Thoughts on mortgages real estate and first time buyers
Whether you put up a real tree or an artificial one, it’s good to keep in mind some basic safety tips.
We only put up a Christmas Tree once a year. We’re only human, and we forget things. Whether you put up a real tree or an artificial one, it’s good to keep in mind some basic safety tips.
From the National Safety Council.
Happy Holidays!
Al and Larry Ubell, the “Gurus of How-To” appear regularly on Leonard Lopate’s radio show on WNYC.
I have been a faithful listener of Leonard Lopate’s radio show on WNYC FM for many years. Since I’m often driving around making sales calls in the middle of the day, I have the luxury of tuning in to Leonard’s show while tooling around Brooklyn, Queens, and Long Island.
One of the regular features on Leonard’s show is a visit by the Gurus of How-To, Lawrence and Alvin Ubell. Their most recent appearance was November 9th.
I highly recommend tuning in to the show (and maybe even posing a question for the Gurus!) either via radio or on the ‘net. Larry and Al present often complicated issues about home inspections, engineering issues, environmental testing topics, and even chats about ugly or not-ugly newfangled flourescent bulbs. They always have great answers for the listeners who call in. If you miss the show, you can always find it in the WNYC Archives.
As much as I know about homes and stuff, heck, I still manage to learn a thing or two from the Ubells. They have a wonderful newsletter, too. I highly recommend it: it’s good reading.
Larry and Al also provide home inspection services to homebuyers through their company Accurate Building Inspectors. If their inspections are anything like the superb information provided on the radio, I imagine any homebuyer could consider herself in very capable hands by hiring them.
If you’ve read my blog and advice before, you know that not only am I a strong advocate in favor of a quality home inspection by a Certified Engineer, but that I also believe the Engineer, ready to inspect immediately you make an offer, should be part of a Homebuyer’s negotiating strategies.
A quality home inspection is part of the process of buying your first home. When you prepare in advance by getting prequalified, and lining up your professional advisors—your attorney and engineer—you negotiate with a Homeowner from a much stronger position. In this market, that can make the difference between getting the home you want at the price you’re willing to pay, and endless frustration with Realtors and Sellers who don’t seem to “get it.”
One other note: if you tune in and love what you hear, don’t miss the opportunity to make a contribution and support public radio.
Commercial real estate is a very unique proposition, completely different from residential real estate in every way including the financing. This NYTimes.com article advises investors to proceed with caution. So do I.
An excellent article in today’s NYTimes.com about investing in Commercial real estate. I love this article because it echoes much of what I say to my clients when investigating commercial real estate opportunities; namely: proceed carefully.
Too often the urge to jump into an opportunity with the “get rich quick” mindset makes people foggy of the brain. The careful research they normally might apply to a consumer purchase such as a car or airline ticket to Orlando gets tossed out the window. A sense of urgency compels folks to jump now and check the parachute rigging later. Such reckless behavior is very dangerous.
If we can draw any lessons from the recent run up in residential real estate prices it should be that of cautious due diligence.
This NYTimes.com article professes just such an attitude. So do I.
Sometimes I meet a new client whose fervor to jump in causes them to lose patience with my careful—and much slower—approach. I’ll take my time to thoroughly prequalify every aspect of the transaction. I wouldn’t be servicing my client properly if I didn’t. I need to work with a view towards anticipating problems and solving those problems to get the loan approval and ultimately the closing.
My attorney John McEntee once told me, “The best way to make money in real estate is just to buy it.” He did not say, “…throw all caution to the wind and buy it.”
Commercial real estate is a very unique market, different from residential real estate in every way including the financing.
I’ll choose the cautious “due diligence” approach every time, thank you very much. If that’s how you want to approach your investment in commercial properties, then I’m your (financing) man!
The NYTimes.com article is here:
10 Ways To Stumble In Commercial Real Estate
This is the process I recommend to my clients on the “How-To” of making an offer.
When you make an offer to purchase a house you are opening a dialogue with the Homeowner. You want to buy the home at the price you’re willing to pay; that doesn’t always equal the listing price. I think it’s important to view the offer as a process and not the be all and end all of the transaction. Often Buyers feel “constricted” by the offering process. It is perfectly understandable that you might feel impatient with the process of shopping for a home. Too, some Realtors might try to make you feel as if you must make your “best and highest” offer.
I encourage you to discard that oppressive feeling. Liberate yourself and use the offer as a way to get what you want: the home you like at the price you’re willing to pay.
Follows is a process I recommend to my clients on the “How-To” of making an offer. I hope you find it useful in achieving your goal of homeownership.
In my view of the offering process, I want my clients to present themselves as the best Buyer for a home the Homeowner has ever seen. Everything you do within this “How-To” creates that sense in the mind of the Homeowner.
I know from personal experience these methods work. Many of my clients have had offers accepted by following my advice. Realtors have told me, “We had another Buyer offering $10,000 more than your client, but your client impressed us and the Homeowner as clearly being the ‘better Buyer.'”
1. Always make offers in writing. Yes, it is absolutely true that offers can be presented verbally. Don’t do that. Put your offer in writing every time. Even if you are in a situation where you and the Seller are sending counter offers back and forth, every new offer should be in writing.
When your offer is in writing, you come across to the Seller as serious. Think about it, anyone who is taking the time to go in to the real estate office and sign the form is serious about buying a home. Seriousness counts big time.
Put the following into your written offer:
-The amount of your “earnest money deposit” or “good faith deposit.” That is the amount of money you’ll put into escrow with the Seller’s attorney upon signing the contract of sale.
-The amount of your mortgage financing. Of course you’ll back this up with a prequalification letter, but you must include the amount of your mortgage in the offer.
-Items included in the sale. If the appliances and the chandelier in the dining room are to be included in the sale, make sure they are written in to the offer. This shows the homeowner you were paying attention when you inspected the home and asked, “What’s included in the sale?”
-The name and telephone and fax numbers for your attorney.
-Anticipated contract date. Always make this date within 48 hours of your offer. Present the assumption the Seller will accept your offer and immediately forward a contract to your attorney.
Again, this demonstrates to the Seller how serious you are. You are in effect saying, “I am so serious about buying this home I want to sign the contract immediately!” Imagine how many other Buyers out there are delaying things like signing the contract (and potentially changing their minds).
-Anticipated closing date. This is an interesting point for the offer. I always recommend putting the closing date for an offer within thirty days of the contract (check with your mortgage Lender to be sure this is possible). The fact is most closings take place within 60 days of contract, and your attorney will likely put that in the contract, but if your offer says “thirty days,” once again you demonstrate how serious you are about buying the home.
2. Prequalification letter. Your mortgage professional should be available to fax a prequalification letter within hours of your making your offer; even on Saturdays or Thursday evenings. The prequalification letter should match your offer, not display a higher loan amount. You don’t want to give away your negotiating position by showing the Seller you can afford more than you’re willing to pay.
3. Mortgage pro phone call. I think a phone call from your mortgage professional to the Listing Agent is a home run. When the Listing Agent here’s from the mortgage person directly how eminently qualified you are, imagine how that raises your profile to the agent and the Seller!
4. Credit Scores. Your mortgage person should be prepared to disclose your credit scores. While you don’t want your credit report released (that’s not allowed, anyway), many times the Listing Agent wants to know the credit scores.
5. Engineer ready to go. When you sign your offer, be sure to tell your Realtor that you’ve already spoken with your Home Inspector and you can have the inspection done tomorrow. Whoa, that’s really the mark of a serious Buyer!
6. Get ready with your counteroffer. If you offered less than the asking price, then you need be prepared with your counter offer if the Seller either declines or counters your opening offer. All of the steps above should be repeated with the new price replacing the original number. Organization and swift responses rule the day! Oh, you may not want to counter offer. That’s okay, too.
A great discussion came up this week on LifeHacker prompted by a reader’s question about the “walkthrough” before closing.
I love LifeHacker.
LH is a wonderful blog presented under the manifesto “Computers make us more productive. Yeah, right. Lifehacker recommends the software downloads and web sites that actually save time. Don’t live to geek; geek to live.”
I have learned so many great things about computers, the internet, and life in general from the information and links to blogs, websites and news articles posted there. I highly recommend you bookmark the site, put it in your RSS reader and geek to live!
A great discussion came up this week on LifeHacker prompted by a reader’s question about the “walkthrough” before closing.
When you’re getting ready to close on your home, schedule an appointment with your Realtor to inspect the home. You usually do the walkthrough inspection the night before or morning of the closing. You want to make sure there are no nasty surprises waiting for you once you move in and you want to verify that everything in the house and the condition of the house is reasonably the same as when you decided to buy it.
Below are the suggestions I offered on LifeHacker. Be sure to check out the LH site, too, as there’s lots of good advice from the LifeHacker readers.
1. Take your original home inspection report with you. Highlight in advance any major items that were to be repaired by the Seller prior to closing.
2. Take your time as you conduct your inspection.
3. A standard purchase contract provides that Plumbing, Heating, and Electrical systems are in working order and the roof free of leaks. Concentrate on these items.
4. If any personal property is included in the sale, such as refrigerator, stove, A/C, chandelier, etc., be sure those items are present and in good working order.
5. Observe any major cosmetic damage. Often you’ll see damage to a floor or wall that was previously obscured by furniture or carpeting.
6. Does it look like the Seller is packed and ready to move? Most contracts call for the Seller to vacate within 3-5 days. If it looks like they haven’t even begun packing yet, be prepared for a surprise request at closing.
7. Bring to the attention of your Realtor and attorney your concerns or checklist of missing or damaged items. Remember that for the most part you are purchasing the home “as is.” You can’t start negotiating price reductions at the closing table. Your attorney should be your guide in this area: she’ll know what you can and can’t fight for and/or ask for a credit for at closing.
8. Don’t forget your utilities. Once your closing date is confirmed, you should coordinate with the Seller their moveout date so you can have all utilities switched to your name and turned on effective that date.
9. If something is a glaring problem—huge hole in the wall, leaking bathtub onto ceiling below—be sure to snap photos. And, if you’re going to ask for a credit at closing, you’d better have at least two contractor estimates for the damage/repair. Don’t expect the Seller’s attorney to concede to your informal, “Well, I went online and saw a new bathtub is $3,000” estimate when deciding if and how much credit you’ll get.
10. Remember the Seller is holding your money in escrow. If it appears you are trying to “default” and get out of the transaction they could very well walk away and keep your money. Tread carefully, rely on the counsel of your attorney, and remember this is supposed to be a happy time, the purchase of a home. Don’t get bogged down and angry over minutiae. The fact is, when you own a home, things break. It could happen the day before closing, three months or six years later.
In an effort to simplify the whole credit report shebang and provide a starting point, here’s some advice I posted on LifeHacker.com earlier today.
What about your credit report? It’s out there and you’re wondering what it looks like and how it will appear to a prospective Lender. Maybe you’re preparing for the big home purchase sometime next year and you want to have all your ducks in a row. Perhaps you’re worried about identity theft or you’ve had problems in the past because your Dad, whose first and last names you share, has credit accounts appearing on your report. Or you’re just getting started building a credit history.
Whatever the reason, you want to know and you want to know now. And, once you know what your report looks like, what do you do to correct mistakes or increase your score?
The latest fashion seems to be for consumers to focus tremendous amounts of time and energy checking and protecting their credit history. Franky, I think all this energy being expended on credit reports is nonsense, but what do I know? I’ve only been looking at them for seventeen years!
In an effort to simplify the whole credit report shebang and provide a starting point, here’s some advice I posted on LifeHacker.com earlier today:
1. You can get a free report once a year from each of the three bureaus:
http://www.annualcreditreport.com
2. If you check your report and discover mistakes, fix them yourself. NEVER pay anyone to do this. The Federal Trade Commission has an excellent tutorial to guide you through the process of credit repair:
http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm
3. Want to know how your credit score is calculated? Try MyFico.com:
http://www.myfico.com/CreditEducation/?fire=1
4. If you have superb credit, consider opening a credit card with a bank based in the state of Arkansas. The reason most credit card companies base their operations in either Delaware or South Dakota is the law does not provide for an interest rate cap. Arkansas has a very reasonable cap, which in the 16 years I’ve known about it, has made credit cards from that state the best deal around. Once you’ve got an Arkansas credit card, transfer your balances from thos Delaware and S.D. cards and begin saving money on interest!
5. If you had problems before or you’re new to the credit card arena, ConsumerAction is one of the best resources I’ve found on the ‘net for advice on rebuilding or starting anew a credit history:
http://www.consumer-action.org/
6. I think the subscription services provided by the credit bureaus is a waste of money and time. You really don’t need to be alerted every month about your credit report. If you pay your bills on time, use your credit wisely, then you really shouldn’t need to worry about your credit score because it will be excellent.
You can access these websites directly from my homepage, tcurranmortgage.com on the “Links” page.
Have your attorney on your “team” before you get out there shopping for a home. It makes good sense to protect yourself in this way with the single biggest purchase of your life.
It is common here in New York to have an attorney represent the Buyer in a purchase transaction. I know elsewhere in the country this is not necessarily the case. Frankly, I can’t understand how anyone could proceed with signing important legal documents without an attorney present to review and advise.
I’ve recently encountered two situations where the Buyers were not represented by an attorney at contract or closing.
In the first case, the Buyer purchased a property in Florida. Until I reviewed their documents a year later, they had no idea a prepayment penalty existed on the mortgage loan for the Florida home. Their mortgage person was one of those, “Sign here! No Problem!” quick-talking salespeople who doesn’t bother to counsel, advise, inquire of, or explain the loan product.
Sure, the Buyers received a Truth-In-Lending statement for the loan prior to closing. But the TIL does not actually explain the loan terms. It provides only the fundamentals such as term (30years), Fixed/ARM, and the prepayment penalty box is way down near the bottom of the page and only says, “…may have to pay a penalty.”
That’s not much detail is it?
Had the Buyer been represented by an attorney at this Florida closing, their lawyer could have advised them right there at the table about the existence of the penalty, and the particularly onerous nature of this penalty (five years!).
That’s what the attorney does at closing: reads the documents before you sign and explains or questions those documents if there is something there that may be detrimental to your best interests.
The second case I heard of was last night. A Buyer signed a contract to purchase an apartment without an attorney representing her. The Buyer is not the least bit qualified for the mortgage loan. There is no way possible this Buyer can obtain financing to purchase this apartment.
Normally, you might think, “Well, alright, Buyer makes application to the bank, is denied for the loan, presents the denial letter to the Seller and gets the downpayment back.” Seems simple enough—and very common, indeed—but, not in this case.
The contract of sale has no mortgage contingency. And the Buyer put 10% of the purchase price down on signing.
If the Buyer had an attorney, at the very least the attorney would have made provision for a mortgage contingency in the contract. If the Seller refused to provide such a contingency, the attorney would have advised the Buyer of this deficit and the potential loss of downpayment. If the Buyer insisted on proceeding with the purchase minus the contingency, then an attorney could have advised the Buyer to be absolutely certain that mortgage financing was possible before signing the contract.
No attorney. No mortgage contingency. No mortgage loan approval. No way to get back the 10% downpayment.
Have your attorney on your “team” before you get out there shopping for a home. Your team of professionals should be at your disposal to advise you before you open up the paper to look at the “Homes For Sale” ads or contact a Realtor to show you homes.
It makes good sense to protect yourself in this way with the single biggest purchase of your life.
A smoke detector can save your life.
Thanks to Lifehacker.com for the link:
Be sure your smoke alarm is checked, maintained, and up to date. It amazes me when I speak with someone on the phone and hear the unmistakeable sound of a chirping smoke detector in the background on the other end of the phone. Or when I visit homes and see the installation plates up there on the ceiling sans detector!
The ridiculously tiny investment of your time and money buying and maintaining a smoke detector can save your life!
Here’s the link to the Arlington, VA Fire Department info page: Smoke Detectors
The desire to own a home in BedStuy is strong, but you may not know where to buy, and when you get out there you quickly discover how nutty this market really is.
The truth about buying a home in Bedford Stuyvesant
I have helped people buy their first homes since 1989. I have helped all kinds of people, in all kinds of markets and with all kinds of loans. Have I seen it all? Probably.
Bedford Stuyvesant is the HOT place to buy. But it’s confusing.
The desire to own a home in BedStuy is strong, but you may not know where to buy, and when you get out there you quickly discover how nutty this market really is.
I did mortgage loans in Bedford Stuyvesant as far back as 1990.
In 2004 I refinanced a beautiful home on Greene Avenue for a young couple. They needed to pull some equity out to buy the home next door. When I arrived at their house, I recognized that block. I had refinanced a home there in 1990. There were seven burnouts on the block back then. Several other houses were boarded up. Flash forward to 2004 and I saw only homes that were immaculately restored, or in the process of restoration.
I know BedStuy. I know that block to block can be a world of difference there. I know from looking at hundreds of houses in person when you’ve got potential problems at hand or when you have original details like pocket doors.
A little more here: An Englishman in BedStuy
Two tools. Buyers use them to get what you want: your dream of homeownership at the price you’re willing to pay. Sellers beware!
I believe the prequalification letter is a negotiating tool. Buyers must use this important device wisely when making offers to purchase a home.
In today’s uncertain and changing market, a Buyer has only two fundamental advantages when bargaining with Sellers. Remember, Sellers are still holding all the cards on price and timing of a sale. Those Sellers who aren’t “real” Sellers, will just sit it out until they can get their price or they finally give up, take the sign down, and head for the backyard barbecue grill.
Too, there are many “real” Sellers who want to believe beyond all hope they can still get top dollar (read: Summer 2005) for their home. As such, they’re not willing to negotiate on price, closing deadlines, downpayment, financing, or incentives (tossing into the sale price that freezer in the basement they would otherwise sell you for $350!). They really do want to sell, but haven’t gotten it through their heads, yet how dramatically the market has changed.
If you’re a serious Buyer—that is, you really want to get out of the rat-trap of renting an apartment—you’re faced with the dilemma of breaking through this impregnable mindset of Sellers. I don’t believe we’re in a “Buyer’s Market” yet, and there’s no guarantee this market will become a full-blown “Buyer’s Market.” Therefore, you have to focus on the fundamentals if you are truly to accomplish your goal of homeownership.
A Buyer has two devices, tools, or “weapons” in the quest to make the dream come true.
The first is the ability to get up and walk away from the negotiating table. I’ve said it before, and I’ll say it again a thousand times, a Buyer’s power is defined by the willingness to get up and say, “No, thanks.” You have to draw the line, and force a Seller to negotiate. If they come running after you as you leave the table, great, you’re making progress. If they don’t, well, you’ve just saved yourself a whole bunch of aggravation and potentially financial distress.
The second tool is the prequalification letter. Never show a Seller your maximum loan qualifications. If you’re negotiating down a price of, say, $425,000 to your offer of $387,500, and your prequalification letter says, “$500,000” the Seller has absolutely ZERO incentive to bargain with you. After all, according to the letter from your Lender, you can handily afford the price the Seller is asking. Boy! You’ve got nerve trying to bargain that Seller down when you’re obviously well-off enough to afford more than the asking price! The nerve!
Your letter should reflect only the price you are offering. If you increase your offer, have your mortgage person increase the prequalification letter. If you have to do this three or four times to get what you want, then so be it!
I have always customized my prequalification letters based on the offers my clients are making. Since
I specialize in 100% financing, the offer and the letter are usually the same amount.
But, there’s more to the use of this important tool. The letter is just a piece of paper, and you want the Seller (and their Realtor) to truly have confidence in you. You want to present yourself as the one and only Buyer for this home, so, “Take my lower offer NOW!”
The prequalification letter should be delivered immediately you make the offer. If you made your offer on a Saturday afternoon at 3:30p.m., the latest the prequalification letter should be delivered to the Seller is 10a.m. Monday morning. I usually send mine within hours of the offer, even if it’s a Sunday evening. Yet, too often, I hear from Realtors how they’re still waiting for a prequalification letter the following Wednesday! Frankly, I think that’s ridiculous.
This delay only serves to dilute your credibility in the mind of the Seller. And if you’re trying to get the home for less than asking price, if you’re strong enough to use option one in bargaining (walking away), then why would you knock yourself down a few pegs by working with a mortgage person who isn’t as aggressive as you are? The speed with which you—and your team of professionals: mortgage person, engineer, attorney—work puts action ahead of words. As the old saying goes, “Actions speak louder than words.”
Two tools. Buyers use them to get what you want: your dream of homeownership at the price you’re willing to pay. Sellers beware!