Monday, September 28, 2009
Saturday, September 5, 2009
What does "insured" or "insured with escrow" mean?
HUD homes are usually listed as being "insured with escrow for required FHA repairs" or occasionally "uninsured." What this means to the buyer is that, if you are using FHA financing, a home insured with escrow will require some repairs as part of the conditions of purchase. With non-HUD houses, these repairs would have to be completed prior to the closing of the sale. With HUD homes, the repair allowance amount, shown in the listing, is added to the amount of your loan and amortized into your monthly payment. After the closing of the sale, you will be required to complete these repairs and pay for them out of your pocket within a specified period of time - usually 90 days, although extensions are usually possible. Once the repairs are completed, the FHA appraiser will return to assess the repairs, making sure they have been done to FHA specifications. At that point, the homeowner will submit receipts for the work and will be reimbursed from an escrow account set up by your lender. If the total of the receipts is less than the amount in the escrow account, the remainder will be credited back to the balance of your loan. Any amounts over the escrow amount will not be reimbursed. If a home is listed as "uninsured," FHA financing is not available. These places usually require fairly extensive repairs and should be considered by investors or those who are comfortable tackling relatively long term projects. Every once in a while, someone will luck out and find a house that is just "insured." This means that FHA financing is available without any required repairs. If you see one of these that isn't a practically brand new house, be sure to go play the lottery that day, for lady luck has smiled upon you.
What kind of deposit do I have to put down?
For most houses, the earnest money required is $1,000. For some, fairly inexpensive houses, you will only have to give us $500 up front. The biggest difference between HUD earnest money and others, is that it HAS to be in the form of certified funds, most sellers will let you write a personal check at this point. HUD doesn't trust you as far as they can throw you. The good news? If you are using FHA financing and plan to occupy this house, this could very well be the only money you have to come up with.
What do you know about the condition of the house?
HUD provides a "Property Condition Report" which assesses the overall condition of the home with a checklist of all structural, mechanical and, to some extent, cosmetic items in the home. You can find this report on any currently listed home by clicking here and searching by the address. This report is not a substitute for your own home inspection. Problems with plumbing or electrical systems are often shown simply as not functional without specifying the source of the needed repairs. In other words: we'll tell you what we found upon a simple inspection but really, as the buyer, you should beware.
More to come later!
Friday, September 4, 2009
What is a bid period?
HUD homes are listed for a set amount of time, usually around 10 days,before any offers will be considered. At the expiration of that time (the bid period) all offers received from owner occupants will be considered. If an acceptable offer has been received, the winner bidder will be notified and the home is then under contract assuming that all original paperwork is received by HUD within 48 hours of notification. If no acceptable offers are received, new bids will then be reviewed on a daily basis going forward. Any offers received before midnight of a particular day are considered to have been received at the same time.Non-owner occupant offers are not considered during the initial bid period but are considered for daily bids. It is a federal crime to represent yourself as an owner-occupant if you do not intend to occupy the home for a period of at least two years. You have to sign something saying that you understand this and I have to sign something saying that I have explained it to you. Sounds like they take this pretty seriously, huh? Yeah, they do.
Will HUD pay closing costs?
HUD allows 3% (and no more) of the purchase price to be used for closing costs. This amount is already built into the price of the home and an offer for the full asking price which requests this 3% is still considered by HUD tobe a full price offer. If you are offering less than full price or expect someone to be bidding against you AND you don't need this allowance, it is to your benefit NOT to request them as HUD bases their bid acceptance on the actual net to HUD, not just the purchase price.
Will HUD consider a low ball offer?
HUD uses a numeric formula to determine whether or not to accept an offer. So called "low ball" offers will never be accepted except possibly in the incredibly rare instance when a HUD home has been on the market for the better part of a year. If this is the case, the listing will basically say something similar to "All offers considered." Otherwise a low ball offer is nothing but a waste of time. Occasionally, if an offer is very close to what they will accept, and there were no other bids that meet their minimum, they may respond with a decline of the offer but a dollar amount which you can submit the following day that they will accept. Contact me for more information on what types of offers will usually qualify as a winning bid. HUD reduces the price of its listings on a regular basis.The amount of these price reductions is, in almost all cases, 10% of whatever the original asking price was. If you think the price is too high right now, wait a few weeks and check back, they may have reduced it to something more in line with what you feel is reasonable. Keep in mind that many HUD homes sell quickly after price reductions (often the same day) so don't dilly dally if the price is right!
You've picked out your title company, insurance company and you've stayed on top of the process. Now what?
21. Schedule your closing. Eeeek, we're getting close now (no pun intended). Your contract will specify a closing date. If you don't close by that date, technically the contract is void. Nobody wants that (usually). Try to get your closing scheduled for at least 2-3 days before then. If anything unforeseen comes up, you'll hopefully have time to get it resolved before you have a stroke.
22. Decide whether you want title insurance. I mentioned before that your lender will require a mortgage holder's policy. That benefits them alone. If you want any assurance that no one is going to come back and say that they inherited your house 30 years ago and never sold it to those crazy people that moved in later (you know, the ones you bought it from), you are going to want an owner's title policy. The first policy is the one that costs the most, the second one (yours) is available for a fairly nominal cost. Do yourself a favor and buy title insurance.
23. Review the settlement statement, also known as the HUD-1. This is a standard government issued form, so no matter where you live, it will look the same. Go over it with your Realtor to make sure that anything the seller agreed to pay is being charged to them and that your earnest money has been correctly credited. Also make sure that your lender closing costs are the same as what you agreed to when you first applied for the loan. If there are any changes needed be sure to contact your lender and the title company to get things corrected. Lastly, look at the last line on the left hand side of the first page. It will tell you the cash due at closing down to the penny. You will need certified funds in that exact amount made out to the title company. In some cases, the lender or seller may require you to wire the funds that day.
24. Do your final walk through. You'll go back to the house with your Realtor 1-2 days before closing. The purpose of this visit is just to make sure that nothing significant has changed with the condition of the property since you made the offer. You know, like trees falling through the roof, chandeliers taken down, holes in walls, things like that.
25. Show up for the closing, cashier's check and driver's license in hand, ready to sign away your first born. You may want to do a trial run by signing your name just as it appears on the contract about 422 times, just for practice. And don't pass out when you see the sheet that shows the total amount you are going to pay over the course of the next 30 years. Fair warning - it isn't pretty.
Congratulations! You are now the proud owner of your very own home. No one can tell you that you can't paint it purple*, no one is going to raise your rent every year**, no one can tell you that you aren't a grown up now***. You've done it!
*Unless your homeowner's association or local historical district says so
**Unless you got an adjustable rate mortgage - don't do it
***Except your mom
Shout out to Julie - thanks for lending me the picture of your house. I won’t tell people that I made it look even purpler if you won’t.
Thursday, September 3, 2009
These posts are a shout out to all the geeks out there who enjoy crunching a few numbers. Install your pocket protector in its rightful spot and savor the moment!
All of Chattanooga / Hamilton County Real Estate Sales through the MLS
All active, residential listings as of 9/3/09: 2,803
Pending or contingent listings (under contract) as of 9/3/09: 418
Residential listings closed (sold) during August 2009: 295
Number of months to sell current actives at August's sales pace: 9.5
Hamilton County, under $100,000
Active, residential listings: 582
Pending or contingent listings: 104
Residential listings closed during August 2009: 91
Number of months to sell current actives at August's sales pace: 6.4
Hamilton County, $100,000-200,000
Active, residential listings: 1,041
Pending or contingent listings: 208
Residential listings closed during August 2009: 130
Number of months to sell current actives at August's sales pace: 8.0
Hamilton County, $200,000-400,000
Active, residential listings: 785
Pending or contingent listings: 90
Residential listings closed during August 2009: 55
Number of months to sell current actives at August's sales pace: 14.3
Hamilton County, over $400,000
Active, residential listings: 396
Pending or contingent listings: 15
Residential listings closed during August 2009: 19
Number of months to sell current actives at August's sales pace: 20.8
For all the non-geeks out there who need a little interpretation:
Long story short: if you've got a house that you want to sell for under $100k, get crackin'! There are lots of buyers out there for houses in this price range and not so very many houses, especially ones that aren't falling down or located in Upper Slumtown (or both! Adventures in homeownership!). The first time buyer credit is doing its job and convincing a lot of property virgins to get down off the fence. Who doesn't love free money??
The next tier up isn't faring too bad either. There are still quite a few first timers looking in this price range as well. Seventy-nine of those 130 sold last month were under $150,000. Doesn't take a rocket scientist to figure out that the lower the price, the better things are moving...
...especially when you look at the top end of the Chattanooga real estate market: over $400,000. Quite frankly, if I had a house in this price range I might keep it off the market and wait for greener pastures ahead. In fact, there was only one lonely little house (OK, so "little" is a bit of a misnomer - it was 6,500 sq. ft.) that sold for more than $800,000 last month, compared to 110 currently on the market. While it's a little tough to feel sorry for people living in a million dollar house, still, that's a difficult pill to swallow.
Tuesday, August 25, 2009
30 yr fixed – 5.00% APR5.135% 360 P&I Payments @ $1073.64
15 yr fixed – 4.50% APR4.727% 180 P&I Payments @ $1529.99
30 yr FHA/VA fixed – 5.125% APR 5.967% 360 P&I Payments @ $1088.97
Great Rate – 5.20% APR – 5.762% 360 P&I Payments @ $540.63
Great Advantage – 5.50% APR– 6.075% 360 P&I Payments @ $556.13
Great Start –5.80% APR – 6.390% 360P&I Payments @ $574.71
-based on $100,000 sales price
Rates courtesy of Sarah Suits, for more information & details call or email:
Saturday, August 22, 2009
16. Pay for your appraisal. Your lender or another third party will order an appraisal from a licensed appraiser. Both the appraisal and the home inspection will usually need to be paid for up-front by you. The appraisal is a double check for your lender. They don't want to lend more money on a house than the house is worth. The appraiser comes in and puts in his two cents about whether or not s/he thinks the house looks good enough for the money you (or actually the bank) is putting into it. In some places, you'll also have a survey done, again, something you would pay for up front. In practice, this is not required and is rarely done in Chattanooga unless there is some type of property line dispute.
17. Honestly, there isn't much for you to do at this point. You'll need to start shopping for home owner's insurance - also called hazard insurance. Check with the company that has your auto and/or renter's insurance, you can often get discounts for having several policies together. Once you have decided on a policy, submit the agent's contact info to your lender. At least around here, you won't pay for the policy yourself right now.
18. Pick out a title company. These are the people who will handle the actual closing paperwork. They will also check out the title to the property and make sure there are no liens or back taxes owed. The title company will also provide a title insurance policy which protects the mortgage holder in the event that a previously unknown lien comes to light later on. For many foreclosures, the choice of title company may be somewhat out of your hands. Most will have already had the preliminary title work done and paid for by the seller. There isn't usually a good reason to have it done again so you might as well use what someone else has already paid for.
19. Start putting all that new furniture you're going to need on your credit card Avoid making any large purchases during this time. You have a pre-approval but right now your loan is going through the underwriting process which means that all of your financial actions are being scrutinized by either a computer or a human number cruncher. Either way, you are going to want to look like a good credit risk.
20. Check in with your Realtor and lender every 3-5 days just to make sure everything is on track. You'll have anywhere from 2-6 weeks of dead time between your contingency removals and closing. You don't want to get within a couple of days of your contract closing deadline only to find out that someone has been waiting for 3 weeks to hear back from you on something that can't be taken care of in time. Say things like "Just wanted to make sure the title work has been ordered" or "Have we heard back from underwriting yet?" Makes you sounds like a person who is really on top of things and who will not be trifled with.