Tuesday, March 31, 2009

If you didn't refinance yet.............

If you did not yet refinance, and conditions have been such that you would have benefitted in some way, you need to keep some changes in mind if and as you revisit the possibility in the weeks to come.

Fannie and Freddie have added what they call "loan level price adjustments" which take effect on April 1st - no fooling. It looks like the only way to avoid these extra fees is to have a FICO score of at least 740, and that isn't easy in today's economic client.

Yet, it could depend on which lender you would use. It is believed that some lenders (and we don't know how many or how few) already have incorporated these "extra" fees into their costs during the first quarter. While doing so likely cost some borrowers more than it should have, this does mean it is possible that a quote of costs you may have recently received could include these figures.

Thus, if you are planning on contacting one or more lenders about doing a re-fi in the near future, please clarify about the impact on these additional fees. If it could cost you a few hundred dollars more than you anticipated to get a re-fi done, factor it out against your total and actual monthly savings.

I have also heard about some lenders increasing their underwriting and processing fees by as much as $300 to $400. On one hand, I can understand this because many lenders have to work harder to put loans through because of the new credit concerns and restrictions. But on the other hand, the lenders need these loans in order to survive and a reduced profit is a lot better than none at all.

My point is that if the new costs and additional fees were to, for example, result in an additional $1,200 cost, you could look at it that it is really costing you an "additional" $100 per month over the first year. If you are refinancing to save, say, $150 per month, your savings would really be equal to $50 per month for your first year. Is it really worth it?

On the other hand, I have heard too many "I'm going to wait and see what happens" stories from both consumers and lenders over the past few weeks. My fear is that too many people will wait an additional 6 months or so to refinance to THEN start saving a couple hundred dollars per month. But in waiting, they paid the "extra" $200 per month (total $1,200 using this example). Add another $1,200 for the additional fees just described, and a borrower could, in effect, have paid $2,400 more because they waited. Probably not enough to offset the lower rate they waited for.

By all means, check with different lenders and examine everything you are being quoted.

If you are lender, be sure you explain the new fees and their impact on potential borrowers so that you don't leave them disappointed. If you are a realty agent, you might wish to help your client consider the merits of refinancing vs. a downsize or lateral move for greater monthly savings in this economy. Doing that could produce either an immediate or long term sale for you.

Tuesday, March 24, 2009

Agents and Clients Should Give Feedback

I always encourage my clients who are realty agents to get as much feedback and input from their clients as possible. Yesterday’s post about potential buyers not seeing the vision of making changes or improvements themselves in order to further a good deal on a home drew a couple of nice responses from clients.

One of my clients reminded me that not everybody they work for is as verbal or expressive about their likes and dislikes when it comes to house hunting. I responded that sometimes the agent has to take charge of the situation and ask good questions to get the concerns out. Sometimes it can be done by making a suggestion at a key moment.

A simple “I think that living room would look better with a lighter color” would hopefully spark a “I was thinking the same thing!” or “Actually, I thought the color worked well”. Presto. Now you have a good idea of what color(s) most appeal to your client. And so on.

If you are showing a home to a potential buyer, within minutes of leaving (and before arriving at the next home if it is a multiple showing) you should have as much feedback from the potential buyer, positive or negative, as you can.

Or, if you are looking at homes with your agent, you might also get some feedback from one who knows. I saw nothing wrong with asking my agent questions like, “I liked that sliding door to the patio. Do the other homes we’ll be looking at have that?”. As a buyer, I want the expertise of someone who has seen other homes in the area so that I can compare as well.

To me, the buyer and the realty agent should view each other as an important resource. I have even helped one client to develop a checklist for potential buyers to directly indicate what they like and don’t like about each house they see during the hunt.

The next step is to distinguish between a concern which could be controlled and one which cannot. I wrote yesterday about my wife and I not even wanting to look at a unit next to a power line and with an access road not having a stoplight out onto a very busy road. Even if the unit itself was a bargain and had the features we were looking for, I would have still had those obstacles in the way. Since I can’t remove power lines and build a stoplight, that was out of my control.

Yet, seeing an obvious boys bedroom in a house that would be for girls should not present a challenge. If everything else checks out and the price is right, I wouldn’t let a paint job on a couple of rooms stop me from a purchase.

The potential buyer and the agent need to think this way throughout the process. If you really like a house but estimate you would spend $3,000 to make the changes you want, it might compare favorably against paying $5,000 more for a house you don’t like as much overall.

If you are the buyer, make your decision based on a number of factors. If you are the agent, use good comparisons from your local experience to help make that decision. Maybe we can all work to reduce the “no hurry – the house will be there” approach that is bogging down the market.

Monday, March 23, 2009

Seller Decisions & Their Impact (or lack thereof)

One of the business techniques I have used successfully over the years is to look at a situation from the point of view of everyone involved, no matter what their part or role in a decision being made. I can learn a lot by taking the time to do that, and nowhere is this more true than in all of the real estate related marketing I do.

The story I am about to comment on did not involve anyone I know or represent. It is a good one to apply my theory to, in another attempt to revise the mindset of the current real estate market. I read about a property manager for a residential realty firm in the Midwest. They were representing and managing a long vacant house for sale due to an owner relocating for a new job.

It seems the home had what was considered to be unusual and bright colored carpet in its master bedroom and bright colored paint, including a bright pink for one, in each of the other two bedrooms. The property manager decided to replace the “rare” colored carpeting and have the other two bedrooms repainted with neutral colors. The story says that shortly thereafter, the firm received two offers on the property. Two more than the previous months with the replaced color scheme. This story was, of course, designed to make the listing realty firm look good, and to show how they both maintain and sold a property.

Now comes my theory of looking at this from all points of view – as I see it. If I were the seller, and was told about the paint and carpet jobs (since I’m not sure who actually paid for it!), I would ask why this wasn’t done right after I moved out. The agent is trying to look a hero for making the decision that made a difference and drew offers. So why did this decision take so long to make? I would think my agent would already have this knowledge and input before the house is put up for sale. If that were me, I would expect the cost of the carpet and paint to come out of the commission, since the delay of this “decision” meant a delay in my getting the house sold.

If I were the agent, and hadn’t known to suggest the carpet and paint changes at the outset, I would agree to have the cost of the changes come out of my commission. I would think that now seeing proof that the appearance of details such as paint and carpet make a significant difference in an empty house will make me a lot more in commissions in the future by now knowing to do this.

But now we move on to if I were the buyer. This is where I shoot holes in the whole story. If I liked the house enough and it was priced right, I wouldn’t care if the carpet was purple polka dots. If I wanted it and a reasonable offer was accepted, I would simply get bids and choose carpeting and/or paint jobs that I want, and have that done myself. I feel that I could do better by hiring who I choose and staying on top of it to get it done. Thus, if it is true that people really were not buying this home because of unusual or bright carpet and paint colors, then those early potential buyers may have missed out on a good deal.

When a home is being shown while the sellers still occupy it, potential buyers both know and are reminded that they would have their own furniture in each room and not to judge by what is currently there. Then why should the carpet and paint be treated any differently?

I would also assume that these potential and the eventual buyer had representation by a realty agent. This tells me that either the home wasn’t priced right, and that is the real reason it didn’t sell sooner, or the buyer realty agents missed out on an opportunity for a faster sale by not pointing out that paint and carpet can be done before moving in. I truly hope it was really the price and this “story” was slanted to try to make the realty firm look good, which it shouldn’t.

Going back 3 years to when my wife and I were last looking for our home, I always made it a point to share the good and bad about each home we were shown with our realty agent. There was one unit we drove to and didn’t even go inside because it was right next to a power line tower. Another where the reason we wouldn’t buy is because the only access road into the development fed into and out of an always busy major street, but there was no stoplight. I said if we couldn’t get in and out of there in morning rush hour it wasn’t worth the hassle.

At the home we eventually bought, we talked about what changes and improvements we wanted as soon as we bought. The paint wasn’t one of them, but if there had been a weird color, we would have handled that.

What I am getting to here is that there is a lot of blame for this one property to have taken a long time to sell, considering it went vacant due to a professional move. A potential buyer could have gotten a good deal and had some paint and carpet work done. The property manager wouldn’t have had to wait months to then make a decision that “helps” the sale. The seller doesn’t care what happens to the house as long as the sale is made.

This is not about the one realty firm, however. It is the lack of aggressive thinking and the “How can we make this happen?” attitude. It is not only “the economy” as a prime reason why the housing market is in the shape it is right now. Maybe a brain stimulus would benefit even more than the economic one.

Tuesday, March 17, 2009

The new wave - real estate auctions mean quicker sales

I am finally seeing a growing number of properties going to auction. Before you think I'm talking about abandoned, already foreclosed, or distressed properties, guess again.

Auctions are quickly becoming "in". They are not for problem properties, and thankfully, no longer limited to builders, developers, and banks. Individual sellers can do it. Considering that many listed homes are staying on the market for 3 months or longer, the prospect of having an auction for a home or investment property which needs to be sold being just 30 days away has taken on a whole new meaning. A fresh one.

If you have a home to sell, it no longer has to risk being on the market for month after month. As long as it is priced right. Bidders at most property auctions need to be pre-qualified and come with some money in hand. In other words, a potential buyer needs to show both money and some level of commitment before the auction even begins. Face it, that is not likely to happen between 1:00 and 4:00 on Sunday when your front door is loose in anticipation of visitors to an open house.

To me, the most appealing part of this (besides the faster sale) is the possibility of having more than one possible buyer bidding at the same time. The ability to cut into that vicious cycle of calling and running from one buyer to the seller and the other buyer to the seller and back to both buyers and the number of man hours that waste is most welcome.

Having that deadline of minutes or seconds where if a potential buyer doesn't bid right away he or she loses out is a blessing to the seller.

In this challenging marketplace, providing a faster option for motivated home sellers, regardless of mortgage or foreclosure status, is the best thing to come along in years. Personally, I worked on the "Open House Hotline" updates every week for 15 years. The whole idea is to get potential buyers to a property for sale. The possibility of going online or seeing the weekend Real Estate listing of definite auctions for this weekend means that sales will be made. Way better than an open house list where "lookers" can visit and wait three weeks before making a lowball offer.

On the right side you will see links to a couple of sites which provide more details. If you or your client needs to sell quickly, this is totally worth checking out.

Friday, March 13, 2009

Flood Safety Awareness Week is coming..........

Flood Safety Awareness Week is March 16 through 20. Based on the heavy rain and snow that hit much of the northern part of the country last weekend, this is especially important. I didn’t realize until this week that FEMA reports that 90% of all natural disasters in the country involve flooding. I’ll admit I would have guessed fires and hurricane winds before flooding.

To that point, the National Weather Service has contributed more data and additional resources to increase knowledge of what to do before, during, and after a flood. Especially before. The government web site,
www.FloodSmart.gov, has beefed up the information it now provides.

It is worth knowing about, even for those who do not live in a flood threatened area. And once again, if you are a realty agent or a lender, you should let your current and potential clients know about this. If I were an agent or lender and there is a river, lake, or creek in my farm area with any flooding history, I would be alerting nearby homeowners to this site, whether my clients or not. Again, it not only helps the community, but it presents a positive publicity spin.

Thursday, March 12, 2009

How Supernanny can help lenders and realty agents

I’m going to once again pick up on the theme for industry professionals to be the messenger. More than ever, consumers need to be reminded that you are still in business with each day’s news of some other large company being in financial trouble.

If you are in Milwaukee, Chicago, Madison, or Green Bay (within 100 miles or more of Milwaukee), you have a reason to contact current and potential clients with a large family household within the next few days. ABC-TV show “Supernanny” is having a casting call in, of all places, the Milwaukee area on March 28th at an area restaurant. (Those in that part of the Midwest can contact me for the specifics. I’ll be happy to provide that for you. E-mail me at Dave at firstin.com.

True, this has nothing to do with real estate and won’t lower your mortgage for April. But it could have something to do with some easy self-promotion. Think about it. Even for those families who do not wish to attend, chances are it is news targeting them they would likely spread around to friends and other family members. Followed by the inevitable “How did you hear about this?”.

The person asking that question is not expecting to hear “My mortgage broker told me” or “From my real estate agent” in response. For once, it is a chance to have your name associated with something other than a stalled homes market.

So are home owners who have been waiting to refinance getting spoiled? The 30-year fixed at 80% LTV has been hovering around 5% for weeks now. The constant lowering of the rates that started just before Thanksgiving and continued for 10 consecutive weeks seems to have leveled off. That is still a good thing.

I could certainly understand people waiting to see if and how much the rate would drop “next week” while it was dropping. But now that it has been holding steady, isn’t it time to get the ball rolling? Some lenders have been telling me they have clients who are “still waiting” to refinance.

Some of these same lenders are not telling these potential borrowers that the fees associated with getting these loans are still expected to increase before year’s end. It is possible some lenders might be screwing themselves (and the potential borrowers) by playing the waiting game.

After all, if it would cost a borrower an additional $1,000 to refinance 6 months from now, and you factor in (for example) $200 “extra” per month by not refinancing, it means the borrower has really spent an additional $2,200 to wait that 6 months. And that is if the 30-year fixed rate doesn’t go up. We don’t know for certain that it won’t. If it goes down slightly, it might not be enough to recover $2,200 using this as an example.

Some of the mortgage lenders who are not explaining this to potential clients now might be out on the street themselves by the time those 6 months pass.

Same theory applies when a potential buyer decides to wait on a good deal for a home or investment property. True, the price could drop and the loan rate be lower in 3 months. But the property might not be available at that time either. The creative people are the ones who are succeeding in this market.

Thursday, March 5, 2009

A reason to contact current and potential clients

In the past 25 years of my performing a variety of advertising and marketing tasks, I don't recall an idea this good getting such relatively little publicity. Let alone in this economy!

FedEx Kinko's has rather quietly promised an upcoming day to print resumes for those out of work at no cost at hundreds of their locations nationwide. A great idea to generate foot traffic while generating favorable publicity. Yet, I found out about only because a client asked if I had heard anything about this in marketing circles and I took the time to actually look for it.

You are probably wondering what this has to do with the real estate market. And you are right for wondering that, especially since that's what this blog is all about.

To those of you in the industry, whether on the real estate or mortgage lending side, it is about networking with your database of current and potential clients. And, like the header says, this becomes a major "excuse" to contact them.

Unfortunately, most of your current and potential clients know someone who is now out of work and needs some help with finding another job. Granted, printing out a few more professional looking resumes is no guarantee, but presenting the opportunity to people who wouldn't otherwise have known can make you look good.

Frankly, to me this is the sort of thing that realty offices and associations should be promoting as a help to community residents instead of pumping out the "how many fewer properties have sold within the past week" statistics that help keep the market so unsettled.

Rather than wait, I suggest you move on this now, before any late publicity hits on this, and before a competitor of yours does.

The more current and potential clients you have who are gainfully employed, the more opportunities you have for future referrals and sales. Otherwise, you will also need to print resumes.

This link has the details of the "resume day" coming up. Good luck!


Tuesday, March 3, 2009

What about "Rent To Buy"?

I’m looking for innovation in today’s real estate market, and all I keep getting are statistics. I call it the high cost of procrastination.

Maybe it only seems this way, but it is as though everybody is now waiting when it comes to real estate and especially home sales. Therein lies the problem. Everybody is waiting. That means nobody is acting.

Whatever happened to the saying “It takes money to make money”? People used to invest in real estate, but obviously not right now. Many who normally would are waiting to see what happens. People would invest in the stock market, but based on the amount of decline over the past few months, not anymore. Market investors are waiting to see what happens. Others would invest in CD and Money Market accounts, but those no longer pay out enough to make it worthwhile. Potential investors in CD’s are waiting to see what happens.

So while everyone keeps waiting, what happens?

Real estate will always be there. A company might not, a bank or investment company might not, but real estate will always be there. And it provides a chance to deal in the now.
Want to sell your home or a property you own? You think you can’t or won’t because of the market. That is playing the same waiting game everybody else is.

I continue to have mortgage lenders around the country tell me that they are not able to qualify a large percentage of potential buyers because of credit or down payment issues. Many of these lenders tell me they don’t want to advertise their own services because of the marketplace. And some of those same lenders have a disconnected phone number when I try them back a few weeks later to see how they are doing.

Some lenders and realty agents overlook opportunity. In the circumstance described above, it seems to me that the “turned down” potential buyer has credit and/or down payment challenges. That is understandable in today’s economy. Yet, there did not seem to be an issue with them making a monthly mortgage payment if they had better credit and/or enough for a down payment.

To me, that “turn down” could well be turning down business. That same lender and realty agent could have been helping that potential buyer find a house to rent in the range they could afford.

True, I’m making that sound easy. Wait a minute. With thousands of homes listed for month after month in just about every area, it probably is.

That potential buyer should be presented with three simple words. Rent to buy. While that potential buyer is looking to restore or improve their credit rating and/or saving for a down payment, that potential buyer could actually be living in their “new” home. If they are renting to buy, they will surely take better care and do better maintenance when they have a future stake in the home. From the seller’s standpoint, even if they don’t quite get all of their monthly mortgage back, they can move on to a different location. Maybe even downgrade to remain steady with monthly obligations. Perhaps renting elsewhere while maintaining equity in a home costing them little to nothing.

Such a “rent to buy” arrangement could include the lender and realty agent and eventually provide them with commissions. Could be on the rental or for if and when the rental turns into a purchase. This could avert foreclosures and would help the revenue for lenders and realty agents. Significantly, it would not leave potential buyers “waiting” like the rest of the people in the industry.