Category Archives: Investing

A Seller's Guide to FHA

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FHA insured mortgages have received a stigma in past years for creating a challenging transaction.  Sellers seem to prefer conventional financing, even subprime financing, over an offer with an approved FHA buyer.   

The Federal Housing Administration was established in the 1930s following the Great Depression.   These innovative low down payment loans were intended to help more people become home owners with intentions of creating more stability in neighborhoods.  FHA insured mortgages are woven into American history.

Here are some reasons you,as a Seller, should consider an offer with FHA financing.

  • Preapproved FHA buyers are full documentation loans.  These buyers have been scrutinized and have provided income and asset documentation in order to have a true preapproval.  
  • FHA mortgages are not going to “disappear

NWMLS Form Changes

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I attended a Forms Update Training Class put on by the NWMLS recently and learned about a bunch of changes that are coming down the pike on October 15, 2007. And while I posted some class notes and sample Purchase and Sale Agreement documents over on my site, I thought I’d summarize things below.

Highlights

  • Coldwell Banker Bain (and I assume others) will drop the usage of their “own” optional clauses forms which will make co-op transactions smoother and easier for all agents.
  • Lots of discussion was given to the Washington State Supreme Court decision Alejandre v. Bull, which was the impetus for many of these changes. I won’t bore you with the details here. But they ruled “economic loss rule” prohibits the Buyer from suing the Seller for negligent misrepresentation regarding the condition of real property when the parties relationship is governed by a contract. The courts want to see the allocation of risk of economic loss in the Purchase and Sale Agreements – Hence the changes.

Purchase and Sale Agreement

  • Legal description must be attached as Exhibit A
  • No more counter-offer expiration date (use the counter-offer form)
  • Paragraph 9 – Buyer to waive or not waive the right to remedy in Form 17
  • Homeowners Policy is new default in P&S
  • Closing date and Possession date same – or use NWMLS forms 65A or 65B
  • New provisions address charges and assessments against the property
  • Page 5, item x: 10 day contingency for buyer to verify all information provided by Seller or Listing Agent.

Form 17

These have been in effect since July, but for clarification sake were covered in the updates class. There are several changes here, but the “Environmental Section” is the main one. Buyer can still waive the right to receive unless one of the items in the Environmental Section is checked yes. In that case, the form can not be waived.

As a side note, foreclosure properties are no longer exempt. No one has a clue why the legislature took that one out.

Financing Contingency

  • Buyer must seek Sellers consent to change lender or loan type after loan application period lapses (usually 5 days)

Inspection Contingency

  • Adds changes for “Environmental” Changes of Form 17
  • Advises Buyers to do septic inspection (NWMLS Form 22S)
  • Neighborhood Review Contingency is back

Optional Clauses Contingency

  • Utilities broadened to include others
  • Selling Office Commission moved to NWMLS Form 41C
  • Seller to produced HOA documents if available

I interrupt the regularly scheduled programming…

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to bring you this video interview by Joel from Inman Connect. While I talk too much and too fast, some of you might find it interesting to hear a bit about the history of RCG as well as some more details on the idea of “linkation“…

Now you can go back to your regularly scheduled programming…

I am a Mortgage Dispenser

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Over the past month, I’ve been combing through my database of my closed clients who have either adjustable rate or balloon mortgages.   I’m sending each and every [photopress:july55ad.jpg,full,alignright]one of them a letter reminding them of the terms of their mortgage.   Regardless of how much time I spend explaining how their mortgage program functions, as soon as someone has moved into their new home and they’re unpacking boxes—they’ve forgotten the fine details to the financing that made buying a home possible! 

The letters restate what is disclosed on the Federal Truth in Lending and their Note, including what their margin and caps are.    It also addresses when their first adjustment will take place and what the worse case rate and payment may be.   Worse case payments are currently not disclosed on the Truth in Lending.   

I began my mortgage career on April 1, 2000.   So far, 20% of my closed transactions have been adjustable or balloon mortgages and 3% of my total closed business would be classified as “subprime

7 Ways to Make an Impact

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Getting people to visit your website and read your blog post is interesting, but the most successful bloggers I see seem to get a kick out of having an impact on the industry. With that in mind, I came up with seven ways to make an impact by blogging:

1. Be more consumer-focused: No one loves an argument about buyer agency more than Ardell DellaLoggia (Here’s her first post on RCG a year-and-half ago to give you some perspective). While she may appear to loose an argument with real estate insiders from time-to-time, she always comes out ahead with consumer by arguing for what she consistently believes is their best interest.

2. Be more principled: Whether it be refusing to accept Brad Inman’s gifts or going out of his way to disclose meager earnings from his site, Greg Swann insists on taking the high ground. Add a prolific personality and the ability to say the right words at the right time, and Greg has clearly earned his reputation as a leader in the RE.net.

3. Be more consistent: Whether your interest is real estate blogs or the architecture of doors; Whether you are Beattles’ person or a Dylan person; Whether you like Odd & Crazy or Odd & Ends, Hanan Levin has been searching out the edges of the internet to return with blogging gold. Despite threats to quit and/or move to New Zealand, he continues to delight with multiple updates every day.

4. Be more fun: Is there a business plan behind traveling the country and playing with photoshop? Who cares. The Sellsius boys have shown us all how to make a huge impact by simply having more fun that the rest of us!

5. Be more credible: Whether taking on short sales, professional status, or subprime lending, Jillayne Schlicke always finds a way to offer the voice of reason by providing an interesting perspective filled with interesting solutions…

6. Be more unexpected: With stories ranging from the real estate happenings of Sanjaya, little towns in Austria with unusual names, and hard-hitting coverage of Redfin, one can never know what you’ll get when you land on a post by Marlow Harris… except that it will be interesting and probably provocative.

7. Be more up-to-date: No one else follows the online real estate industry better than Joel Burslem of the Future of Real Estate Marketing. Whether he is analyzing the new guys like Terabitz or the old guys like Zillow, he never misses and interesting story and consistently does a top-notch job putting developments in perspective.

——————-

If you’ve made it this far, then I might as well tell you the genesis of this article…

After my presentation a few weeks ago in Austin, TX, the folks at KW asked if I’d like to submit an article on blogging for the next issue of the KW newsletter. Rather than succumb to the usual “5 reasons you should blog” type article, I thought I’d try to be a bit more interesting and profile some of the bloggers that have made the largest impact on me.

I still haven’t figured out how I’m going to deal with the links (which obviously don’t translate well to a written article). I think I’ll just add one link for each individual back to their blog, and include some text that says the article is best viewed “blog” format on Rain City Guide with a link back to this article. If someone has a better solution on how to deal with lots of links within a printed article, I’m definitely open to suggestions…

As always, I’d love to get your feedback. Should I re-phrase things? Should I include another blogger who has made a strong impact on you?

And, no surprise, I put off writing this article until almost the last minute (the article is due by the end of the month!), so if you have some suggestions, you’ll need to make them soon in order to get into print! 🙂

New Mortgage Program for Helping Out Family Members

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Finally there is a mortgage program available that are designed for when someone is buying a home for another family member.   Previously, if someone wanted to buy a home to have their elderly parents live nearby, unless it could be classified a second or vacation home, the borrower would need to use non-owner occupied financing (much more expensive in rate and cost than owner occupied or second home financing).   

In addition to helping out the folks, this new program, the Family Opportunity Mortgage, works for parents buying a home for their college student and parents who would like to help their disabled adult child buy a home. 

Here’s the skinny:

Assisting a College Bound Student

  • The child must be enrolled in college.
  • The property must be located close to the college the student is enrolled.
  • Property must be a reasonable distance from the parents home.   
  • Property cannot be rented and the child must occupy the property for a minimum of one year.
  • Parents cannot own another second/vacation home in the same location as the student’s home.
  • Parents qualify for the loan, the child does not.   If the child is old enough, they can be on the mortgage with the parents, however it’s not qualified required.

Assisting an Elderly Parent

  • Elderly parent must have insufficient income to qualify for a mortgage or be unable to work.
  • The individuals qualify for the loan.   The parents can be on the mortgage although it is not required.
  • There are no distance requirements between the elderly parent and the individuals (their child).

Assisting a Disabled Adult Child

  • Disabled adult child must have insufficient income to qualify for a mortgage or be unable to work.
  • The parents qualify for the loan.   The parents can be on the mortgage although it is not required.
  • There are no distance requirements between the elderly parent and the individuals (their child)
  • Disabled adult child occupies the property as their primary residence.
  • Parents may all ready own their own primary residence.

It’s about time!  🙂  

Ba-Ba-Ba-Benny and the Fed

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Aw come on and sing along with me (Benny and the Jets).   Ben just surprised many by dropping both the Fed Funds and the Discount Rate by 0.50%.    It’s too soon to tell how this may impact mortgage interest rates…however it (the Fed Funds rate) directly drops the rate home equity loans are based on to 7.75% (Prime Rate).    You can see by the chart below that waiting on rate reductions from the FOMC to impact long term mortgage interest rates may not be the move for you to make.

[photopress:SeptAlertChart.jpg,full,centered]

Chart compliments of Loan Tool Box

The Fed based this reduction due to ” the tightening of credit conditions has the potential to intensify the housing correction”.   To read the entire press release, click here.