Real Estate Turbulence

I just came across this list of the "88 Types of Turbulence", from By Referral Only, a Real Estate Coaching Firm. I thought it was definately blog worthy as it basically goes through most, if not all of the roadblocks that come up during a real estate transaction. I did notice that the attorney category is not listed, probably because most states are not attorney states like New York is.

88 Types of Turbulence
Things That Might Go Wrong During Your Transaction

The Buyer/Borrower:
1. Does not tell the truth on loan application.
2. Has recent late payments on credit report.
3. Finds out about additional debt after loan application.
4. Borrower loses job.
5. Coborrower loses job.
6. Income verification lower than what was stated on loan application.
7. Overtime income not allowed by underwriter for qualifying.
8. Applicant makes large purchase on credit before closing.
9. Illness, injury, divorce or other financial setback during escrow.
10. Lacks motivation.
11. Gift donor changes mind.
12. Cannot locate divorce decree.
13. Cannot locate petition or discharge of bankruptcy.
14. Cannot locate tax returns.
15. Cannot locate bank statements.
16. Difficulty in obtaining verification of rent.
17. Interest rate increases and borrower no longer qualifies.
18. Loan program changes with higher rates, points and fees.
19. Child support not disclosed on application.
20. Bankruptcy within the last two years.
21. Mortgage payment is double the previous housing payment.
22. Borrower/coborrower does not have steady two-year employment history.
23. Borrower brings in handwritten pay stubs.
24. Borrower switches to job with a probation period.
25. Borrower switches from job with salary to 100% commission income.
26. Borrower/coborrower/seller dies.
27. Buyer is too picky about property in price range they can afford.
28. Buyer feels the house is misrepresented.
29. Veterans DD214 form not available.
30. Buyer comes up short of money at closing.
31. Buyer does not properly “paper trail” additional money that comes from gifts, loans, etc.
32. Buyer does not bring cashier’s check to title company for closing costs and down payment.

The Seller:
33. Loses motivation to sell (job transfer does not go through, reconciles marriage, etc.).
34. Cannot find a suitable replacement property.
35. Will not allow appraiser inside home.
36. Will not allow inspectors inside home in a timely manner.
37. Removes property from the premises the buyer believed was included.
38. Cannot clear up liens – is short on cash to close.
39. Did not own 100% of property as previously disclosed.
40. Encounters problems getting partners’ signatures.
41. Leaves town without giving anyone Power of Attorney.
42. Delays the projected move-out date.
43. Did not complete the repairs agreed to in contract.
44. Seller’s home goes into foreclosure during escrow.
45. Misrepresents information about home and neighborhood.
46. Does not disclose all hidden or unknown defects and they are subsequently discovered.

The Realtor(s):
47. Has no client control over buyers or sellers.
48. Delays access to property for inspection and appraisals.
49. Does not get completed paperwork to the Lender in time.
50. Inexperienced in this type of property transaction.
51. Takes unexpected time off during transaction and can’t be reached.
52. Misleads other parties to the transaction – has huge ego.
53. Does not do sufficient homework on their clients or the property and wastes everyone’s time.

The Lender(s):
54. Does not properly pre-qualify the borrower.
55. Wants property repaired prior to closing.
56. The market raises rates, points or costs.
57. Borrower does not qualify because of a late addition of information.
58. Lender requires a last-minute second appraisal or other documents.
59. Lender loses a form or misplaces entire file.
60. Lender doesn’t simultaneously ask for all needed information.
61. Lender doesn’t fund loan in time for close.

The Property:
62. County will not approve septic system or well.
63. Termite report reveals substantial damage and seller is not willing to fix.
64. Home was misrepresented as to size and condition.
65. Home is destroyed prior to closing.
66. Home is not structurally sound.
67. Home is uninsurable for homeowner’s insurance.
68. Property incorrectly zoned.
69. Portion of home sits on neighbor's property.
70. Unique home and comparable properties for appraisal difficult to find.

The Escrow/Title Company:
71. Fails to notify lender/agents of unsigned or unreturned documents.
72. Fails to obtain information from beneficiaries, lien holders, insurance companies or Lenders in a timely manner.
73. Lets principals leave town without getting all necessary signatures.
74. Loses or incorrectly prepares paperwork.
75. Does not pass on valuable information quickly enough.
76. Does not coordinate well, so that many items can be done simultaneously.
77. Does not bend the rules on small problems.
78. Finds liens or other title problems at the last minute.

The Appraiser:
79. Is not local and misunderstands the market.
80. Is too busy to complete the appraisal on schedule.
81. No comparable sales are available.
82. Is not on the Lender’s “approved list.”
83. Makes important mistakes on appraisal and brings in value too low.
84. Lender requires a second or “review” appraisal.

Inspectors:
85. Pest inspector not available when needed.
86. Pest inspector too picky about condition of property.
87. Home inspector not available when needed.
88. Inspection reports alarm buyer and sale is cancelled.

-Rachael

A picture is worth...?

I recently read an article that stated that houses with high quality photos eventually sell with a higher average price than properties marketed with poor photography.  This article excited me because I've always taken pride in the way that I market a home, both with the copy I use in the ad and the ways that I capture the spaces that the house offers with my camera.  I also spend a lot time editing, cropping and brightening my photos before I post them for the public to see. 

It almost angers me that some agents take listings and put little to no effort into their marketing. Short abbreviated text(when they have plenty of room to write more), blurry photos, sideways pictures, pictures with people and/or pets in them, timestamped photos and out-of-season (snow in July) are the kinds of things that irk me . Some agents can't even get out of their car to take the exterior photo of the house.  I just don't understand how someone could do such a disservice to their client.

I was very tempted to display some examples, but I decided to restrain myself to avoid any confrontations or issues that might arise.  I don't want to make any enemies out there, but just wanted to voice myself on the subject.

-Rachael

Short Sale?

Just like seller's concessions, I find myself explaining short sales a lot too so I figured I'd post a blog entry about them as well.

In a nutshell, a short sale is when a person sells their home for less than what they actually owe on their mortgage.  The short sale must undergo an approval process by the bank(s) that hold the loan(s) on the property. First, the owner needs to be approved for the short sale, they must prove to the bank that they are facing a real economic hardship (loss of job/spouse/income/etc).  This is achieved by providing pay stubs, tax returns, bank account statements and filling out a financial statement where all monthly expenses are documented.  Once the owner is approved for a short sale, then the offer that is presented must be also approved.  Once a bank begins to review an offer to purchase, they will either order an appraisal or BPO(broker's price opinion), or both to gauge the value of the home.  The bank wants to make sure that the value of the property, compared to the offer amount makes sense.  It is also very important to be aware that most of the time properties are marketed as short sales without notice or approval of the bank, therefore the initial listing price may not be approved by the bank, it may be a figure that the homeowner and listing agent devised (sometimes an outrageously low number).  Because of this, the bank can and may counter any offers over the asking price.

Example: If the offer is for 100,000 but the property is worth 300,000 based on recent sales, most likely the bank will not accept because they would make out better if they just foreclosed.  I have heard that banks are willing to accept 28% under the appraised value of a home, but don't hold me to that.

Keep in mind also that the bank will not only be taking a loss on the home's value, but they will most likely be picking up other expenses related to the sale such as real estate commissions, back taxes, attorney fees, etc.

Sounds easy, doesn't it?

While I have had a short sale approval in 24 hours, I have also had one that took 5 months, and then another that took months before finding out that the bank actually wasn't even considering the offer my clients presented and they foreclosed and the house was auctioned off.  Those clients ended up losing a lot of time, but ended up finding a wonderful house in the end

Short sales have become a large part of today's market, so as a buyer, one would need to decide if they want to entertain looking at short sales or stray away from them completely.  A short sale can be a great deal, but you need patience and time...you need to be prepared for the fact that it could take a long time to get a decision from the bank and that in the end you may or may not end up with that house you fell in love with.

That's the long story, short :)

-Rachael

What is a seller's concession?

I find myself explaining what a seller's concession is to my clients quite often so I figured I'd post about it here.

First of all, the term seller's concession is very misleading, because it leads everyone to believe that the sellers are giving the buyers money out of their own pockets to pay for closing costs.  What it actually is, is an additional amount above the purchase price that the buyer tacks onto their mortgage loan amount, this additional money is used for their closing costs.  The maximum seller's concesssion allowed is 6%, so a buyer applying for a $200,000 mortgage can add up to $12,000 on top of their loan and that $12,000 can be used to pay for attorney fees, title insurance, mortgage points, escrow tax money, etc. 

The only caveat here is that the property being purchased now has to appraise for $212,000 instead of $200,000 or else the concession will not work.  If you are planning on adding a concession onto your offer to purchase, have your Realtor make sure that there are supporting comps so that you can have the assurance that you will not run into any appraisal issues down the line.

I think seller's concessions are beneficial because while they may not cover all of the closing costs, they enable a buyer to free up a large amount of cash that they can now reserve for upgrades and/or personalization of the home, furniture, etc.

-Rachael

Hello out there!

I've been wanting to start a professional blog for awhile now, to share some of my experiences with the world as well as educate my readers on some of the terms that are our there pertaining to real estate and real estate transactions.  I am always stumbling on things that I'd like to share with people, so this will serve as a way to do that as well.  I am looking forward to creating a following and interacting with my readers so that we can learn from eachother. Thank you for your support.

-Rachael