Lender Paid Closing Costs Save Negotiations

Perhaps the most misunderstood portion of a #RealEstate transaction are the #ClosingCosts.

For the purpose of this blog, closing costs are everything that the buyer has to pay for except the down payment.  Title Fees, Origination Charges, pre-paids, everything rolled into one number.

On a recent transaction, I was representing the Seller.  The Buyer's initial offer was quite low, and also included a Seller Concession for Closing Costs.  After talking with the Buyer's agent at length, I discovered that the primary concern of the Buyer was that he be able to keep the cash that he would normally lay out for closing costs.  The Seller was adamant that he would not pay closing costs.

I called the Lender involved in the transaction to see if he could talk to the Buyer about putting closing costs into the loan.  The interesting part of this is that the Lender initially said that they wouldn't do it.  After a couple of minutes of chatting about loans, I discovered that the lender could cover a good sized chunk of the closing costs, but they would require an additional 1/8th point of interest.  As a matter of fact, for an additional 1/4 point, they could cover them all!

So now the question was how much would this add to the loan, and how much could the Buyer put up with?

It turned out that 1/8th point added $11 to the monthly payment.  1/4 point added $23 to the monthly payment.

When the Seller learned that the Buyer was going to pay at least some of the closing costs, he decided that splitting the costs with the Buyer would be OK.

We closed the transaction.

#Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Contingency Sales in Phoenix

I had an interesting conversation with someone the other day about contingency buying.  This person wanted to make an offer on a house contingent on the sale of their house.  The only problem is that their house is not on the market yet, and they want to have an offer accepted before they put their house on the market.

Interesting, isn't it?  There is no lack of lunacy in the world!

Here are conditions that might allow a contingency to work:

1.  The Buyer's house already has to be under contract
2.  The Buyer's transaction must have already cleared the inspection and appraisal contingencies
3.  The person purchasing the Buyer's house has to have two things:  a) a good sized earnest money deposit and b) an assurance from the lender that underwriting has already OK'ed the purchase
4.  The purchase of the Buyer's home cannot be a contingency purchase.

Colleagues of mine have had contingencies that have had as many as 7 homes lined up and falling like dominoes when the market was stable and lenders were solid when they pre-approved a person for a loan.

Would you consider a contingency purchase/sale now?  I would be interested to hear from you.

Have  a great day!

Tim


#Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

How Much Do You Want?

When taking a listing, I have found that one of the questions that people are hardly ever prepared to answer is "how much cash do you want to walk away with?".  If you would like to sell your house, this is a critical factor!  No matter what amount you sell for, you can only get so many pesos after everything is done.

People always seem to think in terms of "how much can I get for my house".  This is a wrong-headed way of trying to wring the highest price out of a property.

Why is it wrong-headed?  Consider this:  You have two offers in front of you, one for $200,000, and one for $195,000.  The $200,000 offer asks for 3% concessions from the seller to cover closing costs.  The $195,000 offer asks for no closing costs.  Taken at face value, the $195,000 offer actually nets the seller $1000 more than the $200,000 contract.

Also, when it comes time for the appraisal, you stand a much better chance of having the $195,000 value approved by the appraiser than the $200,000 value.

So, beware when your pal down the street tells you how much his house sold for - you don't know how much he netted from the sale.  After all, isn't the bottom line the most important one?


#Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Phoenix Market Has No Explanation

Is this the expression that you get from your clients when you try to explain the Phoenix market to them?

Here are the facts, let's try to make some sense out of them.

1. Appreciation is still more than 10% over last year
2. The Number of Listings are not quite double than this time last year
3. The Number of Sales is tracking along "normal" lines, but are about 300 less than last year on average
4. Average Sale prices took a small hit early this year, but are higher than they have been in the last 5 years
5. Average Number of Days on the Market is currently 83 - Higher than last year, but lower than the 5 years previous to that.

If there is a single explanation to this set of facts, it would be "we are headed towards a normal market", but that answer is a little too simple.

There are lots of social issues being brought out in the market today, along with several big impacts on the financial side of things.

Socially, we are seeing people staying out of the market until they are older.  Many College and University graduates are not finding the high paying jobs that they anticipated, and they are leaving school with an already large financial burden and don't want to add to it by financing a house.  They would rather live with their parents a little longer to get their financial situation stabilized.

Financially, people seem to still be holding their breath to see what is happening next.  They believe (maybe rightly so) that they need to see some solidity and growth in the economy before making any large changes.  They have the feeling that there could be a big negative shift in the economy, even though they can't pinpoint where that shift may occur.

Leave a comment - let me know what you think!


#Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Part-Timers Don't Belong in Real Estate

Do you see the error on the stone?  That error will be there forever, because a part-time person was involved.  For all eternity, this poor mother will bear the ridicule of the idiot that put it there.

No, that isn't right - the people who commissioned the stone will first be caused anguish and anxiety, then they will be angry, then they will demand - and probably get - a new stone.  And they will remember every negative emotion and reaction that they have along the way.

As a Real Estate Buyer's Agent, you are responsible for what is written on the stone.  You are responsible for coordinating the ballet of people that dance in and out of the transaction.  You control the tempo, the beat, and are ultimately responsible for on-time closings with a minimum of hassle for both clients.  You are the one who determines what everyone remembers.  It is amazing the number of people that are involved in a real estate transaction.  Consider:

On the Buyer's "side":
Buyer (Usually 1 or 2 people)
Buyer's Agent (usually 1 person)
Buyer's Lender Rep
Buyer's Lender Rep Processor (up to 4 of these people)
Home Inspector
Termite Inspector
Other Inspectors
Appraiser
Underwriter

On Both Sides:
Title Officer

On Seller's "Side":
Seller (Usually 1 or 2 people)
Seller's Agent
Repairmen

The Buyer's Agent is responsible for coordination of all these people.  Putting them into and out of the transaction as necessary is the responsibility of the Buyer's Agent.  This coordination has three elements to it:

1) Availability - the Buyer's Agent has to be available to take calls, read emails and respond to text messages.  Not possible if you are already working another 8 hour job.  Your "window" for response is an hour or two after "work".  This results in many things taking an additional day, and if the person you want to communicate with is only available during "business hours", several days.

2) Communication - the Buyer's agent has to have the ability to take whatever time is required to get an inspector on the job, talk about situations with the lender, evaluate and respond to the appraisal, etc.  They have to be able to forward information to the appropriate party in a timely fashion.  When a required repair has been completed, you have to communicate it to the Buyer, the Appraiser, the Lender and the Inspector.  Where do you find the time to do this if you are working "full time"?

3) Follow-up - The Buyer's agent must continually be following up on each person involved.  What about the required repair?  Is it complete yet?  If so, you have to take photos and communicate them to the Appraiser and the Lender.  Then, you have to make sure that the Lender has communicated with the Underwriter.

When the Buyer's agent works another job, and "does real estate" like most people "do drinks" or "do lunch", the Buyer and Seller will both suffer.  Their memories of what happened will remain indelibly etched on their memories.  Not only that, but the people that they talk to, correspond with, and meet in grocery lines will hear all about how things are so messed up.

There is a clause in the contract on line 341:  Time is of the Essence:  The parties acknowledge that time is of the essence in the performance of the obligations described herein.

People who do "part time" real estate continually violate this most important part of the contract.  Your client is owed a fiduciary duty 100% of the time - not when your "job" allows it.


#Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Solar Power - Not So Sunny - Part 3

This is the third in a series of blogs about #Solar power.  The deeper I dig, the more I find out, so I don't know when this will end.

Solar panels just sit there - there are no moving parts, there are no levers to pull or knobs to turn, so it seems that they might just produce electricity forever...

There are only a few articles out there that tell you how much solar panels degrade - on average - about 1% per year.  That means for each Kilowatt your panels produce, each year they will produce less and less power for you.  So, it follows that the first year you use solar will be the best year ever.  Every year after that, your power output decreases.  Here is a chart that shows how much power output is warranted by several solar power panel producers:

This degradation is covered in the lease - as a matter of fact, the lease under-promises so much that it is almost funny.  Remember Mr. and Mrs. Smith?  Their system is supposed to produce 9 Kilowatts of power.  In Arizona, the sun shines nearly every day for at least 8 hours.  The system should easily produce 72 Kilowatts per day.  The lease promises nearly 15,000 Kilowatts to be produced Annually, which sounds like a lot, until you discover that 15,000 Kilowatts is only 200 days worth of energy production - or just a little over 6 months of power.

So, the warranty is nearly worthless.  The power produced by the Smith's solar system could be cut nearly in half, and the warranty would still hold.  They would still be paying the same lease amount, their bills from their power company could double, and they would have no recourse.

At the end of the lease, the system is only warranted for 12,000 Kilowatts annually - nearly 25% less than originally promised.  That means the amount paid to the power company will go up proportionately, and their "savings" will decrease.

Let's pretend that a car had a warranty on gas mileage like solar systems have a warranty on Kilowatts produced.  A car that gets 20 MPG brand new would only be warranted for 15 MPG by the end of the warranty period.  Is that OK with you?

Yes, there is still more to come!


#Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Cheap Homes Becoming Extinct

Cheap homes are going the way of the Dinosaur!  In a survey of the MLS this morning, the Greater Phoenix Area reveals that there are fewer homes available in the $0 to $100,000 than there are in any other price group until you reach $400,000 - $500,000 price group.  Here is how they break down this morning:

$0 - $100,000                   2009 Homes available
$100,001 - $200,000        6690 Homes available
$200,001 - $300,000        4908 Homes available
$300,001 - $400,000        2593 Homes available
$400,001 - $500,000        1314 Homes available


#Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman