Tips for Buyers

  • strict warning: Non-static method view::load() should not be called statically in /home/annotto/annotto.com/annotto.2/modules/views/views.module on line 843.
  • strict warning: Declaration of views_plugin_display::options_validate() should be compatible with views_plugin::options_validate(&$form, &$form_state) in /home/annotto/annotto.com/annotto.2/modules/views/plugins/views_plugin_display.inc on line 1877.
  • strict warning: Declaration of views_plugin_display_page::options_submit() should be compatible with views_plugin_display::options_submit(&$form, &$form_state) in /home/annotto/annotto.com/annotto.2/modules/views/plugins/views_plugin_display_page.inc on line 481.
  • strict warning: Declaration of views_handler_field_broken::ui_name() should be compatible with views_handler::ui_name($short = false) in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_field.inc on line 641.
  • strict warning: Declaration of content_handler_field::options() should be compatible with views_object::options() in /home/annotto/annotto.com/annotto.2/modules/cck/includes/views/handlers/content_handler_field.inc on line 206.
  • strict warning: Declaration of views_handler_argument::init() should be compatible with views_handler::init(&$view, $options) in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_argument.inc on line 745.
  • strict warning: Declaration of views_handler_argument_broken::ui_name() should be compatible with views_handler::ui_name($short = false) in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_argument.inc on line 770.
  • : Non-static method views_many_to_one_helper::option_definition() should not be called statically, assuming $this from incompatible context in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_argument_many_to_one.inc on line 34.
  • : Non-static method views_many_to_one_helper::option_definition() should not be called statically, assuming $this from incompatible context in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_argument_many_to_one.inc on line 34.
  • strict warning: Declaration of views_handler_sort_broken::ui_name() should be compatible with views_handler::ui_name($short = false) in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_sort.inc on line 82.
  • strict warning: Declaration of views_handler_filter::options_validate() should be compatible with views_handler::options_validate($form, &$form_state) in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_filter.inc on line 585.
  • strict warning: Declaration of views_handler_filter::options_submit() should be compatible with views_handler::options_submit($form, &$form_state) in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_filter.inc on line 585.
  • strict warning: Declaration of views_handler_filter_broken::ui_name() should be compatible with views_handler::ui_name($short = false) in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_filter.inc on line 609.
  • strict warning: Non-static method view::load() should not be called statically in /home/annotto/annotto.com/annotto.2/modules/views/views.module on line 843.
  • : Non-static method views_many_to_one_helper::option_definition() should not be called statically, assuming $this from incompatible context in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_argument_many_to_one.inc on line 34.
  • : Non-static method views_many_to_one_helper::option_definition() should not be called statically, assuming $this from incompatible context in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_argument_many_to_one.inc on line 34.
  • strict warning: Non-static method view::load() should not be called statically in /home/annotto/annotto.com/annotto.2/modules/views/views.module on line 843.
  • : Non-static method views_many_to_one_helper::option_definition() should not be called statically, assuming $this from incompatible context in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_argument_many_to_one.inc on line 34.
  • : Non-static method views_many_to_one_helper::option_definition() should not be called statically, assuming $this from incompatible context in /home/annotto/annotto.com/annotto.2/modules/views/handlers/views_handler_argument_many_to_one.inc on line 34.

Where to start

The first step in the home buying process should be to talk to a lender and determine what you can spend. From there, define what area you would like to live in and what features in a home are important to you. For example, do you need a yard or garage? It is also a good idea to remember that you may not get every item on your list. Be willing to compromise. If you can find 4 out of 5 items that you want, than you have done pretty well. There are always trade-offs; would you rather a nicer home in a less desirable neighborhood, or a less desirable house in a nicer neighborhood? Let your agent offer advice and guide you through the process. But also remember that ultimately the final decision is yours.

 

How to be ready for an REO sale

REO sales differ from regular sales in several ways. First of all, when the seller accepts your offer they will ask that you sign an addendum. This is generally a new contract with some terms from your offer, as well as all the sellers terms. This addendum, once signed, overrides everything in your original purchase offer. In exchange for a below market price, REO's are usually as-is sales. What this means is that rather than the standard 17 day inspection period, the bank will only give a few days from signing their contract to none at all. In the case where there is no time allowed after signing, the bank will usually give you a few days to return their contract before moving on to the next buyer. During this time it is advised to get all inspections done. The seller expects that some repairs will be found in the inspection, but this will not be a negotiating tool for the buyer, as it would be in a traditional sale. Banks will not usually give a repair credit, or change the price due to an inspection, unless something very serious is found, like a new foundation needed. They will often pay for closing costs if the price warrants it, but little else. They prefer your offer be as clean and simple as possible. It is not advised to ask for them to pay for inspections, pest repair, home warranties or items that are normal buyer costs. Offers contingent on the sale of your own property will never be accepted. Title and escrow is sellers choice, and is non negotiable. This is because bank sellers get a discounted rate based on their volume, and it can also benefit the buyer. For example, escrow is typically split 50/50, so if they get a discounted rate, so do you. Delays to close of escrow incur a per diem fee to the buyer, approximately $100-$150 a day. Many lenders will require that you pre-qualify with their lender. By law they cannot force you to use them if you are accepted, but they are allowed to disqualify your offer if this rule is not followed. We are being told that this is a lenders way of pre screening buyers that may not qualify for a loan. It is actually a lenders way of trying to recoup losses in our current crisis. If they sell a foreclose that cost them hundreds of thousands in losses, securing 30 years of interest on a new loan helps to offset that. While all buyers may not use them, requiring everyone to pre-qualify at least gives them the chance to bid on the loan. 

 

How to be ready for a Short Sale

 Short sales can be a long and frustrating process, so it is best to be mentally prepared before entering into them. The bottom line is that they take much longer than any other type of sale. The updates on progress can be non existent to incorrect. Basically, the last man standing wins, because many buyers drop off during the waiting period. For clients that are interested in short sales, I recommend writing the offer, forgetting all about it, and carrying on your search as if it never happened. This way you do not get disappointed, or frustrated. If you get a surprise call one day that your offer has been accepted, and you are still looking, than great. While this makes short sales sound like a waste of time, they are not. Not only are they closing faster than in the past (approximately 3-6 months) regular sales and REO's have so many competing offers, that they can be frustrating for buyers in their own way. By looking at and offering to buy all types of sales, you are increasing your chances of getting a home.

 

Understanding multiple bids

Due to a shortage of inventory right now anything well priced is receiving multiple offers for over asking price. Deciding on what to offer is something your Realtor can help you with. They will pull recent sold sales comps, that will show you what others have been paying for similar properties. Do not look at any comps that are over 3 months old, as we are in a rapidly changing market. Due to strict competition, offers are expected to be clean and precise. Ask the seller for a little as possible, be pre-qualified (not just pre-approved), have your proof of funds and earnest money in your agents possession. Have inspectors on stand by (or have a Realtor who does). Understand how you look to a seller. FHA and VA buyers are considered less desirable than cash or conventional offers. These buyers will often compensate for this by offering more money, but be aware that the price you offer must still appraise or your loan will not go through.

 

Why pre-qualify

A standard California real estate contract gives a buyer 7 days after acceptance of an offer to submit proof that they have preliminary loan approval. However, your offer will look much more professional if this is included in the original offer. In an economy where even stable and responsible people are being turned away, this is the first step to ensuring your loan will close. Many bank sellers are requiring that you pre-qualify with them, in an attempt to recoup losses. I recommend that all clients keep a folder handy of everything their original lender needed when they pre-qualified them. A common scenario is that a buyer wants to bid on a bank owned property with multiple offers and a pre-qualify requirement. They have only a few days to do this before the sale goes pending, and it often takes lenders that long to call them back. You may have to follow up repeatedly. In this situation it is essential that you have everything ready to go. Items like tax returns do not expire, but there are several items that do. It is a good idea to get in the habit of adding items that change monthly (like pay stubs and bank statements) to your folder as they come in.

 

FHA Vs. Conventional loans

See the glossary for a more in depth explanation of these terms. It is important to know that in a sellers view conventional and cash offers are preferred, for valid reasons. FHA and VA loans required small to no down payments, so buyers are seen as not as stable or serious. FHA and VA loans require that the property be in good and habitable condition, so no fixers will be allowed. Many REO's are considered fixers.  Uneducated buyers or agents will sometimes bid on these properties, when there is no chance of the loan going through. Both types of loans require all pest repair to be done before COE. As these buyers do not typically have extra cash on hand, the repair falls to the seller. In our current market it is rare for a seller to pay these costs. VA loans require that a seller pay many other fees that are considered buyer fees. Both types of loans require the property to be approved. On a single family home this means meeting certain criteria, many of which are mentioned above. On a condo they must be on an existing list. If a VA condo is not on the VA list, there is no way to get it there. If an FHA condo is not on the list, there used to be an option to get a "spot" approval. This meant that while the complex was not approved, an individual unit could be approved, if it met certain requirements. Aside from the unit itself being in good condition, and HOA must also meet requirements. The two main ones are that owner occupancy for the building is over 50%, and that the reserve fund is adequately supplied. Several years of foreclosures have depleted many HOA reserves, as buyers in default stop paying their dues. Spot approval have recently been abolished by the federal government.

 

Money to close your sale

 

In addition to your down payment, there are several costs that buyers may need to pay to close their sale. Closing costs are fees that the lender charges for writing and processing your loan. In an up market this will almost always be a buyer cost, but in a down market it can be negotiated that the seller pay, or that it is financed into your loan. Closing costs are about 3% of your loan amount. Escrow fees are also negotiable, but commonly split 50/50 between buyer and seller. They are about .5% of your loan amount. The buyer will have to pay for a home inspection, usually $300-400. Any repairs that come up during the inspection will be negotiated between buyer and seller. Lastly there may be pest repair. Again, this is negotiated between buyer and seller. It is important to know that many lenders will not fund a loan until termite work is completed.

 

ann otto - 619-540-1003