Memorial Day 2014

There are a host of activities taking place in the Greater Boston area this weekend to honor those who have served and sacrificed.  Please click here for information on parades, remembrances and other related activities.

Wishing everyone a wonderful weekend.

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Ready to close…or are we?

The underwriting conditions have been submitted reviewed and approved by the underwriter so the loan is ‘clear to close’ but we are not finished yet!

At the very end of the mortgage approval process there are two last double checks that can put borrowers at risk.                          

Within 5 days of the closing the lender is required to do a ‘credit refresh’.  This report does not re-pull the credit report but shows the lender any activity that may have impacted the credit report since the credit was originally pulled.  The report is looking for newly issued credit and any indications of sloppiness with credit during the mortgage process timeline.  Depending on the outcome of the credit refresh report a full credit report may have to be pulled to see if the reported activity has impacted the borrower’s credit scores.  Borrowers on the edge of either debt ratios or credit scores could lose their approval.

At this point since the loan had been approved and the commitment date has passed, if there are any issues that show up on the credit refresh the borrower is at risk of losing their deposit if the loan does not close.  We work very closely with borrowers and counsel them not to make major purchases or get new credit cards (no matter how attractive the offer is) without consulting with us first.  We have had to re-work loans because of a $20.00 increase in debt; this is a serious consequence and one that we all monitor.

In addition to the credit refresh we are also required to complete a ‘verbal verification of employment’ within 5 days of the closing.  This is to confirm that the borrower/s remain employed as stated on the mortgage application.  Ironically, we have had borrowers who have changed or left jobs and neglected to inform us… needless to say this can create some complications just days before the closing!

Both the credit refresh and the verbal verifications of employment can be the source of a delay in the closing as well.  If a closing is delayed both verifications my need to be re-done (remember they must be completed within 5 days of closing).  There are some employers in the area that will only complete the verbal verification on set hours and days… so timing can be a problem.

It is vitally important to your closings that you and your buyer clients are fully educated and up to date on any complications that may impact them.  Borrowers with high ratios or lower credit scores need special communication and monitoring from the lender to insure a smooth transaction up until and beyond the closing. 

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Let’s complain together!

We are constantly striving to improve our service to our customers and our referral partners.  This is a tough industry and it is hard to define good customer service when providing an extremely regulated, highly technical and complicated service. 

So I am a student of service…  I love high touch, high trust, big hug service!  We are all clients… to our doctors and dentists, to our grocery stores and other suppliers; to anyone whom we pay for something in return.  Service matters more to me than product does because a great product with bad delivery can be so disappointing… but a great customer service experience lives on no matter what.

Recently, some of us were lucky enough to be sent on an award trip to the Four Seasons in Palm Beach by our parent company.  Needless to say, service is top notch at a Four Seasons.  Here are a couple of great examples:

One of our LO’s, Sheira, was teasing one of the pool folks that it was their job to deliver the sun moments before a sudden shower drove her back to her room.  Fifteen minutes later there was a knock at her door and she was presented with oranges sliced into sun shapes and lemon cookies with a note that said, “I told you, you could count on me to deliver the sun” signed, Chris, assistant pool and beach manager.

How does an organization empower and encourage their team to be so customer centric and creative?

Another LO, Amy saw a bug in her room and called down to the desk, and of course they were up in her room to address the situation immediately.  Later they sent a box of chocolates and a bottle of wine to her as an apology!

It does not take that much creativity to deliver a nice apology, just the desire to make your clients happy and comfortable!

I was disappointed when I came to my room from the pool at 3pm and it was still not refreshed and our breakfast dishes were still there after I had called twice to get it done.  Rather than complain on the spot, I waited until I received my post-stay survey via email and then I commented on how annoying this was to me.  I am still waiting to have my bottle of wine and chocolates delivered… to my home???

When we are upset or concerned about service delivery we have to complain in real time not after the fact. If we leave our complaints until after the transaction is completed, we are not allowing our provider to correct the issue, and are ensuring a frustrating experience with limited resolutions for all involved.

In our last sales meeting I announced that we are going to ask our clients to complain more! How do we know if we are making our clients happy when we only ask them once the transaction is complete? We cannot correct, we cannot HUG, and we cannot adjust or fix a situation if we do not ask along the way if we are doing a good job.  As consumers we are not giving our service providers an opportunity to please us or win back our trust if we do not complain. As service providers, we must also be willing to allow our clients to complain, and to ask them directly for feedback, both good and bad.  So let’s start complaining more and expecting more and better service – from our providers and ourselves.

Remember – “The bitterness of poor quality remains long after the sweetness of low price is forgotten.” Benjamin Franklin

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Multiple Offers (and how to get yours accepted!)

Market forces have shifted and today it’s a seller’s market in many communities. Here are some tips for frustrated buyers and buyer’s agents to help get offers accepted! 

Make a Large Down Payment– the larger your down payment the more attractive your offer. Why? Because if the appraisal comes in low the buyer with the largest down payment may not have their financing impacted by a low appraisal and can move forward on the purchase without further negotiation.

Pay Cash– If you can, make a cash offer. If the purchase timeframe allows you can still get a mortgage or you can mortgage the property after the purchase transaction is concluded. 

Date Flexibility– if you can determine exactly what the sellers’ need in terms of closing dates and then meet those dates – your offer could win even if the price you are offering is lower than others. You can go for an extended closing or even offer to rent the property back to the seller for up to 60 days. Meeting challenging timing needs for the seller can make you the perfect buyer!

Removal of Contingencies/ Financing– We are never comfortable recommending that a buyer remove their mortgage contingency unless they can truly pay cash for the property- BUT we certainly know a winner when we see one and often have buyers who remove their mortgage contingencies with a very THOROUGH pre-approval process. 

For added protection– IF you choose to remove a mortgage contingency or make a cash offer or one with a large down payment, the buyer can put an appraisal contingency into their offer so that they have options if the property appraisal comes in low.

Removal of Contingencies/Home Inspection- If you are knowledgeable about home construction or have a friend or family member who is an expert, you might want to consider removing your inspection contingency. Of course you will have no recourse if a structural problem arises that you were not aware of… Removing contingencies also removes protection for the buyer so keep that in mind.  

The Personal Approach – Introduce yourself!
Selling a home is a very emotional experience for many people and often they want to know that their home is going to a ‘good’ family or person, especially if this was the sellers first home or they raised their family there. A letter from a perspective buyer introducing themselves and explaining why buying this property means so much could make a difference in the offer process and negotiation.

Don’t Give Up 

It can be really disappointing and frustrating for buyers today. Don’t give up! As the market improves more sellers will be ready to put their property on the market increasing inventory and perhaps eliminating the multiple offer effect that we are seeing in some areas today.

It is anticipated that rates will remain low for the foreseeable future. However, even if not at their record lows it is important to keep rate movement in perspective. Rates can go up much more before they start to come up off the historic lows that we are seeing today. 

Homeowners – ready to move up, down or out? This is a great time to sell so what’s keeping your from taking advantage of this fantastic market?   

Let’s talk about it on Tuesday May 6th-Join the Fairway team of mortgage experts to help you determine your next real estate steps. Should you stay, should you sell, should you rent, should you buy and what CAN you do based on your financial profile. With information comes clarity so don’t be afraid to learn about your options in a low stress, low pressure, and friendly environment.

Tuesday May 6th-6-7:30 pm

60 Wells Ave. Suite 101

RSVP to amy@amyrates.com

Light refreshments and free credit reports included!

Come to our First Time Seller’s program and we will learn about this crazy market together!

 

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Mortgage Minutiae #14 – Underwriting

Your Loan Application is Approved!!!!!

(But what are these conditions and what does this really mean????)

After all the data is collected and documented the loan file goes to the underwriter for final approval.  The underwriter’s job is to go over every box on the loan application and make sure that the data provided is supported by the documentation in the file.  Today it takes over an hour to underwrite a straight forward file with salaried borrowers. Underwriting for a self-employed borrower can take over 2 hours.  As we have pointed out previously, this is a detailed and painstaking process.

Generally when an underwriter approves a loan there will be conditions to that approval.  A conditional commitment is not an issue unless there is a condition that the borrower cannot meet.  Many lenders underwrite files early in the process and issue an approval with multiple and complicated conditions.  WATCH OUT!  Beware of an approval with multiple conditions. Talk to the buyer and lender about the likelihood of the buyer being able to produce the documentation required to support the conditions. 

Once the loan is approved the lender will issue a commitment letter with the conditions itemized on the document.  The borrower then assembles any additional documentation requested. The lender may also have to provide additional documentation such as a corrected form due to a type-o or some updated information.  Loan documents have age limits so some conditions are simply to update a document such as a more recent pay stub or an additional bank statement.

Once the conditions are assembled, the underwriter will review them and as long as no new questions come up, the loan will be ‘cleared to close’.

Do not let a contingency date pass if there is a condition that the buyer is not confident they can meet.   DO NOT allow a contingency date to pass if the approval is subject to an appraisal or condo approval or any seller side items that the borrower has no control over.

30% of purchase transaction fall apart just before closing due to loan declines.

If you have a buyer with multiple conditions on their approval call the lender to determine if the final approval is at risk.  Speak with the borrower about their ability to meet the conditions.  GET AN EXTENSION on the contingency date if there are any concerns about meeting the conditions. 

Work with me because we DO NOT issue an approval if there is a condition on the commitment that the borrower cannot meet or that could ultimately end in the loan being declined.

Be smart and ask questions to insure that your transaction ends with a happy buyer, seller and agent.

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Quick tips and thoughts about what’s happening now in real estate and finance!

 It’s Tax Time!

I know that it is only 20 degrees this morning but yes, April 15this right around the corner. If you are planning on buying a piece of real estate in the next couple of months, do not delay in the filing of your taxes. Especially if you are self-employed, tax transcripts are required. If we need to factor in 2013 income, a delay in filing will delay our ability to obtain your transcripts in a timely manner.

Beware!

There are multiple fraud scams around tax filing. A popular ploy is stealing a tax payer’s identity and then filing a tax return and taking the refund. One of the best ways to combat tax return/identity theft is to file your returns as early as possible.

For more information on this alarming new fraud trend read this: http://www.examiner.com/article/irs-overwhelmed-by-tax-return-identity-theft-scams

What’s happening with the real estate market?

That is a complicated question. Recently released numbers indicate a large drop in sales this year as compared to last. However one important reason for this drop is the decline in foreclosure and short sales. What this means to you is that as values rise the number of distressed sales falls. Rising home prices should eventually lead to a more normalized market as more and more people can finally sell their property at a gain so that they are in a position to move up! For more details on this trend:

http://www.keepingcurrentmatters.com/2014/03/25/the-truth-about-the-nars-home-sales-numbers/

Survey Thoughts

Thanks to all who participated in our short survey as part of ourFirst Time HomeSellercommentary. 

Realtor Responses:

Most realtors believe the biggest concern sellers have about listing their home now is fear that they will not be able to find a new home, followed by a fear of the timing of the transaction i.e., will they have enough time once they sell to buy, which was tied with not having enough equity in their current home to make selling/buying an option.

When asked what they are doing differently in this market, most responded with various types of networking and outreach activities to reconnect with past clients.

In a reflection of current trends, some referenced using social media and blogging more as ways to reach out to clients. 

And finally, when asked how they coached buyers through this aggressive offer marketplace, the answers varied widely, from: “On a wing and a prayer!” to more specifics like “set realistic expectations”… “Offer thorough CMA’s,” “build trust,” and above all, “be patient.”

Client Responses:

On the client side, all mentioned getting ready to sell within the next 6 months to a year, with the most often cited reason for selling being to purchase a bigger/move up home, with one respondent downsizing.

Biggest concern was being able to buy a home without selling first and tight turn-around times for transactions if their own home sells before they have found a new one. Also mentioned was current interest rate being too good to move.

66% of respondents said they would be interested in attending a seminar to learn more about navigating the current market, so stay tuned for more information about that!

Tall Stack of Documents

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Sticky Offers!

This is an extremely busy and frustrating market.  If you are a listing agent you are probably a bit overwhelmed with multiple offers and demanding sellers and trying to navigate the transaction so all get to the closing table and end up happy.

If you are anyone else you are running as fast as you can to do business, maybe.  On any given weekend we here at Fairway have dozens of borrowers making offers on their dream home, and on any given weekend all other lenders in MA have dozens of borrowers making offers on their dream home… and generally those dozens of borrowers are all offering on the same home, at least that is what it feels like!

As long as we are in a multiple offer market there will be one winner and many disappointed losers for every listing…. So how do we make offers that stick?

What matters other than price?

Timing – look at date flexibility, find out what the sellers need and want and deliver those dates.

Down Payment Size – The greater the down payment, the more attractive the offer is!

Cash – If able pay cash!

Speed – With our premiere appraisal team and rush group we can get a property appraised and a loan approved and ready to close in two weeks!

What about contingencies?

Financing – Call your loan officer to determine if it is reasonable for your buyer to remove the financing contingency and what the related risks are.  This is not the same as paying cash – what it means is that buyers cannot get the deposit back if denied the loan. If properly pre-approved, the only concern when removing a financing contingency is that the appraisal comes in at the purchase price, and that the buyer is willing to make up the difference between the agreed upon price and the appraised value.

Inspections – Some people remove the inspection contingency, and some people have the inspection at or even before they make an offer.  I heard of one offer accepted with the agreement that they would have the inspection right away but that the results of that inspection could not be used to cancel the contract on the house, with an at offer deposit of $5,000 versus the standard $1,000.

More Inventory 

Until we get more listing inventory we are going to have lots of frustrated buyers…   In a recent survey of current home owners the biggest obstacle to listing their home now is fear of not finding another property.  Most of those surveyed will be looking to ‘move up’ when they believe that the timing is right for them.

Team up with Fairway to present “First Time Seller” programs where we can engage sellers in pre-approval activity, and home selling strategies that could bring more inventory to our market.

House and Keys in Female Hands

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Thinking About First Time Sellers!

This may be one of the most aggressive seller’s markets that I have seen in my 25 year career, fueled by the fact that there are too few properties to purchase, prices are high, rates are low and demand is rabid. So what is stopping you from selling your house today and moving on to the next one?

Every day I am bombarded with notices of first time buyer programs, classes and products.  But as an industry we appear to be ignoring our first time sellers.

There is a first time for everything, but unlike your first taste of sushi, or first time skiing, a high cost transaction can be very intimidating for a first timer, especially in an aggressive market such as this one. Don’t hesitate; instead educate yourself about the process so that you can approach selling your house with confidence.

Start with the lender:

You need to investigate what you can afford once you sell your current home, or if it is possible for you to purchase without having your home sold.  A qualified mortgage advisor will walk you through the steps and options.  Many people discover that they can qualify to make a step up in housing without having their current home sold, which gives them a lot more flexibility because they can buy before they sell.   Learn what your buying power is, so that you can determine if your needs and wants will be met in the price range.

Meet with your realtor:

Once you understand your buying power meet with a realtor for the selling side and the buying side to determine a pricing strategy for selling and a timing strategy for buying.  Learn what your buying power will get you, study communities where you are likely to purchase.  I don’t recommend looking at specific properties if you do not have all your ducks lined up.  If you happen to find your dream house and you are not ready to buy you will be disappointed and frustrated, so look through MLS and drive through the cities and towns that interest you in the meantime.

Come up with a plan that buys you time! 

Once you know what you’re buying power is and have a good idea of what your house is likely to sell for, do what your listing agent tells you: clean up, spruce up and stage your house for sale.  Work with your agent to determine a timeline for the sale. First time buyers do not have to sell in order to buy, so you can make the rules.  You can list your house with a timing strategy, and have a statement directly in the multiple listing service that states “closings on or before” and specify a date that is 4– 5 months out.  Remember, inventory is tight, so if a buyer falls in love with your house they will work with your timeframe.  For example, the buyer can lock in their rate for 90 to 120 days and if that is not enough time for you, you can close on the sale of your home and rent it back from your buyer for up to 30 days, giving you months to find and buy the next house of your dreams!  There are many ways to work this out; you simply need to create the right selling/buying strategy for your situation with your professional team.

Take a serious look at renting:

Many sellers are enjoying the freedom of renting for a time. Yes, it can be disruptive to move and then to perhaps move again. However, renting can be a great way to explore a new neighborhood or style of living to see if you will enjoy it before engaging the purchase process. I have had sellers who have opted to live with parents or other family members, or who have rented summer houses and put their stuff in storage while they look to buy.

There are whispers in some of our communities of a new real estate price bubble forming; perhaps it makes real sense to sell today taking advantage of these new price highs before the market swings in another direction.

Get educated, and don’t let the fact that you are a first time seller prevent you from participating in the incredibly competitive real estate market. With the right team you can get to your next dream…home!

 Home For Sale Sign in Front of Beautiful New Home

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Condominiums and Multi-Family Properties

As you have learned, not only do the borrowers go through an exhaustive vetting process prior to mortgage loan approval, but the property has to meet lender requirements and go through an approval process as well. For single family homes this process is pretty simple.

If a borrower needs to factor in rental income to qualify when purchasing a multifamily home, the appraiser must verify current market rents as a piece of the appraisal process. The appraiser must verify that the use of the property is ‘legal’ meaning that it is zoned and taxed as a multifamily property.

Condominium properties require a more exhaustive investigation.

Although some of the condominium property requirements may appear arbitrary, the rules exist to protect both the borrower and the lender. Rules are different for small properties (2-4 units); versus large properties, there are different rules for new construction and new conversions and the rules can change with jumbo versus conventional financing. 

I will not get into the specific rules here but will cover the general areas that are reviewed for condo approval. There are many nuances, so it is important to review every property with us at listing or when considering an offer so that we can be sure that the property will meet lending requirements for the borrower’s scenario.

· Owner occupancy

Lenders want a high level of owner occupancy in all condo associations. Owner occupants are considered more likely to maintain their property, pay all fees on time, and manage assessments or fee increases if required. Statistically, investor owners will stop paying their fees and even the mortgage if their personal finances get snarled, which can weaken a condo association.

· One Owner – high percentage of ownership

One unit owner cannot own more than 10% of the total units. For the reasons outlined above, if one unit owner owns a high percentage of units and fall upon hard financial times, the entire association can be at financial risk if that owner stops paying their condo fees.

· Adequate Insurance Coverage

Condo fees include the insurance coverage for the entire condominium structure. “Walls In” coverage has recently been added into the insurance requirements for condo units. Many master policies cover to the walls of the condo unit and borrowers traditionally would get a more standard policy to cover fixtures and personal contents. Today if Walls In coverage is not provided by the master policy the buyer may be required to get a small amount of additional coverage.

There are some other insurance requirements. Our experience tells us that most associations are adequately insured; it is the ‘Walls In’ requirement that comes back to us on some loans.

· Reserve Funds/Budget concerns/Litigation

Today condominium associations are required to have 10% of their annual budget going into a reserve account; this must be a line item on the actual budget.

Additionally the lender needs to verify that all condo fees are collected and up to date, no more than 15% of the total units can be past due on their condo fees.

We are required to verify that there are no pending law suits against the association that are not covered by the master insurance policy or any other issues that could negatively impact the condominium finances

· Commercial Use

Any commercial use cannot exceed 20% of the entire square footage of the subject property.

There are many ins and outs of condo lending. If you have more questions or something above wasn’t clear, call us-781-719-4664 or email info940@fairwaymc.com… we’ll help you be the “condo experts” with every condo conversation, listing or selling so that all involved in the transaction will be happy with the outcome.

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This past week we had a great event in our office featuring Bruce Irving, realtor, home renovator, and former producer for This Old House. He answered questions for people curious about whether it was better to sell their home or renovate and stay, what types of renovations were the most beneficial for future sale, and gave great advice about the home renovation process.  Below are some additional helpful tips from Bruce.  For more information visit www.bruceirving.biz

Ten Things to Get Straight before You Renovate

1. Live there. Unless the home you’ve just purchased is a total wreck, live in it for a good period of time before shaking it up with a renovation. Learn its flow, where the groceries land, where the laundry wants to go, how the sun hits it, where the choke points are, which way the rain slants, even get a sense of its soul–all of which will inform your choices when you make your plans to change things.

2. Accept this truth: almost every job costs more and takes longer than you think. After you (and your advisors) have done your very best to estimate the cost, add 20%. If you don’t have the funds, cut the job back. Ditto on the time: add 25%. If it’s a big job, add slightly less–say 20%–if you can vacate the house for the bulk of the project. If you happen to beat these projections, then your surprises are happy ones.

3. Good professional help is worth the money–that means design as well as construction. You are about to spend more than you ever thought possible—it might as well be for a correctly designed thing.

4. Use your professionals wisely and efficiently: Many architects charge by the hour (which is a good way to work with one), so bring a lot of thinking and pictures (of likes and dislikes) to your first meeting. If he or she doesn’t ask you a lot of questions about your needs, desires, and the way you live, find someone else. Listening skills and curiosity are crucial in an architect and builder. With contractors, be willing to pay for (and wait for) a good one. Skip the low bidder and probably the one who is available right away.

5. Choose your teammates wisely. Be it a designer or a general contractor, ask to contact their last three clients. These people will have experienced the person at his or her current level of achievement and staffing. Also ask the architect for two GCs s/he has worked with; ask the GC for two architects. These people have seen the person as only a professional can. Visit you’re a couple of candidates’ jobsites to check out cleanliness, organization, and vibe.

6. Take your design to the schematic stage (as opposed to finished “biddable” plans) and then get a contractor or two to look at it. This way you can find out if your project is in the right budget ballpark before falling in love with a plan–and paying for a complete set of bid drawings. It’s also a good way to meet potential contractors, get their input, and not misuse their time.

7. Lay it out for real. Lots of people have great difficulty truly understanding blueprints. They say they get it, but quite often they don’t. Whenever possible, mark out the proposed change on the floor, the wall, the yard, and walk through it. The experience may surprise you. Ask lots of questions. There’s no such thing as a dumb one, and besides, it’s your money you’re spending. You should know why and on what

8. Water kills houses. If you’re faced with a choice of working on the outside or the inside, start on the outside. No point in putting in a new floor if the roof is getting set to leak. Gutters, grading, foundation plantings, flat roofs—make sure the water is going where it should: away from the building.

9. Synthetics are good. Especially when it comes to the exterior, low-maintenance is the name of the game, and cement clapboarding (HardiePlank), expanded polyurethane moldings (Fypon), and cellular PVC trim (Azek) outlast today’s wood and hold paint better. Each has its own quirks, so make sure your contractor is familiar with them or willing to learn about them. New treatment processes have made real wood exceptionally rot-resistant as well—Centurion is a pine trim that comes with a 50-year warranty against decay.

10. Psychology counts. I was describing my business to someone in a restaurant when  the woman at the next table leaned over. She was a psychologist and she said that in her experience, renovations were right up there with moving and loss of a job as stressors on couples. The issues, she said, were power, control, and money. One way to see what your issues will be is to take on a small project together–paint a room, put up a mailbox. Your styles will soon be apparent, and you can work on figuring out a division of labor that might accommodate them–on that job and larger ones in the future.

BONUS: Spend good money on things you touch every day–door hardware, doors, faucets, appliances, kitchen cabinets. The tactile experience sends a daily reminder to you and your guests about the solidity and quality of your home.

EXTRA BONUS: Think long and hard before you replace your windows. If they’re original to the house and are in half-decent shape, they can and should be resuscitated. In combination with a storm window, a properly functioning old window comes very close to equaling the energy efficiency of a modern thermal-pane unit–and will outlast it. Anyone claiming that you will earn your money back in energy savings by installing replacement windows is either misinformed or looking for your money himself.

Content courtesy of Bruce Irving Renovation & Real Estate Services

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