More Control Issues

I wrote a couple of weeks ago about what you have control over when Selling your home and what you do not.  I promised to address some “control issues” around Buying as well, and so here are a few thoughts:

Lenders:  Do you have control over whether you are approved to purchase a home that you fall in love with? Yes. When you begin your search for a new home, the first stop ought to be a good lender.  A decent percentage of home Buyers do not begin this way, and it is the source of much disappointment and frustration.  I often will take Sellers out looking for properties when I list their home on the market so that they can begin to get an idea of what they like & don’t like in a new home, (and it gives them the opportunity to see how other homes are presented… giving them *hopefully* an incentive to tidy theirs up and create a good showing : )  Very often these clients of mine poo poo talking to a lender before we venture out… they think they know about what they are approved for, and/or will tell me they talked w/someone awhile back who approved them for such & such.  I’ll admit to giving in at times to Buyers who have not yet been to a lender or who have not handed me an approval letter as yet, and I will tell you I have seen tears when people think they’ve found “the one” & then decide that’s a good time to talk to a lender. Here are some pointers:

  • Get the facts up front before you begin looking for properties.  That way you are only looking at homes you would be actually able to purchase. In any undertaking, you want to begin with facts so that you can make good decisions about how to proceed.
  • Don’t worry about taking a lender’s time before you have a property in mind.  This is what they do.  They are used to it.
  • Listen to your Realtor and any other qualified advisors when you are looking for a good lender.  Get a good referral.  You should have at least three from which to choose. ***The lender is the entity holding the most amount of control in the end stages of any mortgage transaction.  A lender who knows and works well with your Realtor will be inclined to nurture the process… especially in the end stages.  And one who is experienced and skilled will be able to field any last-minute issues that may arise so that you actually get to the completion of your transaction.

Negotiating – Do you have control of the negotiation process? Yes.

So, you’ve fallen in love with a property, and you are “countering” with the Sellers over various items.  Your job is to keep a cool head, and remember what is important to you.  Your Realtor will give you good advice on pros & cons of different options, and in the end, it is your decision how to proceed.  Remember your budget and look at the bottom line.  That said, also give some thought to how important a few dollars a month may or may not be to you if you are achieving other goals.  Remember… You’re in the driver’s seat. You get to decide what’s right or wrong for you.

Earnest Money or Promissory Note? – You make this decision too, and the one about how much it will be.  I advise my clients that the earnest money is their statement to the Seller reflecting their sincerity (earnestness : ) in wanting to purchase their home.  The Seller will be taking their home off of the market if they accept your offer, and so you are showing good faith, and in the event you do NOT abide by the contract you are, in essence, compensating them for taking their home off the market for you for a time.

An earnest money check always gives a better impression with an offer (and you are trying to get them to agree to accept your offer right?) than a promissory note. The exception to this would be if you are out of state and making an offer without the ability to hand your Realtor an earnest money check.  People tend to understand this circumstance.

Your earnest money goes toward the bottom line of your transaction, and is held by the escrow office as a neutral third party while your transaction is in process.    If, for instance, you find something during your inspection period that causes you to want to retract your offer, escrow will return your earnest money, and you can begin looking for another suitable property.  The contract also states that you must be able to get funding… so if you are not able to obtain funding through no fault of your own, you should receive your earnest money back as well.  If the home does not appraise for at least the sale price, and either you, the Seller, or both of you are unwilling to negotiate price or come to some other arrangement, you should receive your earnest money back. The only way to lose your earnest money, really, is to violate some term of the contract.  As long as you meet the time lines in the contract, and perform as you have agreed, your earnest money is safe.

Well, I hope that these tidbits were helpful.  That’s enough discussion of  “control issues” for now…  I’ve got to run and assist some fantastic Buyers in making some decisions of their own!

“Control Issues”

I seem to keep bumping into a concept lately that I thought might be nice fodder for a post in the Blotter.  How much control do you think you have in general in your life?  How much control would you LIKE to have?  …Are you sure?

In real estate there are certain things we can control and certain things we cannot.  I thought it might be fun to delve into some examples of this:

  • If you are selling your home, do you have control over the location? Well, no.  BUT, when making a decision about where to buy, that would be a good time to look down the road and take that property’s location into account for future resale purposes.  If you are getting a REALLY good deal on a home because of where it’s located, you might want to think twice.
  • If you are selling your home, do you have control of it’s condition? Absolutely.   Now, you may say, “I only have a certain amount of money to spend on getting this place ready for sale”, but in the end, you are making the decisions, and have been making the decisions… and now here you are.  Control of this factor aside though, no matter what kind of financial position you are in, this is always an issue when selling your home… “How much should I put into this home I am moving out of?”  When I am working with a client in a position where there are limited funds, we sit down together first and I go over my list of items that will make the property most appealing to the greatest number of Buyers.  THEN, we get real.  Some things, like paint, are inexpensive, and realistically can be handled by the homeowner themselves. Some things require professional assistance.  Sometimes it is just a matter of rearranging a few pieces of furniture and perhaps doing your moving “sort-through” now & considering it work you’ll have to do to move anyway… Tends to make it purposeful and even fun!  Goodwill will love you, and a storage facility or a POD might be a good option to clear your home of things that only make the rooms look smaller.  You’ve heard it before: “The way you live in a house is NOT the way you sell a house.”  So… you do have control of how your home will present to the Buying Public.  Just lay out the facts & pragmatically decide the best way to address each issue.  Buyers in this market are picky… they can afford to be with the number of homes from which to choose.  You have to reveal the gem that is YOUR home, and when you do, someone else will walk in and love it the way you did when you were in that position.
  • Do you have control over the terms of an accepted sale agreement? Yes.  You may not agree with me, but after all the options have been presented and discussed between you and your Realtor, you get to say yea or nay.  It’s your house and you don’t have to sell it for terms that are not to your liking.   Now… do you sometimes have to give a little here or there in order to make your transaction happen?  Yes.  For instance, when there are repairs requested that you are advised will, or may, be required by the Buyer’s lender, it might be in your best interest to make them so that you can close… that is if you want to.  If there are safety issues or other significant ones that have been uncovered in inspection, many will also want to address those prior to close.  The Golden Rule tends to work well here, and usually you are in the process of negotiating terms for your own purchase, so you get to enjoy a 360-degree view of how it feels to be on either side. Again though, you are in control.  You can always say “no”, and the chips will fall where they fall.
  • Are you in control of price & your home’s position in the marketplace? Yes.   You obviously don’t control what other people have sold their homes for around you, or what has happened in the market in general, but after your Realtor presents you with comparable data (i.e. available facts), you make the decision regarding what number will go on your flyers and on the MLS. Many Realtors will let you know that they will or will not take on a listing depending on the “reasonableness” of the price desired by the Seller.  You still are the one who makes the final decision on price, and perhaps the decision on whether to work with that person or not.  As a Realtor myself, I will tell you that most Sellers want to price their property too high for the market (sorry… it’s true : ).  Consider that a Realtor who is advising you does not have much of an incentive to talk you into pricing your home too low…  being as their compensation is based on the sale price.  Worth a thought.  I’d venture a guess that you are probably being given the straight scoop.  I like to tell my clients that all we are doing is looking at the facts, and pricing accordingly…  why would you do anything less?  Dianne and I have been reporting that the facts show homes selling now seem to be the ones either very new on the market, or very old listings that have dropped their prices considerably & often.  Ask yourself how long you want to be on the market, and how many price reductions you are willing to go through if you price against what the facts are telling you.  You will gain the most exposure when your home is fresh on the market.  Take advantage of that and price it right. Also.. remember that you are most likely buying as well…  any market conditions will be in effect on either side of the negotiation table.
  • Are you in control of marketing your home and the exposure it gets? Yes.  That is your Realtor’s job, AND, you are part of this conversation and deciding what kind of promotion you want.   Talk to any prospective Realtor about how they plan to garner exposure for your listing.  Look at the words they are choosing for your promotional pieces and make sure you like how the property is being presented. Make sure their is a good deal of Internet exposure, and that all the details about your home are factual.  It’s also a good idea to go over marketing with your Realtor on a periodic basis to gauge feedback and results. Give your input, and make sure to voice any concerns, but then trust your professional, and put your energies to how the house itself  is presenting each day to prospective Buyers, and to your own search for a new home.
  • Are you in control of the timing of your transaction? No.    You really never know when that Buyer will walk in your door and have the reaction “This is the one!”.  You need to have your Windex ready every day as you leave for work & at least briefly touch each of your sinks & fixtures.  You want them to shine when that Buyer walks in. Check your home’s entrance as you leave to make sure that there is that great first impression just waiting for the right moment. Once that happens, and your Buyer has arrived, there are a few things you CAN control about timing, such as when you are willing to be out of your property- unless there is a set date that the Buyer absolutely needs… If this happens, then you are back to “Do I want this transaction to go forward?”… I have not said that there may not be a few hard decisions here & there : )   For the most part, this is why you picked the Realtor you did.  Let them help you through any rough spots.  In the end stages of your transaction, the Buyer’s lender will truthfully have a good deal of control over what happens in what kind of time frame. Know that even if the timing seems like a roller coaster ride, all the dominoes will fall into place and the timing really will, most always, take care of itself with some good choices, and sure, steady footing as you move to close.  Accept help from your Realtor during this time, and get ready to move into your new home!

This seems like a lot for now.  The subject of “Control” and under what circumstances you have it and to what degree is such a rich subject.  I promise I’ll come back to it, and perhaps focus on the Buying angle next time.   In the meantime… Happy Summer!

Very Best,


News & Notes

State of the Market:

  • Have We Hit Bottom? The experts agree that generally speaking, the country has “hit bottom”, with various areas lagging behind a bit. predicts that the Portland area will hit bottom in Q3 of this year. Our latest RMLS Market Action Report for the Portland area indicates that Portland metro area closed sales increased 18.4% when comparing 2009 vs 2010. Pending sales rose 45% and new listings rose 12.4%. The average sales price declined 8.5%.

(Money Magazine) — The drama is nearly over. After a decade of extremes — the ebullient highs of the real estate boom, then the devastating lows of the bust — calmer forces are beginning to prevail in the housing market.

  • Local Lake Oswego Data The RMLS Market Action Report lumps West Linn and Lake Oswego together, but here is some interesting data:
    * In February 2010 the average sales price was $457,700.
    * The average time on the market was 153 days.
    * Pending Sales rose 52.7% in Feb 2010 as compared to Feb 2009.
    * The average sales price has declined 9.7% in a rolling 12-month equation (i.e. 3/1/08 – 2/28/09 compared with 3/1/09 – 2/28/10)
  • Rates are Rising I have clients asking  “Is this the right time to buy or should we wait?”  One thing we know is that rates are rising. Right now they are still in the 5% range…  actually they are up a bit today at 5.125% but overall they’ve been fluctuating between 4.875% and 5.125% for 30-yr fixed.  As for more foreclosures to come, and prices lowering… interest rates are rising, some say 7% is possible NY Times… so if you ARE planning to finance, all the experts agree that this is the time to be buying, because even if prices go lower, the fact that the interest rates go up effectively nullifies your benefits.
  • Portland Area Rating Improves “Mortgage insurance companies have upgraded Portland’s property value housing trends, meaning that they predict values to be stabilizing in the Portland market.”  Pat Goodell, Academy Mortgage
  • Tax Credits For first-time home-buyers and “moving-up” buyers, there is still time to find a property you love & get a mutually-agreed deal in place before April 30th. So….  hang in there if you are still looking for that “right” one.  Work with your Realtor to narrow the field, or give Dianne or me a call if you are not working with a Realtor.  (I love working with Buyers…. it is actually the reason I originally got into real estate.)
  • USDA Loans USDA anticipates running out of funds to lend by end-April 2010.  If you are thinking about rural properties and considering a USDA loan, now would be the time to ink an offer.
  • FHA Mortgage Insurance Premiums Rising FHA’s upfront (financed) mortgage insurance premium increased to 2.25% effective April 5. And/but, if you are anticipating taking advantage of an FHA loan, don’t fret too much. You WILL now have the higher premium, however,  it’s not anything that should get you in a tizzy, as it will make very little difference in your mortgage payment.  For example, on a $300,000 loan amount, your payment will only increase by approximately $8./month adding in that higher mortgage insurance premium.  (This according to Pat Goodell of Academy Mortgage  503 380 0953.)
  • “The Deal” One thing I am noticing is that many people are becoming so enamored with “the deal” these days, that some are missing the point of why they decided to purchase to begin with, so I am simultaneously always trying to meet my clients needs & desires in a *property* (i.e. what they are trying to accomplish for themselves in their lives w/the purchase… what they truly like), while at the same time being cognizant of the “deal factor” for them.  Keep in mind these things regarding “deals”…  there are basically three kinds:
  1. People who are pricing their homes to sell. They have their own circumstances (down-sizing/relocation/up-sizing/on & on & on), and they are wanting to move on in some fashion.  There are plenty of these out there these days, especially as home owners look around and face the fact that they are now competing with so many homes in or approaching foreclosure.  There are some very real advantages to buying your home from these folks.  Some include: Often these homes are in tip-top shape / You are dealing directly with the owner of the home and as long as the agreed-upon sales price does not dip below what they owe on the property, you are in “Pending” status when you reach mutual acceptance, and /You are negotiating only with the Seller.  / You proceed through a normal closing process if you are taking out a loan, and notwithstanding any negotiations or hoops you need to jump through for the underwriter, you will most likely close in 30-45 days.
  2. Short Sales. These homes’ owners owe more to the bank than what the property is worth in today’s market. The bank is agreeing to take less than what is owed from the Seller.  There are many, many banks in existence and each has its own methods and processes, so there is no uniformity of what to expect, with a few exceptions that I will get into in a moment.  There may be more than one bank involved if there is a second mortgage or more. There are a few things that you can expect, and they are:   * Even if the Seller accepts your offer, the bank is the one (or ones) to give final approval considering that what they will receive is less than what was contracted with the Seller.   ***The bank (s) will usually have paperwork that you must sign if you want to be in the running that will change how the property proceeds through the sale process including: Notifying you that they will only accept an earnest money check & no promissory notes/ They will keep your money and wait to see how many other offers they receive / They will not give you a time line on when they will respond to your offer / You are usually on your own with regard to any repairs / It is usually several months before you find out if your offer was the one accepted & get to proceed to close / During this process the property very often stays in “Active” position on RMLS / Very often the paperwork you must sign includes a provision wherein the bank retains the right to accept another offer right up to closing.   ***For these reasons,  I counsel clients that they must REALLY be in love with a property to proceed through this process.  Also, depending on the property, you may be entering territory wherein you know that you will be competing with other offers, so the best advice, if this is the case, is to make this your best offer… especially if you plan to sit out the long process and want to have a happy ending.  Don’t try to “wing it”… these are complicated times & even the professionals involved are still feeling out the landscape.  There are all kinds of people calling themselves “experts”.  Make sure you know what you are doing and ask for licenses if you think people on the periphery are operating outside of their scope of expertise. Talk to your Realtor as to what your options are, and rely on that trusted professional relationship for guidance.
  3. Bank-owned properties. These homes have usually been through the short sale phase unsuccessfully.  The property has either been on the market & not sold, or the owners opted not to try a short sale and have simply stayed in the property until they had to move on as the bank proceeded through their legal remedies to regain the property due to non-payment.   These properties are sometimes in sad condition due to hardship (i.e. deferred maintenance), but many times these days, they are in very good condition… a sign of the times & the large numbers of otherwise responsible homeowners who simply found themselves in an untenable position through job loss or other factors. The thing to remember about these properties is that the price is ALWAYS lower than either short-sales or standard “good deals”. The bank wants to move on and prices the home low.  The bank is now the Seller and usually acts just like a normal Seller, i.e. Negotiating (tho usually not for repairs)/ accepting or rejecting an offer/Moving on to close with the property going to “Pending” status once it’s mutually agreed-upon/Proceeding through a normal closing process for the Buyer. For this reason: Investors and others are waiting in the wings to pounce on these very often with cash offers, so you have to be quick, and you want to be very careful about low offers, though this can sometimes still be a viable option. Talk to your Realtor about options as they will vary from property to property.

Hope this info is helpful!