prices because a fall in home prices at the top end will eventually filter down to lower priced homes.

"At a time when both our federal and state governments are grappling with massive budget deficits and attempting to jumpstart our economy, this is exactly the wrong message to be sending," added Grasso. "Discussing President Obama's ill-advised plan will be at the top of our agenda when the NJAR^® leadership team heads to Washington, D.C. next week. We are hopeful New Jersey's congressional delegation will see how this approach will undue the work they have already done to revitalize the housing market and work to change it."

The NJAR^® leadership team will visit Capitol Hill in Washington, D.C. next week to discuss key issues that have an impact on property owners and the real estate industry, including the proposed cut in the mortgage interest deduction.

March 10, 2009

Corzine Budget Proposal is an Assault on Property Owners

Today, to a joint session of the New Jersey Legislature, Governor Jon Corzine proposed the state's spending plan for the upcoming year. This year's budget proposal was an attack on property owners. Property owners took a major hit when he declared his goal to eliminate the property tax deduction next year on state income taxes for everyone but seniors.

Amongst the drastic cuts Governor Corzine announced was a 2 percent reduction in municipal aid, which is used to offset property taxes. He also stated his intention to gut the property tax rebate program. Property tax rebates would be maintained at current levels for seniors, the disabled and those earning less than $50,000 a year. Households making $50,000 to $75,000 a year would only receive two-thirds of the rebate they received last year.

Additionally, Governor Corzine is looking to increase payroll taxes for unemployment insurance, as well as place a one-year three-fourths of 1 percent rate increase on the taxes paid by residents with incomes of $500,000 or more. He is also seeking to make state workers take 12 days of unpaid furloughs.

Governor Corzine said the new state budget will be about $29.8 billion, approximately $3 billion below the current spending plan. He said budget decisions were made as a result of a shrinking revenue base due to a poor economy. The bulk of $2 billion New Jersey is set to receive from President Obama's federal stimulus aid will go to Medicaid and education.

NJAR^® is gearing up for a legislative fight to oppose Governor Corzine's proposal to do away with the deduction of property taxes paid on state income tax filings, as well as other proposals that will lead to higher property taxes. Stay tuned as we will need all New Jersey REALTORS^® to be united in their opposition to these ill-advised policies.

Mortgage Interest Rales Below 5 %

David Fialk (Choice Realty Co.) — Sun, 15 Mar 2009 06:44:17 -0500

Great News For Home Buyers and Home Sellers! Mortgage Interest Rates Are Below 5 %.

Consider the benefits. A lower interest rate will reduce the monthly payment for a mortgage loan or provide the ability to finance more in a home purchase and have the same monthly mortgage payment.

An example: using a $300,000 mortgage (calculations are estimates only)
* 5% interest rate equals a mortgage payment (principal and interest) of $1,610
* 4.75% interest rate equals a mortgage payment (principal and interest) of $1,564
This is a is monthly savings of $46.00.

A home buyer now has the benefit of $46.00 monthly savings in the mortgage payment with the lower interest rate. However, if the $1,610 mortgage payment was acceptable, a home buyer could now increase their price range and borrow an an additional $9,000 in the mortgage and still have a mortgage payment at or around $1,610. Lower mortgage interest rates allow for a more affordable home purchase or enables an increase purchase price range.

A fixed interest rate is for the life of the mortgage loan. With mortgage interest rates at, or near historic lows, now is the time to consider to consider a home purchase! And for Qualified First Time Buyers, don't forget the IRS $8,000 Tax Credit!

Whether you are thinking of purchasing a home in Iselin, New Jersey, other Towns in the Middlesex County area or anywhere else, please consult with a REALTOR or Mortgage Consultant who can provide more information and provide assistance with mortgage pre-approval.

And there are benefits to home sellers and potential home sellers too! With any drop in mortgage interest rates, more buyers are able to purchase due to increased affordabilty and lower monthly mortgage payments. Current home owners desiring to move up to a larger home, will now enjoy the same benefits of lower interest rates and may find that their next home is now even more affordable than previously thought.

For following mortgage interest rate information was provided by Jayne Codella, Mortgage Consultant, Wells Fargo Home Mortgage.

For new purchase loans for single family, owner occupied properties with loan amounts of $250,000 to $417,000, with credit scores of 730 or higher and minimum of 10% down.

Conventional Mortgages
4.875% for a 30 Year Fixed 0 points
4.625% with 1 point
4.375% with 2 points
Condos, multi family and lower credit loans will have slightly higher rates. Refinance rates are slightly different depending on equity in the home, rate term or cash out and credit scores.

FHA Mortgages
Loan amounts between $250,000 and $417,000 for purchases of single family or multi family homes. Must be owner occupied.
5% with no points
4.75% with 1.5 points
4.50% with 2.25 points

Searching For a Home or Selling a Home in Middlesex County, New Jersey

David Fialk (Choice Realty Co.) — Wed, 04 Mar 2009 04:31:03 -0600

Middlesex County Closed Real Estate Sales Data

Obtaining reliable current information is a very important aspect of searching for, or selling a home, in Iselin, New Jersey or any part of the County or State. I am providing Sales Data from the Middlesex County Multiple Listing System for one family homes and condos/townhouses comparing closed sales in 2008 to 2007.

This type of information can help you see the factual average trends of real estate sales and sale prices in particular Towns of interest as compared to reading about regional or national statistics.
Real estate is local. If you are thinking of buying or selling a home in Colonia, the real estate market there may not be same as in Edison or Woodbridge. Real estate values vary from Town to Town, and from one neighborhood or section of a Town to another.

While statistical information is important to review, knowing the average sale prices is just part of the process of understanding the current trends in real estate values for a particular location, especially when buying or selling home. Other important information to obtain would be the comparison of closed sales from one year to another, the comparison of active homes on the market to sold and closed sales and a list of recent homes which were taken off the market unsold, commonly referred to as expired listings.

Obtaining local, reliable real estate information is extremely important to home buyers and home sellers, especially in a real market like this one in 2009. Obtaining this type of information, and more information about a particular area, is not difficult. Most all real estate agents can provide it. However, it is the interpretation of this information and data which becomes even more important in making home buying or selling decisions. And that leads to another very important consideration in buying or selling a home, selecting the REALTOR to help.

Providing MLS information and statistics is easy. However, it is the interpretation of that information which separates the abilities and value of one agent to another.

For home buyers, find a REALTOR who has recently sold homes in the desired areas of your home search, is very familiar with market values and continually shows various homes in the price range and area desired. Lastly, select a REALTOR who is not hesitant to provide all the real estate statistical information pertaining to the home purchase decision.

For home sellers, find a REALTOR who has recently sold homes in the surrounding area, is very familiar with market values and continually shows various homes in the price range and area the home is located. Lastly, select a REALTOR who is not hesitant to provide all the real estate statistical information pertaining to the home selling decision,

Click Here to View 2008 Closed Sales Comparison Chart for Middlesex County, New Jersey.
For More Complete Middlesex County Statistics, Visit www.DavidFialk.com or Click Here.

For Many, A Cash Reward For Buying A Home

David Fialk (Choice Realty Co.) — Mon, 23 Feb 2009 12:59:16 -0600

IRS $8,000 First Time Buyer Tax Credit

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

Unlike the First Time Buyer Tax Credit passed in 2008, this First Time Buyer Tax Credit does not have to be repaid. A tax credit is not an income tax deduction. It is a reduction in income taxes owed.

$8,000 Home Buyer Tax Credit at a Glance

• The tax credit is for first-time home buyers only.

• The tax credit does not have to be repaid.

• The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.

• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

For a qualified first time buyer, this tax credit can be compared to receiving a cash reward for buying a home. The cash reward is received when filing the 2009 income tax return.

Most first time buyers utilize most all of their savings when purchasing a home. Wouldn't it be advantageous to have $8,000 to replenish the savings account after the home purchase, have the money available to replace the older, less efficient furnace in the home purchased or replace the exterior siding? Perhaps paying down the outstanding mortgage balance, and saving even more money over the term of the mortgage? There are numerous options and opportunities this tax credit provides.

For more detailed information on the $8,000 First Time Buyer Credit!

Lost Home Showing Opportunity

David Fialk (Choice Realty Co.) — Thu, 29 Jan 2009 07:12:01 -0600

A home on the market for sale needs to be available for showings in order to get sold. Without a showing, there will be no offers.

On Wednesday, at 9:00 AM, I received an unexpected call from a client who had the day off due to the snow storm we had in New Jersey, and wanted to look at homes. There was 2 inches of snow on the roads, and the snow was now starting to turn to rain. It was truly nasty out at that time of the day, and the local roads were a mess. An appointment was set for 11:00 AM with the buyer.

After confirming the appointment with the buyer, I then went about searching the MLS. There were 5 properties I needed appointments for, all within the same neighborhood location,.I started calling the listing offices to set the appointments. Three were relatively easy to set. Two were vacant with a lock box, and on the other one I needed to call the listing agent on their cell phone as the listing office was closed. I did reach the agent who then had to call the owner and call me back for showing confirmation.

On the next one, the showing instructions were to call the seller direct to set the appointment.. I called the seller to arrange the appointment for 11:00 to 11:30. The seller said that they were about an hour from the home, but they would leave now to get there as soon as possible. Due to their situation, I asked them to call me on my cell phone when they got to the home, and I would then show their home next to help with their personal schedule. I received their call when they arrived at the home and I showed the home within 5 minutes.

The last appointment was a different story. It was a property listed three days earlier. When calling the listing office, I was told that they had to call the listing agent as there were no showing instructions, but they thought the home was vacant and it shouldn't be a problem showing. I did get a call back and I was told that the listing agent would go to the home and put on a lock box, and it would be done before 12:00. I then set that one to be the last home I would show.

We got to the home, and no lock box. I called the listing agent on their cell phone, and was told that something came up and it would be another hour or so before it would be taken care of. Needless to say, we are standing out in the rain and the buyer is now annoyed.. The end result, we did not wait around to look at the home.

As it turned out, the home where the seller drove one hour to open the home was quite nice. So nice in fact that the buyer decided to submit a contract offer when we arrived back at my office. Two hours later, there was contract acceptance!

This buyer was anxious to buy a home, and they had an unexpected day off from work. Their current home was under contract, and the home they had a contract on did not work out after two weeks of negotiating.

Did the agent and owner of the vacant home without a lock box miss out on a sale? I don't know. I never got into the home. They did miss out on a showing though, and without a showing there is no chance for sale.

Did the buyer miss out by not seeing that last home? Apparently not! They chose to make an offer on one they did see, and one they liked!

It is very important for owners, and listing agents, to make it as easy as possible for agents to set appointments and gain access to homes for sale! You can never tell what showing will result in a contract offer and sale! Home buyers look when it is convenient for them! There is no such rule that says a buyer will come back to look at a home when it is convenient for the owner or the listing agent!.

More About The IRS $7,500 IRS Tax Credit

David Fialk (Choice Realty Co.) — Thu, 22 Jan 2009 04:06:25 -0600

Are You a First Tme Home Buyer?

Did you purchase your home on or after April 9, 2008, or are closing before July 1, 2009 on a home you are purchasing? Take advantage of the IRS $7,500 First Time Buyer Tax Credit!

Not familiar with this tax credit, read more: Why isn't their more excitement. Jump to my post "First Time Buyer $7,500 IRS Tax Credit".

Have you recently closed on your real estate purchase in 2009 or will be closing on a purchase shortly? Are you aware that the $7,500 IRS Tax Credit can be used on your 2008 IRS Tax Return? Yes, a first time home buyer can choose to claim the $7,500 IRS Tax Credit Credit on their 2008 Tax Return for a home purchased in 2009, and benefit now rather than wait until 2010 for the tax credit when they file their 2009 income taxes.

It's simple. Delay filing your 2008 tax return until you close on your home purchase in 2009, provided it is prior to the April 15, 2009 IRS filing deadline.

In order to obtain the tax credit, the appropriate IRS Form must be used, Obtain IRS Form 5405

For more information regarding this, visit the Internal Revenue First Time Buyer Tax Credit Information Center.

Be Prepared in Making a Contract Offer_Part II

David Fialk (Choice Realty Co.) — Thu, 01 Jan 2009 12:10:45 -0600

Initial Deposit

Be prepared to write a deposit check when making a contract offer to purchase real estate. Commonly referred to as a Binder, this is the check made out to the Selling Real Estate Office when submitting a contract offer. In simple terms, it is a good faith deposit to express interest in purchasing real estate.

What is the required amount of a Binder deposit? There is no law as to a required amount, but local real estate practices may determine what is acceptable. Common sense should prevail in determining the amount of the Binder deposit however. Writing a check for say $100.00 shows good faith, but what kind of statement is that making to the owner when the offer is presented to them? Would a more substantial Binder, say $1,000.00, make a stronger statement? More will follow later in discussing strategies in structuring a contract offer.

The Binder is generally not deposited by the Real Estate Broker until there is offer and acceptance, a signed contract of sale. However, there are State Real Estate Licensing Laws which regulate how long a Real Estate Broker can hold a deposit check without depositing it into the Company's Trust Account. In cases where contract negotiations are prolonged, perhaps beyond five business days, most Real Estate Brokers will either deposit the check into their Trust Account during the negotiations, or ask the buyer to write a new check as contract negotiations continue.

Earnest Money Deposit

It is quite common in many real estate markets that homes are purchased where the total down payment is less than 10% of the purchase price. In these type real estate transactions, the earnest money deposit will generally be some portion of the total down payment, or perhaps the entire amount of the down payment in a transaction where the buyer has a total down total payment of 3% to purchase a home. The earnest money deposit is something that may eventually be determined during contract negotiations.

The earnest money deposit is generally paid within a certain time frame after completion of Attorney Review, and is generally paid to the Selling Broker, unless local real estate practices provide otherwise or there is a change made to the contract during the Attorney Review process where the Seller's Attorney may request to hold all deposit monies in their Trust Account.

There are times when a contract of sale is terminated after Attorney Review, such as a home inspection revealing problems with the home or mortgage denial. In those situations where a contract to purchase is cancelled in accordance with the terms of the contract, all deposit monies previously paid by the buyer are refunded.

More will follow later in discussing strategies in structuring a contract offer.

Mortgage Considerations

A contract to purchase real estate will include a mortgage contingency clause which provides a time period for the buyer to apply for a mortgage of a specific amount and obtain mortgage approval in order to complete the purchase. This is commonly referred to as the mortgage contingency. The time frame for mortgage approval varies and is determined by the type of mortgage being obtained (Conventional, FHA, and VA) and how complete the mortgage pre-approval process was. A buyer's Real Estate Agent or Mortgage Representative can help in providing more information about the time frame required in processing the formal mortgage application and obtaining the written mortgage commitment.

It is recommended that a buyer reviews their Mortgage Pre-Approval when submitting a contract offer, and provide a copy to their Agent. Review is necessary to verify that the mortgage amount in the contract offer is the amount in the Mortgage Pre-Approval, or less.

All too often buyers begin their home search in one price range and later find that they need to increase their price range, and increase the mortgage amount, to find a home they like. Obtaining an updated and revised Mortgage Pre-Approval to reflect the mortgage amount in the contract offer is highly recommended.

Mortgage Interest Rates and Mortgage Rate Lock-Ins

Another important consideration is mortgage interest rates. Mortgage interest rates may fluctuate from day to day and from one mortgage lender to another. Buyers should obtain a current interest rate quote when making a contract offer as this rate may be different from the quoted interest rate when the Pre-Approval was issued. The interest rate affects mortgage payments, mortgage qualifying and price range.

Closing Date

A closing date is included in the contract offer. This date may be important to the seller in contract negotiations as it relates to their time frame in moving. It is also a consideration for the buyer with regard to a mortgage interest rate lock in. Mortgage lenders have various interest rate lock-in policies. Consult with the Mortgage Representative to obtain more information on interest rate lock-in policies and length of interest rate lock in period.

Buyers: Be Prepared in Making a Contract Offer

David Fialk (Choice Realty Co.) — Sat, 27 Dec 2008 14:23:41 -0600

Part I_Some Preliminary Information

Be it the real estate market in 2008 or any other real estate market for that matter, the structure of a real estate purchase contract offer can be the difference in it being accepted or rejected. No, the offering price is not the only factor in negotiating a contract to purchase a home.

Regardless of the number of pages in the sales contract, a contract offer can be broker down into 3 separate parts which can be important to the seller: price, terms and conditions. Each has to be satisfactory in order to obtain seller acceptance. In some situations, full price offers are not acceptable due to the buyer's terms and conditions in the contract offer. In other instances, contracts get accepted and signed even though the offer was much lower in price than other competing offers, but were more favorable for the seller in terms and conditions. What then is the secret in preparing and submitting a contract offer to buy real estate? This is where the value of an experienced Buyer's Agent is with providing assistance in preparing the contract offer and structuring it in a manner that does not create questions or concerns for the seller and their listing agent.

There is more to purchasing a home than just looking at houses.

The first step toward purchasing a home is obtaining Mortgage Pre-Approval from a reputable Mortgage Lender(Read Mortgage Pre-Approval versus Mortgage Pre-Qualification below), and be sure a copy is included with the contract offer. Why? The first question to be asked by the seller and listing agent at a contract presentation will be "Does the buyer have Mortgage Pre-Approval?

Secondly, there is no cardinal rule that there must be some fixed amount that a seller will negotiate from their asking price. Home buyers need to obtain factual sales information about the market area, and section of Town, they are considering buying in before submitting an offer. While it is very likely that sale prices have declined in the past few years, they have not dropped equally in all Towns and in all neighborhood locations. Remember Economics 101 from Grammar School: "What's true of the whole may not be true of the parts". That is what I am referring to here. Real estate values are local, and various factors influence market value such as buyer demand, amount of homes for sale, mortgage rates, local economic conditions and so on and so on.

In preparing a contract offer, it is important that a buyer obtain a Market Analysis for the property being considered. A report like this can be prepared by the buyer's agent and it should contain information comparing similar properties which are active on the market for sale, listings which expired and did not sell in the past six months, under contract sales and closed sales in the past six months. This information should also provide the asking price history and days on market before sold. With a report like this, a buyer can then have a better understanding of the real estate market and be better prepared when submitting a contract offer.

It is highly recommended that buyers obtain a blank contract of sale and addendums early in the home searching process. Contracts can be intimidating to many buyers. It would be much better to review the contract documents in advance of making a contract offer. Making a contract offer is an important decision. Being properly prepared is the first step toward making a successful contract offer.

Thirdly, buyers should be completely aware of their personal finances and the total costs of purchasing a home. Buying a home involves down payment, expenses occurred during the purchase, such as mortgage application fee, inspection fees, and closing costs. It is important for buyers to obtain the estimates related to transaction expenses and closings costs. When a buyer is not properly prepared for expenses like these, they could have an affect on exactly how much a buyer has for the down payment which then could affect how much is needed in a mortgage to complete the purchase.

Buyers should be educated and informed when making an offer to buy a home. Surprises are for birthdays, not buying a home!

Factors That Do Not Affect the Value of a Home

David Fialk (Choice Realty Co.) — Sun, 21 Dec 2008 11:08:02 -0600

When selling a home, there are many factors which affect market value and the eventual sale price of a home, such as location, condition, size, amenities, features, improvements and upgrades, local economic conditions, the current real estate market and mortgage interest rates, among others. Some of these factors are within the control of the owner, and others are beyond the control of the owner.

The definition of Fair Market Value includes various terms such as: the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale; the buyer and seller each acting prudently and knowledgeably; assuming the price is not affected by undue stimulus; normal marketing time period, informed buyer and seller.

In helping owners obtain a Market Value estimate for their home, REALTORS® can provide a Comparative Market Analysis (commonly referred to as CMA). A thorough Market Analysis will include full property details and pricing information of the most comparable type properties currently listed on the market for sale, recent pending or under contract sales, those where a contract offer has been accepted, recently closed sales transactions as well as listings which have expired, those that did not sell during the marketing time period. The purpose of a report like this is to provide the owner with factual information to help them in their decision to sell by providing a recommended asking price and estimated sales price. While no two properties are truly identical, an analysis like this can provide home owners with the most reliable method of obtaining a market value estimate for their home.

In the process of reviewing the pricing information however, it is quite common for owners to question the market value estimate and pricing recommendations. The questions and concerns they have about price, while valid in their situation, do not have an affect in determining the market value for their home. What are some of the factors that do not have an effect in establishing Market Value?

...The Price Paid for the Home...

The price paid for a home one year ago, three years ago, five or ten years ago has nothing to do with what the home is worth today. Real estate values exist at a fixed point in time. A home may have been purchased for $300,000 three years ago, and may be worth $315,000 today. Someone else may have bought a substantially similar home for $250,000 five years ago and it is worth $315,000 today. That is a drastic difference in equity in a relatively short period of time.

Real estate ownership has been blessed with appreciation in home values, but that appreciation is not always in a straight line. Real estate values are not static. Over the long term, an investment in real estate is generally considered the most valuable type of investment, one with the best financial returns. Over the long run, it is probably the best investment people can make.

Depending on the market conditions when the home was purchased, some owners were fortunate and purchased in a buyers market before the increases in real estate values like we just recently witnessed between 2001 and 2006. Others may have bought at the end of a strong real market and were forced to pay top dollar in a highly competitive sellers market, as many owners are experiencing now who purchased their home late in 2006. It is economic market conditions, the economy, employment, mortgage rates, supply and demand, that create changes in the real estate market and cause real estate values to increase, remain stable and perhaps drop at different periods of time. These are the factors that are beyond an owner's control.

All owners would like to get the price they feel they should get for their home when they choose to sell. The reality is, their home is worth what it is worth, and that is the price a willing buyer is willing to pay. A buyer will not pay more for a home than what they would have to pay for another home with similar features and amenities in a similar location, something called the "Principle of Substitution".

It is for that reason why so much reliance is placed on sales data when establishing market value, and not personal emotions or personal circumstances.

...When the Home Was Purchased...

Whether a home was purchased twenty five years ago, three years ago or just last year, the purchase price was the value when it was purchased, and has nothing to do with it's market value when being sold. A seller with twenty five years of home ownership and substantial equity has the same right to fair market value as an owner with just 3 years of home ownership and perhaps little or no equity accumulation.

Decisions to sell may be difficult for owners with short term ownership especially when real estate values have not increased or have possibly dropped since the home was purchased. Home owners with long term ownership and substantial equity can make selling decisions easier than owners selling their home without the benefit of real estate appreciation. In either case, the market is the market, regardless of when the home was purchased, and the home is worth what is worth.

...Actual Cost of Improvements and Repairs...

While it is true that that the condition of a home has a definite affect on its market value, and that a well maintained home will sell for more than a home in need of updating and repair, the actual cost of making repairs and improvements may not be equal to the increase in market value. Why? Cost does not necessarily equal value in real estate.

Repairs and improvements are two different things. A repair corrects something that is broken or not working properly, and does not necessarily add value to a home when fixed. Some types of repairs are considered necessary repairs. A leaking faucet, broken windows, clogged drains, screens with holes, gutters hanging from the roof, missing downspouts, cracked concrete walkways, among others. Repairs like these can be considered deferred maintenance, are considered minor repairs. They are maintenance related and are easily noticed by buyers. They draw attention and become distracting. If not taken care of, conditions like these will definitely have a negative impact on the marketability of a home which will then have a negative affect on market value. When repaired or fixed, these type repairs make a home more saleable, not necessarily more valuable. In other words, just because repairs cost $1,500 does not mean that they have increased the value of the home in that amount. However, if not repaired, they could result in a loss in value of more than the cost to repair and, maybe more important, the loss of potential buyers because they feel the home needs too much work.

What about the roof, exterior siding, windows, heating system, electrical system, central air conditioning system and hot water heater? These type improvements are more costly than the repair items noted above and can have a larger impact on marketability and market value. While a buyer may not rave about how beautiful the furnace looks because it is now, they will definitely have negative thoughts on a home where the furnace is original and is 50 years old. A new or newer furnace will be more efficient than the original, save the buyer money in monthly fuel bills and, more importantly, is an item that will not need to be replaced by the buyer in the near future.

These type items relate to the effective age of a home. The chronological age of a home can be different from its effective age. There is a life expectancy in how long a roof will last, how long a furnace will last, etc. A 50 year home can have an effective age of 20-30 years when improvements like these have been made. When comparing homes, buyers are concerned with near future essential improvements which need to be made, especially those that are costly, like these. Quite often buyers will pass up on homes they are interested in simply because they need too much future updating, even if the asking price is appropriate considering the condition of the home. Why? Very often they just do not have the time or inclination to take care of major updating, but more importantly, they may not have the additional cash to make the improvements after closing as they have exhausted their savings for the down payment and closing costs.

Should a homeowner replace the original 50 year old furnace when they are ready to sell? Should they invest the $2,300 to $4,000 and have the furnace replaced? A furnace is an integral system to the home, and one buyers are concerned with. However, it is just aspect of the home. The question relates more to whether it will cost more to sell the home with the original furnace than what it would cost to replace. If the furnace is the only item requiring immediate attention, it may not prevent a sale. However, if there are other must do improvements, it will have a negative impact on market value.

Decisions like this have to take into consideration the overall condition of the home. When investing in a new furnace today and spending $2,500, what is the likelihood of receiving a full return on the investment? The reality is that it will help sell the home, but not necessarily at a price to recapture the cost of new furnace.

...How Much the Seller Needs...

Whether a home owner has owned their home for 30 years and has paid off their mortgage, or is one who has owned their home for only a few years and has an equity loan on top of the original mortgage, the market value of their home is what it is. Market value has nothing to do with mortgage balance. Likewise, where the owner is planning on moving to another home, what they need to spend for their next home does not have an affect on the value of their current home. Their home is worth what is worth, whether they are moving into a home they already own, buying a less expensive home or are purchasing a much more expensive home. Market value has nothing to do with the amount the owner needs to purchase another home. In either scenario, there is a reality however. In order to sell a current home, there needs to be sufficient sale proceeds to pay off the existing mortgage(s) and, or, provide enough equity to enable the purchase of the next home. For many owners, it is a matter of choice. Is it worth it to me to sell my current home and move forward or not? For others, the options are not that simple. Home buyers make their purchase price decisions based on how much a home is worth to them, not on how much the seller is asking or how much the seller needs. Buyers look and compare one home to another. They ask to see comparable sales, and they base their contract offer on what the real estate market is saying the value of the home is. A home buyer will not pay more for a home than it would cost them to find a similar home, in similar condition and with similar amenities.

Mortgage Interest Rates Drop to Record Levels

David Fialk (Choice Realty Co.) — Fri, 19 Dec 2008 16:02:53 -0600

Now is the Time to Think About Saving Money!

Mortgage Interest Rates continue to fall! As reported yesterday by Freddie Mac , "the average rate on 30 year fixed mortgages dropped to 5.19% from the year's previous low of 5.47%".

And that is the average rate for mortgages across the Country. I have already saw interest rate quotes below 5%, but I need to confirm that. Selling real estate for 37 years now, seeing mortgage interest rates for a 30 year fixed mortage at or around 5% is a rarity, an almost once in a lifetime type of event! Interest rates this low create opportunities for not only first time home buyers, but also provides opportunities for current homeowners in refinancing and perhaps the opportunity to consider purchasing a vacation home or investment property.

What are the savings? Just a very short while ago, mortgage rates on a fixed rate mortgage for 30 years were hovering between 6% and 6.375%. For a $300,000 mortgage for 30 years at 6.375%, the mortgage payment for principal and interest is $1,872. With rates at 5%, the payment is $1,611. That is a monthly savings of $261 and $3,132 in annual savings on monthly mortgage payments

For buyers thinking about purchasing their first home, for homeowners desiring to move up to a larger home or considering refinancing, now is the time to move beyond the thinking mode.

First Time Buyer $7,500 IRS Tax Credit

David Fialk (Choice Realty Co.) — Fri, 31 Oct 2008 17:35:42 -0500

Why Isn't There More Excitement?

It is not too late to take advantage of the new $7,500 First Time Buyer IRS Tax Credit, included in the enactment of the Housing and Economic Recovery Act of 2008, which applies to first time buyer home purchases of a principle residence between April 8, 2008 and July 1, 2009.

A tax credit is a not deduction. It is a reduction in income taxes owed! In other words, when you file your income taxes for the year the home was purchased (2008 or 2009), you will be able to subtract $7,500 from the amount of federal tax liability owed which will either increase your tax refund or reduce the amount of money owed to the IRS. I am providing various links for further explanation and details of this program.

However, this tax credit is not free. It has to be paid back. Repayment begins two years after the credit is claimed, and must be repaid within 15 years. That's $500 per year. Yes, it would have been much better if there was no repayment provision, but an interest free loan for 15 years is not such a bad thing, is it? That's right; there is no interest on the tax credit received!

While many have questioned the benefit of this type of tax credit, which requires repayment, take a look at the benefits of this $7,500 tax credit. More first time buyers than not leave the closing table and have little left in savings after the purchase of their home. As new homeowners, they are now confronted with a mortgage payment that exceeds what they were accustomed to paying in rent. They have a home to furnish, more rooms to fill with furniture than their apartment in most cases, and also need to spend money on painting, some redecorating, carpeting and window coverings. In addition, there are a few home ownership necessities such as a lawn mower, ladder, garden tools and the like which must be purchased, not to mention the expense of making any costly repairs or improvements which are required.

More often than not, these purchases are made with a charge card, and with interest rates that are upward of 17%, with monthly payments that are in addition to the large new monthly mortgage payment. So why isn't there reason to be excited in obtaining a $7,500 tax credit, and having the benefit of repaying it over 15 years without interest!

Talk about savings. Let's assume the new homeowner has cash reserves and is prepared for moving into their new home and is financially prepared for the purchase of the various items mentioned above. Why should they consider taking the $7,500 tax credit?

Let's assume a $300,000 mortgage was needed in the home purchase at 6.5% interest for 30 years. If the tax credit of $7,500 was taken and used to pay down the mortgage, that would be an interest savings of $487.50 per year using simple math, or approximately $40.60 per month. However, interest calculations on mortgage payments are calculated monthly on the unpaid mortgage balance, which is much different than the simple math equation reveals, and is more beneficial from a financial perspective.

The truth in the matter is that the savings is much greater than the simple math calculation. When the $7,500 tax credit is used to pay down the mortgage, the current monthly mortgage payment remains the same, but with each payment more money goes to the principal balance and less to interest. It is a win win calculation! The savings per year will exceed the $500 cost of repayment of the tax credit and the benefit over the term of the mortgage in principal reduction will surely surprise you. Contact you mortgage company for a revised amortization schedule to calculate the exact savings in paying down the mortgage loan and do discuss the various aspects of the tax credit with your accountant.

As a REALTOR, I am excited for buyers who are eligible for this IRS $7,500 First Time Buyer Tax Credit and buyers should be excited too!

Please read the information below!

NAR_Tax Credit Information
NAR_Tax Credit_FAQ
IRS_Tax Credit For First Time Buyers

Mortgage Pre Approval Versus Mortgage Pre Qualification

David Fialk (Choice Realty Co.) — Mon, 20 Oct 2008 05:20:13 -0500

Is there a difference between a Mortgage Pre-Qualification letter and a Mortgage Pre-Approval letter?

Considering taking advantage of the favorable mortgage interest rates? Considering taking advantage of these historically low mortgage rates to look for and buy a home? Before taking the time to drive around looking for a home, before taking the time to visit Open Houses and before taking the time to meet with a REALTOR® to look at homes, meet with a Mortgage Lender to review the mortgage process and obtain Mortgage Pre-Approval.

The reality is that most all buyers need to obtain a mortgage to buy a home. Since so few buyers are able to think about buying a home and paying cash, wouldn't it make sense taking care of the financial details first?

Price range is determined by the down payment plus the mortgage amount to be borrowed. The mortgage amount is determined by income qualifications, credit and other important criteria.

Not only is obtaining Mortgage Pre-Approval important to the buyer themselves, but it becomes even more important in the process of searching for a home and making contract offers. Most experienced REALTORS® require their clients to have Mortgage Pre-Approval and, more importantly, very few home sellers will even consider a contract offer without Mortgage Pre-Approval.

Many buyers have asked, "is there a difference between a Pre-Qualification letter and a Pre-Approval letter" or "does it make a difference if I have Mortgage Pre-Approval or Mortgage Pre-Qualification"? These terms appear to be similar, but are in fact quite different. Not only do they cause confusion for home buyers, but there seems to be many interpretations from those in the real estate and mortgage industry as well.

Speaking as a REALTOR®, the difference is documentation and verification. In other words, is the buyer providing copies of income paystubs and bank account statements to the Mortgage Lender in the pre-approval process or is the Mortgage Lender simply relying on verbal information provided by the buyer? More often than not, the difference between the two terms is that one is issued without any verification of information and the other starts with the buyer providing written documentation of all information submitted. While neither is a considered to be a mortgage commitment, nor a written mortgage guarantee, obtaining a Mortgage Pre-Approval letter is more preferred than obtaining a Mortgage Pre-Qualification letter.

Based upon my experiences in selling real estate and helping buyers obtain mortgage financing, Mortgage Pre-Qualification is generally a process where a buyer contacts a Mortgage Lender/Mortgage Rep, often on the phone, who then asks the buyer to provide some information such as current address and how long living there, social security number in order to obtain a credit report, down payment amount and annual income. I assume a credit check authorization form is signed by the buyer and faxed to the Mortgage Lender. After the credit check is ordered and received by the Mortgage Lender, the Mortgage Rep then estimates the amount of mortgage the buyer can afford and sends(via fax or email) a letter to the buyer with the title Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $___________ and a purchase price of $__________. This is usually done within a half hour or so of the initial phone call, and at best can be described as an estimate of borrowing ability, and not Mortgage Pre-Approval.

In the qualification letter, varying type disclaimer information is always included such as: subject to a formal mortgage application and payment of application fee, subject to verification of employment, subject to verification of assets, subject to credit review, subject to mortgage underwriting guidelines, interest rate to be the prevailing rate of interest for the mortgage type applied for, among many other subject to statements. In other words, we will give you a mortgage when we see that the information is correct.

What kind of problems could arise when a formal mortgage application is submitted by the buyer after they've obtained a Mortgage Pre-Qualification letter like that one? The mortgage application process involves somewhat standard underwriting criteria and guidelines for each particular type mortgage, whether VA, FHA, Conventional and other variations of each.

The Buyer does have a Pre-Qualification letter, but how reliable is it if important information such as income, debts and assets, while assumed to be correct and accurate, has not been at least verified with copies of paystubs, savings accounts, charge card statements, etc.? Yes, it is possible that the buyer provided correct information and will obtain a mortgage commitment when a mortgage application is submitted. However, there are many circumstances where even though the information verbally provided is accurate, certain other details are not mentioned which may have a negative impact on the mortgage approval process. Details like income being received off the books, down payment being borrowed(not gifted from a family member), savings for the down payment only but no other assets for closing costs or inconsistency in work history to name just a few situations that can cause problems in obtaining mortgage approval.

While Pre-Qualification letters like the previous example are common, not all Mortgage Lenders provide Pre Qualification letters in that manner. Since the mortgage application and approval process involves a credit check, income verification and asset verification among other criteria, many Mortgage Lenders require a more thorough process in providing Mortgage Pre-Approval. In addition to obtaining a credit report, many Lenders require the buyer to provide proof of two years of income, pay-stubs or income tax forms, copies of bank statements and copies of charge card statements.

When all the information is complete and the credit report is obtained, it is then submitted to the Mortgage Underwriter for review and approval, who then issues the Mortgage Pre-Approval letter. In fact, the Mortgage Pre-Approval letter is worded something like this: Congratulations, You Are Pre-Approved for a mortgage loan in the amount of $________ and a purchase price of $__________ subject to a Contract of Sale and a satisfactory Bank Appraisal on the home being purchased. While more time consuming than the previous pre-qualification practice discussed above, not only is it more thorough and more reliable, it also provides a shorter mortgage application time process and provides the ability for a fast closing when one is desired.

Consider the advantages of this type Mortgage Pre-Approval. First of all, there is the confidence for the buyer in obtaining a written mortgage commitment for the home they have just signed a contract for and the home they have already made an investment in; hiring an Attorney for contract review and hiring an Home Inspector to perform the Home Inspection, Termite Inspection, Radon Inspection and any other required inspections. Needless to say, I can't even count the number of real estate transactions I've heard about that fell apart after the buyer paid for the bank appraisal and all the inspections due to the buyer not being able to obtain mortgage approval, even with a Pre-Qualification letter. It just doesn't make sense!

Even more important is the benefit in negotiating with a seller in the purchase of a home, something that can make the difference of being the buyer who gets the signed contract or being able to negotiate a better price. The Mortgage Pre-Approval provides comfort to the seller and REALTORS® in knowing that they have a serious buyer and one who has already taken the most important step in buying a home, arranging the financing first!

Help yourself negotiate for a better home purchase.

Contact a Mortgage Lender to discuss obtaining Mortgage Pre-Approval before you get in the car to look at houses! It is worth the effort, trust me!