Mukilteo Real Estate: #10 best community in America by Money Magazine

Posted on July 21, 2009 by Tim

This past week I retrieved my latest issue of Money Magazine from the mailbox and was pleasantly surprised to find that Money Magazine ranked the seaside community of Mukilteo as among the very best communities to live in. Ranked number ten in the country by the magazine, the town offers spectacular views of the Puget Sound, the Olympics, and the Cascades if your home is situated to look east. Among the reasons to consider living in Mukilteo were the good schools and lower property taxes when comparing to other communities in the study.

In today’s market, when you consider the housing price pullback, community, schools, employment and intangibles, Snohomish County offers some of the very best real estate in the Northwest.

I can certainly attest to the spectacular setting in Mukilteo. While waiting for the Ferry to sign some clients on Whidbey Island this past Spring (one of the perks of being in the escrow business is traveling to different communities) I took some pictures of the “glass-like” water scenery (can be very rough) in the morning. I’ve never seen any portion of the Puget Sound water so calm.

Mukilteo Ferry Landing & Lighthouse -Photo Copyright Tim S. Kane 2009

Mukilteo Ferry at Ivars Fish Bar - Photo Copyright Tim S. Kane 2009

Mukilteo Ferry & Fishermen - Photo Copyright Tim S Kane 2009

Mortgage Disclosure Improvement Act: New Waiting Periods on Mortgage Transactions

Posted on July 16, 2009 by Rhonda Porter

In an early post, Ardell wrote about the significance of a buyer being able to close quickly…new regulations may put a damper on that. With mortgage applications taken after July 30, 2009, waiting periods will go into effect with regards to when and how disclosure forms are provided to the consumer. The Mortgage Disclosure Improvement Act (MDIA), which modifies the Truth in Lending Act (TILA), was originally going to become effective on October 1, 2009, however the effective date was moved up two months which may catch some real estate professionals by surprise.

Here are some of the details:

Good Faith Estimate and Truth in Lending Disclosures….required waiting periods.

Under MDIA, early disclosures are required for “any extension of credit secured by the dwelling of the consumer.” Three business days from application, the consumer must receive an initial Good Faith Estimate and Truth in Lending (unless the borrower is denied at application).

The earliest a transaction can possibly close is seven days after the initial disclosures have been issued by the lender (delivered in person, mailed, emailed, etc.). This is assuming no re-disclosure is required.

Re-disclosure (waiting periods after the early disclosure and corrected disclosures) of the GFE/TIL are triggered if the fees and charges are more than 10%; if the APR is more than 0.125% or a change in loan terms. Three business days must pass in the event of re-disclosure. Re-disclosing is nothing new, it typically happened at closing–this will no longer be acceptable. Mortgage originators “should compare the APR at consummation with the APR in the most recently provided corrected disclosures (not the first set of disclosures provided) to determine whether the creditor must provide another set of corrected disclosures”. Double check those APRs prior to doc!

From MortgageDaily.com:

“The Commentary added by the MDIA Rule expressly provides that both the seven-business-day and three-business-day waiting periods must expire for consummation to occur. The seven-business-day waiting period begins when the early disclosures are delivered to the consumer or placed in the mail, and not when the consumer receives the disclosures. The three-business-day waiting periods begin when the consumer actually receives or is deemed to receive the corrected disclosures. If corrected disclosures are mailed, the consumer is deemed to receive the disclosures three business days after mailing. If a creditor delivers corrected disclosures via email or by a courier other than the postal service, the creditor may rely on either proof of actual receipt or the mailing rule for purposes of determining when the three-business-day waiting period begins to run.”

Consumers have the right to waive or shorten the MDIA if “a consumer determines that an extension of credit is needed to meet a bona fide perosnal financial emergency”.

No monies may be collected from the borrower with exception to a “bona fide and reasonable” credit report fee until they receive the initial disclosures. This may cause a delay of when an appraisal is ordered. Most lenders require an upfront deposit to cover the cost of the appraisal. The collection of fees rule may also cause potential issues if a borrower is doing a certain type of lock (some with float down or extended lock periods require an upfront deposit). NOTE: HVCC requires the borrower receive a copy of the appraisal at least three days prior to closing.

Tim Kane can attest that there is nothing worse than a borrower learning at signing their final loan papers that the fees are significantly higher than what was originally disclosed. I’d like to think that all mortgage originators redisclosed WHEN modifications to the transaction/fees take place…obviously, this has not been the case.

DFI covers MDIA here.

Re-disclosures could become a “holy hand grenade” to quick closings.

Are We Facing A Housing Shortage?

Posted on July 15, 2009 by Chuck

In looking at the latest Northwest MLS statistics for King County, it would be tempting to say that our housing market is recovering. But it is an odd mix of data. Single family home sales volumes are up (even better than last year), inventory is down sharply from last year, prices seem to be starting to rise again, and average days-on-market is dropping. That all sounds pretty good. (larger residential stats charts)

(Note that the Northwest Multiple Listing Service neither prepares nor is responsible for these charts – the interpretation is my own.)

But condominium sales are still slow (though rising some), inventory is staying high, and median prices are not rising. That doesn’t sound quite as good. (larger condo stats chart)

What are we to make of this seemingly conflicting data?

What it looks like to me is that we are in the early stages of a housing shortage. While Seattle and the west side have been built out for decades, Bellevue and the east side communities have been absorbing most of the region’s growth for the past 50 years or so. But we passed the Growth Management Act in 1990, and then we added the Critical Areas Ordinances. As a result, it has become harder and harder to get permits for housing developments of any significant size. In fact it appears that over the last 10 years or so it has become far easier to get a permit for a 100-unit condominium high-rise than for a 100-home residential development. The rate of application for new building permits “fell off a cliff

Lower Interest Rate – Escrow Timeframe

Posted on July 13, 2009 by ARDELL

1) How long is Escrow?

The correct answer is it can be as long or short as the buyer and seller want it to be. However a long escrow timeframe can cause an escrow to fail, because it can create a situation where the buyer no longer qualifies for the mortgage. Just because the buyer qualified when the offer was submitted, doesn’t mean the buyer will continue to qualify on the day the lender is supposed to fund the loan so the escrow can close.

A lender assumes a given interest rate when they qualify the buyer. If that interest rate is different for the reasons detailed below, at time of close, the buyer may not qualify at that changed interest rate.

2) Why do most agents write a contract to close in 30 days or less?

Dan Green of The Mortgage Reports wrote a post today explaining why a shorter escrow timeframe equals a lower mortgage interest rate. His post explains that a 60 day lock “costs more” than a 30 day lock, often in terms of higher interest rate vs. higher cash costs to close.

In order for the buyer to get the rate they think they are getting, they have to be able to lock that rate for no longer than 30 days. While the buyer is not required to lock that rate, it should at least be a possibility. If a buyer looks at a rate quote of 5%, they often are not told that assumes a rate lock period of no more than 30 days. So if they sign a contract to close in 60 days, and then try to lock the rate in the first week of their contract, they will find the rate to do that is higher than the rate they were quoted the day they made the offer.

The rate can change in a few hours without the issues noted in this post. But even if the rate does not change at all, the rate will be higher if you try to lock it through a 60 day closing vs. a 30 day closing.

The honest lender who asks “what is your proposed closing date” and gives you a “60 day lock rate quote” will be higher than the lender who assumes a 30 day lock. Be sure the lenders are using the same parameters when quoting you a rate prior to making an offer, so that you are comparing apples to apples. In this scenario the most trustworthy lender could appear to have a higher rate, when they are being most honest about the potential for rate if you lock for 60 vs. 30 days.

3) How does the closing date timeframe, chosen at time of offer AND ACCEPTANCE, impact the buyer and seller in other ways?

Buyer A gets a pre-approval letter the day they are submitting an offer. The lender pre-approves the buyer for a $300,000 mortgage at 5%.

Seller B accepts the buyer’s offer BUT asks for a 90 day closing, as the home they are moving to is new construction, and won’t be completed for 90 days.

Buyer A accepts the seller’s counter-offer as to closing date.

30 days later the buyer sees interest rates rising and wants to lock the rate. The lender quotes the “lock rate” and the buyer is confused. “I see the rate on your website is 5%. Why are you quoting me 5.25%?” Lender explains that a 60 day lock vs. a 30 day lock adds 1/4 of a % point to the mortgage interest rate.

Here’s where it gets REALLY complicated…if the buyer doesn’t qualify to buy the house if the rate is 5.25% vs. 5%, he can’t lock it. If he chooses to wait until the closing is within 30 days before he locks the rate, the rate could be at 5.5% at that time. If the timeframe for the finance contingency protecting the buyer’s Earnest Money expires prior to that time (and almost all do), the buyer is painted into a corner by circumstance.

Moral of the story is often a buyer CAN let the seller have 90 days to close if they are renting month to month. But a buyer must consider the impact of the interest rate floating out for 60 of those 90 days and/or the cost of locking for more than 30 days at time of contract.

Today, it is near impossible for a seller to stay in the property for more than 60 days from time of offer and acceptance. You can close in 30 days and let the seller stay or rent back from the buyer. BUT the buyer’s lender will not allow that seller to rent bank for an extended period. If the buyer is qualifying at an “owner occupied” interest rate, they will impose a maximum number of days that the buyer can rent it to the seller. Beyond that time period the buyer’s lender will consider it an “investment” mortgage, and higher investor interest rate and higher downpayment requirements, vs. an “owner occupied” purchase money loan.

The “ifs, ands or buts” that happen in a split second during negotiations, can change the “assumptions” made at the time the buyer received their preapproval letter. The lender is often not “in the room” while these negotiations take place, or consulted for every tiny change in close date or rent back terms. They most often don’t see those “changes” until the buyer and seller both sign the contract as finally negotiated.

These small changes can put the buyer’s Earnest Money “at risk” of loss. The agent is the “protector of the buyer’s Earnest Money”, as related to changes in contract terms during negotiations. Yet how many realize the changed position the buyer is put in when the seller counters for a longer close date?

We see thousands of articles on “How to choose an agent?” Perhaps asking the agent “what happens if the seller wants to close in 90 days, or wants to rent back for 90 days?”, is a better question than “How many homes have you ‘sold’ this year?” The cost of closing is VERY important to the buyer. Not closing at all, due to changes no one played out to the likely eventual worst case scenario, affects both the buyer AND the seller.

Agents don’t “sell” houses. Agents represent the buyer OR the seller AND the transaction as a whole, as it appears at time of offer…AND as it changes during negotiations and escrow.

Handing a contract to escrow and waiting for a commission check is no longer an option. Changes in lending BACK TO the old tried and true rules of the game, requires agents to be on their toes all the way to the day escrow closes…or doesn’t close.

Why are so many escrows not closing these days? Everyone asks that question. Truth is the skills needed by an agent have changed dramatically back to old school…and agents still think “it’s the lender’s job” vs. theirs.

Tales From the Dark Side #1

Posted on July 9, 2009 by Ray Pepper

[Editor’s Note: As a long time member of the Rain City Guide community, Ray Pepper has offered to share stories with us about his on-the-ground experience working as a real estate broker with $500 Realty. We’re calling these “Tales from the Dark Side” and today, I’m please to hit publish on the first edition of this series. Please give a warm welcome to Ray Pepper as the latest contributor to Rain City Guide!]

In an attempt to educate the public and fellow agents of the NWMLS I offer an incident dated Sept 2008.

Client Sam and Tim have been Pre-Approved clients looking for a home in Des Moines with a current Buyers Agency agreement on file. They attend Open Houses and call me for showings every month or so. They have been educated on how to advise all fellow agents they are working with an Agent.

Sam found a home driving around and called me from her cell at the vacant residence. It was a Sunday at 4pm and I got the message about 8pm. The voice mail indicated she called the Agent on the sign, to inquire on the price, and as it turned out the agent lived across the street.

As the story unfolds the Agent spent 2.5 hours with our client talking about the home, the history of it, and the wonderful community she has lived in for decades.

I receive a phone call to write an offer on the property Sunday night. I asked my client how they got inside. She stated the listing agent let me in. I asked, ” Did you remind her you were working with an agent?” She said absolutely!

An offer was written around midnight and was promptly sent Monday morning.

The next phone call I received was one that has been repeated before but this time much harsher then I have ever heard. It reminded me of my old female Drill Sergeant at Fort Leonard Wood. ” Listen here Pepper!” “I’m a million dollar producer!” “I’ve seen the likes of you come and go!” “My time is very valuable!” “Don’t speak until I have finished what I’m saying!” “Your clients lied to me!” ” We have a wonderful community here and I don’t think dishonesty is a good fit for our community!” “I’m not here to do your work for you!”

I’m new here to RCG and I believe none of you know me personally. Those who do will attest that there is nobody more sincere, honest, and willing to take any and all slanderous language. I have listened to it for years at the Seattle/Tacoma Home Show and Puyallup Fair. I took it all in as usual. I attempt to never laugh but always educate based on the rules set forth by the NWMLS and the State.

I immediately contacted my clients and told them about the incident and how I had to remove myself from this transaction. My clients stated to me SHE is the liar and the agent “offered” to just walk across the street and show her listing to them. As it turns out while I was on the phone with my clients the listing agent called back for Round 2 of screaming and I continued to listen. I must confess that at times I find this very therapeutic and relaxing. I was threatened to be turned into the NWMLS, the State, and her Broker. I strongly encouraged her to do so.

We all know how this story ends. The Buyer wanted the home. The Seller wanted it sold. The buyers walked because they did not want to have this agent as their neighbor.

It is my opinion the only one who ever loses from this type of behavior is the one who will never know it happened. At last look the house still remains on the market today, this time with a new agent.

Our clients closed on their new home in April 2009.

[photo source: Sir Mervs]

My “Talking” Good Faith Estimate

Posted on July 3, 2009 by Rhonda Porter

Ardell asked me to share with you how I present Good Faith Estimates to my clients when I’m not meeting with them face to face…and believe or not, most of my clients I never have the pleasure of meeting. We do most of our conversation via email or over the phone. When possible, I like to include a presentation where I review the good faith estimate for the client section by section.

Here’s an example from a transaction a few months ago where my clients were buying utilizing an FHA mortgage with minimum down payment.

The program I use is called Jing and you have up to 5 minutes to record your presentation (I was pushing my time with this presentation…you might be able to tell that I’m trying to wrap it up at the end). The uses for this program are endless.

This does take some extra time to prepare an estimate…but I think it’s worth it!

Calculating Income of Employed W2 Borrowers for Mortgage Qualifying

Posted on June 26, 2009 by Rhonda Porter

Jillayne wrote a post about the upcoming national licensing exam that mortgage originators will have to take and pass (unless they work for a depository institution) due to the SAFE Act. She provided examples of questions that may be on the exam. One of them is how to calculate income–which is receiving quite a few comments on her post.

If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant’s
monthly income?
(A) $2,163.20
(B) $2,343.47
(C) $2,379.52
(D) $2,487.68

The correct way to calculate this is 13.52 x 40 hours x 52 weeks divided by 12 months = (B) $2,343.47. The mortgage originator should also review the last two years W2’s to make sure the income is steady or increasing. If it’s decreasing, this will need to be explained and the income may be averaged or a lower income may be used. For example, if the borrower recently had their hours cut due to the economy, the new lower figure will most likely be used. What’s most important is steady hours for the hourly employee…a recent jump in hours may not be considered either.

It’s important that the borrower has a minimum of a two year history in their line of work in order to be able to use the income (secondary education may be able to count towards the two year requirement). If someone started a second job one year ago as a waitress for supplemental income, it might not meet the criteria to be factored towards income unless the borrower had a second job in the same industry over the past two years.

Overtime and bonus income needs to be received for the past two years to be factored for qualifying as well. Again, this boils down to stability and trends with income are heavily considered.

Commission incomes (W2) requires a two year history as well and the income is averaged. If a borrower’s commission income is more than 25% of their annual income, they’re treated more like a self-employed borrower. They’ll need to provide their last two years complete tax returns and non-reimbursed business expenses that are claimed on the tax return will be deducted from the gross income (they’re treated more like a self-employed borrower). A situation that I’ve seen is where a borrower was paid a salary and then received a promotion where they had greater earning potential. The employer reduced their base and added a commission structure. Because the commission was a new feature to the income, only new lower base income was used for qualifying.

It all pretty much boils down to showing stability over the past 24 months and recent trends when calculating income. Also be prepared to complete a Form 4506–even if you’re paid salary–as a measure to prevent fraud. Lenders may also require a Verification of Employment with your employer to confirm the information provided regarding employment, income is accurate and that employment is likely to continue prior to funding your new mortgage.

There are many other types of income–for purposes of keeping this post short, sweet and simple, I’ve stuck to income that’s reported via a W2 and a “full doc” loan.

Hopefully you’re working with a Mortgage Professional who reviews your income documentation upfront and calculates it correctly…and I hope you’re quickly providing the information that is being requested so that you’re properly qualified in the beginning of the process. Nobody likes to get involved with a transaction to find out that the underwriter is not going to use the income that was used on the application because it was figured incorrectly.

Questions? Ask! 🙂

Settlement Statement: Is the interest rate of the Note disclosed on the form?

Posted on June 25, 2009 by Tim

It is routine for escrow departments of title companies and independent escrow firms to provide a Settlement Statement to a loan officer (and agents) prior to making appointments with clients to sign their paperwork. Once loan documents are received by escrow the closing staff move to get this accomplished as quickly as possible. This is done for a variety of reasons but mostly to assist in ironing out any discrepancies prior to meeting with the client.

If you reconciled a “yes,” the interest rate is on the Settlement Statement, you are correct. So, where is it:

Line 901 of the Settlement Statement
If a borrower has a loan, it is on Line 901 to calculate interest (see screenshot)

Can this be missed even after escrow receives a HUD approval “green light,” “all OK,” “call the borrowers to make an appointment?” Unfortunately, yes. Hopefully this post will assist consumers and those in the business that were unaware that this is on the Settlement Statement and to prevent situations where escrow is meeting a client at their home at 8pm to sign docs and hear the client remark, “this is not the rate/program we were quoted.”

Interest rate on HUD

Is Your Open House In The NWMLS For ALL To See?

Posted on June 14, 2009 by Courtney Cooper

The last few weeks have been extremely busy open house wise for us in Seattle – mostly in the $400,000 and under price range or close to it. Agent hits on the NWMLS for those listings has also soared and the web traffic in general has increased for this price point. The buyers are definitely out there poking around!

Many of my recent open house visitors have been Redfin buyers. They seem to expect to be treated poorly by other agents at opens. Maybe this is just my own perception, but they are physically cringing upon entrance. I guess it could be my outfit or my hair, but more likely it must have to do with the typical reception a Redfin buyer might get. The point of an open house has always been for the hosting agent to meet, network, and possibly pick up new clients. Although it is also great exposure for the listed property, very rarely does the open house sell the home – at least it didn’t used to.

Enter Redfin.

Redfin arguably has one of the nicest real estate search websites and their open house feature is probably second to none. I can’t keep up with their changing business model and have no idea how effective or not they are for their clients, but do love their site and always welcome Redfin buyers to my open houses. Redfin buyers seem to almost always be actively looking for a home. They meticulously schedule and map out the open houses they plan to visit and they come with questions prepared. In short, they are serious.

One little problem:

Open houses that show up on the site are swept from the NWMLS when a listing agent enters the information in the “public open houses” field of their listing and not all listing agents do this. Some companies prefer to hold on to that information and only enter their open houses on their corporate site alone. Soon enough, though, most agents will hopefully catch up and realize that not entering their opens for all to see is a disservice to the seller. Just looking at Seattle stats alone in the NWMLS, Redfin has sold 62 residential properties and 9 condos since the beginning of the year. Redfin buyers are clearly putting a dent in the inventory.

Redfin aside, it is just smart business and good representation to enter your open house into the NWMLS so that you expose your seller’s property to as many potential buyers as possible.

The Buyers are out, and trying to buy, but…

Posted on June 12, 2009 by Chuck

Buyers are out, and trying to buy, but they don’t seem to be quite as successful as some of the more breathless news reports would lead you to believe. I have always liked the Pending Sales statistics from NWMLS because they represent the most recent monthly snapshot of new contracts on listed properties – i.e. a Buyer and a Seller have made a deal. But recently a lot of those ‘deals’ have not closed, the Seller has not gotten his or her money, and the Buyer has not gotten possession of the property. It appears that a lot of these current transactions, which are indicating a high level of Buyer’s intent to purchase, are falling out or being delayed for long periods.

Here is a chart built from NWMLS published statistics of Pending vs Sold data – the chart is built by taking a two-month moving average of Pending (previous month) vs Sold (current month) data. Note that this post expands on an earlier post by Ardell in her Sunday Night Stats.

Let’s call this chart the Fall-Out Ratio – we may want to keep an eye on it.

(Required disclaimer: Statistics not compiled or published by the Northwest Multiple Listing Service) reilingteamcom-fall-out-ratio-0906

Historically the fall-out rate has been well under 10%, but then in early 2008 the fall-out rate started climbing like a rocket. Recall that we had the mortgage market meltdown in late 2007, and lenders started dramatically tightening their lending practices. Then we had the larger financial and business crash in late 2008, and more people started losing their jobs – and the other 90% got nervous. It was also in late 2008 that we started seeing a lot more short sales in our Seattle/Bellevue area. Recall that in a short sale, the insolvent seller is trying to avoid foreclosure by selling the property and getting the lender to accept less than is owed on it. That lender approval process is often slow and uncertain, and it certainly is contributing to this rise in the Fall-Out Ratio. Short sales may be 20% or more of our current sales activity, and those delays may also be a major contributor to why the average Days-on-Market measure isn’t dropping in concert with Months Supply. Other contributors to the fall-out rate would include failure to reach agreement on inspection, and failure of financing. I’m sure we’ll get a lot more insight on causes from the comments by our great RCG contributors.

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