by Sean Hess (www.SeanHess.com), Broker and Manager of St. Augustine Team Realty (www.StAugustineTeamRealty.com)
I just did a post on my personal site about Who’s Fault is it When a Real Estate Listing Doesn’t Sell. It’s simple, straightforward and I hope you enjoy it!
Have a fantastic New Years!
As promised a Christmas and New Years present for St. Augustine Team Buyers: write a contract before January 7th and we’ll give you a FREE home warranty at closing (a $400 value)! Just our way of saying “thank you” for the business!
If you were a friend of ours on Facebook you would already have known about this last week. Become a Fan of St. Augustine Team Realty on Facebook and be the first to hear about new listings, price changes, and money saving deals!
Also: we took a great new listing in Ocean Gallery at 95 Village Del Lago. This 2-bedroom/2-bath condo is sold fully furnished and could be a great rental investment in popular Ocean Gallery. Situated close by the village pool, this condo is a corner unit in great condition with a screened porch overlooking the popular Del Lago lagoon. Great amenities in this condo complex included heated indoor and outdoor pool, hot tub, exercise room, clubhouse, tennis, racquetball, playground, and private beach access. Ocean Gallery is a gated community with 24hr. security.
by Sean Hess (www.SeanHess.com), Broker and Manager (www.StAugustineTeamRealty.com)
Before any present finds its way under the tree, before any group of reindeer make that first night landing on a snowy roof somewhere in the world, there’s a lot of training that goes on behind the scenes. Santa was kind enough this year to let us into his REINDEER TOP GUN facility where the best flying reindeer in the world train for Christmas. We hope you enjoy it as much as we did!
Merry Christmas!
by Sean Hess (www.SeanHess.com), Broker and Manager for St. Augustine Team Realty (www.StAugustineTeamRealty).
Selling Realtors?
If you’re a Realtor this is the time of year you feel especially for sale…recruiting postcards, e-mails and phone calls are as common as Christmas decorations right now.
I just wrote a post for my personal website that tells a little bit why we switched companies (actually, we opened a new one). It also has a link to a great article by Rob Minton on some things to think about if you’re a real estate professional thinking about making the switch next year (big company, small company, or start your own company). I hope you enjoy it!
by Sean Hess (www.SeanHess.com), broker and manager, St. Augustine Team Realty (www.StAugustineTeamRealty.com)
A quick disclaimer: I just got all this information this morning and it was a bit like drinking water from a firehose. But here’s how I interpret it.
Lenders and title companies will be using a new Good Faith Estimate (GFE) and Settlement (HUD-1) Statement starting January 1st.
For buyers it means some added consumer protections. The first thing that’s different is that the GFE is done at the time of loan application, not at the time of pre-qualification/pre-approval as it was in the past. The second thing that changes is that the lender’s fees as stated in the GFE cannot change. If the lender’s do change by a certain percentage, the whole GFE has to be re-done and re-disclosed, and the buyer must have three days to review it.
If this three-day re-disclosure period comes into play it will delay real estate closings by three days. Headaches for all involved.
The hope is that this will shut down lenders who quote a rate upfront and then jack it up at the closing table (forcing the buyer to accept it or not close on the home). As I understand it the new GFE is like a contract between the lender and the buyer: if the lender states a fee at time of GFE he has to abide by those stated fees. If they go over that amount, too bad.
Another added twist is that lenders will no longer be able to offer the classic “pre-qualified” or “pre-approved” letter. However they still feel that they will be able to come up with something that says “if so and so puts down this much at this rate for this term he should be able to afford this home.” Can’t wait until I see my first one.
The new HUD-1 (are they still calling it the “HUD-1,” I wonder) Settlement Statement now has a third page which compares the lender fees as stated on the GFE with what the actual costs are. Ideally they should be the same or only slightly different.
The new HUD-1 also itemizes things differently and accounts for things a little differently. In the past if a seller was paying buyer closing costs (let’s use $5000 in closing costs as an example), each little cost would be itemized on the seller’s side until it added up to $5000. With the new statement it’s just shown as a lump sum credit for $5000. And the yield-spread premium (the difference between the rate the lender charges the buyer and the actual base rate) will also be shown on the statement.
To put all these changes in a nutshell, if you’re a buyer and/or seller in a transaction and the lender miscalculates closing costs, it will delay closing three days. So be prepared.
Most lenders I work wih locally have their sh*t together. They live in town, they work in town, and if they screw up they’re accountable. But if you’re a buyer using Third World Lender of the Internet, be especially prepared to fork out an extra three days rent for the moving van.
by Sean Hess (www.SeanHess.com), broker and manager, St. Augustine Team Realty (www.StAugustineTeamRealty.com).
Earlier this week we introduced the players in a real estate deal (I forgot the Appraiser so I just updated the post). Today it’s how the real estate deal goes down.
After weeks on the internet looking at homes or driving around weekends looking at signs, the potential buyer calls a Realtor. The call usually starts with a breathless buyer asking to “see a house” or “know more about a house.” Sooner or later the Realtor usually asks if the buyer has spoken to a mortgage professional about a loan, or if they plan on paying cash. The Realtor then throws the ball to the mortgage person.
The mortgage person calls the Realtor back after talking to the buyer. Mortgage people don’t discuss a buyer’s financial situation with a Realtor, but give them a simple thumbs up or thumbs down on the price (or the buyer). Sometimes the mortgage broker will tell the Realtor how to structure the offer to better meet the buyer’s goals.
From there the Realtor takes the buyer out to look at properties. Ideally the buyers find something they love and write an offer that is accepted. The Realtor prepares the offer on a standard, state-approved, fill-in-the-blanks contract. The buyer usually has to put some money down (“consideration” in contract terms, also called “the binder” or “earnest money deposit”) and writes a check to an escrow account located either with the real estate company, a title company, or an attorney.
At this point the buyer must make formal loan application if they have not done so already.
The home inspection and pest inspections are next. Assuming the buyer’s financing is good, the inspection phase is the last chance the buyer has to get out of the deal without endangering the money he or she put down. If the inspections are unsatisfactory, the buyer can typically walk and retain his deposit if he otherwise follows the deadlines for notice spelled out in the contract.
If inspections are satisfactory (sometimes this requires the seller ponying up for repairs), the bank orders the appraisal. If the appraisal comes back at or above the purchase price the deal moves forward. If the appraisal comes in low the bank may still loan the money, but the buyer or seller will have to make up the shortfall. In some cases the buyer will put more down, in some cases the seller reduces the price, in some cases the two sides agree to disagree and the transaction is canceled.
At this point a survey is ordered. A survey is tangible proof that the property exists, and verifies the location of the property. Occasionally a survey will uncover the fact that the buyer is not buying what the buyer thinks he is buying, or that buildings on the property are actually located at least partly on someone else’s property (called an “encroachment”), or vice versa.
The title company is also working hard at this point, researching the records, and making sure the home is saleable in the respect that all the leins, mortgages, taxes, etc. are able to be taken care of with the money from the sale. Sometimes a lein or an encroachment will make a property unsaleable, in that there is too much risk for the lender to lend on it, or the lein can’t be satisfied by the purchase price. Due to Florida homestead law it is not unusual for people not listed on the deed to have an ownership interest in the property, and these people have to sign off on the sale as well (and may be due some of the proceeds). This is why in Florida sellers cutomarily pay for the owner’s title insurance policy: it’s their responsibility to prove that they actually have the right to sell it.
As this is going on the buyer is also shopping for and then binding insurance on the property.
In the background all the loan paperwork and underwriting is going on with the lender.
As closing approaches the title company is working hard to tie the loose ends of the deal together for the closing date. Talking with all parties involved, making sure everyone gets paid, putting together the settlement statement, and trying to pull it off seemlessly. Still, the title company and everyone involved are ultimately at the mercy of the lender’s “package” (read: money) showing up in time for closing. Most of the time it does. Some of the time it shows up the same day (but late). Less of the time it shows up the next day or next week. This can be stressful.
When the money shows and everyone’s been paid, the title offcially moves to the buyers and the keys are handed over.
And all parties but the buyer and seller wake up the next morning and do it all over again. In real estate it’s a truism that as soon as you’re paid, you’re unemployed.
by Sean Hess (www.SeanHess.com), broker and manager, St. Augustine Team Realty (www.StAugustineTeamRealty.com)
Last week in a post titled FIRST TIME BUYERS HAVE NO RIGHT TO BUY I promised that we would go through the buying process for a first time buyer. This is the first post on that, and it introduces the major players in a residential real estate transaction.
The Real Estate Agent (aka Realtor): The Real Estate Agent is often the first thing a buyer encounters when they step out of cyberspace real estate and into the real world of real estate. The Real Estate Agent has to be proficient at many things: dedicated enough to prospect for buyers and sellers, savy enough to close a sale, technically experienced enough to handle contract details, unflappable enough to handle the inevitable problems that arise, skilled enough to find solutions and keep a dying deal alive, and stubborn enough to do it all over again the next day. Realtors do not get paid a salary, and they do not get paid regularly. They get paid from the real estate commission when a deal closes.
Some Real Estate Agents specialize in working with home sellers, some specialize in working with home buyers. Most are generalists that work with both. In Florida, Agents don’t typically work for buyer or seller; they are “transaction brokers” and actually work for the success of the transaction. In a sense they are advocates for the property itself.
A Real Estate Broker is the director (and sometimes owner) of a real estate company. A Broker Associate is a broker who holds a license to direct a company but chooses not to, and instead works for a broker who does direct. A sales associate holds a license to sell real estate, but not to run a real estate company.
The Site Agent: The Site Agent is a Real Estate Agent who sits new construction. Site Agents are usually not Realtors (a Realtor is a member of the local Board of Realtors and a member of the Multiple Listing Service or “MLS”). Site Agents are typically “Single Agents,” and as such, by law they serve the Builder for the Builder’s absolute benefit, and never for the buyer (again, by law). If you’re a buyer and you visit a Site Agent, understand the Site Agent cannot by law write a deal that benefits the buyer at expense of the Builder.
The Mortgage Broker: The Mortgage Broker shares most of the characteristics of the Real Estate Agent: dedication, savy, experience, skill and unflappability. Where the Real Estate Agent wears out shoe leather chasing buyers and sellers, the Mortgage Broker wears out shoe leather chasing Real Estate Agents. Since 90% of buyers work with Real Estate Agents, the Mortgage Broker works hard to get referrals from the Agent. Real Estate Agents gravitate to Mortgage Brokers who take care of their customers and don’t cock up the deal.
In the past the Mortgage Broker made his living on the slight difference between the Lender’s interest rate and the rate he, the Mortgage Broker, charged. These days the Mortgage Broker mostly makes his money on the origination fee of a loan.
The Loan Officer: The Loan Officer is like a Mortgage Broker that works for a bank. Some Loan Officers get paid a salary, some get paid based on the amount of loan business they bring in.
The Lender: The Lender is the entity that actually lends the money a buyer uses to purchase the home. It is rare when a bank or mortgage broker lends his or her own money to fund a loan (called “private label loans”). Instead, most of the money comes from large, institutional lenders.
The Appraiser: The Appraiser does just that, appraises the property. They are hired by the bank to determine if the property is really worth the loan amount/sales price. The bank really wants to know if, in a worst case scenario, they can get their money back if they have to foreclose. Appraisers have to follow a very strict set of guidelines and are not allowed any “gut feel” pricing. In many cases these rules hamstring them and the values they bring back as a market shifts dramatically one way or the other.
The Home Inspector/Pest Inspector: After the buyer decides which home to buy and gets tentative approval on a loan, the Home Inspectors come in to check over the properties. More and more often the Home Inspector is also licensed to do the Pest Inspection (aka “Wood Destroying Organism” or “WDO” inspection).
The Surveyor: After a home has passed inspection one of the last steps is to have a survey done on the property. Surveys are done to verify the size and location of the property, that any structures are located inside the appropriate property lines, and that there are no encroachments from other properties. Surveyors also do Flood Elevation Certificates, which establish which flood zone the property is in.
The Insurance Agent: The Insurance Agent sells any insurance that is required by a lender (if not by common sense) for the property. This typically involves the sale and binding of Homeowner’s/Windstorm Insurance for homes, Flood Insurance for all properties, and Interior/Contents Insurance for condos and townhomes.
The Title Agent (aka “The Closer”): The Title Agent or Closer is the person or persons who tie all the loose ends of a real estate transaction together in time for closing. They coordinate the sales price, downpayment, repair credits, loan information, taxes, surveys, insurance payments, title insurance, homeowner’s/condo association payments, loan package, commissions, and anything else that is needed to prepare a final settlement statement. It is a thankless job.
The Real Estate Attorney: As new-construction contracts and lender addenda specific to bank-owned homes are written on non-standard contracts, a good Real Estate Attorney is invaluable when a buyer needs help navigating these difficult documents. Not all attorneys are versed in Real Estate.
by Sean Hess (www.SeanHess.com), broker and manager, St. Augustine Team Realty (www.StAugustineTeamRealty.com)
The best thing about being a Realtor is that you can list a property anywhere in the world, even a property that’s at the North Pole. Our good friend Santa Claus will be listing some of his North Pole properties with us over the next few weeks and we invite you to take a look as they come available. Seems the Big Guy is running out of space in these buildings and needs larger facilities for all those toys! The first property is a Toy Warehouse with Assembly Area. Enjoy!
by Sean Hess, broker and manager, St. Augustine Team Realty (www.StAugustineTeamRealty.com)
Quite a provacative headline, isn’t it? But it’s true.
First-time buyer, middle-time buyer, last-time buyer, it doesn’t matter: there is no right to buy a home.
To buy a home in St. Augustine or anywhere else you have to have “credentials,” and by credentials I mean you have to have cash, credit, income, assets, and/or combination of all four.
In the boom market buyers would walk through the doors without any credentials and walk out the doors with a home…and you see where that got us.
So now we’re back to credentials.
If you’re a first time buyer (or any buyer) and you don’t have enough cash to buy a property outright, the next easiest way is to go for an FHA loan. FHA loans only require 3.5% down, though you may have to put more down if your closing costs exceed that amount (common in properties under $100,000).
You will also need a verifiable source of income, or tax records that show your sources of income going back at least 24 months. It’s also a good idea to have assets…a rule of thumb is to have at least two years worth of house payments in the bank in case you ever lose your source of income for an extended period. People pooh-poohed this during the boom years but it turned out to be really good advice.
Lastly you’ll need good credit.
In the past credit was a measure of a person’s willingness to pay (whereas income is a person’s ability to pay).
Nowadays credit is a bit more muddled. The economy’s meltdown in 2008 left economic carnage in a way we haven’t seen in 80 years. Credit now is as much a historic record of economic turmoil as it is a person’s willingness to pay. So the person with a manageable house payment who lost his job and turned to credit cards to survive is lumped in the same group with the so-called investor who gave false information on loan documents then defaulted. Where do you draw the line? And no one’s bothering to draw the line yet.
Next week we’ll go through the buying process step by step to see how this all works together.
