I get this question to many times a day, but the honest answer isn't so easy.  A lot of Realtors and others will tell you if you can save 1% off our rate then it is a "no brainer".  I will respectfully disagree. 

We need to take a hard look at other factors.

How long are you planning to stay in your home? 

What type of loan do you have now?

Are you paying MI or PMI?

What is your loan to value?

So let us play 20 answers or so (you get the idea, plus this make you leave comments)

•1)      If you say to me that you plan to sell as soon as the market recovers------ Do not refinance

•2)       If you say to me that you see 5 to 10 years in this home, then I will say to you that a 3 to 5 year pay back is acceptable.

•3)      If you have a subsidize loan, STOP read your prepayment clause.  Unless you have had the loan for 10 years you will probably pay through the nose.

•4)      If you are at 6% or so and have no MI or PMI STOP.  Most of the country is a declining market.  So talk to a few appraisers and get their honest opinions.

•5)      If you have MI or PMI and your credit score is say under a 680.  Stop your payment will go up even if your rate goes down

•6)      If you have a FHA loan or a USDA Rural Development loan, ask about a streamline refinance.  This might save you if you have had credit issues since the purchase but have been able to keep the house payments current.

•7)      Use basic budgeting skills and also look at amortization charts.  Determine what is best for you and your family.

•8)      Can you use the "savings" to retire higher interest rate debt?  Saving  $100 a month to pay off a 20% credit card might help you better in your long term financial future.

•9)      Are you planning to place the "savings" into your retirement plan?  This might be an acceptable plan, depending on how long you plan to stay in the home.

•10)   You get the idea.  There is no "rule" for refinancing. 

AS LONG AS YOU ARE NOT USING YOUR HOME AS AN ATM.

  As some of you may know, I just listed my home for sale.  I know, there is too much inventory and all the reasons not to list right now since I am not "desperate" to sell.  Truth is I don't care if I sell or not right now, but it would make my world a little easier to live in if it would sell before next winter.  But, as I was going through the home with my listing agent it struck me that virtually every realtor that will show this home does not know how to sell it.

A few will "pre view" the home, but even then they will not spend the time to get to know the product.  What are some of the features in the home?  What might be unique to this home that the others they are looking at don't have?

Things like rope lighting in the "toe kicks" of the custom built cabinets.  Pull out pot and pan drawers, we have 2 of them in our kitchen.  The lighting under the over head cabinets along with power strips.  It is the small things like this that help a home stand out from the rest of the competition and it is the good "professional" sales person that will take the time to know this home and the little things that it offers.

I encourage all of you to stop and slow down when you are "pre viewing" or showing a home to potential buyers.  Allow the buyer to linger and touch and feel the home.  If the listing agent has done their job you should have a list of the extra features.  Point them out to the buyer.  The energy efficient window tinting that is on the large 8 foot windows over looking the 18th fairway.  The pre planning for the out door kitchen, with the gas and water lines plumbed to that spot.

Sales people will tell you all about "FAB" selling.  That is Feature and Benefit selling.  Find 3 to 5 things in every house that you show to point out.  Make a "showing pacakge" that has the listings that you are showing them and a list of the features that you point out and some extra items that you don't point out along with places for them to write notes about what they like and be honest disliked about each and every property. 

Granted, not every home has"custom" features; but there are things in every home to point out.  Maybe it is the way the natural sunlight comes in that kitchen window that would really show off the buyers stain glass decorations, or maybe you heard the buyers speaking about something they wanted in a potential home.  Maybe, it is the route to school that the kids won't have to cross a busy street.  The point is use your ears and your mind and you will find 3 to 5 things in every home

Do the small things to earn more sales.

On Friday, as you know, my home went into the MLS and I know you saw the listing.  But did you really look at it?  After all, approximately 45 minutes after it us uploaded into the system you started making comments that it is 20% to high!

So, Mr. Realtor did you really look at the listing?  I know that you have never been in my home so I am curious as to what makes you say that it is so over priced?  Now, I understand that you just "reduced" your listing just across the way by over 20%, but that is what you do when you are about to lose the listing to foreclosure.

 Mr. Realtor, I thought I would take the time and tell you a few things about my home, since you have not been in it and I just sent a notice to your managing broker that you will not be allowed to show it.  My home was built by the same, yes the SAME builder that built the one you are so desperate to sell.  Wait, it gets better.  It is actually almost the same floor plan, since I took that plan and "tweaked" it to flow and work better for me. Sure, my home is smaller by about 700 square feet, but it is a single level and since you missed the latest news flash; single level homes are more attractive to an aging population.  But back to the home itself.  My home has every feature your listing has and a few more.  Of course you might have known that had you really looked at the listing.

Finally Mr. Realtor, this is a home that you bragged about having a cash buyer for at more than my asking price only 8 months ago.  So, I wonder if it was worth almost 10% more then and now you are saying I am 20% to high; I wonder what you tell your clients? 

Really Mr. Realtor, the lack of professionalism that you display is what bothers me the most.  Is it really surprising that the public thinks so little of our professions that we rate below USED CAR SALESMEN?  Maybe when you start saying the things you say, you should stop and think.  After all, you do represent more than just yourself when you make bold statements in public like you made friday afternoon.

Today as I visited with Realtors I was struck my the universal tone of what they tell me the consumer is saying

"How low are rates going to go?"

and

"We are waiting for the market to BOTTOM" 

So, my natural question is "how will you know when the market has hit the bottom?"  Will the Talking Heads knock on your door and sing to you?  Will the news media announce it?  Will Obama and his friends deliver your bailout? Will it knock you over as you are peering down and it is coming back at you?

Look, the real answer to all of these things is really simple.  Can you the consumer afford to buy right now?  Ask yourself this question, what are you paying in rent and what would your house payment be?  We have all heard about how the credit market is tight and blah, blah  and more blah.  But, stop and think!  With FHA and USDA loans and the 8 grand tax credit for first time home buyers (those that have not owned a home in 3 years) can you really afford to wait for the so called bottom? 

Yes, you need a 620 score for the best rate (FHA is now 620 and it is the banks call not FHA and USDA is still 580 BUT you get tagged hard for under a 620).  But at that score and with little to nothing down you are still at 5% or so.

A $150,000 loan at 5% is $805 a month!!!

What are you paying in rent?????

I understand that the world is a terrifying place right now.  Will you get your 40 at work?  Hell, will your company even be in business in a year?  I so do get that, BUT you still have to have a place to live and you will be paying rent and with the affordability index at 176 vs. 106 in 2006 can you rent cheaper that you can own?

That my friends is the real question

Can you rent cheaper than you can own?

Not, when or where the bottom arrives.

Just when you thought you had the credit scoring system all figured out along comes FICO 08.  Now we all know with all the changes in the lending world that credit socres are so overly important and we are all looking for ways to help our clients maximize their scores and actually FICO 08 just might help some.

  Transunion started using it end of January and Equifax is planning a fall launch and Experian, well it is anyones guess when they might roll it out. (Experian and FICO are not very friendly these days)

Some of the changes are

• Collections that start under $100 will not have an impact on your score. These are 3rd party collection accounts.  You get no love for paying down that $500 collection to $75.
• Maxed out credit cards will hurt MORE
• An approximate 15% shift in points towards credit use.  This will help your score if you care little debt on your credit cards and hurt you if you are maxed out
• A single 30 day late will not hurt as bad or one rough spot BUT a pattern of 30 day lates will hurt more
• Authorized User accounts will still be scored, BUT there is going to be some sort of "reality test" that FICO isn't sharing with us.  The guess is if the consumer has a 2 year credit history and there is a 20 year old authorized user account on that consumers credit they wont be receiving the "points" for that account.  In other words does that account make any sense in the consumers credit profile.

You know, that listing of yours that is really not so bad but is so outdated or the kitchen or any part just kills all maybe might have some interest.

 If some one could just see all that potential you will have a happy seller and we know the seller doesn't have the money to fix it up or they "don't want to make a decision on what the buyer might want"

So what is a smart Realtor to do?

Call your local professional mortgage professional and ask if they can do a Streamline 203K.  Then get a few bids from contractors detailing the work and then add in a nice artist rendering of what it would look like.

WHAT?  How does this work? 

The 203K Streamline will allow for up to $35,000 of repairs or updates if you will.  The home really should be "livable" after all it is the intention of this program that the new homeowner is able to live there and not have to pay rent and update or fix the place.

1. The home is appraised as the work is already completed
2. The loan is for the purchase price plus the improvements less the 3.5% down payment
3. At closing the seller gets their money and the new owner has the improvement money left in escrow and as the work is completed brings in the bill and it gets paid.
4. All work should be able to be completed in a timely manner (90 days)

Ok so it isn't as easy as having the perfect listing BUT with the amount of homes for sale some good some bad and some just ugly, being able to give your seller and your listing just a little something to make them stand out from the crowd is all you are really after

 Are you much like me and all you hear is political talk on how to do this and how to do that?  Has any elected public offical actually put forth a "plan" that actually has details?  What about the talk about "temporary nationalization" of the banks?

How about something that doesn't include lower asset values?  How about a plan that just might actually stop or at least greatly slow the foreclosure inventory coming on to the market that is keeping the inventory well over demand that is actually the issue here.  Supply is grossly over what the demand is at this point.  This is after all an economic problem that needs a market answer not a political one.

How about we bring back an old friend, the step rate program otherwise known as the graduated payment loan?

Here is how we do this

1. No Appraisals.  Sorry we don't care what the home might be worth today.  I don't care if you are "underwater".  Heck you are "underwater" when you drive that brand new Lexus or other car off the lot and you keep making your payments so keep making your payments on your home.  If you can afford them then you are alright if not you fall into the next step.
2. For all those in foreclosure (and no we will not try and pick who gets help and who doesn't, we just do not have time and YES this makes me angry but) Your loan will be rewritten.  All that you owe, current balance PLUS all late payments and fees will be what your new loan will become

Example your balance is $200,000 and you have 25,000 in late payments and fees.  Your new loan is $225,000.

3. For the next 24 months your interest rate will be 4%, then it will go to 5.25% for 18 months after that and then settle at 6.25% for the balance of the loan.  If the market has a lower rate at that time and your home has increased in value to where you could get a lower rate, fine then refinance it at that time.

4. You will get a letter from your lender with your new loan terms via certifed mail.  You have 21 days to reply to this offer if you do not then we will resume forclosure proceedings.

WHAT DOES THIS PLAN DO?

No mortgage brokers or anyone will make any money in this plan on these loans. But we put a stop for the time being on the amount of inventory entering the market and we give EVERYONE a chance to start over.  Think of this as a big "Do Over". No bank takes a "loss" or write down and with the inventory under somewhat control we all wait for values to rise. (True FTHB's will be allowed to use the step program to enter into the market BUT they will take a FTHB class).  We do not have time to decide and debate who is worthy of help and who isn't, we need something to stem the tide of the supply increasing to a point that we can no longer absorb it into the market.

For those "underwater" the market will increase your values again you just have to wait.  Juswt like that fancy car you are driving.  Values will rise if we get the inventory under control, you just might have to stay in that home for 5 years or more and honestly how bad is that?

I Listen yesterday to Mr. Obama's little speech laying our his "plan" for the housing mess and kept

wondering were the little old lady from the Wendy's ads in the 80's  "wheres the beef"  

After all, HOW are "WE" going to do this?  A little while back when the "sub prime"market was imploding we received this wonderful program called "FHA Secure".  This program was to help save homeowners just when the mess was starting with the ARMS adjusting all over the place and house payments going up hundreds of dollars in some places.  So what happened?  The banks didn't and wouldn't make the loans. 

One case in point is a client of mine that got hurt on the job and lost 75% of his income for 4 months.  Instead of missing a mortgage payment they lived on the credit cards and and ran their debt up. So, now drowning in debt and back to work they are struggling to keep up and yes are missing so payments on the credit cards.  Nothing major a 30 day here and 30 day there.  With the debt loan maxed to the limit the credit scores are low and now we have missed payments so we dip below 500. BUT the FHA Secure program was designed for these people.  They are the "Poster Kids" of FHA Secure.  But to keep this post short, lets just say they lost the house because the banks wouldn't, couldn't make the loan.

So, fast forward to now.

We have the government making this wonderful speech and I really loved the line that he want to stay and hang out yesterday but had to get back to work. 

And we have the banks tightening the guidelines. Now, we know most of this "plan" will probably fall to FHA insured loans.  Why?  Because of the mortgage insurance that will be charged on higher loan to value loans.  Look, if you bought right with 20% down and are not struggling with your payment and your homes value has dropped you are not a candidate to refinance.  Why pay mortgage insurance?

So back to the changes.  580 scores are now 620. So, if you are struggling and have maxed out your debt and maybe missed a payment you will be under 620.  Don't believe it, have your credit pulled.  Yesterday, got an email from our secondary department that we now longer have any investors that will purchase a loan from us that as a single 30 day late int he last 12 months.  That right there just got every one of these loans denied.

So, President Obama tell me this, just how are we going to do this?

Are you sir going to be the underwriter and the bank that makes these loans?

 Yes, that is the response I just received from a Realtor at almost 7 pm local time.  This Realtor called me at 4 something when I had a client in my office and as I was walking out the door at 5 for a meeting I was given the message. 

Now the question is why that response? 

and

Do you get the same?

As we reach the mid way point of the first month of 09Now, is the time to review your business practice and your

CUSTOMER SERVICE BUSINESS MODEL.

Can your clients count on you?  In today's world how do you service your client and allow for family time and all the other stressors in our world.

Look I know this is not easy, BUT then again it is.  Honestly it is.  I will not tell you what time management "guru" or other "self help stud or studette" to look to for help.  The honest and easy way is to set limits and to let your clients know your limits.  They will respect you and your professionalism if you do.

SO

I wonder (because this profession amazes me) are you taking advantage of the tools that are out there to help you  be profitable?

Do you have a contract for you and your clients on what you will do?

Examples:

• Do you text?
• Is your cell phone a tool you use to say send a picture or email? Can you price out a loan or do a MLS search on your phone?
• Do you have limits on when you are available to clients? and do they know it? (hence my title I am available and will return all communication between 7am and 8 pm: email, text or phone and my clients know it)
• Do you block out time for you during the day?
• Do you schedule "FREE TIME"
• Are you using "auto responders" on email?  If so stop, this tells me you don't care and are out of touch. I will move to the next person.
• Same for "scheduled time" to return calls and messages.  I have an associate that every time I send him an email or call him I get " I will return messages between X and Y hours".  Now I understand that he got this from a "time management guru" but it screams "I DON"T CARE".

Bottom line

Professionalism

and

Customer Service

Simple my friends.  Take care of the basics and the basics will take care of you.  Now per my contract with myself and my family.  The business day is done.  Enjoy your evening and we will engage in debate tomorrow.

There are many stories out there this week that we will be at 4.5% soon..... according to an article in the WSJ yesterday.  The article goes on about how this will be for "new home loans".  Will it happen?  No one is really sure and I bet you are getting that question from your buyers......  5% to 4.5% on a 30 year will equal 30 bucks a month.....  but I want to share with you what is actually happening in the market TODAY.....  

 #1)  I have a client looking to pull cash out to consolidate some bills on a manufactured home.  They are at 6.375 on a loan I did for them a year ago.....  today with their score high 500's their rate will be 7.5%......  not so good  

#2)  Another refi with approximately 620 scores.....  rate on the loan I did almost 1.5 years ago 6.375  today.... 6.875%   if the scores go over 680 we can get them at 6%   Moral of the story.....

YES rates are low and anyone can quote you and your buyers ANYTHING, but be careful.....  now more than ever it is important to know and understand what your mortgage banker is quoting to you and your clients.  Sure I can quote you 4.875% BUT did I find out what your credit score is?  Did I find ouut what type of home you are living in or looking at?  DID I ASK YOU ANY THING ABOUT YOUR STATUS????

A professional will find that out so you have no suprises in the future.