What Would Warren Do?

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The news spread like wildfire.  No, it’s not another politician’s sex scandal or the latest (definitely not greatest) gas prices.  It is the monumental statement made by Warren Buffett that he would buy up “a couple hundred thousand” single-family homes.  The catch is that he would do that if it were something he could practically manage. He may not be able to practically manage it but individuals certainly can.

Think about that.  For months, if not more than that, countless Realtors have been urging their clients and potential clients that now is the perfect time to buy.  Now that it comes from one of the biggest investors of our time, it brings new light to the subject for many investors and has generated widespread industry buzz from the moment the billionaire uttered those words.

In an interview where he discussed several topics, soon into the discussion with Becky Quick of CNBC’s Squawk Box, he said that in addition to equities, single-family homes are probably the most attractive investment there is out there right now.  With the low rates that seem to be heading further down still, he suggests buying at these low interest rates and then for homeowners to refinance if and when the rates dips even more. 

He cited that the only reason he has not purchased as many homes as he would have liked is because of the practicality of managing the transactions and properties.  Apartment units might have been more manageable and in his words, he said he would “load up on them” had that been the case. But for the everyday investor it makes perfect sense to seize this opportunity and Warren Buffett highlights this repeatedly in his most recent discussion on CNBC.

Mr. Buffett shared his perspective on the idea of buying homes at distressed prices, fixing them up and renting them out as an ideal way to get a solid return on investment.  Referring to the changing trends and attitudes within the housing market, he also said this is the perfect way to “short the dollar” because with a 30-year fixed rate mortgage it can go two ways; either the interest rate is too high down the line after which you can go and refinance or if it’s too low the other guy’s stuck with it for 30 years.  Could this be the return of the house-flipping craze that we saw boom in the mid 2000s?

Mr. Buffett’s statement brings new light to something that so many agents and mortgage consultants have been saying all along.  Buy now.  At a time when stocks are just now rebounding after four years of inching their way back up, he says that consumers should acquire 30-year fixed rate mortgages and then refinance when rates go down further. 

If homeowners can hold on to their property for a long time after purchasing it at the lowest rates the industry has to offer they are sitting on the best investment possible of our time.  Of course equities are still very strong but they have come up quite a bit and Warren Buffett says owning a home is a “leveraged way of owning a very cheap asset”, making it quite possibly the most attractive investment that you can make.

HUD-Owned Homes Are One of Real Estate’s Best Kept Secrets

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For a few years now the real estate market has been heavily leaning on the buyers’ side with a lot more inventory than there have been buyers and unfortunately because of the economy we are going to see more of the same in 2012. But if you’re a buyer, this could not be a better time for you, especially with interest rates still as low as they have ever been!

HUD-Owned Properties Are Not Always Money Pits

The single biggest hang up that most homebuyers have about looking at HUD-owned homes is that they perceive the properties to be money pits waiting to happen. The truth is that there are a lot of properties in perfect or at least near-perfect condition.  At best these properties require some rehabilitation but nothing that will cost too much or involve lengthy time-consuming projects.  In fact, aside from a few cosmetic issues like paint, flooring or fixtures, HUD-homes most often have solid structure and very desirable amenities, floor plans and features.

Homeowners Can Manage Fix-Ups With the FHA 203k Home Reno Loan

There will be times that you will come across serious fixer-upper homes in this category however you will likely get the property at a steep discount and with the help of a 203k loan you can build in renovation costs into your mortgage.  The best advantage of this is that you can customize the home to your needs, doing anything from installing a high-end kitchen and bathrooms to finishing your basement or even landscaping. One of the best features of this loan is that it also facilitates owners to live elsewhere for up to 6 months while rehabilitation takes place, keeping up mortgage payments in the interim.   Add to that the fact that you will get the same low interest rate on your 203k loan and buying a HUD home makes even more sense!

Deep Savings Make HUD-Owned Homes Worth a Few Cosmetic Fix-Ups

When you consider the financial benefits of buying in today’s market and buying through HUD with the historically low interest rates available out there, it makes good sense to browse HUD homes.  Most buyers receive deep discounts on their property – discounts that add up to thousands of dollars and many times even tens of thousands of dollars.  When you factor in the low interest rates and as a result buyers being able to afford much more house for the same monthly payment amount, dealing with a few cosmetic concerns is well worth it.
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To begin your search for HUD homes, browse the official HUD search engine of all properties listed nationally, by state.  Keep in mind that in order to bid on any of these homes you must go through a registered HUD broker as all real estate agents are not qualified to handle these transactions.  Getting a great deal, sometimes as much as 40% below market value, is worth a little extra effort – so why not start your search today?

Is Now a Good Time to Buy?

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I get asked all the time whether or not now is a good time to buy. Honestly, now is a great time to buy. Never have I seen sellers more willing to negotiate than I do right now.

First of all, we have fantastic mortgage rates. These rates are at all time low. The average national interest rate is at 4.6% for a 30 year fixed rate loan while the 15 year rate is around 3.78%. Could we have imagined these kinds of interest rates just a few short years ago?

As an example, if you took out $300,000 loan for 30 years at a fixed rate of 4.6%, your payment would be around $1,537 per month. If you decide to wait another year hoping prices will go even lower and the rate rises to 5.7%, you would need home prices to fall another 12% to come in at same mortgage payment. That's more than double the price decline most are expecting to happen.

I truly do not believe that interest rates will be going much lower. In fact, most experts predict that they will be going back up to just under 6%.

I also don't foresee prices falling another 12%. If anything, prices are stabilizing. In many areas, prices are actually starting to inch upward again.

Mortgages for expensive homes will fall to $625K for a conforming loan very soon. Right now, lenders can do over $700K on a regular conforming loan without having to worry about getting into a non-conforming situation.

For buyers, there is also a lot less competition right now. It's the perception of many buyers that prices will fall lower, but most experts think there may be an additional 5% decrease at most in some markets.

In Connecticut, some areas are already seeing upward pricing trends. In other words, don't sit around waiting for the prices to adjust downward as well as the interest rates. They are so super good right now that it doesn't make sense to keep waiting it out in an already fantastic market.

For renters, new studies are showing that renting really isn't such a great deal right now. Demand for rentals over the last few years has increased because of the rise of foreclosures and less renters looking to buy. However, the supply has not kept up which means that rental prices have gone up. Why rent when you can buy a home and pay less each month?

Experts also believe that qualifying for a mortgage is likely to get harder instead of easier. As the mortgage market starts moving into the private market and away from Fannie Mae and Freddie Mac, many believe that tougher lending standards will be created.

As always, if you have real estate questions or want to get pre-approved for a mortgage, call or email me. I am also always happy to sit down with you and go through the whole buying process with you at any time.

Shop Around Until Interest Rates Drop when Buying a Home

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When you're in the market for a home, I'm here to help you find the best mortgage terms around. But I also want you to be a fully-informed consumer! 

As you already know, buying a home may be the largest purchase of your life so you should go into it with eyes wide open! In this article, I'd like to provide you some proven and common-sense guidelines that can save you time, money and hassle during the mortgage-hunting process. 

Guideline 1: Look Beneath the Surface of the Interest Rate! 

If you're like most prospective home buyers, you call lenders or use the Internet to shop for the best interest rates. That's a good first step, no doubt about it! But, the mistake many buyers make is that they stop there and don't consider the fees that may be added on to the loan later by the cheapest lender. 

In other words, it's the lenders' game, and they may want you to play by the rules you're not even aware of. The answer, of course, is to know those rules ahead of time so you know exactly what you're getting when you buy that mortgage. More on this subject later! 


Guideline 2: Chose the Type of Lender That Works Best for You! 

There are several different sources of lenders - banks, credit unions, mortgage brokers, etc. They all have their advantages and disadvantages in terms of the rates and services they can offer you. For example, credit unions often provide the best value and service, but, of course, you have to belong to one in order to receive their services. 

Regular banks and "big lenders" (Bank of America, Citigroup, etc.) also provide competitive rates and services. Of course, they only offer products their companies provide. You can also use a mortgage broker. This person is a "wholesaler" who uses several lenders to give service to their customers. The advantage of a broker is that he or she offers a greater selection of rates and products. However, they also tend to be more expensive than regular banks and big lenders. 

Brokers make money in two ways. One is origination fees ("yield spread" or "rebate"). Essentially, the origination fee is a commission paid by the bank to the brokers to encourage them to use their firm. The second way is by selling a higher interest rate to you. This means there's room for you to negotiate that interest rate down! 

When a broker quotes you an interest rate, ask him or her to tell you what the origination fee, rebate or yield spread on that rate is. For a broker, a reasonable amount would be a total of 1% of the loan amount from yield spread, origination or combination of the two. Most brokers usually want to make at least 2%. 

Tip: Don't pay an origination fee unless the broker informs you that he or she isn't getting anything on the back end of the deal. 

The bottom line: you can (and should) shop among all these lenders to find the lowest rate. It can save you thousands of dollars over the life of the mortgage. 


Guideline 3: Review the Good Faith Estimate with an Eagle Eye! 

By law, lenders are required to provide you with a Good Faith Estimate or GFE. In essence, the GFE gives you a general summary of all the costs and expenses you'll incur at the time you close on your new home. The document should cover closing costs and the amount of cash you need to close on the agreement. It should also spell out which if any prepaid expenses must be handled and the average monthly payment you'll have to make in order to keep up with the loan. 

Most lenders provide complete and straight-forward information on these forms; however, there's no reason for you to accept the GFE at face value. Comb through the information and if you don't understand a particular item or fee, ask for an explanation. If you still don't understand them, you may want a lawyer to review them for you so you have complete understanding. 

Remember: A GFE is only an estimate. Changes may occur through no fault of the lender. A reputable lender will let you know if fees are going up substantially. In general, however, if those fees go up by more than approximately 16%, then a red flag should go up in your mind. 

Guideline 4: Negotiate, Negotiate, Negotiate! 

When confronted with the expertise and "prestige" of banks, we all have a tendency to think they know best, and we should, therefore, agree to their terms. Never think this way! Banks are like any business; you can and should negotiate with them! 

Want more information on banks and other lenders? Contact me today!

Happy New Year! Thank You – Valued Clients, Friends and Partners!

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We had a FABULOUS year in 2011 and we couldn’t have done it without you!  Thank you for your support, your belief in us, your trust in our amazing agents and your continued partnership in all your real estate endeavors.  Wishing you and your family a very Happy New Year!  We look forward to serving you in 2012 and beyond.

100% Financed Mortgages – CHFA Helping To Stabilize the Local Real Estate Marketplace

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The Connecticut Housing Finance Authority (CHFA) has a program in place designed to assist homeowners or potential homeowners with the purchase of distressed properties.  The program, called the Homeowners Equity Recovery Opportunity Program (or HERO) provides for several concessions that would allow the buyer to purchase a short sale or bank-owned property with reasonable ease.

Very Little Money Down

Like most FHA loans, buyers would only have to pay 3.5% down on a CHFA HERO financed purchase – an amount that is very doable for most prospective buyers these days, especially in light of the current economic downturn.

Down Payment Assistance

An added benefit of the program is that buyers that qualify for down payment assistance may be able to finance that portion of the purchase as well, effectively making the home purchase 100% financed.

More Distressed Properties Sold Equals Marketplace Stabilization

As the CHFA website states, the program is “designed to support neighborhood stabilization by providing first mortgage financing to encourage first-time homebuyers and existing homeowners to purchase and/or purchase and rehabilitate foreclosed or abandoned properties including properties conveyed by deed in lieu of foreclosure or short sale.” Buyers can qualify for this loan only for the potential purchase of distressed properties.

Newly Expanded Rules Makes for Broader Range of Buyers

The HERO program was conventionally available only for first time homebuyers but the rules have since expanded, allowing existing homeowners to also fall under the umbrella of qualified applicants of this financing program.  This opens up the realm of possibility to a much wider range of homebuyers.

Own and Rent at the Same Time and Still Qualify for HERO

If you are looking for either a short sale or a bank-owned property, and you want to be an owner-occupant and move into that home,  CHFA will allow you to keep your existing home and while using up to 85% of your net rental income from your existing home to qualify on your next loan to purchase the second home and move into it.  In other words, you can own two properties at the same time, using your existing/current home to qualify your second purchase.  By tapping into the rental income potential of the first property, you will have then strengthened your investment portfolio significantly.

Lower Than Average Interest Rates

Though as a nation we are already used to seeing the all-time low interest rates that have made international headlines across the board, the benefit of the CHFA HERO loan program is that rates are even lower than many other markets.  Since the rates do fluctuate, the most accurate rate quote will come from a loan officer, but the fact is that when you combine all other factors of the HERO program along with the low, low rates – the opportunity is an amazing one!
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To learn more about CHFA, check out their website here or if you want to read  specifically about the HERO financing program visit this link.

The Home Warranty Advantage; Providing Assurance to the Buyer and Peace of Mind to the Seller

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Homeowners Insurance is great – it covers a lot of things like fire, theft and vandalism – and in case there is a storm that causes significant damage, the policy’s right there to protect the owner.  But what about a policy that looks after the interests of the property while it listed on the market and one that works to the advantage of both sides of the buying and selling fence?  A home warranty is a perfect supplement to a homeowner’s insurance policy and it broadens the overall coverage in a variety of ways.  Here is a rundown of the variances between the two and how a seller getting a warranty policy on their home for sale is a great tool!

The Benefits of a Home Warranty Policy

While home insurance largely covers catastrophic incidences and damage, a home warranty policy goes far beyond in that it address the home including wear and tear items.  Also, maintenance and repair is typically includes in a home warranty policy.  As a selling tool, this is fantastic, because during the process – or even after the home is sold – for up to 13 months, the areas of the home covered under the policy are warranted.  Oftentimes, a buyer will come across an issue with something in the home that could become a deal breaker but with the added peace of mind of a warranty, the seller can sit back and relax knowing that most things will likely be covered.  Examples of things that fall into range of coverage on a home warranty are flooring, plumbing systems, electrical systems, and wear and tear of these areas plus also the furnace and in come cases, the roofing or other major components of the home.

Home Insurance Policy Advantages

The single biggest difference between a home warranty versus a home owners insurance policy is that the latter covers the basic replacement value in general if there is a major catastrophe such as a storm that cause damage, fire, theft or vandalism or personal liability.  There is not personal liability coverage under the home warranty policy, rather it focuses on the “used” contents of the home.


How a Home Warranty Policy Helps in a Real Estate Transaction

Home Warranty of America is a company that provides very good coverage under their policy (for a list of their benefits, click here) including 13-months of free seller coverage, with coverage beginning on the first of their home being listed for sale.  The free coverage period for the seller lasts for up to 180 days and the policy is only paid for upon sale of the home at closing.  The best part of a home warranty policy is that even after the buyer has taken possession of the property, the coverage continues.  That means that as a seller, you will not have to contend with any last minutes issues that can and do come up. When applying for the warranty, be sure to choose coverage that address all potential concerns you may have for the home so that if there were a need for repairs or coverage, you would have it provided as a benefit.

An industry association held a study in which it was determined that not only do homes sell up to 50% faster when there is a home warranty policy in place, but also the selling price typically comes within three percent of the list price.  In today’s real estate market – this is an advantage that any seller would want to avail!