My client just bought a new home two years after we did a successful short sale on his previous home. He now has a mortgage at half the interest rate he was paying previously.Â His new home isÂ approximately half the purchase price of his old home that he purchased in 2004, and his new payments are a third of the old payments. Icing on the cake is that the new home is larger, move in ready, with a two year warranty. More icing? His new payments are $315 a month lower that his small rental.Â Yes, it really is less expensive to buy than rent.
How did we do this?Â Of course timing is everything.Â Prices in this area are 50-60% lower than they were in 2004. There is a good inventory of homes that are reduced accordingly.Â When we completed the short sale on his first home, I told him to keep the rest of his credit clean, pay the rent on time, and he would be able to buy again.Â It didn't hurt that he was a V.A. buyer.Â V.A. buyers can buy a home again two years after a short sale.Â
Unfortunately, many figure their credit is shot anyway, so they drown their sorrow in their credit card debt.Â After going through the trauma of losing their home, they may think they will never buy again.Â But after living in a rental house or worse yet - an apartment, they change their mind.Â The desire for home ownership is very strong and everyday I am amazed at the lengths buyers will go to in order to have their very own home.
Every situation is different.Â Did you sale your home or walk away?Â What is your credit and employment like? What kind of loan are you looking for FHA, VA, or conventional?Â See a good loan officer who can assess your situation and give you advise on how to find your way back to home ownership again. Don't wait too long; it may take time and who knows where interest rates will be this time next year.Â
There was a time not so long ago when FICO scores, debt to income ratios, and strict federal guidelines were not road blocks to homeownership. There was a thing called lease option, lease to own, or option to buy. This path to ownership is still available.
A buyer who has the income to purchase but does not qualify for a loan due to bad credit, or simply a lack of down payment can still negotiate a contract with a seller who is willing to collect rent, put aside a portion for a downpayment, and allow the buyer to exercise his/her option to purchase at an agreed upon time.
All terms are negotiable.Â Lease options can be 1, 2, or 5 years.Â Buyer and Seller agree on price, payments, terms, and put it in a contract.Â
Buyer benefits include:
1.Â Can have bad credit but ability to make payments
2Â Â It's an option to buy not an absolute
3.Â Your name is not on the title until you exercise your option, which could be a plus in the case of a lawsuit, divorce, etc.
More sellers are willing to do lease options now that the market is slowing and more buyers are having difficulty obtaining loans.
I attended a great outreach this week in Hemet.Â The city is participating in the federal Neighborhood Stabilization Program using federals funds to buy, rehab, and resell foreclosed single family homes in Hemet.
What little profit is made on these homes is recyled back into the program to buy more foreclosures.Â What a wonderful way to keep a city from becoming blighted and offer affordable housing to first time buyers.Â This program also comes with a great loan called NSP loan. The City of Perris is doing the same Neighborhood Stabilization Program.
Hemet is also participating in a loan program that is available for any home within its' city limits. It's called the City-Wide Loan.
The City-Wide Loan is available in Temecula and several surrounding cities.Â Not every lender is qualified to participate in these city loans, so check with a realtor that is working closely with one of the program's preferred lenders.
For more information on the qualifications for these loans visit http://www.nphs.info
New Home Credit and First Time Buyer Credit of $10,000 goes into effect May 1, 2010. $100 million is allocated to the New Home Credit and $100 million to the First Time Buyer Credit.
The very popular New Home Credit in 2009 ran out of money quickly. It generated so many sales that it was re-introduced again this year along with the First Time Buyer Credit. The money for the First-Time Buyer
Credit is expected to run out much faster than the New Home Credit this year.
eligible taxpayer who purchases a qualified personal residence on
and after May 1, 2010, and on or before Dec. 31, 2010, or who
purchases a qualified principal residence on and after Dec. 31,
2010, and before Aug. 1, 2011, pursuant to an enforceable contract
executed on or before Dec. 31, 2010, will be able to take the
allowed tax credit. The credit is equal to the lesser of 5 percent
of the purchase price or $10,000, in equal installments over
three consecutive years. Under AB 183, purchasers will be required to
live in the home for at least two years or forfeit the credit
(i.e., repay it to the state).
HOWEVER...this money will go
fast. The $100 million allocated for California's first-time
credits may be depleted in about 20 days or sooner. The
total tax credit allocation for all taxpayers is $100
million for first-time homebuyers and $100 million for new homes, both
on a first-come, first-served basis.
For an update on how many applications have been filed and for the dollar amount, watch this site: http://www.ftb.ca.gov/individuals/new_home_credit.shtml
I love referrals! I never realized that referrals could come so quickly
after a closed deal. I thought "oh maybe if I keep in touch, they'll
buy another house in five years and remember me"...not so.
I closed a deal with a buyer last month, who sent me his sister who is
looking for a home. Then I closed another one last week and got a call
from her friend who is an investor. Another referral was from a client
that I just successfully completed a short sale with. Then there is a happy buyer I haven't even closed with yet who is giving me referrals.
Why do my clients like me? I educate, educate, educate. They really
want to understand this crazy market and love it when someone from the
"inside" will share it with them. It shows them
that you are knowledgeable and love your work so much that all you want
to do is talk about it all the time and tell everyone what's going on
in the real estate world.
There is another factor. I know agents who never get referrals because
they just see their clients as dollar signs. Clients pick up on that
right away. These agents try to talk their clients into buying something they
don't want; they don't listen, they don't ask, they just show them home
after home with the hope that one of them will stick. That is a waste
of everyone's time.
Just show every client that you are interested in what's best for them, not
the other way around. Don't push, don't stalk, just educate. Seems to
be working for me....that's my blog and I'm sticking to it.
My clients are always amazed when we first start searching for homes.Â They see the headlines in the media that there thousands of foreclosures on the market, now is the time to buy, make an offer, the banks are desparate....NOT.
When we begin to put in offers and there are multiple offers on each home, and the offers are above list price and they lose out to an all cash buyer, then they see the big picture....it's not a buyer's market; it's a banker's market.
If the media is right and there are so many foreclosures flooding the market, where are they?Â There are several answers.
1. The Make Home Affordable Program was designed to keep homeowners in their homes while they work something out with their lender.Â The goal is to make homeowner's payments no more than 31% of their gross income. These homeowners are staying in their home while working with the lender...this takes time.
2. The Moritorium - California is the Land of Never-Ending Moritoriums.Â The banks are under pressure from the Obama Administration to show a concerted effort to work out a loan reinstatement plan for the homeowner.Â The governor of California has extended the moritorium that was started by the Bush Administration in 2008.
3. The banks are not releasing their inventory...we call it a Shadow Inventory, estimated to be in the hundreds of thousands. I have heard several different theories about this including: making their portfolios look good, not deflating the market anymore by releasing them all at once, to it's not their fault - the government is not letting them.Â Hey, the government did bail them out; who knows?
I do know this, there is something in the works.Â I see banks get organized, coming up with plans, streamlining their process. I think 2010 is going to be a great year for real estate and buyer's patience will finally pay off.
I have been working with the same VA buyers for six months. They are
qualified, they have their VA certificate, they are willing to put
money towards closings costs, and I cannot get them a home.
It's not that I have never sold a VA buyer a home, I have never sold
one when we had to compete for the home. The onIy deals I closed for VA
buyers were homes that no one else wanted in other words, no
competition, seller's only offer!
I educate my buyers, I prepare them for the market, I tell them how to
be competitive, and then I write winning offers. But with VA buyers the
odds are stacked against me. Even if I offer more to compensate for the
buyers lack of closing costs and VA non-allowables, I have to worry
about jeopardizing the appraisal. AND It doesn't help that there is a
shortage of REO homes to sale in the first place!
I have been told by more than one listing agent that there is an order in which the banks consider offers that goes like this:
1. All Cash above list price.
2. All Cash at list price.
3. Conventional Loan
I tell my buyers, it's nothing personal, it's a bank, they have no
personal attachment to the home. They just care about the bottom net
amount. Yes, with a VA loan even if the buyers are willing to put money
towards the closing costs...there are still those non-allowables and
that can be a deal breaker.
Talk about deal breaker, I recently got an accepted offer (cash) only
because my buyer said he would pay the termite. The other cash buyer
lost the deal by $75.
In the meanwhile, my buyers are discouraged and have stopped looking.
They are going to save their money and go for a conventional loan.