What Actually Takes Place During A Bank Appraisal

With many homes going to contract, buyers and sellers are both going to be having their homes appraised.  The biggest question I receive is what actually takes place and when, so this brief blog will give you a general overview of what you should expect to happen and what your agent should be doing !

When Does A Bank Appraisal Take Place ?

• Typically your appraisal will be ordered within a week or so of your buyer applying for the mortgage, your agent whether your the seller or buyer should contact the mortgage representative to check on the procedures of each bank.  Some of the larger banks prefer to do the appraisal after all the documentation requested of the buyer has been submitted.  Most common banks that leave appraisal towards the end are Wells Fargo, Chase, and Continental Home Loans.  If your using a mortgage broker, than you are more likely to see the appraisal done sooner than later.  

Who Should Be At The Bank Appraisal ? 

• Whether I am working as a buyers agent or as a listing agent, I always attend my appraisals.  It is extremely important in my opinion for both agents to be involved to make sure that the appraiser is getting all the information that is needed, because without the home appraising properly it will not sell.  Appraisers are hired as a third party, so you want to take the opportunity to communicate with them and share your knowledge when you can.  
• The homeowners I often will not ask to leave the home during this process, depending on the appraiser and how thorough they are can take from 30 minutes to an hour.  When the homeowners are there for the appraisal we just ask that you allow the appraiser to walk through the home freely.  

What Does The Appraiser To While They Are There ? 

• The appraiser will typically note the numbers of rooms, size of the rooms, and take pictures to show the bank the condition of the property.  They will also take pictures of certain things specifically the heating system, electrical panel and roof.  They will also take measurements of decking or sheds to make sure the proper permits are in place for the home to have those items.  
• Either before or after, they will also scope out other homes in the area that recently sold which they found on MLS.  Once they have seen those homes although they can't go in, they must fill out a large amount of paperwork for the appraisal to be acceptable to the bank.  They will credit and debit for things as need to come up with the value of your home.   This is why real estate agents always insist on using the comparable homes in the area to determine your list price ! 

When Will The Appraisal Be Complete & Who Will See It ?   

• Appraisals will be sent to the bank within 48 hours of it being completed, remember they are hired as a third party.  The bank should notify the mortgage representative within a maximum of 5 business days as to whether the home appraised for.  
• The only one entitled to see the total appraised value is actually the buyer, as the seller your have the right to know if it was appraised high enough for the sale but not the specific number.  If your home does not appraise and did not include any sort of sellers concession than you will need to speak with your attorney to decide what negotiations you would like to go forward with.  

Short Sale Vs Foreclosure

I wanted to take a moment to talk about Short Sales & Foreclosures, although our inventory is not overwhelmed as it was once by them their are still some of these listings on the market.  Buyers who are looking to make a purchase often times think that these are impossible sales, which they are not but unfortunately they can be time consuming.  This blog will not only explain exactly what these kinds of sales are but some of the pro's & cons of these sales as well.  

Short Sale: Where the homeowner has proactively decided to sell their home in order to avoid foreclosure.  This kind of sale gives the homeowner the right to negotiate offers before they are submitted to the bank, but the bank will have the final say on whether the offered price is acceptable.  The homeowner might have the difference between the loan amount vs sold price, and in some cases will immediately be able to obtain a loan on a new home.  

• Pro - These homes are typically mortgageable thru FHA, Conventional, or 203K Loans.  
• Pro - Homeowner will be able to give helpful information about the home including age of appliances, fixtures, or provide paperwork on warranties.  
• Pro - You can usually purchase these homes at a lower price than market value, usually between 5% - 8%.
• Pro - Typically these homes are still being occupied and maintained by the homeowner, and they will be responsible for their belongings including garbage being removed from the home. 

• Con - Timeline for bank approval is an unknown it can take anywhere from 3 months to 12 months to purchase a short sale home.  
• Con - Although the homeowner has the option to give you information they are not required to fix or represent any items in the home.  
• Con - Although some homeowners may have listed their home, sometimes getting in to see the home for a private viewing might be difficult.  

Foreclosure: The homeowner has normally vacated the home and the bank will either A. Hire an agent to advertise the home or B. The home will be sold at a public auction (Real Estate Agents Will Have Access To The Foreclosure Auction Schedule).  The homeowner is no longer involved in any way with the sale of them home, and will be held responsible for the difference between loan amount vs sold price, and will not be eligible for another home loan for 5-7 years. 

• Pro - The timeline to purchase a foreclosure is typically much quicker than the process of buying a short sale.  
• Pro - Most of these homes are very easy to see because they are shown with a Lockbox Code or HUD Key.  
• Pro - These homes are generally sold at a significantly lower price than market value because of the deterioration of the home.  

• Con - These homes typically will need to be purchased either with cash or a 203K Loan.  
• Con - These homes are also sold as-is, this includes any garbage or debris left in and around the home. 
• Con - Many investors will come into the auction with the ability to purchase that day and close within 2 - 4 weeks which can hinder a buyer with a mortgage being able to "win" the home.  

Tips For Purchasing A Short-Sale

• If you are looking to get the home at a good price, and a quick bank approval than looking at Approved Short Sales are a great option, because the bank has already agreed to price.  
• Although the homeowner can give you information, don't skip the home inspection.  You will want to make sure than those "small" issues will not put you over budget after the repairs have been made.  
• Before submitting an offer to the bank take a look at the comparable homes in the area and keep your offer within 10% of market value.  The bank will be basing their decision on your offer on a 3rd party appraisal telling them the current market value of the home.  
• Make sure you utilize a Buyers Agent, they will be able to find out necessary information that will help you choose a viable short sale by checking key information such as: Sellers Attorney, Which Banks & How Many Banks Are Involved, How Co-Operative Will The Homeowner Be.  

Cash Deals In Today's Market

I thought it was about time I took some time and wrote a blog about cash deals in today's market.  Interest rates are at a all time low still, but some buyers are still opting to buy their homes in cash figuring it will earn them interest quicker invested in a property than sitting in the bank.  If you are the buyer who has the ability to buy in cash you do have the upper hand on some other buyers, but not all.  This blog is for both the buyers, and for sellers to help both understand how a cash deal works, benefits of accepting a cash offer, but also how/why a seller may not be able to accept a cash offer.  

Presenting A Cash Offer

There are certain steps to presenting a cash offer that you may not ordinarily have to do, normally when you present an offer with a mortgage you would be presenting the offer with you mortgage pre-approval.  When you are doing a cash deal you will need to provide "Proof of Funds", this must be  recent, if your proof is 3 months or older you must get a new one.  Generally you can contact an agent at your bank and ask them to provide you with a letter, or even simply a copy of a recent bank statement with your bank account information hidden with only your name and available balance displayed.  

If you are purchasing your new home, with the cash from the sale of your current home than you must let this be known in the very beginning of negotiating.  Before you can place an offer, just like any other buyer you should be under contract on your current home.  

Benefits Of Cash Offers 

A seller may or may not prefer a cash offer because of the benefits it presents to them.  Not all homeowners are in a position to accept a lower cash offer because they may have a certain amount they need to "clear" on their home.  There are benefits that can make taking a lower cash offer vs a higher offer with a mortgage appealing to a homeowner.  

• No Bank Appraisals - This is pretty simple to understand, you do not need to worry at all about whether or not your home appraises because there is no bank involved which can sometimes be an obstacle.  

• No Loan Funding Contingencies - Whenever someone obtains a mortgage there are certain paperwork the bank will require from them, if they can't meet those requirements they will not be able to obtain the mortgage.  This can sometimes be avoided by using a good mortgage company but their are no guarantees, financial circumstances can change quickly and unexpectedly. 

• Home Inspections - Every buyer is entitled to a home inspection, but generally with cash deals the home is sold "as is", which means there will be no repairs or credits done to the home.   This is because generally homeowners are already accepting a lesser offer because of it being cash.  

• Faster Closing - It generally takes 60-90 days to go to closing on a home, the time frame is usually decided by how quickly a buyer can get the mortgage commitment, and close.  With no bank comes the benefit of being able to close at a time that is good for both the seller and the buyer.  

I have many homeowners ask me when is the best time to accept a cash offer vs waiting for a buyer with a mortgage pre-approval, unfortunately there is no set criteria but I can give you some pointers on when or why you should consider it.  

• If you need to move or relocate quickly, no one likes the idea of leaving there home vacant because of the risks and costs associated with it.  
• If you have your eye on another home that is on the market the benefit of having your home go to contract quickly will in turn mean you can put in a stronger offer for your new home.
• If the home is an estate sale it may need work, or you may not know the full history like the actually homeowner would.  Homes that need work will generally take longer to sell, which is why a cash offer allows you to move the home quickly reducing costs, as well as risks while giving you less responsibility after your home inspection report comes back.  

Always remember your Realtor should be advising you whether or not a cash deal is a good option for you, this goes for both buyers and sellers.  If you are the buyer placing a cash offer, my best advice is to make sure your Buyer Broker has helped you come up with a fair offer, remember there is a difference between a cash offer and a low offer ! For homeowners that have received a cash offer the process of deciding whether to accept it, or perhaps counter all depends on your home, situation, and the market for your immediate area. Your Realtor will be able to pull what cash sales have closed to help you make an educated decision about what is a fair offer for your home! 

What To Look For When Your Purchasing A Renovated Home

So I am sure those buyers who are out there looking have noticed the abundance of renovated homes that are currently on the market.  I am finding there are two very extreme opinions about these renovations, either the buyers absolutely refuse to even look at them, or they will look at nothing other than a renovated home. 

I would never tell anyone to not consider a renovated home, because there are some definite advantages to buying a home that has been renovated.  At the same time there are some very specific things you will want to take a look at when it comes to buying one of these homes. 

•  How long did the renovation take? Your buyers broker will be able to tell you when the home sold to the investor, from the day it closed to the day it came back onto the market is what you want to focus on.  If it was flipped within a short period of time (30-45 days) you will want to have a very thorough home inspection.  The reason for this is because in that short of a time period it was more than likely a cosmetic renovation.  
• What was done during the renovation? Certain things are quite obvious, but just because the home has new baseboards it does not mean that the heating was upgraded, you want to check the boiler/hot water heater/oil tank.  It could be that they did not require being replaced but the only way to know for sure is to let a home inspector look at it.  Don't ever assume that just because a light switch was replaced, that the electrical system was upgraded, most investors will upgrade the electric to 200-amp service, which is ideal for a remodeled home.  
• How many homes has the investor renovated? More and more people are choosing to take advantage of all of those short sales by buying them and re-selling them.  Many investors are well known in the Real Estate community, you may not know them but your buyers broker will be able to find that information out for you just by talking to the listing agent.  Do not attempt to find this information out on your own, call your broker! I personally have a investor who has been doing this for 15+ years, and I have investors who have been doing this for 2-3 years but I only work for those who do quality work.  
• What kind of warranty is provided? It is very common that new construction builds that they provide some sort of home warranty, but you always should ask if this exists on a remodeled home.  Some investors will simply give you the warranty paperwork that is provided by the manufacturer of the items the put in the home; others will offer you added warranties about the work that was done by their contractors.  It is not very common but you should still ask the question because it is a definite plus if they do! 

Those 4 questions on the most important questions you will want to know the answers to before you put in an offer on a renovated home.  Not every investor throws together remodels, but these homes are not for everyone.  If you are an avid to it yourself, or even have friends that are contractors many times you can do the same cosmetic work over the course of a season as the investor did.  I would like to think of myself as pretty handy, but I could never come close to what any of my investors do as far as quality of work.  So let's look at a few of the perks of buying a renovated home.  

The obvious perk is you are getting a turn-key home, that you will be the first to live in and will include some 

sort of warranties that you ordinarily would not have.  

 Investors now are smart and in order to move their investments instead of rushing through the renovation they

price the home a few thousand dollars UNDER market value that means your paying less for a better home.  

The reality is the renovated home came about because of an estate/short/foreclosure sale, which means the investor

has done all of the dirty work for you this is a very big perk for those areas that were really hit when the economy

went because the majority of the homes your looking at will be these renovations. 

A renovated home is not for everyone, take the time to talk with your Realtor about your wants/needs as well as your price range.  If your working with a buyers broker they will be able to guide you on what kind of home is best for you.  I always try to reinforce the importance of having a buyers broker working for you but it is a absolute must if you are planning on buying one of these homes.  Only a buyer broker will be able to do the kind of research this home will require, the listing agents are legally obligated to get the best possible deal for the investor, not for the buyer.  If you are planning on looking specifically at renovated homes I would suggest going one step farther and working with an agent who is knowledgeable on these kinds of homes, not only selling them but listing them and working with investors they will know right away what questions to ask, and what answers you want to hear !! 

What Do Expect When Buying A Short Sale

Many of today's buyers are opting to take advantage of getting a "deal" on a short sale, now I previously wrote a blog explaining the process of buying a short sale.   I want to take a moment to explain a bit further not the process but what you should expect to see, and how you can prepare yourself for looking at these homes.  If you are looking for information on the process please refer to this blog.

So you have decided your going to get a deal, and you are on the lookout for that home you can steal off the market.  Well let me prepare you a little bit for what you may walk into, remember these homes are often time distressed or abandoned. 

Before you even start looking at short sales you must remember a few important points.

1. There is still a homeowner involved even if they have abandoned the home, unless they have made other arrangements they first have the right to accept or reject your offer.  
2. You have the right to have a home inspection performed on the house, but that is as far as it will go there will be no repairs made to the home. 
3. Anyone looking into a short sale should also become educated on a what a rehab loan is, some of these homes will not be mortgageable and will require a rehab loan.  
4. "Sold As Is" means just that, many people assume that it just means that no repairs will be made but it also means that any CO issues the home may have not and will not be addressed.  

If that hasn't scared you off from purchasing a short sale, let me give you some reassurance.  Not all short sales are in bad shape and/or have CO issues.  Most of our short sales that are coming onto the market are actually still being lived in by the homeowner so let me prepare you a bit more.

• As I said earlier the homeowner still has the right to negotiate before any offer gets submitted to the bank, the chances of "stealing" one of these homes are slim because the bank will want at least 96% of what the market value is, and the homeowner will want the process to go as quickly and smoothly as possible so submitting a low offer would do nothing but waste everyone time.  

• Not every homeowner will be happy that their home is for sale, and to be quite honest some of them will be flat out rude to you.  Don't take it personal, and do not rush out on their account take your time and look the same as you would if the homeowner was being nice.  Sometimes getting into these homes can be a bit more difficult so you want to make sure you see everything while you are there.  

Those that are well versed in DIY projects, or who have family in construction are the most likely buyers to purchase and mortgage a distressed property.  When you are going out to these homes there are a few important things you should really be prepared for, and this is the most important part of this blog, remember this is specifically for vacant distressed homes.   

• Ladies, this first one is for you and I speak from experience when I am saying this.  DO NOT wear heals/skirts/open shoes when you are going out to look at these homes.  Even in this heat I would recommend wearing jeans or long capris rather than shorts.  Some of these homes have been vandalized and their could be glass, or debris laying around and worst case there can be mold in some of the areas of the house or exposed insulation that can irritate your skin.  

• Bring your flashlights and be prepared to use them, even on the sunniest day these homes can be eerily dark.  Most of the time this is caused by the boarded up windows, and doors but the lack of electricity at night is always an issue.  You will also want to consider bringing some hand sanitizer, some of these houses can be a bit on the dirty size so if you are anything like me you will be very happy to clean up a bit after being inside.  

• View these homes during "normal" hours, this is all about your safety.  You will have to use flashlights to see and your site will be way to limited in the evening hours.  There is no way to know if squatters have been using this home for a warm place to sleep, and viewing these homes in the late evening hours is just not safe.  

• NEVER close the door behind your agent, again this is all about your safety as well as your brokers, you never know what your walking into.  By leaving the front door open you are making it clear to those neighbors and other agents who may be showing that you are in the house, and they will be able to hear you inside god forbid something is to happen.

Now I know that all that may make you think it is not worth looking at short sales at all, but it is rare to see homes in this extreme distress anymore.  It is much more typical that the homes are still being lived in or taken care of by neighbors but I have quite a few buyers who are looking for this kind of project coming to me over the passed few weeks.  The best way to find the short sale that is right for you is to talk open and honestly with your agent, here are a two easy ways we can help you before you even step foot into one of these homes.   

• As brokers we have access to things that you do not, if you would not consider a home that would require a rehab loan we have the ability to check the agent listing to see if the home would require one or not before you go and look at it.  

• Many of these short sales will not have pictures attached to the listing, don't discount them just based on that if you are nervous about seeing these vacant homes because you would only want to do cosmetic work, see if your agent would be willing to preview them for you.   

The best piece of advice I could give you when your buying a short sale is to expect the unexpected ! Short sales are not for everyone.  The good news is that we are not seeing any large amount of short sales coming onto the market at the rate they were in previous years, and we are slowly seeing these homes sold !

Deciding To Buy Or Rent What You Need To Know

It's that time of year again where we see renters deciding whether or not they will continue renting, or will consider being a new homeowner ! This blog is to help all those considering purchasing answer that most common question "Should I Buy Or Should I Rent?" 

Why Should I Buy A Home Instead Of Rent ? 

It's a fact that in most markets, buying a home is significantly cheaper than renting.  Renting is money you will never get back, but buying a home is an investment in your future.  In most areas, if you can afford to rent, you can afford to buy! For more information on this topic you can refer to my blog, here it will give you both the pros and cons for both buying and renting, as well as offer you alternative options.  

How Do I Know I'm Ready To Buy A Home? 
The best way to know if you're ready to purchase a home is to look at your current situation.  You don't need to be employed with the same place for 2 years, you just need to have had a steady income in one field for the past 2-3 years.  You will want to run your credit and take a good look and make sure everything that is on the report is correct, if not you will want to have it corrected! You will also want to make sure you have money saved up for a down payment, in some cases you can withdraw from an IRA penalty free for a first time home purchase.  For more information on this topic you can refer to my article, here.

How Much Money Will I Have To Pay Upfront To Buy A Home? 
This is not an easy answer, because there are two factors depending on what kind of loan you take and the amount of the loan is what will decide your down payment.  For an FHA Loan you will need to put down 3.5% where a Conventional Loan you will need to put down atleast 20%.  The average cost of a home in Suffolk County is about $325,000 which would require a FHA down payment of $11,375.  

You will also need to factor in closing costs, but you can also ask for a sellers concession or have the money "gifted" to you from a friend or family member.  This ranges again by the loan amount, and any mortgage broker is required by law to give you a good faith estimate of closing costs, this is why you should always choose a reputable bank Of course, Coldwell Banker Mortgage is more than happy to help and you will always be given all of your loan options.

Once you have decided that you are in a financial position that you would like to go ahead and begin searching for your new home there are a few things you should look into.  You will want to learn the difference between what kind of homes are on the market, who you should have working for you, and what happens once you have found that "perfect home".  Because each of these topics are best explained in detail I will list each topic below with a direct link to blogs to help you get informed ! 

• Why You Should Work With A Buyer Broker
• What Kinds Of Home Are On The Market
• Benefits Of New Construction
• Short Sale VS Foreclosure
• What To Offer For That House 
• What Happens After Your Offer Is Accepted 
• What It REALLY Means To Be In A Buyers Market 
• Tips To Finding The Perfect Home

Short Sales In Today's Market

The market has picked up and more buyers are out looking for homes, my job is to help guide those buyers and homeowners who are selling their homes ! I want to touch base and give everyone a quick refresher on what a short sale is and what the process actually is, there are still quite a few leftover on the market and new ones coming onto the market.

What Kind Of Short Sales Are There On The Market ? 

• Approved Short Sales:  This is where the bank has already set a price that they are willing to take for the home.  These kinds tend to move a bit quicker since the "negotiations" have already taken place, unless you plan on submitting an offer below asking price.  These can usually close within 90 - 120 days after going to contract.  

• Un-Approved Short Sales: This is the less predictable short sale because not only has the bank not agreed to a price but more than likely the homeowners are still in the process of submitting all of their paperwork as well.  Normally in order to submit your offer to the bank you will need to provide them with contracts, which means you will need to use your down payment to get into contract.  

What Is The Process Of Purchasing A Short Sale ? 

1. Meeting with your buyers broker, deciding on your offering price based on the actual market value of the home.  Take the time to review how long it has been on the market, and for your own knowledge what the Lis Pendens is on the home.  
2. Presenting the offer to the homeowners, ideally they will accept the offer or counter.  You can sometimes ask the homeowners to do fixes or repairs as well, but your agent will advise you to if this will help or hurt your chances.  
3. Once you have an accepted offer from the homeowner, you will than go into contract on the home.  Your offer will now be submitted to the bank for their approval this is where the timeline becomes less predictable.  
4. The bank will send out their own appraiser to perform a BPO of the property.  This is where they  will go look at the condition of the home, and of the surrounding comparable homes.  This is why basing your offer on the current market value is key, if they see your offer is considerably less than it chances are they will not accept.  Remember the bank does not necessarily have to counter your offer they can simply reject and you will need to re-start the process to change your offer.  
5. Hopefully you will have gotten your offer accepted or successfully negotiated with counters to get the home for the price your comfortable with.  Your mortgage broker should have began your process of you obtaining your commitment so that all the attorneys can schedule the closing and get all of the necessary paperwork from the homeowners for their short sale to be complete for you to be able to close ! 

Truths & Myths Of Short Sales 

• Myth: The homeowners have defaulted on the house and have not paid there mortgage.
• Myth: Anyone can short sale their home if they owe more than it is worth.    
• Truth: The homeowners must have suffered some circumstance for no longer being able to afford their home, and are unable to make other arrangements with the bank.  

• Myth: You can offer the bank whatever you want, they would rather sell it than hold onto it! 
• Truth: The home may not be worth what the remaining mortgage is on the home, but on average the bank wants 96% of the market value of the home regardless of what they are owed. 

• Myth: You can use any company to list your homes as a short sale! 
• Truth: You can, but your home will not sell.  You need to hire an agent and company that has worked on and with banks on short sales in your area.  Only a knowledgeable agent will be able to properly handle a short sale, the reason their is a higher commission rate is because of the extensive additional work we must do.  

• Myth: Whatever is left in the home the bank will come and clean out before your closing.
• Truth: What you see is what you get, literally this unfortunately includes whatever leftover debris is left by the previous owners.  In the case where the homeowners are still in possession they will almost always take their belongings and properly dispose of what they are not taking with them.