Closing Costs - Hand In The Cookie Jar

In this day in age where profit margins are slim and competition is fierce; mainly because everyone has their "hand in the cookie jar" so to speak. What does this mean? Well, take mortgage loans for example. When you purchase or refinance a home there a certain expenses that are unavoidable, whether your loan is $20,000 or $2,000,000 there a certain expenses that must be incurred in order to see the transaction close. For instance, title insurance, appraisal, recording, flood certification, closing, overnight fees, courier fees etc. These fees can really add up in a hurry and most must be done to ensure both a proper closing and to protect the interest of the buyer/owner of the property. Other fees are often found in purchase transactions as well, such as pest or structural inspections.

These costs incurred do not come without a price, no one works for free. A mechanic is not going to fix your car without a charge, you cannot walk down to your local Sub Shop and expect a hand out, nor can you walk into Bank or Mortgage Office and expect to ask for X without paying to get it. Appraisers charge money to provide a fair and unbiased opinion of value, title companies charge money to research a particular property and check for liens, easements, surveys etc. Inspectors obviously charge money to go through a home and make sure that it is structurally sound or point out possible hazards, (i.e. a crack in the foundation). What's the point?

Well, just because there are fees involved does not mean that you cannot get a fair price. Do business with someone that has relationships with title companies, appraisers, inspectors etc. Most often than not if the company is reputable then they have already laid the ground work by doing a lot of volume through these entities and intern can give their clients a discount solely on the fact that they do a substantial amount of business with their referral partners. Do your research and choose a company that "has it all" a good reputation, solid referral sources, knowledge, and a "fair" price for doing business.

Your comments are welcomed!

Appraisal Headaches

I started my career in the Real Estate field 4 years ago as an Appraiser. Sometimes I still get questions regarding some common issues related to the property. The best advice I can offer for a purchase or a refinance would be to get as much information about the property (subject) up front before you order the appraisal. Ask if they know the estimate square footage of the property above grade. If they have one level above grade and a full basement, believe it or not they don't have a 2 story home! Ask if their is anything unique about the subject. Does it have a lot of acreage, is it manufactured/modular, is it earth contact, is it a log cabin, etc. If there is acreage with the property, ask if any of the land is used for agricultural use. This helps an appraiser when doing a preliminary search for comparable sales. Another issue I've seen is for a borrower to turn their garage into an additional room. Does this add more value to the home? Yes, if every other comparable sale in the area doesn't have a garage. 9 out 10 times it evens out in the adjustments. Yes, you've added more square footage, but you also eliminated a garage which is more desirable. These few recommendations can go along way and save you some headaches. Please feel free to post any questions or concerns you may have. Looking forward to your comments.

JB

Zillow.com has been launched. . .Again

There has been an increasing trend in Real Estate and Residential Finance to give buyers and sellers easier access to real estate tools through technology. Some of these have been welcomed and some have been demonized. Zillow.com is another tool in this trend. Zillow.com is an internet based company that has developed, what they consider to be, an encompassing site that will lets you determine the market value for your home. There are several services similar, but Zillow.com has a few technological features to make it a big player in the national market.

Don't rush out to refi just yet. These values are based on public information obtained through county and state information. So in some cases, Zillow.com may be a little off. But, its a good place to start. Zillow.com is also full of great resources for both Buyers and Sellers. I consider it to be a pretty good, non-partisan, resource to learn more about every aspect of residential real estate. Everything from how to get pre-approved for a mortgage to how to negotiate with your selling agent.

A couple of neat features from Zillow.com. . .the "Make Me Move" listing. This is a place where you can list your house for sale. They say "everything has a price", well that is exactly what this feature is. "Make Me Move" the free and easy way to tell others the price you'd be willing to sell your home for, without actually putting it on the market. It's that magical number you just can't refuse. Once you set your Make Me Move price, potential buyers can contact you anonymously via e-mail. Then it's up to you whether or not to sell your home. Try it out! You can remove your Make Me Move price at any time. Thinking about selling soon? Use "Make Me Move" to start gathering interest from potential buyers.

Also, If you believe your value to be way off (according to Zillow.com) you can submit to them reasons to justify a re-value determination. Things like additions/improvements to the home, new schools or amenities in the immediate area, or comparable sale around you.

Again, I don't consider Zillow.com to be the final word in determining the value of your home. There are several sources that will be used to determine the offer price by buyers, realtors, or lenders. But Zillow.com is another good resource to educate yourself and help you achieve your real estate goals.

Look around Zillow.com and post your comments here

Buyers Market!

All we hear on the news today is that the market has made a quick change from a sellers market to a buyers market. But what does that exactly mean, and what does that mean for our customers/borrowers?

Well for the past few years, property values have been rising. Combine that with low interest rates, and it creates a growing market. This has given a lot of developers and builders more opportunity to create more product (more homes) in the growing marketplace. Different areas of the country have varying degrees, but in Mid Mo, we are seeing a lot of builders that have been continuing to build, build, build in order to maintain a line of credit. But builders can't keep building forever unless those homes sell.

As the saying goes, "a house is only worth what someone is willing to pay". Sure, you can get appraisals to determine a market value. But ultimately, the home is only worth what someone is willing to pay for it. So, when rising property values price a majority of buyers out of the market, and inventory (homes) continues to increase, it creates a surplus of homes. If you can remember back to your first "Econ" lesson. . .what happens when there is too much supply and too little demand? Prices fall. Long story short, we should expect some builders to either reduce their prices or create more incentives to sell their existing homes. Look for things like "Free UpGrades", Seller Paid Closing Costs", "Free Homeowners Association", Etc. I've even seen some builders throw in Plasma TV's and moving trucks. But in the simplest terms. . .Builders will make several different concessions in order to sell these homes. Hence, a Buyers Market.

Another area to consider. . . current homeowners. Some of these homeowners took advantage of the low interest rates of the recent past to purchase new homes or refinance their existing. Some of these homeowners used Adjustable Rate Mortgages (ARM's) which had low rates locked for the first 3, 5, or 7 years of the loan. The problem is that those ARM's are getting ready to adjust and in some cases can adjust as much as 2.0%. Example: taking a payment of $1265.00 up to $1540.00. In some cases, this prices that homeowner out of their own home. That homeowner will either have to refinance again, in hopes of getting a lower rate (which are still available) or absorb that increase. Some may even decide to sell their home and downsize into something more affordable. These are the people who will take a hit. Because, not only are they competing with builders and existing inventory, but more than likely, the value of that home may have decreased due to the surplus of housing. In extreme cases, they may even owe more on their home then they can sell it for.

I know this post may seem lengthy, but it certainly deserves some attention. Most Real Estate Professionals are creating ways to counteract this trend or their working to produce programs to ride the buyers wave. What ideas have you seen? Your comments are welcomed.

Welcome!

Welcome to our open forum. Professional Mortgage Group, Inc. is a full service firm for both our borrowers and our real estate partners. We welcome you to contribute and refer to our blog site as much as you like. The content of this site will consist of useful and vital information for the purchase or refinance of real estate property.

PMG