Hurlbuthomes.com Blog

Sorry for those of you that subscribe to both my professional and personal blogs, this was so good, I wanted to post it in both places.

I love sharing stories like this . . . A week or so ago, I was given a lead through John L. Scott's eBusiness team. I'm a certified eBusiness associate and as folks search for homes on johnlscott.com, if they happen across a home that is NOT listed by JLS (the horror!) and they want more information about it, they fill out a little form on the site or call the number. Once they make contact with the eBusiness corporate team and they say "Yes, I'd like to speak to a Realtor" they're referred to someone like me.

So I spoke with this gentleman last Friday. He was pre-approved to $193,000 but in our conversation, he mentioned he was only comfortable to about $120,000 - $130,000. I said "No problem, we can work with that!" So on Sunday, we met at a home listed for $89,900. I could tell just by walking up to it that it would be very tough, if not impossilbe to finance. As I was pointing out the various deficiencies in the home, I mentioned that it may qualify for a rehab loan, but the maximum amount money available would be sucked up almost immediately in the repairs that needed to be done.

On Monday we spoke again and I asked him for his pre-approval letter. The letter stated that in fact he was approved to $193,000 FHA loan with a 3.5% down payment, but down towards the bottom the lender was asking for 6% in closing costs as a concession from the Seller. (Anytime I see this, it's a red flag to me . . . it tells me the lender is probably making a BUNCH of money at the buyer's expense) I told him I do a first time home buyers seminar and that I think he and his wife would really benefit from it to gain an overview of the process. I thought it would be helpful before we headed out and looked at anymore homes. He could understand why some homes were harder to get financing for than others. He thought it was a great idea and we set up an appointment for later in the week. I also asked "Do you mind if I bring my lender along? She does a terrific job of working with 1st time home buyers and explaining the financing piece." He said "Sure!" I also asked him to bring his Good Faith Estimate (GFE) with him so he could see how my lender's loan compared to his.

We all met Wednesday evening, my client had not received a GFE from the other lender (another red flag) but we sat down and my lender started her discussion of the process. About the first question she asked him was "Are you current or former military?" and he replied "No, I only served for about 3 years between 84 and 87." She and I looked at each other and I asked "Were you hororably or generally discharged?" and he said "Yes, honorably" My lender said "You can go VA!" She then went on to explain why the VA loan is quite a bit better than an FHA loan and how it could save him quite a bit of money monthly by not having to pay Private Mortgage Insurance (PMI). As we went through, she asked what payment he was comfortable with. He said "Oh, only about $1,200 - $1,250 per month" so she started running figures. She said "That gets you about $180,000 - $190-000" You could see his eyes actually light up. I said "(client's name) When we go look at a $180,000 home, you're going to see a whole new world opening up to you".

We finished our meeting that night and I went home and updated his search on the MLS. I sent him a number of listings. The next morning I got this "John, Listing # XXXXXXXX would be my dream home. All depends on the monthly payment. If we get approved for this price it would be great. Can we see the home?" Well the price was $184,000 and as his Debt to income ratio at the $180,000 purchase price was 31%, I knew it was a possibility, but checked with my lender just to be sure. Turns out the builder (This was a BRAND NEW HOME) was also offering an $8,100 buyer bonus on top of everything. So we went and looked at it Thursday night. I had a good feeling they'd like it (especially compared to the $90,000 one we looked at on Sunday) and had the contract written. I used the $8,100 to get them a refrigerator, washer and dryer AND get $6,000 of their closing costs paid. We got mutual acceptance on the contract yesterday and they move in at the end of May. His payments with ZERO money out of pocket are going to be $1,244 WITH Taxes and Insurance included.

So here's a guy that a few weeks ago wasn't sure he could buy a home. To thinking he could afford about $120,000 maximum (I'd REALLY like to know what that lender was charging him as a rate, etc.) to BUYING a $184,000 home and BEING COMFORTABLE doing it! I have THE best job in the world! No question.

No, this post is not about Major League Soccer. Although likely in the United States not many people know what that is either! No, today I want to talk about the Multiple Listing Service, the MLS. What is it? Why is it important?

In general, most agents are members of their local MLS. There is not one BIG MLS that covers the entire country, rather there are local regional MLS's. I suppose it would even be possible to have more than one MLS in the same city. As I understand it, in the Puget sound, prior to the evolution of the Northwest Multiple Listing Service (NWMLS) there were a number of smaller metro MLS's. In our MLS, the NWMLS, basically covers most of western washington and even parts of Eastern Washington although there are other MLS's in Eastern Washington as well.

The MLS is a repository, a database of homes. As agents, when we take a listing for a home, the first thing we do in general is input that listing into the MLS. Once that listing is input into the MLS, it advertises it to other members of the MLS as available. If they have searches set up for their buyers, then your home pops into that search if it matches the criteria and that agent will forward your home to their client.

In addition, once the home is listed in the MLS, every company (John L. Scott, Windermere, Keller Williams, etc.) that is a member of the MLS has the ability to "suck down" the information from the MLS and re-post it on their web site. This is why as a buyer, if you search for homes on http://johnlscott.com/ or Windermere, or Keller Williamas, etc. you'll likely see the same homes over and over again. So when looking for a home, pick the site (Ahem, John L. Scott) that works best for you and stick with it. It'll save you time and duplication of effort.

As an added benefit, as agents, when we represent you the buyer, we can show you ANY home that's listed in the MLS. So you don't have to use a Keller Williams agent to show you a Keller Williams listing. You can use any agent (Ahem, ME!) to show you any listing you see. AND even if you want to see a For Sale By Owner listing, we can make provisions for that as well. As a buyer's agent, our services to you are 100% free.

So search away, get yourself represented by a buyers agent and get into that new home!

This is the second of a two part series. This series will discuss the ins and outs of short sales. This second part will focus on short sales from a buyers perspective, the first part detailed them from a sellers perspective. Please note, these articles are inteded for informational purposes only and should not be construed as advice for your individual situation. If you're considering a short sale, foreclosure and/or bankruptcy you should seek the legal counsel of a real estate attorney to advise you on your individual situation.

In my last post, I talked about some of the pitfalls of dealing with a short sale as a Seller. Today, I'm going to talk about short sales from a buyer's perspective. I'm going to be a bit repetetive, so bear with me for a second.

Let's start off by defining what a short sale IS. A short sale by the most basic definition is when: The net proceeds from the sale of a home are not enough to satisfy the underlying liens (mortgages) on the property AND the seller does not have the means to pay the difference between the net and the amount owed. Take this example, a home is listed for sale for $200,000. They receive a full price offer and after selling expenses NET $182,000. The seller only has one mortgage but the mortgage on the property is $190,000. There is a difference between the net proceeds and the mortgage amount of $8,000. Is this a short sale? ONLY if the seller cannot bring the difference ($8,000) to the closing table. If the seller does not have the money to bring to closing to close the sale, they yes, we are in a short sale situation. Clear? As Mud?

As a buyer, your agent will show you many homes. Some you'll like, some you'll hate and some you'll LOVE! The ones you love typically have all or most of the things you're looking for. Number of bedrooms and bathrooms. Large enough, correct yard size, fixtures, location, location, location. Unfortunately, we're often attracted to homes we can't afford. But a phenomenon has taken place of late in that the homes we really love have started to become affordable! But there's a catch. Many of these homes are affordable because the seller is selling them "short". The price on the sticker is not necessarily the price you'll pay. WHAT?! Isn't that illegal? I thought if they advertised it at a certain price, they had to sell it for that price?! In a normal sales situation, assuming the seller has equity in their home, if they advertise it at a certain price and terms and a ready, willing and able buyer offers that price and terms, then yes, they have to sell it for that. But in a short sale situation, there is a little clause in the listing agreement that says "All terms subject to underlying lien holder's approval". Those Dirty Good For Nothin' Rotten Scoundrels! You knew there would be a catch didnt' you?

You see, in many cases with all the competing inventory out there, a short sale seller has to price the home well below market value to even attract a buyer. Because of all the pitfalls that are associated with short sales, many buyers and even a number of agents are scared to jump in worried they're not going to get the home. At the very least, a short sale home will add one month to the process (the quickest I've ever seen a bank give approval was 3 weeks) and it could add 6 months to the process. Many buyers are not willing to wait that long. In 6 months, there are too many unknowns. Will the housing market decline further? Will prices start to rise? If prices start to rise and I don't get this home, will I be able to even afford a home? If prices decline further, am I overpaying for the home? What will my interest rate be in 6 months? Will that interest rate be high enough that I don't even qualify for this home any more?

Q: So why would a buyer want to pursue a short sale?
A: If this happens to be the perfect home at the perfect price, then the buyer can get a VERY good deal on a home that they maybe couldn't afford to purchase otherwise.

Q: Will my offer even be approved and if not, then what?A: There is no guarantee your offer to the bank will be approved. And if it's not, then you're back to looking for homes again.

Q: Can anything else happen while my offer is in?
A: Believe it or not, you can put an offer on a home and the bank can still foreclose on the home before they even review your offer. Amazingly, the short sale department and the foreclosure department often don't talk with one another. So while the SS department can be negotiating a short sale and be close to approving it, the foreclosure department can go ahead and foreclose. Now the buyer is out of a home and the seller is too.

Q: So it sounds like Short Sales are all negative, what's the benefit?
A: For a buyer, the benefit can be huge. If the short sale ends up getting approved, the buyer may acquire title to a home for 10's if not 100's of thousands less than what that home would appraise for. For a seller, they may be relieved of all or a portion of their mortgage debt, creating a huge relief for them.

When you go out to look at homes, consider these questions:

• How soon do I need to be in my new home?
• Do I want to focus on price alone, or do I want the home of my dreams?
• Am I patient enough to wait up to 6 months to get an answer? And am I OK if that answer is "no"?

Discuss all these questions with your Realtor. Be very specific with them as to whether or not you want to pursue short sales. They can be a great deal if you get them approved, but they can be a big headache in the mean time. Talk with your Realtor to determine the best course of action in your specific situation. And if you're looking for a GREAT Realtor, give me a call. I'm happy to help anytime.

This is the first of a two part series. This series will discuss the ins and outs of short sales. This first part will focus on short sales from a sellers perspective, the second and final part will detail short sales from a buyers perspective. Please note, these articles are inteded for informational purposes only and should not be construed as advice for your individual situation. If you're considering a short sale, foreclosure and/or bankruptcy you should seek the legal counsel of a real estate attorney to advise you on your individual situation.

Let's start off by defining what a short sale IS. A short sale by the most basic definition is when: The net proceeds from the sale of a home are not enough to satisfy the underlying liens (mortgages) on the property AND the seller does not have the means to pay the difference between the net and the amount owed. Take this example, a home is listed for sale for $200,000. They receive a full price offer and after selling expenses NET $182,000. The seller only has one mortgage but the mortgage on the property is $190,000. There is a difference between the net proceeds and the mortgage amount of $8,000. Is this a short sale? ONLY if the seller cannot bring the difference ($8,000) to the closing table. If the seller does not have the money to bring to closing to close the sale, they yes, we are in a short sale situation. Clear? As Mud?

Q: Why would someone sell their home "short"?
A: A number of reasons would cause someone to sell a home "short". The easiest way to explain this is that SOMETHING has changed in their lives that forces the sale of their home and they don't have enough equity in the home to profit after selling expenses. Loss of income, job transfer, mortgage payments increased beyond their affordability, etc.

Well, it looks like Spring has sprung and we're finally seeing some positive signs that we may be at or near the bottom of the market. Pending sales are up, way up . . . and new listings and active listings are down compared to the same time last year. In Pierce County, we're getting close to what the National Association of Realtors (NAR) considers a "Balanced" market.

The NAR looks at months of inventory to determine if we have a buyers market, a sellers market, or a balanced market. The barometer is 6 months worth of inventory. At 6 months worth, we have a balanced market, less than 6 months it's a Sellers market and more than 6 months, it's a buyers market.

Months of inventory is calculated by dividing the number of homes that sell in any given month into the total number of homes available. For example, in March of 2009, in Pierce County, 975 homes went pending and there were a total of 5,588 homes that were active, so based on pending sales, there is currently 5.73 months of inventory. Compare this to last year where at times we had upwards of 14 months of inventory, you can see we're in a much better position.

So, wihtout further delay, here are your March 2009 MLS statistics for Pierce, King and Thurston counties:

	Total Active Residential Listings		Average Time On Market		Average Sales Price
County	03/09	03/08	03/09	03/08	03/09	03/08
Pierce	5,588	7,014	95	95	$252,295	$298,222
King	9,588	10,592	84	80	$421,315	$539,732
Thurston	1,551	1,980	106	96	$262,636	$287,825
	Total Closed		Total Closed YTD
County	03/09	03/08	03/09	03/08	% Change 12 Mo
Pierce	577	730	11,525	8,717	-16%
King	2,358	1,697	21,548	19,266	-22%
Thurston	415	330	3,679	3,142	-9%
Data Courtesy of the Northwest Multiple Listing Service (NWMLS)