Archive for the ‘1st Time Buyers’ Category

ACCURATE MLS DATA OR???

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Real estate agents in Silicon Valley enter their “for sale” listings into the MLS Listings data base as soon as the Paperwork is signed.

These listings are immediately available for the public to see by signing on to MLS Listings.com. or at Realtor.com.

No paid for advertising or promotions, just 100% real time accurate data

The Zillows and Trulias of this world (and dozens of smaller Portals) buy this data from us and put it out on their flashy web sites in order to pull you in and sell you some of their “(For Profit”) services.

What they don’t tell you is that our MLS Listings data base is continually updated in real time as agents make additions and changes.

They can choose how often to update their sites and typically do so every 7 to 10 days.

This means you cannot assume that the information they provide is accurate.  

The information you get at MLS Listings.com, or Realtor.com is updated in real time and will always be accurate.

Your choice:

Free on a very well designed web site where the critical data is often out of date.

OR

Free on a less flashy but 100% accurate site.

HOME BUYERS QUESTIONS

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Absolute_Mortgage

Absolute_Mortgage (Photo credit: kathleenleavitt)

HOME BUYERS QUESTIONS

A recent study by THE INMAN GROUP showed that 90% of 1st Time Buyers felt they were well prepared when they started the home buying process. By the time they finished 56% said they should have known much more about the financial aspects of home buying.

The top problem areas were:

1. The Mortgage Selection options.

2. The Closing Escrow process, especially loan closing.

3. The Offer and negotiation process.

This supports my personal experience and justifies my firm policy of having a typically 2 hour initial meeting with new buyer clients to discuss these and a few similar areas. This allows us to deal with the probability that many hours spent on the Web has given them a toxic mix of good, wrong, ambiguous, and dangerous data, but no framework in which to analyze it.

The biggest single problem in my experience is the idea that house hunting should start with looking at houses.

WRONG

It should start with finding the optimal Mortgage FOR YOU based on your current circumstances and future plans.

When you have determined (accurately) how much you can afford and which type of mortgage is best suited for you, should you be using your valuable time to start viewing only homes which meet your parameters and pockets.

NOTE: It’s worth remembering that the 30 year fixed rate mortgage is seldom the best choice for the majority of buyers. However it is always the most expensive.

 

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API 2015

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We now know that API will no longer be updated, and will in fact be replaced from next year by a more valuable index.

Question is what will replace it for the missing year?

Latest I hear is that for one year only it will be by an index which will cause considerable misunderstanding in the minds of it’s users.

For one year only the index will be the average of the past 3 years API’s!!!

Because of the way API has always been measured 80% of all schools improved every year. Therefore the new score will be lower than 2014 as the calculation will include previous lower scores.

Home buyers checking out the schools which their children will be attending next year are almost certainly going to see that the “API” has gone down from it’s 2014 number.

We should hope that sanity is restored before this change is implemented but I’m not confident.

 

GOODBYE API

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Say farewell to the API as you know it. Welcome to new era of accountability, with at least a couple years of confusion in between. English: San Elijo Hills Middle School

 

The release Thursday of the results on the state’s Academic Performance Index marks the end of a decade of judging student performance based on test scores alone. Within three years, California will have moved to a very different system in which scores on the newly introduced Common Core assessments and other state standardized tests will be but one spectrum in the prism for evaluating schools and districts. 

 

There will be new, multiple measures that could include high school and middle school graduation rates, rates of absenteeism, reclassification of English learners, passage on Advanced Placement exams or a mix of other indicators.

 

How these measures will fit together, and whether the can even be combined into a single index, will be the State Board of Educations challenge.

 

The law gives them till Oct 2015 to have it in place. 

 

 

 

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CREDIT SCORES and MORTGAGES

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As most of us know our Credit Score (FICO) has a major influence on whether we can get a Mortgage at all. What’s not always understood is that it also has a huge impact on the interest rate we can get. Here’s a simple way of figuring out how big that impact can be for different scoring ranges: 

*    CREDIT SCORE BELOW 620:

A credit score of 620 or lower places you in the “sub-primeborrower category. If you are considered a sub-prime borrower, you will likely pay 3 percent more on a mortgage loan than someone with excellent credit and will likely pay double-digit interest rates on a home equity loan or a line of credit.

*    CREDIT SCORE OF 620 TO 674:

This credit score range is still considered below optimal. If your credit score falls in this range, you will likely pay 2 percent more than borrowers who boast excellent credit ratings.

*    CREDIT SCORE OF 675 TO 719:

If you find yourself in this credit score range, you should find it relatively easy to procure a good loan. You will typically pay up to half a percentage point more than a borrower who has excellent credit in regards to a loan.

*    CREDIT SCORE OF 720 AND ABOVE:

If you possess a credit score at or above 720, you have an excellent credit score. This means you will be able to acquire a lender’s most favorable rates and you are in the position to shop around thus finding the best loan for you in regards to term, interest rates and other factors.”

by the way….

Factors contributing to someone's credit score...

Factors contributing to someone’s credit score, for Credit score (United States). (Photo credit: Wikipedia)

 

If you are considering getting help with Credit Repair be aware that the vast majority of organizations claiming to do this are scammers and/or crooks.

I can personally recommend Ken Strey for a professional service. His contact info is below. 

Scorewell Inc. | 925-478-4732 | kenstrey@scorewellinc.com | http://www.scorewellinc.com

 

 

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PROBLEMS FOR THE 1st TIME BUYER

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Cover of "Buying a Home (Essential Financ...

Cover of Buying a Home (Essential Finance)

Real estate transactions place a particularly complex set of psychological and emotional stressors on buyers and sellers.  Clients are supposed to make wise financial decisions, find (but manage!) their emotional passion for a property, do diligent research, and handle an uncanny list of logistics – all at once.

This has been the case since the dawn of the real estate business. But the last decade has added two line items to this list of stressors that have sent some buyers and sellers over the edge – and pushed many others right to the (deal-breaking) brink:

The biggest recession in American history is one — this has ratcheted up buyers’ and sellers’ financial fears and the pressure to make smart, sustainable decisions.

The advent of the internet is the other — now that every bit of market data and advice is literally at hand, real estate consumers can overwhelm themselves and fall prey to “analysis paralysis” in the effort to get informed.

Client mindsets, unmanaged, kill deals. And you can’t manage what you don’t first understand. Even worse than glitching up your close rate, some of these anxieties can actually cause panic, paralysis and poor decisions. Let’s take a little trip inside the minds of our post-recession, constantly-connected home buyers and sellers, to get a better understanding for their freak-out moments and sticking points.

Neurosis #1: Interest Rate Fixation.

The buyer and refi-er with interest-rate fixation checks interest rates online all day, every day. They hang on Bernanke’s every word – and text or call you immediately after his every press conference to see what you think about it. They notice rates rise and fall by .375% one week, and have done the amortization math to reveal that this difference would save them $2,750 over their 30 year loan.  As a result, interest rate fixated buyers and home owners often freeze up when it’s time to lock rates, hesitating out of the hope/fear that rates will decline, even by a smidgen, tomorrow.

As with most human neuroses, interest rate fixation starts from a good place: the desire to be a smart, informed, wise money manager and real estate decision-maker. But it can spiral to a place where it borders on delusional. Something about the ease of access and constant information about every moment’s variation in interest rates makes mortgage borrowers perceive that they have more control over the precise timing of their rate lock and their transaction than they actually do.

How you can help

If you have someone with interest rate fixation on your hands, it might help to keep them mindful of the overall goal of buying the right home at an affordable price and terms, or saving money and paying their home off early, via their refinance.  Explain that they should be aggressive about moving their house hunt and refinance forward. But also inform them that their contingency and underwriting timelines have more impact on the timing nuances that dictate their precise interest rate than obsessively watching CNBC ever will.

Neurosis #2: House-Stalking Syndrome.

Your house stalkers are those buyers who are constantly asking you about homes that are not on the market, having seen a late-night infomercial that urged them to write letters to owners asking them to sell – and finance – their homes.  These are also the buyers who see a ‘Coming Soon’ sign go up on the most luxurious home in town and start checking online, calling the listing agent and emailing you 5 times a day to know the moment it comes on the market. Then, when it is listed at a price far beyond their means, they go to the Open House, put in a lowball offer (with a picture of their Yorkie) and go into mourning when the place sells for hundreds of thousands more than they could every have paid.

Believe it or not, these are the most benign symptoms of house stalking syndrome. I’ve heard of house stalking buyers who track the sellers down on Facebook, knock on their doors, and even attempt to sabotage their open houses. But by and large, house-stalkers reserve their fixation for late-night internet research into a property’s permit history, floorplans, owners and neighbors, estimated value, days on market and listing agent history.

How you can help

Historically, house stalkers were seeking to be the first to hear of a price reduction.  But on today’s seller’s market, house stalkers are often legitimate buyers driven slightly nuts by the prospect of getting outbid (again).

To minimize this mania, it’s essential for you, the agent, to be the calming presence in a crazy market.  Create a sensible house hunting plan and strategy, encourage them to view homes priced low enough that they can compete and stay within budget, and brief them up front about how many offers buyers normally are having to make before snapping up their ultimate home.

Neurosis #3: Home Voyeurism, aka Looky-Loo Syndrome, aka Property Peeping Tom Tendencies.

Home voyeurs are related to the aforementioned home-stalkers, with one big difference: they have no interest in actually buying a home!  Hence, these Property Peeping Tom’s can be the bane of an agent’s existence, because their phone calls, emails and texts place a real drain on the time you could be spending with serious clients.

As long as there have been open houses, there have been looky loos. But the advent of the internet has exacerbated their symptoms and encouraged their bad behavior by rendering so much more information about properties and the people involved with them publicly available.

How you can help

The toughest type of Property Peeping Tom to deal with are those friends and relatives who beg you to use your real estate agent superpowers to constantly pull comps, get insider information or even provide access to listed homes for what you know will turn out to be no good reason. One word: “no”.  Wait – one more word: “boundaries”

Neurosis #4: Décor Expectations Disorder.

Reality TV, real estate shows and design magazines have created some pretty unrealistic expectations about what the interior of a home should look like on any given day. While the average human being isn’t put off by some unopened mail in the basket or a pair of sneakers in the hallway, those with Décor Expectations Disorder are shocked and outraged by even the slightest signs of real life inside the homes they view. They are aghast when every pillow isn’t fluffed and completely incensed by out-of-date appliances.  No window valances? Quelle horreur.

How you can help

Truth is, the ante has certainly been upped. Buyers at all price points do have the right to expect listings to be clean and prepared for sale – and listing agents must know that homes which don’t measure up will not command top dollar. If your buyer client has Décor Expectations Disorder, remind them that the perfectly staged homes tend to get more offers and sell for more, so that a poorly prepared property might present a good opportunity for them.  Encourage them to visualize the place in the pristine condition they’ll keep it, if and when they end up owning the place.

And take every opportunity to remind your home sellers that the competition is fierce. In fact, remind them that they are not just competing against nearby listings, but also against the standard of cleaniness and decor that buyers see in the media. Encourage them to be vigilant about keeping their home pristine and clutter-free while it’s listed and being shown. Stagers, housekeepers and storage units are property preparation investments that can have pay off big, at closing.

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API Myths

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St. Clare School. Oldest Elementary School in ...

St. Clare School. Oldest Elementary School in Silicon Valley (Photo credit: Wikipedia)

Heiwa elementary school %u5E73%u548C%u5C0F%u5B...

Heiwa elementary school %u5E73%u548C%u5C0F%u5B66%u6821 _18 (Photo credit: Wikipedia)

An increasing number of new home Buyers are using the API system as a major factor when choosing where to buy a home. 90 % of 1st time Buyers start by requiring that the Elementary School has a 900+ score. Given that this eliminates approx 95% of schools in Silicon Valley we have a problem.

The solution is to explain how to use the API System for what is is designed to do, not what they are being told by other uninformed parties.

First we clarify that API does not tell how good a school is. Specifically at the Elementary level it measures only 2 subjects: English and Math.

Whilst these are important i firmly believe there is much more involved in being a good school than teaching how to take tests in 2 subjects only.

An API FULL REPORT also gives the demographic make up in a given school, and how each group is scoring. For example, let’s just take a typical Silicon Valley Elementary school which has an API score 0f 860 and a total of 350 students, 50% White, 50% Asian, and 50% others. We will consistently see that the Asian student group has a 900# API, while the White group will be in the 800’s.

If I were an Asian Buyer I might see this as a good reason to save a huge amount on my home purchase by considering an 860 Total Score for such a school to be perfectly acceptable for my children. This decision could well allow me to buy a suitable house for $500,000 rather than the $600,000 it will cost in the next school district which is similar in all respects except the API score.

The 2nd and most important piece of advice is to find one or more suitable neibourhoods, then go and visit the local school(s) during the normal day. Every school I know is delighted to allow future parents to do this and thereby get a real life idea about the quality of the school.

 

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ANALYSIS/PARALYSIS Syndrome

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Raven's Progressive Matrices Example

Raven’s Progressive Matrices Example (Photo credit: Wikipedia)

A nasty medical condition has been diagnosed amongst a small segment of the population here in Santa Clara’s Silicon Valley.

It affects only Highly Educated, Computer Literate, people between 25 and 35, and only when they decide to try to buy a house.

The virus feeds off such people’s addition to “DATA” regardless of accuracy, or relevance to the Home Buying process, and despite the lack of sufficient knowledge to accurately evaluate it.

In a very short time they lose all sense of purpose and truly believe that if they could just know everything there is to be known about the history of a house and all persons who have ever lived in it, plus the ethnicity of every family living within 2 miles of it, and the IQ of all children of these families, there is a “DATA” supported formula which will tell them if they should buy it, and if so, how much they should be willing to pay.

The lack of such a formula throws them a frenzy of inaction leading to the diagnosis of the dreaded ANALYSIS/PARALYSIS Syndrome. Unofficially this is referred to as the “I can’t decide” problem.

Being Highly Educated (NOT THE SAME AS INTELLIGENT) they will blame the problem on their Real Estate Agent who is obviously not finding them the relevant “DATA” needed to make the correct decision.

They then select a new Agent based on his/her promise to provide them all the “DATA” they ask for and to never offer them advice.

To this date no-one suffering from this debilitating condition has  actually bought as house as long before they reach any decision the subject property has already sold at, on average, 15% higher than the price their process suggested.

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APPROVED LOAN CANCELLATION RISK

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Image representing New York Times as depicted ...

Image via CrunchBase

Home buyers may face an unexpected delay or cancellation of their loan if subsequent financial activity raises any red flags for lenders, especially since Fannie Mae now requires a borrower’s credit to be rechecked right before closing a mortgage.

Making sense of the story

  • Borrowers are advised to keep their credit      picture in the clear by refraining from any purchases that may be seen as      a liability from the lender’s view. For example, the sudden addition of a      $3,000 balance to a new credit card account for an item you’re planning to      enjoy in your new home may cause the lender to send back the loan to      underwriting in order for the calculations to be redone, which could      result in a higher interest rate.
  • If in doubt, borrowers are advised to check      with their loan officer before accruing any new debt so that the purchase      of a new home is not jeopardized.
  • Fannie Mae allows the maximum debt-to-income      ratio to be 45 percent (meaning that a maximum 45 percent of your gross      monthly income can go to cover debt, mortgage and housing expenses).
  • When only one spouse of a couple is named on a      loan, credit rechecks can cause problems if the other spouse has a low      credit score. When the loan is based on one spouse’s income instead of      two, the lender will see a higher debt-to-income ratio.
  • In addition, lenders now routinely re-verify      the employment status of borrowers just before closing, which represents a      standard practice being reignited after the financial crisis. If a      borrower’s employer is undergoing a name change, then the lender also      should be notified to avoid delays.
  • The most creditworthy borrowers may not have      their loan status affected by large purchases before a mortgage is closed,      but those with tighter finances are advised to be more cautious.

 

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FOOD FOR THOUGHT FOR FRUSTRATED BUYERS

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 Many buyers in Silicon Valley are getting fed up of having their offers beaten out by other bidders who value the property higher than them. I’m beginning to hear “We’re going to drop out until the market calms down and we can buy at a sensible price”.

IS THAT A SENSIBLE STRATEGY?

Not in my opinion. When the market calms down it will be because SUPPLY and DEMAND have equalized as they ALWAYS DO. When this happens prices will have leveled off at a higher point, and the number of new homes for sale each week will be stable.            

All of us in the industry know prices aren’t going down and neither are rates! And deep down most buyers know it too.

As it stands, mortgage rates on the Conforming 30-year fixed loans are just over 4% for the best borrowers, up from 3.5% (or lower) in May.  

Many incoming buyers are in payment shock. Combined with higher home prices future buyers are seeing their planned for mortgage payment get higher with the new rates.

So What Does Fannie Mae Think?   

When  Yahoo’s “The Daily Ticker” asked Fannie Mae chief economist Doug Duncan if he felt rates would go down, he said rather bluntly, “We do not”.                                          

Duncan did sprinkle in a little bit of good news as well.

“Mortgage rates have probably increased more than the Fed wanted, seeing that they’ve jumped about 60 basis points (.60%).     

“Some improvements in rates are in the near future because all the bad news the Fed is going to slow its mortgage purchases are built in. 

  “We could possibly see a slight improvement in rates for a very short time”.   

CONSIDER:

A ½ % rate increase in a $500,000 loan will cost an extra $9,000 over 5 years,

The current rate of price increases will level off, but at a higher level.

English: Mortgage debt

English: Mortgage debt (Photo credit: Wikipedia)

The end result of delaying will be a higher price with a more expensive mortgage.

 

Is it Time get back in the hunt!!!

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