Seattle Home Buying Guide

I received the following info from a mortgage rep I work with.  Looks like FNMA is changing the rules again. 

PS – If you need any help with a mortgage.  Lance Morgan is a great resource.  He is the one who sent me this info.  His contact info is at the bottom.

Here is the info:

Timeline:
Effective with all applications dated June 1st and after.
Summary:
FNMA is requiring the implementation of their Loan Quality Initiative. 

• Requires a more comprehensive review of the initial credit report for alerts to confirm customer identity.
• Second review of Customer credit prior to funding to ensure there are no new liabilities that could affect qualification for the loan.

Impacts:

• Lenders will now need to secure signed letters of explanation for all credit inquiries showing on the credit report.  (The letter can be signed by the Customer at closing).
• The Lender will run a second credit report on the day the file is being prepared for loan documents. The second report will not update credit scores. 
• Changes to the total debt ratio that exceed 2% will require a lender to update the credit information and rerun the approval.  This could change the approval decision.  Any new inquiries that did not show on the initial credit report will require another letter of explanation from the Customer.

To Dos:
Let your Customers know about the new credit requirements and carefully coach them not to increase their debt during the mortgage transaction.  It is HIGHLY critical that once a borrower applies the DO NOT use credit cards, lines of credit or apply for new credit.
I will continue to counsel my buyers about such changes and I want you to be aware because I can foresee this being an issue especially with lenders who lack in the communication department.

Lance Morgan
Branch Manager/Mortgage Consultant
Windermere Mortgage Services Series LLC/WRE
Serving: Lake Forest Park and Wedgwood
425.478.6412  Cell
206.306.9483  Office
206.306.9463  Fax

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Rob Graham, Seattle Home Buying Expert

Windermere Real Estate

206-321-6349

www.robgrahamrealestate.com

robgraham@windermere.com

Popularity: 13% [?]

There is nothing you guys seem to like more then real life examples of practicing what I preach so here you go:

I have a client who is purchasing a home in Maple Leaf.  The seller’s disclosure indicates that the sewer backed up and flooded the basement two years ago but has been fixed.  Our inspection including sewer scope, indicates that in fact the sewer was not fixed and due to root intrusion, is due to flood again in the near future.  Considering the $25,000 it cost to repair the damage last time, my clients are very happy they paid the $230 for the sewer scope.  It looks like the seller is going to pick up the tab for repairing the line the right way. 

Don’t be penny smart and pound foolish.  Get the best inspection you can and include a sewer scope.  Not doing so can cost you tens of thousands later. 

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Rob Graham, Seattle Home Buying Expert

Windermere Real Estate

www.robgrahamrealestate.com

206-321-6349

robgraham@windermere.com

Popularity: 2% [?]

So in my last post, I explained the difference between short sales, distressed properties, foreclosures and bank owned property.  Still confused?  Don’t feel bad.  There are many agents who don’t know the difference either.

Short Sales however are when a seller is trying to sell a home but will not make enough money from the sale of the home to cover what is owed on the mortgage and the closing costs of the sale.

In this situation the bank, who is going to take a loose on the sale, needs to approve the sale.

I am sure you won’t be too surprised to find that when big banks get involved, the situation gets complicated.  In fact I have found that the bigger the institution generally the slower the process. 

Getting bank approval can take anywhere from a few weeks to several months. 

You make an offer on a short sale home the same way you would any other home.  Since the seller is not going to make any money on the sale anyway, they are more then happy to accept almost any offer.  The offer then needs to be forwarded to a bank.  Where it generally sits for a long period of time.

In the eyes of the bank they are in no hurry.  The longer they wait, the longer time for a potentially better offer on the home to come in is and the more time the owner has to come into money and decide to not sell. 

In my experience the entire process takes on average 4-5 months.  During that time you will not hear nay information from the bank at all.  Your buyer’s agent can not contact them either.  It is like you sent an offer off into the wild blue yonder. 

It can be very frustrating.

The banks almost always have the following rules in effect.

1. The bank will not make any changes to the home.  You are free to do an inspection, and should, but unless it is a major item that will prevent the sale of the home, they will not fix anything.

2.  The bank reserves the right to receive and consider any and all additional offers that may come in on the home.  Short sales tend to be priced somewhat low and get a decent amount of attention.  If another offer comes in, it gets forwarded to the same committee and we all wait for a decision. 

Again, very frustrating and time consuming.

3.  The bank reserves the right to change it’s mind and the components of the offer at any time.  The agreement to sell is between you and the seller, but the bank has the right to refuse to allow the sale for any reason at any time. 

It isn’t uncommon for the rules to change and a buyer to have to come up with additional cash after a previous deal has already been approved. 

The bottom line is that short sales are long, frustrating, and cumbersome.  The bank holds all the cards.  Despite the fact that it is them that wrote a bad loan and the market that is dictating the price and their client who is forced to sell, they will hold you over the fire to get as much out of you as they can.

If you have the stomach for it, you can get a great house at a great price.  The financial problems of the previous owner are no longer your concern after close and the bank has no more claim to the home.

Still, short sales are not for everyone.  I have had many clients try and change their minds against short sales.  Those that have seen it through to the end, are split about 50/50.  Half say they would never do it again, and half feel it was worth it.

Hope it helps.

Give me a call if you need help.

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Rob Graham, Seattle Home Buying Expert

Windermere Real Estate

206-321-6349
robgraham@windermere.com

www.robgrahamrealestate.com

Popularity: 3% [?]

I recently received a question from a reader of this blog about short sales.  I promised a post to give you all the information you need regarding short sales.   As I started writing I realized that there was a lot more information then would fit neatly into a single post.  So over the next few days I am going to post a few different times to cover the topic.

First of all lets clear up what a short sale is.  There is a lot of terms floating around out there and it can be pretty confusing.  Here is what you need to know.

Short Sales – A short sale is where a seller is trying to sell there home but they will not make enough money for the sale of the home to fully pay off the money they owe on it.   They are literally selling the home short of what they owe on it. Because the  bank is going to take a loss on the loan they granted the owner, the bank will insist on being involved in the process and reserve the right to give final approval to any sale of the property. 

Distressed Home – A distressed home is one where the owner is at least 30 days behind on a mortgage payment.   They may or may not be interested in selling the home. 

In Foreclosure – A home in foreclosure is generally more then 90 days behind in payments and the bank has begun the process of taking possession of the home.  When the bank gives you a loan for the home, you agree that if you fall behind on the payments, the bank can take possession of the home.  They will then sell the home to recoup some or all of the money they have lost from you not making your payments.

Bank Owned – Once the bank forecloses on the home the bank will take possession just like an owner would.  They will generally turn around and try to sell the home quickly to get their money back. 

That’s enough for today.  Stay tuned for how the purchase of each of these kinds of homes differs.

Give me a call if you need help.

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Rob Graham, Seattle Home Buying Expert

Windermere Real Estate

206-321-6349

robgraham@windermere.com

www.robgrahamrealestate.com

Popularity: 1% [?]

I have fielded many questions about the effect that the Cap and Trade Bill and the recent changes to Health Care will have on home owners. 

Just This week I received this e-mail from the Washington Association of Realtors in an attempt to clear up a lot of the misinformation that is out there.

Is The Rumor Fact or Fiction?

4/23/2010

A couple rumors are circulating that are causing unnecessary concern among our members (and here is a hint, both of these rumors are false)

Rumor Number One

The new "Cap and Trade" Climate change bill in Congress requires a homeowner to license their home prior to selling it.

FICTION!
There is no requirement in the law to license a home before your clients are allowed to sell their home. In addition, there is not a requirement to make a home more energy efficient before it can be sold.

Want Proof? Here you go…

Rumor Number Two

The recently-passed health care legislation imposes a 3.8% tax on homes sales.

FICTION!
An article has been circulating that mischaracterizes and overstates what is actually in the legislation. Here are the facts.

There is a new 3.8% Medicare tax for "High Income Filers" that goes into effect January 1, 2013 The tax is on unearned income and will apply ONLY to single filers with more than $200,000 of Adjusted Gross Income (AGI) and joint filers with more than AGI of $250,000. Unearned income includes interest, dividends, capital gains and net rents.

Keeping in mind the income limitations above, real estate income that will be affected for high-income filers include:

• Sale of a primary residence: If the gain from the sale of the property is below $250,000 (individual)/ $500,000 (couple) NO tax will have to be paid on the gain. The new Medicare tax would only apply to any gain realized over the $250K/$500K existing primary home exclusion that will bring the filers AGI over the $200K/$250K limits.
• Second Home/Investment property: The additional 3.8% tax will apply to the portion of the gain realized on the sale of a second home or investment property that will bring the filers AGI over the $200K/$250K limit.
• Rental Income: The portion of net rental income that exceeds the $200K/$250K AGI limits will be subject to the new 3.8% tax.

Want more info? Download NAR’s Q&A

Rumor Number Three

If you send $1,000 to this Nigerian banker, he will transfer $21 million dollars into your account.

Actually, we don’t know for sure on this one, but we do know the top two are false rumors!

Do your friends and co-workers a favor and pass this email along to them if you think they have received bad information.

I hope this helps clear up some of the confusion

Give me a call if you need help.

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Rob Graham, Seattle Home Buying Specialist

Windermere Real Estate

206-321-6349

robgraham@windermere.com

www.robgrahamrealestate.com

Popularity: 2% [?]