On September 24, at 6:30pm, I will host a Homebuyers Question & Answer session. Joining me to answer your real estate questions will be Marlene Marshall, a real estate attorney at Marshall & Laffey Ltd and Mike Demarse, a mortgage consultant at Travis Mortgage.
I hope that the Q&A will be a very pleasant and informal conversation about buying property. After some introductory comments, I plan to describe each step in the home-buying process....but it is my hope to be interrupted frequently as the whole point is to answer questions that people might have, whether they be general or very specific.
By having a real estate attorney and a mortgage broker present, I hope that, between the three of us, we will be able to provide detailed answers to most questions that arise. While the focus will be on educating home buyers, I also expect this to be a learning opportunity for us "experts," as we will hear firsthand the concerns of consumers.
If those who attend enjoy themselves, laugh a little, and learn a little, then I will consider the evening to have been a success. I hope that attendees will leave with greater clarity about the homebuying process and will understand the importance of buyer representation. Of course, I will also be happy to discuss the possibility of working personally with buyers in their home search.
Whether you are considering buying your 1st home or have already purchased many properties, come learn more about the home buying process and how you can achieve your real estate goals.
William Hall Library (1825 Broad St, Cranston) on Wednesday, September 24, at 6:30pm.
This is a FREE public service event, and I hope to see you there.
The 2nd quarter of 2008 began on a positive note for mortgage borrowers, as a relative lack of news caused the Mortgage - Treasury spread to narrow from its March 13th peak at 2.60% to a low of 2.03% May 30th. The Mortgage Treasury spread is an indicator of relative risk between commonly quoted long-term securities, 30-year fixed-rate mortgages as quoted by Freddie Mac, and 10-year treasury notes. (30-year treasury bonds are not used because 30-year bonds have not been continuously available in recent years). Recent news has been less favorable to the spread, however, as the failure of IndyMac Bank, and worries about the financial stability of Fannie Mae and Freddie Mac have undermined mortgage values. In spite of a 20 basis point decline in treasury yields through June and July, mortgage rates have increased an average of 38 basis points, bringing the spread to a new high of 2.63%
In other words, homeowners now pay 2.63% more to borrow money for the long term than the US Government does. Compare this to an average spread of 1.5% throughout the first half of the decade, and the effect of current market woes becomes quite apparent.
The treasury market has been quite volatile lately, and interest rates have made significant moves both intraday, and day by day. Treasury rates closed sharply lower today on continued worries about the health of the financial sector. While existing home sales results did provide a glimmer of hope, inventory of homes for sale grew further, suggesting that foreclosure difficulties continue to fill the market.
On a positive note, mortgage giant Freddie Mac conducted a successful sale of debt securities, indicating continued investor confidence in the bonds that company depends upon for short-term financing. Freddie, and sister Fannie Mae, underpin the availability of relatively low-cost financing for homeowners, and frequently turn to the secondary market for funds.
FHA mortgages are experiencing an unprecedented increase in demand, with mortgage application share three times higher than a year ago, as government insured loans are becoming a bastion of stability in today's trying market.
We will review and fill out several important documents, including the Listing Agreement, Property Detail sheet, and Seller's Property Condition disclosures. Providing as much detail as possible about the property will help me to market the property effectively, will give potential buyers a sense of integrity about the property, and will avoid potential future liabilities for undisclosed issues.
In addition to the paperwork, I will take room measurements and photographs, taking care to choose appealing but accurate images which will draw people to the property without creating false expectations. To that same end, we will also consider headlines and advertising copy that is most likely to be effective in attracting potential buyers.
5. Marketing
The specific types of marketing will depend on your property and circumstances, but may include any or all of the following:
"For Sale" sign placed on the property, along with take-away information sheets
Placement on the Multiple Listing Service (MLS) -- this is the primary source used by realtors to identify properties for their buyer clients as well as the "feed" for most of the popular Internet property search sites
Open Houses
Flyers that can be posted at your workplace or on public bulletin boards
Print advertising in newspapers and real estate publications
The extent of your participation in marketing details and decisions - e.g. headlines, copy, placement - is entirely up to you. I welcome your collaboration to the extent that you wish to be involved.
6. Showings
While it is important to try to accommodate potential buyers who wish to view your property, we will also try to minimize the disruption to your life by providing as much notice as possible and/or by allowing showings only at certain predetermined times. As a rule, it is best for the sellers to be absent during showings to allow buyers the freedom to explore the property and imagine it as their own. I will make sure to point out important features, answer questions, and note any reactions or feedback that might help us to market the property.
A note on privacy: during showings, it is common practice for people to open closets, medicine cabinets, etc, so please keep this in mind when preparing for showings.
Quite often, first time buyers are unsure of what to expect from a home inspection.
The primary purpose of home inspections is to assure that there are no "deficient conditions" that were not disclosed by the seller, specifically anything that would significantly affect the value or safety of the property. The inspection process will also help you to further familiarize yourself with the property and to anticipate minor repairs or maintenance issues that you should address after closing.
The scope of inspections conducted depends on the nature of the property and on your specific needs or concerns. The "physical/mechanical" inspection covers the major structural components (foundation, framing, floors, walls, roof, etc) and the primary systems (heating, electrical, plumbing). Other inspections might include pest infestation (past or present evidence of termites, carpenter ants, etc), septic system & well (if relevant), radon levels, lead paint, and specific inspections of non-standard amenities (e.g. pool inspection). Your agent can help you to determine which inspections to perform.
A thorough inspector will provide you with a report detailing any and all issues discovered, ranging from major problems (e.g. leaking roof, non-functional furnace, etc) to minor flaws (e.g. loose doorknobs, missing trim or molding, etc). Upon reviewing the inspection report, you can choose to go forward with the purchase as is, void the Purchase & Sales Agreement and demand return of your deposit, or request that the seller make specified repairs or provide a credit at closing towards those repairs. Since the definition of "deficient condition" is somewhat subjective, it is common for there to be some negotiation involved in resolving inspection issues.
Selling in today's market is a challenging prospect. Not only are you competing against a large surplus inventory of homes, but you are doing so at a time when there are relatively few qualified and motivated buyers. It is more critical than ever to carefully plan and manage every aspect of marketing your property.
1. Initial Consultation
During my initial visit to your home we will discuss the specifics of your situation, your motivation for selling, any time pressures or constraints, and any other factors relevant to your selling decision. I'll also ask for a tour of the property and any information you can provide regarding ownership history, construction, condition, important features, and any planned upgrades or repairs. If you have any questions about me or about Epoch Properties, I'll be glad to answer them at this time.
2. Research & Market Analysis
By consulting the public records on your property available at your local Town or City Hall, I will document ownership information, the property description and boundaries, zoning, tax information, liens (e.g. mortgages), and other official information of potential relevance. By reviewing this information now, we can identify any problems or inconsistencies that will need to be resolved prior to the sale of your property.
I will also perform a Competitive Market Analysis (CMA), comparing your property to similar properties that have sold recently as well as to those currently being offered for sale. The CMA is a critical tool in helping to assess the appropriate listing price.
3. Marketing Dialogue
At our second meeting, I will share with you the results of my research, along with my opinions and recommendations for marketing your property. We will discuss the terms of the listing agreement (duration, commission, my obligations to you), the listing price, marketing strategy, and pre-showing preparations (e.g. repairs, upgrades, decoration).
It is also helpful to talk about your expectations as well as a contingency plan if they are not being met. If we are not successful in finding a buyer within a specified period of time, we should be prepared to alter our marketing strategy, reduce the price, or both.
We are starting to hear the term 'buyer's agent' more and more these days. Someone asked me if the whole thing wasn't just one more way for realtors to market themselves, especially in such a challenging market.
The answer is no...
A "buyer's agent" is a real estate agent who has entered into a written agreement to represent the interests of a party (or parties) who intend to purchase property. The buyer's agent helps the buyer to clarify his or her specific needs, secure financing, locate appropriate properties, identify and understand needed repairs or maintenance, negotiate the best possible purchase price, hire service providers (e.g. home inspector, closing attorney), and generally guides and advises the buyer through the entire process. The buyer's agent is legally and ethically obligated to look out for the best interests of the buyer, to disclose any and all information about the property or the seller, and to diligently protect the buyer's confidentiality. As a rule, the buyer does not pay a fee for these services.
It is not at all just a marketing tool for agents. In fact, most agents tend to focus on acquiring listings and often don't even adequately inform buyers about the benefits of buyer agency as it is often not in the AGENT's best interests to do so.
When a listing agent enters into a contract with a seller, there is an agreed-upon commission % to be paid by the seller at closing. If the buyer is represented by another agent, the listing agent must split that commission. If an unrepresented buyer contacts the agent directly and agrees to purchase the property without representation, the listing agent keeps the entire commission.
In that scenario, the listing agent owes all of the loyalties described above to the SELLER and is effectively operating AGAINST the buyer's best interests.
Thus, even though agent's are legally obligated to disclose these facts and (in my opinion) ethically obligated to make sure that a buyer understands all of the ramifications, it is easy to see how this is often at odds with the financial incentives. Do yourself a favor, and find an ethical, competent, trustworthy Realtor to act as your buyer's agent before you even begin to look at property!
Selling property in today's market is a challenging prospect. Not only are you competing against a large surplus inventory of homes, but you are doing so at a time when there are relatively few qualified and motivated buyers. It is more critical than ever to carefully plan and manage every aspect of marketing your property.
As your agent, I will work diligently to help you get the best price and terms possible for your property. And while every seller and every property are different, the process generally goes something like this:
1. Initial Consultation
2. Research & Market Analysis
3. Marketing Dialogue
4. Listing the Property
5. Marketing
6. Showings
7. Negotiating a Contract
8. Satisfying Contractual Obligations
9. Closing
My goal is to minimize your stress and maximize your positive experience by overseeing every detail and by giving you resources, information, and advice that will help you to make the best decisions.
And now the moment you've all been waiting for.........
The end of the list........
7. Perform Home Inspections and Settle any Ensuing Issues
With very rare exceptions, I will strongly recommend that you include home inspections as a contingency in the Purchase & Sales Agreement. While the inspections cannot completely eliminate risk, they will substantially reduce the likelihood of encountering unexpected and costly problems after closing. Inspections are generally performed at the expense of the buyer and typically will cost $300-$600 for a residential property, depending on the nature of the property and the specific inspections conducted.
It is important to schedule inspections as soon as possible after signing the P&S, in order to allow adequate time before closing to resolve any issues which might be discovered. As with every other decision, the choice of home inspectors is up to you, though I am happy to provide referrals from which you can choose. In most cases, buyers prefer that I coordinate the scheduling, but I do suggest that you be present for the inspections, as it presents an opportunity to learn further details and to ask questions about the repair and maintenance of the property you will soon own.
Upon receipt of the written inspection report, we will review it together and determine what issues, if any, require attention. If the inspections uncover any issues which would significantly affect the value or safety of the property, you may terminate the agreement to purchase, ask that the seller remedy the problems before closing, or request a monetary credit towards the cost of the expected repairs. Although not obligated to cooperate, sellers are generally motivated to do so to avoid having to put their property back on the market, especially since they are legally required to disclose any known defects to potential new buyers.
8. Satisfy Remaining Contractual and Practical Requirements
You will choose an attorney to represent you at closing. Again, I can provide referrals if needed. The attorney will perform a title search to ensure that the seller has a clear and marketable title to the property and to reveal any encumbrances, rights of way, easements, restrictions and any other matters or conditions which may affect the property. In addition, your attorney will coordinate with your lender and the seller's attorney to prepare all the required documents for closing.
Once the lender receives a copy of the signed P&S, their underwriting department will order a property appraisal and will begin processing your loan. Even though you may have been pre-approved, it is not uncommon for the lender to require additional or updated documentation from you before issuing the loan commitment. You will also be expected to secure title insurance (typically your attorney will take care of this) and homeowner's insurance before the lender will release the funds for your purchase.
During this phase, it is critical that all of the parties involved are cooperating effectively to satisfy all of the requirements for a smooth and timely closing. As your agent, one of my most important roles is to facilitate this process by tracking contractual dates and coordinating the communication in order to avoid unexpected and potentially costly delays.
9. Finalize the Purchase at Closing
Immediately prior to the closing, we will conduct a final walkthrough to verify that the property is being conveyed in the agreed upon condition.
The closing itself will typically take place at your attorney's office, though it can be conducted at any location acceptable to all parties. Your attorney will review with you the deed, the mortgage, and a sizable stack of related documents requiring your signature. Once you have signed all of these documents, your attorney will record them at the local city or town hall, and the title to the property will officially pass to you.
Having just burst onto the social networking scene (ha ha) I'm still trying to learn how to best use all of these various tools for the real estate business. I have found tons of great advice here, and I'm someone who looks first to those who've found success, or failure, and I try to listen and learn. That's easy to do here on Active Rain, but less so on Facebook and Linked In.
With Facebook, it is a bit easier because there really is more of a social (fun) aspect to rely on. But with Linked In, I've been struggling to find ways to make it useful for our particular industry. It seems to be more geared toward freelance workers who depend on connections to line up work.
Having said that, I'm never one to get discouraged (see above for ha ha comment) so I decided to create a group for Rhode Island Real Estate professionals. I'm hoping to have lenders, attorneys, agents, and all the rest. And I'm hoping to find yet another way we can work together to help us get on the other side of this market, with as few scars as possible.
So, without further ado...here is the group information and an invite for all of you.
4. Identify Properties Which Match the Criteria we have Defined
You may know exactly the type of property you are seeking, or you may be starting with only a few vague preferences. In either case, we will prioritize the criteria that you have defined and create a search profile specifically for you. For many people, the process of looking at properties is an integral part of clarifying their needs and wants, so this profile may very well change as we go along.
Based on your profile, I will perform a search and deliver appropriate listings via e-mail for you to review at your convenience. The large majority of listings will come from the Multiple Listing Service (MLS), the official property database of RI Realtors, where 85-90% of all residential property sold is listed for sale. I do also monitor other sources (e.g. Craig's List, various "For Sale By Owner" sites), but encourage you to do your own prospecting as well if you have the time and desire to do so.
While it is by no means a requirement, most people prefer to drive past prospective properties to check out the exterior, the lot, and the neighborhood before scheduling actual showings. Once you have identified those properties that you wish to see, I will make arrangements for us to go view the properties together at a time that fits your schedule.
5. Visit Properties Together and Perform Relevant Research
As we view properties together, I like to give you as much space as possible to look at your own pace and without too much distraction, though I may point out special features or potential problems that you might have missed. Often, the listing agent or seller may be present; while this offers a great opportunity to ask any questions you might have about the property, it is a good idea in this circumstance to try to maintain a "poker face" so as not to compromise your negotiating position should you decide to bid on the property.
Once we have identified a property which seems to be a good fit for you, you may have questions or concerns that need to be addressed before you are ready to make an offer. By making the appropriate inquiries through the listing agent or researching the public records, I will be able to resolve many of these issues for you. In some cases, particularly when a subjective assessment is involved (e.g. "What's the neighborhood like?" or, "How's the school system?"), I may refer you to other resources or make suggestions on how to do the appropriate research yourself.
Prior to drafting an offer on the property, I will gather as much information as possible to help with the decision-making process. This may include public information regarding ownership history, tax records, and recorded liens, as well as data from the MLS about comparable sales and active listings.
6. Negotiate and Execute a Purchase & Sales Agreement
Before putting ink to paper, we will first consider all of the information we know about the property, its market value, and the seller's situation & motivations. We will also discuss the various contingencies that need to be met, including any repairs that must be made, personal property to convey (e.g. appliances, window treatments, furniture), inspections to be performed, existing property that you need to sell, timeframes for closing, and anything else that will affect your ability and willingness to purchase the property. Finally, we will determine a maximum price that you are willing to pay for the property, discuss best strategies, and settle on an initial offer.
After detailing all of the above-mentioned terms in an "Offer to Purchase," we will submit our offer (usually to the listing agent) and wait for a reply. The seller has the following options: accept the offer as written, reject it outright, or (the most likely scenario) make a counter-offer. It is not uncommon for there to be several rounds of negotiation. Assuming that we succeed in reaching an agreement, both parties will then sign a formal Purchase & Sales Agreement (P&S), laying out the terms in detailed legal prose.
At this time, you should expect to deliver a deposit with the Purchase & Sales Agreement, typically 3-5% of the sale price, which will be held in escrow by the listing broker until closing.
“Our world and the people in it do not always behave as we would like. For this reason, a well-developed and resilient sense of humor is an essential ingredient for health and happiness.”
Paul Hodosh
increased an average of 38 basis points, bringing the spread to a new high of 2.63%
;)
;)
