A lot has been discussed about shadow inventory in real estate over the past several months. I want to give a clearer picture of what shadow inventory is and how it affects the real estate market's recovery.
Shadow inventory is defined differently, depending on who you ask. Some consider it to be just foreclosed homes that are not yet on the market. Others also consider homes that have 1st mortgage delinquencies greater than 90 days. Further, the definition can go on to include homes that are to be short sales that are not yet on the market and any homes that have had modified loans (as most of these loans still default after the modification).
Because of the varying degree of what constitutes shadow inventory, the perceived effect of this inventory varies as well. Without going too in depth with how this is calculated by the National Association of Realtors, essentially they use data from Mortgage Bankers Association and Lender Processing Services to account for the number of households that are to be included in this definition. For more about how this is calculated and determined, CLICK HERE and go to page 8 of the publication.
The effects of foreclosure and shadow inventory situation, just like anything else in real estate, vary by location. Arizona, California, Florida and Nevada are projected to be the worst hit by foreclosures. The good news is that overall delinquencies in all but 4 states (Washington, New Jersey, New York and Vermont) declined. The national average for serious delinquencies of 90+ days declined 38%. For detailed breakdown by state, this is a very informative ARTICLE and a good read.
While the number of delinquencies are declining, the amount of shadow inventory as well as distressed properties currently on the market will effect the pace of recovery in the real estate market. These homes are or will be competing directly with homes that are not in a distressed situation, causing these homes to remain on the market for a longer period of time and keep the market value for real estate depressed or stagnant.
Once these distressed properties are cleared out to more "acceptable" levels, then we can expect to see a more thriving real estate market. How long this will take is still anyone's guess, but we are probably looking at a 2-4 year window nationally, depending on the location. The key is to have an economy that continues to improve, resulting in fewer delinquencies, allowing the real estate market to catch up. Fewer foreclosures, of course, would reduce the amount of homes on the market, create a larger demand for non-distressed homes, resulting in quicker sales at a relatively higher sales price.
Friday, March 25, 2011
Friday, March 18, 2011
FHA Mortgage Changes and Current Interest Rates
FHA is raising it's monthly mortgage insurance, effective April 18, 2011. The current mortgage insurance premium is 0.90%. For any loan applications that are assigned an FHA case number on or after April 18th, will be charge and annual premium of 1.15%. What does that mean to you as a buyer?
On a $100,000 loan, this equates to approximately $20.83 more in your monthly payment or about $250 per year. This may or may not seem significant to you, but it will reduce your potential buying power and approval amount. It is also being projected that interest rates may reach 5.5% for a 30 year mortgage by years end.
Fortunately, there is still some time to get you FHA mortgage application before the change takes place. In addition, average mortgage rates dropped significantly from 4.88% to 4.78% on a 30 year mortgage and the average 15 year mortgage dropped from 4.15% to 3.97%. These rates change every day, so locking in your rate when rates drop like this will help you get more home for your money.
So, talk to your mortgage lender soon or feel free to contact me. I can give you a list of lenders that I refer to my real estate clients. I am always available to advise you and help you find and buy the right home.
On a $100,000 loan, this equates to approximately $20.83 more in your monthly payment or about $250 per year. This may or may not seem significant to you, but it will reduce your potential buying power and approval amount. It is also being projected that interest rates may reach 5.5% for a 30 year mortgage by years end.
Fortunately, there is still some time to get you FHA mortgage application before the change takes place. In addition, average mortgage rates dropped significantly from 4.88% to 4.78% on a 30 year mortgage and the average 15 year mortgage dropped from 4.15% to 3.97%. These rates change every day, so locking in your rate when rates drop like this will help you get more home for your money.
So, talk to your mortgage lender soon or feel free to contact me. I can give you a list of lenders that I refer to my real estate clients. I am always available to advise you and help you find and buy the right home.
Friday, March 11, 2011
Making a Successful Offer to Buy a Home
So you’ve found the home you want to buy. Now what do you do? I’ve put together some information regarding the process of making a successful offer on a home.
Research Have your Realtor inquire with the listing agent about the seller’s motivation to sell. Sometimes the listing agent won’t give that information, but my motto is “if you don’t ask, you don’t get.” Your agent can also provide you with information such as the last purchase price, the current mortgage balance, property disclosures, how long the home has been on the market, neighborhood statistics and information, school information, etc. The goal here is to paint a picture of the seller’s situation and position.
Determine the market value of the home This can be tricky. The key is to use the most comparable sales based on location, size, age, and condition. The comparable sales should be within the past six months, like an appraiser would do.
The tricky part is when there aren’t enough sales at all, or the sold homes aren’t very comparable to the home of interest. That is when adjustments (i.e. distance, size, condition, etc.) could be considered. Once comparable sales are obtained, pricing adjustments need to be made, based on what each comparable home has or does not have in relation to the home you want to buy. If done correctly, you should be able to determine the value of the home.
Formulate the offer Now that you have a feel for the market value of the home, it’s time to develop an offer strategy. Buying a home is a negotiation. There is give and take, back and forth until both sides come to an agreement. The important thing is to sit down with your Realtor and run through offer scenarios to determine the starting offer amount and how to end at or below the value you attached to the home. Your agent should not be telling you specifically what to offer, but they can advise you based on the data provided. The buyer must always be the decision-maker.
Submitting the offer This is more than just faxing or emailing the paperwork to the listing agent. Your real estate agent should be able to let you know of the negotiating strategies and points that he/she will use to advocate your position. Your agent should be using the market data, comparable sales and other information that has been gathered to educate the listing agent about the factors considered in determining your offer. If your agent is able convince the listing agent that your offer is reasonable (even if it’s not), the listing agent will be more prone to sell your position to the seller.
By establishing your position and being able to back it up with data can greatly influence the ability to close the deal. This is where your Realtor literally earns his/her money. If this can be properly communicated and negotiated by your agent, you’ll be well on your way to getting the keys to your new home!
Research Have your Realtor inquire with the listing agent about the seller’s motivation to sell. Sometimes the listing agent won’t give that information, but my motto is “if you don’t ask, you don’t get.” Your agent can also provide you with information such as the last purchase price, the current mortgage balance, property disclosures, how long the home has been on the market, neighborhood statistics and information, school information, etc. The goal here is to paint a picture of the seller’s situation and position.
Determine the market value of the home This can be tricky. The key is to use the most comparable sales based on location, size, age, and condition. The comparable sales should be within the past six months, like an appraiser would do.
The tricky part is when there aren’t enough sales at all, or the sold homes aren’t very comparable to the home of interest. That is when adjustments (i.e. distance, size, condition, etc.) could be considered. Once comparable sales are obtained, pricing adjustments need to be made, based on what each comparable home has or does not have in relation to the home you want to buy. If done correctly, you should be able to determine the value of the home.
Formulate the offer Now that you have a feel for the market value of the home, it’s time to develop an offer strategy. Buying a home is a negotiation. There is give and take, back and forth until both sides come to an agreement. The important thing is to sit down with your Realtor and run through offer scenarios to determine the starting offer amount and how to end at or below the value you attached to the home. Your agent should not be telling you specifically what to offer, but they can advise you based on the data provided. The buyer must always be the decision-maker.
Submitting the offer This is more than just faxing or emailing the paperwork to the listing agent. Your real estate agent should be able to let you know of the negotiating strategies and points that he/she will use to advocate your position. Your agent should be using the market data, comparable sales and other information that has been gathered to educate the listing agent about the factors considered in determining your offer. If your agent is able convince the listing agent that your offer is reasonable (even if it’s not), the listing agent will be more prone to sell your position to the seller.
By establishing your position and being able to back it up with data can greatly influence the ability to close the deal. This is where your Realtor literally earns his/her money. If this can be properly communicated and negotiated by your agent, you’ll be well on your way to getting the keys to your new home!
Thursday, March 3, 2011
What is a Buyer's Agent?
A real estate buyer's representative represents the buyer who is purchasing property in a real estate transaction. Research by the National Association of REALTORS has shown that when a buyer's representative is used, the prospective buyer found a home one week faster and examined three more properties than consumers who did not use a buyer's representative.
The buyer's representative works for, and owes fiduciary responsibilities to, the real estate buyer and has buyer's best interests in mind throughout the entire real estate process. In contrast to attempting to contact multiple listing agents that want to sell their listing for their client (the seller). Also, using a buyer representative keeps the listing agent from acquiring information about your buying position and relaying that information to their client.
A Buyer's Representative Will:
§ Evaluate the specific needs and wants of the buyer and locate properties that fit those specifications.
§ Assist the buyer in determining the amount that they can afford (pre-qualify), and show properties in that price range and locale.
§ Assist in viewing properties -- accompany the buyer on the showings, or preview the properties on behalf of the buyer to insure that the identified specifications are met.
§ Research the selected properties to identify any problems or issues to help the buyer make an informed decision prior to making an offer to purchase the property.
§ Advise the buyer on structuring an appropriate offer to purchase the selected property.
§ Present the offer to the seller's agent and the seller on the buyer's behalf.
§ Negotiate on behalf of the buyer to help obtain the identified property -- keeping the buyer's best interests in mind.
§ Assist in securing appropriate financing for the selected property.
§ Provide a list of potential qualified vendors (e.g. movers, attorneys, carpenters, inspectors, etc.) if these services are needed.
§ Most importantly, fully-represent the buyer throughout the real estate transaction.
The buyer's representative works for, and owes fiduciary responsibilities to, the real estate buyer and has buyer's best interests in mind throughout the entire real estate process. In contrast to attempting to contact multiple listing agents that want to sell their listing for their client (the seller). Also, using a buyer representative keeps the listing agent from acquiring information about your buying position and relaying that information to their client.
A Buyer's Representative Will:
§ Evaluate the specific needs and wants of the buyer and locate properties that fit those specifications.
§ Assist the buyer in determining the amount that they can afford (pre-qualify), and show properties in that price range and locale.
§ Assist in viewing properties -- accompany the buyer on the showings, or preview the properties on behalf of the buyer to insure that the identified specifications are met.
§ Research the selected properties to identify any problems or issues to help the buyer make an informed decision prior to making an offer to purchase the property.
§ Advise the buyer on structuring an appropriate offer to purchase the selected property.
§ Present the offer to the seller's agent and the seller on the buyer's behalf.
§ Negotiate on behalf of the buyer to help obtain the identified property -- keeping the buyer's best interests in mind.
§ Assist in securing appropriate financing for the selected property.
§ Provide a list of potential qualified vendors (e.g. movers, attorneys, carpenters, inspectors, etc.) if these services are needed.
§ Most importantly, fully-represent the buyer throughout the real estate transaction.
Why Your Listing Expired, Why Your Home Didn't Sell
So, has your listing expired recently? If you have experience with your listing expiring, I’m here to help you understand why your listing failed. You really need to understand why your home didn’t sell, before relisting, otherwise, you’re risking a repeat result, wasting more of your time and money.
I recommend thinking back through entire process, from the initial agent interview to the moment your listing expired. This will help you learn what may have gone wrong. In the e-book, I offer a number of questions and topics to think about that will help you reflect back through the listing period.
There are five primary reasons homes don’t sell. Those reasons are:
1. condition,
2. location,
3. poor marketing plan,
4. the agent you selected, and
5. the price.
With exception of location, all of these reasons are items that you can change. To successfully sell a home, you must set your home apart from the competition. The home should be in the best condition possible, priced correctly, marketed extensively and creatively and handled by an agent that has what it takes to manage the process.
2. location,
3. poor marketing plan,
4. the agent you selected, and
5. the price.
With exception of location, all of these reasons are items that you can change. To successfully sell a home, you must set your home apart from the competition. The home should be in the best condition possible, priced correctly, marketed extensively and creatively and handled by an agent that has what it takes to manage the process.
I know you may be discouraged by your expired listing, but please keep in mind:
“ANY HOME THAT IS PROPERLY PRICED AND MARKETED WILL SELL IN ANY REAL ESTATE MARKET!"
“ANY HOME THAT IS PROPERLY PRICED AND MARKETED WILL SELL IN ANY REAL ESTATE MARKET!"
Once again, I go into more detail in my expired listing e-book. To get a free copy of my e-book, simply fill out the form provided at www.expiredlistinghelp.com and I’ll send it to you immediately.
I invite you to call me anytime if I can be of further assistance.
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