John Beckett's Real Estate Blog

You’re finally wrapping up your home purchase. Congratulations. Before it’s officially yours, though, you have one last hurdle: the mysterious process known as “closing” or “settlement.” Open your wallet and hold onto your hat. “Closing costs” — the catch-all term for a host of fees, taxes and charges — can total 2% to 6% or more of your purchase price — $4,000 to $12,000 on a $200,000 mortgage. That means you’ll need to budget a chunk of money besides your down payment. Costs vary by region and by what you negotiate. Buyers usually pay most fees, but sellers may pay some, too. Buyers often get lenders to contribute, too. Be aware, however, that lenders offering a “zero-closing-cost” loan. Closing starts when you sign a purchase contract. It ends about four to eight weeks later, at a closing meeting (or conference) where you sign papers on your loan; pay fees, taxes and services to finalize the sale; and receive the keys and deed to your new home.

Who’s in charge?

A professional settlement agent orchestrates a closing. The agent files documents, pays taxes on your behalf, ensures every task is done and recorded in the time specified by law, and also may hire an appraiser, pest inspector and other professional services. The agent represents the buyer, the seller and the lender equally. In some states, the agent must be an attorney. In others, it’s an independent settlement or escrow company. (An escrow company is one licensed by the state to hold money and documents.) In many states, title companies — whose primary jobs are to make sure there are no claims on the property and to sell insurance guaranteeing that the title is clear — may be the settlement agent.

States’ requirements vary:

• In New York, only an attorney — usually a specialized “closing attorney” — oversees a closing.
• In Nevada, as in most states, title companies act as the settlement agent.
• In California and Wyoming, escrow companies are used.

The federal forms and rules used to disclose your loan costs and closing fees, however, are identical in every state:

• Your lender must give you a binding good-faith estimate, or GFE, within three business days after you apply for a loan. It shows loan costs and estimates your other closing costs. Your final origination charges and transfer taxes can’t vary from this estimate. Quotes for other services may vary by up to 10%. Bigger variations are a “tolerance violation” and the lender must credit you the difference within 30 days of your closing, says Cathy Blaszyk, vice president for lender services at Closing.com.
• At your closing, the settlement agent will give you a HUD-1 form showing your final costs.

How to shop

Closing costs vary greatly. In its 2009 survey of average total closing costs in 52 cities and states, Bankrate.com found a $1,579 difference between the highest-cost state, Texas, at $3,855, and Nevada, with the lowest average cost, $2,276. Most of these fees are negotiable, and you can shop separately for many of them. The consumer has to open their eyes, because they can save a lot of money. People spend more time shopping for a big-screen TV. Closing.com’s closing costs calculator lets you plug in home-purchase information to get numerous estimates and quotes on closing services from providers near you. By shopping aggressively, you might:

• Qualify for a better interest rate than you’d expected.
• Find that a loan offer with a higher interest rate is really the best deal when all closing costs are considered.
• Spot “junk” fees.
• Find lower rates on services such as title insurance, settlement services or inspections.
• Use these lower bids to negotiate better prices with your lender.

Start shopping for settlement services and for additional loan offers once you’ve made one mortgage-loan application. A lender must stick to its good-faith estimate for 10 days. The bank or broker can’t go back and make changes, which gives the borrower a chance to make comparisons. Don’t worry about hurting your credit score by making numerous loan applications. In “4 credit-scoring myths,” personal finance guru and MSN Money contributor Liz Pulliam Weston says that your FICO score will register multiple inquiries in a 45-day period as just one inquiry. Applying is free, except maybe for the cost of pulling your credit report — about $15, tops. Lenders can’t collect application or appraisal fees while you’re comparison shopping. Although recent changes in federal law make it harder for lenders to pad fees, you should still get expert help in reviewing offers and closing documents. The key is getting somebody who is trained and who can comprehensively look at it for you.

In advance, line up either of these:

• A real-estate attorney through the American Bar Association lawyer locator  or find referrals from a state or local bar association.
• A free, housing counselor certified by the Department of Housing and Urban Development (call 800-569-4287.

Read more at: http://realestate.msn.com/article.aspx?cp-documentid=25322086&page=2

1. Is your house in a high-traffic area? While many are advertised in the newspaper, on the Internet and in fliers, it’s still drive-by and foot traffic that brings most open-house visitors. Amanda Staines, a sales director from Atlanta and a former agent, says she plans to hold an open house every weekend until her newly renovated two-bedroom townhome sells. The reason? “Location, location, location. My house is off a major road, so the signage can really pull” people in, she says.

2. Does it have special features or was it recently renovated? An especially beautiful house can make buyers out of the most casual visitors.

3. What’s your home’s sale price? Many real estate agents say they no longer hold open houses for high-end homes, because they consider them a draw for thieves and gawkers. They prefer to schedule private tours.

4. How much time and money am I willing to invest in an open house? In some markets, much of the competition is using stagers and investing in costly upgrades such as painting and landscaping. If you aren’t wiling to spruce things up, an open house might not be worth it.

5. Is my real estate agent behind the idea? If they don’t think it’s a good idea for your home, or are unenthusiastic about it, it might not do much for you.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=13108453

Many people have either gone through foreclosure, a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership of the property, or know someone who has. RealtyTrac released its U.S. Foreclosure Market Report on April 15 for the first quarter of 2010. The report calculates foreclosure filings, including default notices, scheduled auctions and bank repossessions, and showed that 932,234 properties were involved in the first quarter. That was a 7% increase from the last quarter of 2009 and a 16% increase from the first quarter of 2009. An astonishing one in every 138 U.S. housing units received a foreclosure filing during the quarter. If you or a loved one are facing foreclosure, make sure you understand the process. While it varies from state to state, there are normally six phases of a foreclosure.

Phase 1: Payment default

A payment default occurs when a borrower has missed at least one mortgage payment. The lender will send a missed-payment notice indicating that it has not yet received that month’s payment. Typically, mortgage payments are due on the first day of each month, and many lenders offer a grace period until the 15th. After that, the lender may charge a late-payment fee and send the missed payment notice. After two payments are missed, the lender may send a “demand letter.” This is more serious than a missed-payment notice; however, at this point the lender is probably still willing to work with the borrower to make arrangements for catching up on payments. The borrower would normally have to remit the late payments within 30 days of receiving the letter.

Phase 2: Notice of default (NOD)
A notice of default is sent after 90 days of missed payments. In some states, the notice is placed prominently on the home. At this point, the loan will be handed over to the lender’s foreclosure department in the same county where the property is located. The borrower is informed that the notice will be recorded. The lender will typically give the borrower another 90 days to settle the payments and reinstate the loan. This is referred to as the reinstatement period.

Phase 3: Notice of trustee’s sale
If the loan has not been brought up-to-date within the 90 days after the notice of default, a notice of trustee’s sale will be recorded in the county where the property is located. The lender must also publish a notice in the local newspaper for three weeks indicating that the property will be available at public auction. All owners’ names will be printed in the notice and in the newspaper, along with a legal description of the property, the property address and when and where the sale will take place.

Phase 4: Trustee’s sale
The property is placed for public auction and will be awarded to the highest bidder who meets all of the necessary requirements. The lender, or firm representing the lender, will calculate an opening bid based on the value of the outstanding loan, any liens and unpaid taxes, and any costs associated with the sale. Once the highest bidder has been confirmed and the trustee’s sale is completed, a “trustee’s deed upon sale” will be provided to the winning bidder. The property is then owned by the purchaser, who is entitled to immediate possession.

Phase 5: Real-estate owned (REO)

If the property is not sold during the public auction, the lender will become the owner and will attempt to sell the property on its own, through a broker or with the assistance of an REO asset manager. These properties are often referred to as “bank-owned.” The lender may remove some of the liens and other expenses in an attempt to make the property more attractive.

Phase 6: Eviction
The borrower can often stay in the home until it has been sold either through a public auction or later as an REO property. At this point, an eviction notice is sent demanding that any people vacate the premises immediately. Several days may be provided to allow the occupants sufficient time to remove any personal belongings, and then typically the local sheriff will visit the property and remove the people and any remaining belongings. Belongings may be placed in storage and retrieved later for a fee.

The bottom line
Throughout the foreclosure process, many lenders will attempt to make arrangements for the borrower to get caught up on the loan and avoid a foreclosure. The obvious problem is that when a borrower cannot meet one payment, it becomes increasingly difficult to catch up on multiple payments. If there is a chance that you can catch up on payments — for instance, you just started a new job after a period of unemployment — it is worth speaking with your lender. If a foreclosure is unavoidable, knowing what to expect throughout the process can help prepare you.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24721210

The nation’s housing inventory is cluttered with foreclosures, short sales and homebuilders willing to make a deal. If you’re in the market to buy a home today, you’re likely weighing the benefits of each type of property available for purchase. Don’t be fooled. Not all bank-owned foreclosures are sold at deep discounts. Not all builders are slashing prices. Short sales can be a crapshoot, with some buyers enduring months of waiting and still not getting the property. All things considered, it’s possible that your best deal is purchasing a traditionally sold existing home, so don’t count those out of the running. To get the most for your money, it’s important to understand the local market’s inventory; market dynamics will have a lot to do with how various types of homes are priced. Also, do some soul-searching to determine how much risk you’re willing to take and the amount of time and money you’re willing to invest in a home.

Bank-owned properties

Foreclosures reclaimed by the bank, often called bank-owned properties, are often sold at a discount. However, the size of the discount depends on the market you’re in. A recent report from Zillow.com found that the typical discount for bank-owned properties, compared with a traditionally sold home, averaged 20% to 30%. According to separate data from RealtyTrac, an online marketplace of foreclosure properties, the average discount on bank-owned properties was 34% in the first quarter. There is more than one reason why the selling price of a foreclosure is lower than a traditional home. The seller is typically a bank, and would like to move (the property) off the books as quickly as possible. A traditional seller is interested in getting a certain price and is willing to stay in the market. Also, the condition of the home can be an issue. A buyer who wasn’t able to make mortgage payments also probably wasn’t able to keep up with needed maintenance. One of the biggest mistakes homebuyers make when buying a foreclosure is underestimating how much it’s going to cost to repair it. It usually costs a lot more than you think, you can add value to a property by rehabbing it, but probably not more than the cost you put into it. For the lower price, buyers also need to accept that they’re most likely purchasing a home that has been sitting vacant, which comes with its own set of issues because small problems — a leak, for example — can become big ones if no one is there to notice them. These homes also may have limited seller disclosures, because the owner — the lender — hasn’t been living in the home and thus has less information to disclose. Home inspections are generally recommended regardless of what type of property you’re buying, and they’re essential in the case of a bank-owned property. Location matters, too, in the pricing of a bank-owned foreclosure. In places with the highest incidence of foreclosure, bank-owned properties garnered the smallest discounts, compared with traditionally sold existing homes. The places that did not have very many foreclosures right now had large discounts. Another way to look at it: A homeowner aiming to sell his home in a market where a large percentage of sales are foreclosures will likely have to price it like a foreclosure just to be competitive.

Short sales

Short sales offer some of the best deals. A short sale is when the seller owes more on the mortgage than the home is worth, and the lender agrees to accept less for the property to make a sale. But even if you save money on a short sale, you could pay in other ways. Although lenders and government programs are trying to speed up the process required to complete a short sale, a buyer could still wait months just to find out he or she failed to get the home. The home is discounted partly because of the uncertainty that the buyer experiences. You need to understand there’s a reason why they’re less money — you have to play the game, you have to be patient. The market generally discounts short sales by 5% to 8%, compared with traditional sales.

New homes

In many markets, the supply of new-home inventory is dwindling. That has caused pricing in the new-home market to stabilize. That is, fewer bargains may be available for new-home buyers. There is less flexibility on the builders’ side to negotiate prices, plus with supply more in control, there’s not as much urgency to drop prices to move the homes that are currently sitting on the market. Buyers typically pay a 20% premium for a new home, compared with a traditional (nondistressed) existing home, but that also varies by location. That isn’t to say builders won’t find other ways to make a deal. They’re still willing to throw in incentives, like finished basements, as a way to sell a home. But if you’re looking to get the lowest price on a home, this might not be the best route. And if there are distressed sales in new communities you’re considering, proceed with caution. A lot of foreclosures in the area will drive down the prices of nonforeclosure homes, and that can extend to new-home inventory. It’s not impossible to find foreclosures and vacant properties in communities that aren’t even finished yet.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24884570

Americans who are brave enough to buy a home despite persistent predictions of a double dip in housing may want to contact the federal government, as the recession and financial crisis have turned Uncle Sam into one of the largest owners of real estate in the United States.

Rising foreclosures

The housing bust has led to an unprecedented number of foreclosures in the U.S. In May, 322,920 foreclosure notices were filed against homeowners, and more than 3 million homes have been seized over the last five years from delinquent borrowers. While most homebuyers may assume that banks are the only source of foreclosures, the U.S. government also owns many residential properties because of its role in buying and guaranteeing mortgages. Many of these properties are held because of the conservatorship established in 2008 over the government-sponsored enterprises popularly known as Freddie Mac and Fannie Mae.

Freddie Mac

The Federal Home Loan Corp., or Freddie Mac, owned approximately 45,000 multifamily and single-family homes at the end of 2009. The company put a gross value on these properties of $5.13 billion. Freddie Mac obtained these properties by being the highest bidder at foreclosure auctions when the properties were used as collateral for loans owned by the company, or when owners just transferred the property to Freddie Mac without going through foreclosure. Freddie Mac is furiously attempting to dispose of these homes, and has been fairly successful; the company’s average holding period for real estate is less than one year. The company markets the homes through HomeSteps, where buyers can search by state and city.

Fannie Mae

The Federal National Mortgage Association, or Fannie Mae, is also a large owner of foreclosed property. The company owned more than 86,000 single-family homes at the end of 2009, with a value of $8.5 billion. These homes are concentrated in states that were ground zero of the housing bust, with 28% of its inventory in California, Nevada, Arizona and Florida. Fannie Mae also markets these homes intensively, and sold 123,000 in 2009. The company’s official website to sell homes is called HomePath, where buyers can look up inventory near their location.

Other agencies

Another source of homes owned by the government is the Department of Housing and Urban Development. HUD obtains its properties through foreclosure auctions on Federal Housing Administration-insured loans. HUD has a website at hud.gov/homes. Next up is the Federal Deposit Insurance Corp., which owns its inventory through its role in seizing failed banks. The FDIC owns single-family homes but also has a large number of other properties, including industrial and commercial properties and raw land. The Veterans Affairs Department and the Agriculture Department also play roles in financing and guaranteeing home loans, so both own single-family home and other properties. Buyers can look for their dream home through these agencies as well.

Buyer beware

Buyers shopping for homes from the government should be aware of the disadvantages of the process.  Many agencies offer properties “as is,” with no warranties on their condition. There is also little flexibility on negotiating the terms of the contract if the government accepts your offer. Fannie Mae, for example, does not accept offers for houses that are contingent on a buyer selling a currently owned home.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24796144