What about the weather?

Weather affects your prospects of buying a house in two basic ways.

Weather affects your prospects of buying a house in two basic ways.

Let’s use this past week as an example.

Last weekend the weather was not too cold, a bit sunny, and certainly not unpleasant. Until late Saturday afternoon, that is. That’s when the Blizzard of ’06 hit.

Up to the moment when the flakes fell, the weather was agreeable for Buyers out and about shopping for a home. In fact, Saturday the 11th was busy as all heck. Lorraine and I were out with Buyers and were literally bumping into other Buyers and their agents in houses. So, the weather made for a good time to look for a home.

Then the snow hit. No showing houses in that 26.9″ mess. But, though they couldn’t look at houses, the snow was a wonderful bonus for Buyers. Think about all the older homeowners sitting in their houses watching the snow fall. They’re dreading the thought of having to shovel all that white stuff. Impatience to move to sunnier—and less snowy—climes grows with every 3 inches-of-snow-fall-an-HOUR. Methinks this pushes a Seller’s motivation up a coupla notches.

In fact, the proof is in the pudding, as they say. A young couple we’re working with received surprisingly good news when the Seller (an couple in their 70’s by my estimate) counteroffered a total of 5% off the list price in a round of negotiating before, during and after the snowstorm. I even commented to one of the Buyers, “The snow is your friend, today!”

Ahh, then the weather changed. The listing agent, when queried if there was any movement from the Seller on the price further (the Buyers were sitting tight with a “wait-and-see” attitude for a house they really, really loved) responded, “Well we’ve had Buyers looking at the house the last couple of days and the Sellers want to see if they get any other offers.”

Yes, the weather had improved dramatically. The temps were in the 40’s, nay, the 50’s! The snow was a-melting away. The sun was shining and even some danged birds were singing like it was spring! (Sidebar: a Cardinal was singing happily up a tree Saturday afternoon when our Buyers saw this house they loved; and the sun was shining!)

The Sellers must have been sitting there thinking, “Oh, this isn’t so bad, this weather. We can wait and get our price.”

I don’t know if the forecasts of frosty temps for this weekend changed their minds, or some lingering backache from shovelling Monday morning, but the Sellers accepted the Buyer’s offer (the Buyer had come up to the last counteroffer) yesterday, Friday morning.

Wonder what the weather will be like when we close in a few weeks?

Danger! Will Robinson! The Closing Table

Karen shared some stories from closings at other mortgage companies/banks she’s attended recently.

I closed a refinance loan in our Brooklyn office Tuesday morning. I shared a ride in with Karen M. who closes titles for my refinance loans. We had a great chat catching up on business stuff.

Karen shared some stories from closings at other mortgage companies/banks she’s attended recently.

Most disturbing is the ridiculous prevalence of the nasty Option Arm loans. This is the Negative Amortization loan where you borrow, say, $100,000 today. On your mortgage payment coupon you have two or three payment “options.” If you select the lower payment option, the interest you’re NOT paying on the mortgage that month gets tacked on to the end of the loan. If you do that every month—select the lower option—you find yourself owing $120,000 instead of the original $100,000.

Huh? Yah, apparently that’s what a lot of people are saying at the closing tables that Karen is sitting at. The borrowers are sitting there pop-eyed, blood draining from their faces, and shocked into submission as the attorney for the Lender explains how this all works.

“Well, where’s the Loan Officer who wrote the loan?” I asked Karen.

“Oh he’s never there. Loan Officers never attend closings. You’re the exception, not the rule, when it comes to attending closings.”

(Actually, at my office, ALL the L.O.’s attend their closings; it’s not a company requirement, it’s just what we do)

She went on to say how terribly she feels for these borrowers. “But he never explained that to me. I didn’t know that.” All this as the borrowers sign the loan documents. Hey, it’s a purchase loan and the downpayment is on the line. What is the borrower to do, walk out?

I’m nuts about explaining stuff. Lorraine (my wife the Realtor) giggles and chides me a bit (in a nice way) when she’s trying to show a house to our customers and I’m interrupting and pointing to things and explaining, explaining, and explaining some more.

When I write loan applications, I explain the facets of the loan programs to my clients. I need to have them understand what kind of loan I’m approving, the reasons why I selected this program, how the monthly payment is structured, what an escrow account is, why you need life insurance, and, and, and…

Yes, sometimes I ramble. But, rather that than having my clients caught like a deer in the headlights at the closing table wondering, “What the…?”

Internet Resources and advice: Zillow

My feeling about Zillow: it’s just another internet toy that makes money for the site owner through sales of advertising but provides useless or confusing information to/for the consumer.

I just visited Zillow. This is the newly-released, much-hyped real estate information site. For those of you familiar with PropertyShark, think of Zillow as a glamorous version. If PropertyShark is New York City streetsense, Zillow comes off as Hollywood glitz.

My thoughts on Zillow:

I heard yesterday there were loading-time issues, but today I found the site loaded quickly for me.

I entered the data on a house I provided financing for last October. I thought this house would be a good candidate for information being up to date as it has been 4+ months since close.

Zillow provided only the tax assessed value on the property. I can get that from the Nassau County assessor’s office directly.

The description of the house was incomplete: Zillow couldn’t say how many bedrooms.

The last sale information posted was from 1992. PropertyShark’s information is superior. For the same house, the recent sale information is 2001 there. Neither site has the sael from October. Nassau County is notoriously slow in recording sale information, deeds, etc. This would explain the lag for PropertyShark. I don’t know why Zillow can’t pull the same info.

My feeling about Zillow: it’s just another internet toy that makes money for the site owner through sales of advertising but provides useless or confusing information to/for the consumer.

PropertyShark comes closer to the “promise” of the internet: free access to basic and useful information. Of course, in the industry, we take anything available on PropertyShark with a “grain of salt.” We have other, more reliable methods of verifying information about properties. For my part, I check with our appraisers.

Of course, this is all well and good, but there’s nothing like getting out there and actually seeing the houses up close and personal.

Just my opinion.

Starter Homes: anonymous opinions

I queried anonymous members of the Craigslist Housing Forum for their feedback on “Starter Homes.”

I queried anonymous members of the Craigslist Housing Forum for their feedback on “Starter Homes.” The comments and suggestions I received were excellent.

http://forums.newyork.craigslist.org/?ID=38811961

Starter Homes: the beginning

My “Starter Homes” ads on Craigslist sprung from a mission I had with my wife, The Realtor last fall.

I have been advertising on Craigslist to first time homebuyers: “Starter Homes.”

If you’ve read anything on my website or of my postings at the Craigslist Housing Forum or NYTimes.com Housing Forum you know one thing about me above all else: I believe in owning your own home.

Strip away your agonizing thoughts about interest rates, the economy, the global state of politics, oil prices, the jobs outlook, and just about any other distracting negative news that prevents your from achieving this most important goal. And if you’re working with me I’ll peel away the distractions from your brain for you. No problem. My pleasure. Really, I will bring you back to the most important reality, and the only one that counts: you’ve got to own your own home.

My “Starter Homes” ads on Craigslist sprung from a mission I had with my wife, The Realtor last fall. A young woman was referred to me by her aunt. Lorraine and I were entrusted with the task of finding this young lady her first home, located in Nassau County, and priced no more than $330,000-340,000. Whoa. This seemed a daunting task.

More about our experiences with that house purchase here: https://www.tcurranmortgage.com/blog/?p=7

We very quickly discovered the lie to our perception about the Nassau County market. You didn’t have to spend $500,000 to buy a home! Wow! In fact, we found over 140 houses in that first search. And these homes were located all over Nassau. Best news yet: the homes were all priced less than $350,000!

We helped our young customer make her dream come true. I saw this as an opportunity for my clients. I meet so many homebuyers who have the strong desire to live here on Long Island, yet can’t afford the prices. Thus began our work to help as many homebuyers as possible make their dreams come true with homes priced in a range affordable to their monthly budgets.

Now, these homes are what I call Starter Homes and I will write these next blog articles specifically to discuss what I mean by that term. I can tell you in advance: it’s a good thing!

How to Find a Realtor to work with.

My longstanding advice to my clients is: find a good Realtor to work with. They’ll work hard to get the right house for you.

The age-old question, it seems, for homebuyers is, “How do I find a real estate agent who isn’t going to waste my time? One that will help me find the right house at the right price?”

I have long advised my clients, both in person and in home buying seminars, how to locate a good agent to work with to buy your first home.

First, a New York Minute: In New York State, a Licensed real estate salesperson represents the SELLER in every transaction. The ONLY exception to this would be when a Buyer signs an Exclusive Buyer’s Agency agreement with a Licensed real estate salesperson. Therefore, even if a real estate agent is your Mom, she MUST work for the best interests of the Seller (i.e., highest price) or she could lose her license.

When you first walk into a real estate office, the very first action required by New York State is that you sign the “Agency Disclosure,” form. The purpose of this document is to make it explicitly clear to a Buyer that the real estate office works for the Seller.

Life for a Buyer becomes less complicated when you understand this concept. The agent doesn’t work for you, even though she is working to find houses for you. Huh?

In any event, I believe you can also use this understanding to help separate the wheat from the chaff, as it were, when you first encounter a real estate agent and decide if you want to work with her or not.

An agent who makes it clear from the beginning, and who makes certain you have signed the Agency Disclosure Form—and explains it to you—is an agent with excellent ethics. Not to mention she also has a healthy respect for the laws that govern her license.

When you don’t know who you’re dealing with, this demonstration of good ethics and legal-respect can go a long way to assuring a Buyer you’re dealing with an experienced professional.

What comes next?

Money. Money. Money.

Yup, this house you wish to buy, your first house, a precious experience for you, is an extremely emotional event. For a real estate agent, though, it’s all about the money. Agents don’t work on salary, they work on commission. A serious, experienced agent wants to earn that commission with the least fuss and bother possible.

She is going to avoid time-wasting activities. She will listen to your requirements for your house—how many bedrooms, proximity to public transportation and/or highways, etc. —and invest the time to find the best possible houses within your price range.

The agent will take you out and show you just a few houses, probably no more than five. You will be quite amazed when you see the first or second house exactly meets your needs.

This is where things can get slippery for a Buyer. You think, “Wow! That was easy! Two trips to the real estate office and we found two great houses. Let’s go look at more! Let’s keep going until we find the right house!”

Big mistake.

That agent spent considerable time in not wasting time. She doesn’t want to show you thirty seven houses. She wants to show you the right houses and sell one of them to you. She wants to earn her commission. Money; it’s all about the money.

If this is your experience with that same highly ethical, legally-respectful agent, then you can be certain you are in good hands.

By the way, you don’t really have to buy any of those houses. If you give your agent detailed feedback on what you liked and what you disliked about the houses she showed you, she will continue to work for you to find a house.

Good agents get frustrated and quickly lose interest with Buyers who don’t communicate. If that happens, the good agents will drop you faster than you can say, “Open House!” and send you packing to work with the less experienced (or worse) agents.

Some more of my thoughts on agents who won’t waste time: Benefits of Prequalification

Experience means everything for you, the Buyer. You have none. The experienced agent wants to get you into a home and earn her commission. You must rely on her experience to get you a great home in your price range.

Some signs of experience:

-While you’re sitting in the waiting area of the real estate office, look on the walls for awards. There may also be a gallery of “Thank You,” letters from satisfied customers. Those aren’t there to look pretty; they are placed there to show you the experience of the agents.

-A good real estate agent has a real business card, not one of those hokey, prints-‘em-yourself cards from someone’s home computer.

-Here’s a good example of experience versus inexperience: What is a “Customer?” For a Licensed Real Estate Salesperson, the definition under NYS real estate regs.: A “Customer” is a Buyer.

A “Client,” is either a Seller (the most common usage) or a Buyer represented in a Buyer’s Agency agreement. A Buyer cannot be a Client to a real estate agent unless Buyer’s Agency is in effect.

If your agent calls you her Customer, “I have a Customer here and I’d like to show them your house. Can we stop by in fifteen minutes?” then you’re dealing with an experienced professional.

Finally, one of the telltale signs of a good agent is one who is a Realtor. Realtor is a special designation for members of the National Association of Realtors. Realtors wear their “R” pins with pride. The Realtor designation requires an investment of time and money on the part of the Realtor. This is yet another mark of a good agent you should watch for when deciding who to work with to find your first home.

My longstanding advice to my clients is: find a good Realtor to work with. They’ll work hard to get the right house for you.

Credit repair and Settling a collection account for less than you owe.

With a well-organized action plan, credit repair and settling collection accounts can be accomplished without much fuss.

A friend has some heavy medical bills. While she was paying them, the hospital assigned the bills to a collection agency. This is not unusual in my experience with medical and dental bills, no matter the amount, large or small.

She is planning on offering the collection agency half the balance in order to settle the debt. It’s a great strategy, but one that requires tenacity, and extreme diligence to confirm the terms of settlement are in your favor. She was thinking of calling them everyday.

Here’s the advice I gave her:

Best path to credit repair success is to put it in writing every 30 days. 30 days is the cycle mandated by FTC. Under Fair Credit Reporting Act, the credit bureau has 30 days to investigate your dispute. While investigating, the disputed account must be removed (this is the source of the scam-artists who charge for credit repair) from your report.

In the investigation, the original creditor must PROVE the information. If they don’t, the item is removed permanently from your report. If they prove it again, the information goes back onto your report. You’ll get updated reports throughout the investigation period showing the disputed accounts and the status of same.

More on that from Uncle Sam here: https://www.tcurranmortgage.com/links.php

Also, advice on paying off that debt when you settle for less than full balance:
1. Always write down immediately the name of the rep. you’re speaking to.
2. Negotiate your settlement. Best tactic for this is to promise immediate, same day payment in return for favorable reduction of balance terms. Western Union QuickCollect or check by phone is best method of payment.
3. Once the rep. agrees, condition your payment upon a written confirmation via fax of the terms agreed upon. You want a fax because you want a signature on that letter. The letter should indicate the settled balance, date of payment, and that this payment settles the account completely and no further collection activity will be taken.

If they won’t send a written confirmation, you don’t make the payment. Because they can come back later and tell you you didn’t pay the full amount and they didn’t agree to a “short pay.”

4. When you have the letter of confirmation in hand, and it’s correct, send your payment immediately.

You’ll receive a satisfaction letter indicating that all three credit bureaus have been updated to show this account as paid and settled for less than full balance.

With a well-organized action plan, credit repair and settling collection accounts can be accomplished without much fuss.

Negotiating an offer

Let’s look into the offer process from a negotiating standpoint to see how Buyers can improve their offering skills.

I believe in making offers. I believe the only way a Buyer and a Seller can get to the “nuts and bolts,” of the purchase/sale of a house is through the offer process. Too often the Buyers delay on this most important tool. When you make an offer in New York, it doesn’t commit you to anything. You’re not legally obligated to complete the transaction until you sign the contract. Up until that moment—I have always advised—Buyers should use the offer as a negotiating tool.

On the other side of the table, Sellers could behave better with offers, too. Problem is, the Buyer has no way of knowing what’s going on with the Seller in regards to an offer because there is a “middleman:” the Realtor.

Let’s look into the offer process from a negotiating standpoint to see how Buyers can improve their offering skills.

1. Make offers early and often. If you see the house Thursday evening and you “kind of-sort of-maybe-possibly” like it, make an offer anyway. This will give you some time to change your mind. The offer doesn’t commit you to buy the house (more on that below).
2. A NYS Licensed real estate agent must present all offers. The agent can’t say things like, “Oh, no, I can’t possibly present that offer, it’s too low,” or, “The Seller will never accept this,” or, “You’re going to have to come up some more in price for me to present your offer.” The fact is, even if you offer $1.00 for a house, the agent must present your offer. Mind you, the offer won’t be accepted, but still it must be presented.
3. Make offers in writing. Yes, I know the offering form says, “This is a Legal Document. You should consult an attorney before signing.” I know it says that. But the legality of the document has all to do with the real estate agent protecting a potentially earned commission from the Seller and nothing to do with binding the Buyer to the purchase transaction. You can sign 32 offer forms for 32 different houses on a Sunday afternoon and you don’t have to go through with a single one of those purchases until you sign the contract.
4. Be prepared to act quickly after you make your offer. There are two ways to move. First action is away from the house if they don’t accept your offer and you really don’t think you’re willing to pay more than you offered. The second action is to offer more than your opening bid. If the Seller counter-offers, have your backup or next-step-price ready to go. You can choose to meet the Seller’s counter offer or raise your bid somewhere in between your open and their counter.

This backup plan is very important and requires your careful consideration, to wit:

5. Set a Maximum Price you’re willing to pay. What you want to do is realize the maximum price you are willing to pay for a house. That shouldn’t mean it’s your opening bid. This is the price you set and negotiate towards. DON’T COMPROMISE ON YOUR MAXIMUM! If you are getting tossed around in a bidding joust with the Seller, the transaction can get you heated and emotional. That’s the worst time for a Buyer to make pricing decisions. You must have a maximum number in advance (before you present your opening bid) and adhere to that price. This will help you remove as much emotion as possible from the negotiating process (you can’t eradicate emotion: it’s what homebuying is all about, but you can control it!).

6. Timing is everything. No, you don’t want to appear too eager. Yes, you want to appear enthusiastic, prepared, and paint the portrait of the best possible buyer for that house. You’re better than all those other Buyers! Yes, you KNOW you are!

When the Seller counters you have to decide how long you will wait before increasing your offer. If you are the diligent buyer who shows up on time for the appointment, returns the Realtor’s calls in a timely manner, and has your prequalification letter lined up, then you can be sure you look pretty good in the eyes of the Realtor and the Seller. Remember that as you consider how long before you raise your offer.

7. Walk away. Harvey Mackay in his book, “How To Swim With The Sharks Without Being Eaten Alive,” says, “Lesson 24: The Single Most Powerful Tool For Winning A Negotiation Is The Ability To Walk Away…” This is so difficult to do when you’re negotiating on a house. The homebuying experience is so emotional that a Buyer gets wrapped up in the momentum of buying the house. That emotion makes it really tough to walk away when you have to.

Harvey goes on, “…walking away from the table is not just for when you don’t want to deal. Sometimes it’s the only way you can make the deal you want. If you have to have a deal, then all the other side needs to do to win the negotiation is to outwait you.”

I can’t emphasize enough how important this tool is for a Buyer. It works. It gets results. I know because my clients do it and we have seen the results time and again.

More on Closing Costs

Will there be a Seller’s concession?

A client inquired about using a charitable “down payment assistance” program like this one Partners In Charity when she buys her home.

This is a program whereby the Seller of the house must repay the charity at closing for the amount of the assisted contribution. The Seller then possibly qualifies for a tax deduction based on the charitable nature of the reimbursement (depending upon the final tax return and the personal qualifications for such. As usual: check with your tax professional.).

I have investigated several non-profit DP assistance programs similar to this one. In an “up” market as we have been experiencing for the better part of 9 years it is a tool that is really unnecessary. In the event, you would use the charitable contribution/tax deductibility as a way to convince a homeowner to provide a Seller’s concession for closing costs. In our current market in the NY Metro area, homeowners and their agents/attorneys agree to such concessions on a regular basis. In fact, I would daresay it is so common an occurrence as to be an unremarkable part of doing business every day.

When I started out, and up until around ’95-’96, many Sellers and/or their attorneys and real estate agents were reluctant to agree to concessions. The idea was not so commonly applied in those days. Back then, I would spend considerable time “selling” the idea to the other side in a real estate transaction. Nowadays the listing agents and/or attorneys usually call me first to ask, “Will there be a Seller’s concession?” It’s about as common a question as, “Would you like an apple pie with your Big Mac?”

Once you make an offer on a property, the mechanisms necessary to add your closing costs into the transaction and to provide the 100% financing you need to purchase the home automatically kick in to gear.

Closing Costs in NY: Arrrgghh!!!

Closing costs, expensive as they are, are a “fact of life” when financing a home in New York.

Yes, it’s a teeth-grinding, heartburn-inducing, stomach-churning experience buying a house in NY with closing costs being so high.

I am not going to go into the long winded and detailed explanation of the breakdown of closing costs. That’s for another time. I really want to express for you the reality of what the closing costs are: HIGH.

(NOTE: I am referring here to the purchase of houses and condominiums, NOT Co-OPs)

First, the average closing costs total out to about 4.5%-6% of the mortgage amount. On a $400,000 loan, that’s $18,000 to $24,000. WHOA! That’s an awful lot of money. I came to realize a long time ago how difficult it must be for the average New Yorker to save up the money for a downpayment on a house, only to later learn they would need all this extra money for the closing costs. That’s why I have always helped my clients obtain financing high enough to allow the minimum down payment (or recently NO downpayment). In this way, the money they’ve saved up is used for the closing costs.

In New Jersey and Connecticut, closing costs are half of the norm here in New York.

I don’t know why that is, or why the costs are so danged high here in NY. I just know that’s the way it is. If you are getting ready to get out there and shop for a house: get used to this idea. It’s painful, I know, but it is what it is.

Next, let’s talk about disclosure. Federal regulations require disclosure of closing costs to the borrower. We Lenders have to send you an estimate of your closing costs as soon as you make your loan application. The problem is these estimates, being estimates, are subject to the discretion of the party preparing them.

Without complicating the issue, let’s just say that it is entirely possible you could receive an estimate of closing costs that is woefully short. Even if the costs disclosed to you are substantially short of what you actually pay, it’s perfectly fine.

At my office, the company prepares the most accurate estimate possible.

For my part, I have ALWAYS given my clients the ugly numbers right from the get-go. I hate surprises and I want my clients to know well in advance how much money they’ll need. My estimates include things that aren’t even listed on the standard Good Faith Estimate: Purchaser’s attorney; adjustments to the Seller for taxes, water, fuel; the “tip” to the title closer, even!

My estimates are usually within less than $1000 of the final cost to my clients.

Finally, beware of “NO CLOSING COST” advertising come-ons. Unless the loan is a Home Equity second mortgage, the borrower has to pay closing costs. This cute advertising gimmick could be perfectly truthful and mean any number of things. Without breaking them down, understand that you will pay closing costs one way or another.

Closing costs, expensive as they are, are a “fact of life” when financing a home in New York.