Mortgage Tools

Without a doubt, you have heard all about mortgage interest rates and how they are at a 50-year low. We have posted an article a few weeks back about what the low interest rates mean for buyers – Low Interest Rates – a Gift for Buyers?

I have recently found a great graphical tool to display just how low the interest rates have fallen. You can find the calculator online at:

Mortgage Rate Graph

The options for graphical analysis are many. You can observe rate trends for any number of years, both fixed and adjustable rate. You can also narrow it down to a specific region. Additionally you can graph it against a huge number of economic indicators.

Casa no Geres

I recently stumbled upon a post by The Cool Hunter detailing the Casa no Geres, a house designed by Corriea/Ragazzi Aquitectos. The pictures of the house took my breath away. Nestled in the middle of the countryside, this home looks as if simply was not human made. A single-story structure, half of it overhangs a ravine, complete with a lake at the bottom. At the overhanging far end house, you are afforded a stunning view of the lake and the mountains surrounding it. The part of the house that rests on land has walls made of sliding glass, offering the inhabitants a gorgeous view. The interior is designed in a way to reflect the simplicity of the house’s surroundings. The furniture is simple and the overall pastel colors give the home an idyllic quality. It is a magnificent house.

Seller Concession Changes

In January of 2010, the Federal Housing Administration (FHA) officially reduced its allowed seller concession charges from 6% of the purchase price to only 3%. While this reduction was enacted in January, the actual change is due to happen this summer.

A seller concession charge is a percentage of the final purchase price that the seller concedes to the buyer. If the buyer accepts the concession agreement, he has to use the money to pay for all, or at least a part of, the final closing costs. Thus buyers can purchase a property without paying fees out of their pocket. The concession charge is usually included in the original offer submitted to the seller by the buyer’s broker.

A higher concession charge allows the buyer to pay for more of their closing costs. Concession charges are not designed to benefit the buyer and can not be transferred to cash at the end of the deal.

It should be noted, when seller’s concessions are used, the purchase price actually increases so an important factor to consider is whether the home will appraise for the higher value. For example, if you purchase a home for $300,000 and have seller’s concessions of 6%, the new purchase price will be $318,000. This increases the amount of the down payment and the home has to appraise for the higher value, if it doesn’t the bank will lend to you at a purchase price of $300,000 and the buyer will have to come up with the remaining $18,000 in down payment money at closing.

It’s safe to say this practice is rare in Manhattan, because co-ops do not approve (they see asking for seller concessions as a sign of weakness in the buyer’s financial profile) and with the average price of an apartment well over $1.0M it is not easy to find an apartment that will be selling at 6% below the appraised value.

This reduction in seller concession charges will undoubtedly hurt the already ailing market. A large number of buyers simply do not have that much cash, which is exactly why they are taking out mortgages to purchase their homes. With a smaller seller concession charge, they might have to pay for closing costs out of their pocket, which is simply not possible for some.

A Short Guide to Rent-Back Situtions

Imagine this: you have just bought the apartment of your dreams. It is, for a lack of a better word, your dream home. As soon as you saw it on the market, you made a direct buy order and in a matter of weeks, the apartment is yours! The movers have already taken all your furniture out of your previous apartment and are en route to your new home. Eager to move in, you have already hired an interior decorator and the cable guy is due to come later that evening. Overcome with joy, you turn the key and enter your new abode only to find… the previous tenant asleep on the couch.

As the real estate market gradually evolves, the notion of a post-closing occupancy becomes more and more widespread. An increasing number of sellers demand the property they are selling to be rented back to them, at least for a temporary period. The reasons for such a request are many. Perhaps the seller could not close on his new living quarters quickly enough and thus was stuck; temporary housing can be very expensive and the seller could simply have no place to go. Agreeing to a temporary rent-back would ease the seller’s suffering, and it could ostensibly bring in some temporary income. However, such an agreement must be done in a fashion preventing any unfortunate outcomes.

First and foremost, you as the buyer along with your lawyer must asses the risks of a rent-back. If the property is being mortgaged, there could be a clause in the loan that specifies the property must be occupied by its owner. You do not want to have your loan taken back because your seller was not competent enough to find new housing.

If your lawyer approves, and no legal issues arise from a rent-back, you are clear to negotiate with your temporary tenant. The obvious first step is to agree on how long the tenant will be occupying your new property. Once you have established the time period, you and the tenant need to discuss and come to an agreement on the amount and form of payment. Remember, there are a number of ways in which your tenant could pay you – including rent out-right, covering the mortgage payment and daily expenses, etc. Your lawyer will also need to create an addendum to the purchase contract.

Buying at Auction – Pratfall Prevention

As the real estate market in New York City continues to grow and change, a new venue for buying and selling real estate is picking up steam. Over time, auctions have become a more popular way to buy properties, especially distressed properties. Before making a costly mistake, make sure you understand the psychology behind the purchasing at auction.

When a buyer is involved in a private sale, the buyer’s goal is to minimize the amount of money he pays. That much is simply human nature; people want the most they can get for the lowest price possible. However, if the same buyer was put into a similar situation at an auction, his thoughts would be occupied with figuring out exactly what is the maximum amount of money he can spend on said property. Instead of thinking “What is the absolute lowest I can pay for this property,” a buyer at an auction thinks “What is the most that I can pay for this property.” This dramatic difference in behaviors results in huge disparities in final sale prices.

Thus, it is incredibly important for you to remain vigilant when buying anything, especially real estate, at an auction. Figuring out the maximum price you are willing to pay for something beforehand, and sticking to that price will help prevent you from overexerting yourself.

Buyers also need to be aware purchasing at a popular high-activity auction is oftentimes not the best idea. Low-key auctions often fetch much lower prices on similar properties. Lastly, when it comes to bidding on properties, a savvy buyer will bid on a property with a higher reserve price and a higher starting bid. Studies have shown it is those properties that end up selling for less. Low reserve prices prompt a lot of activity, and a lot of activity at an auction directly correlates to a higher final bid.

Buying at an auction can save you money, but it can also cause you to pay much more than you are ready to pay. Remain vigilant!

A Few Key Points for Sellers+

Selling a home can be a very emotional time for any home owner. An owner is usually closely connected to their home and thus parting ways with it is not easy. However, as difficult as it is, it is important to remain objective and to remove as much emotion as you can from this business transaction. Here are a few tips for selling that should help put things into perspective:

1. Seek buyers who do not reside in the same neighborhood. According to multiple studies, buyers from other areas tend to pay more than local buyers. This is especially true when the buyers come from an area with a higher-priced real estate market. In fact, out-of-state buyers tend to pay from 4-6% more than locals. The explanation behind this phenomenon is quite simple. Buyers coming from a different area will need to pay for travel costs, such as car rental fees, hotel fees, etc. While the buyers can ostensibly stay and negotiate the price of their purchase down, or even choose a different property, the travel expenses can outweigh the smaller price.



2. When writing a description for the listing, be careful about what you advertise. While it may seem like a good idea to advertise that new coat of paint or the completely new refurnishing, buyers may begin to question why exactly the house needed the repairs or improvements. In fact, if you over-advertise a house, buyers will only be disappointed when they see it. The trick is to pique the buyers’ interests and then astonish them with the great condition of the home.



3. Pick an attractive real estate agent. A study at Old Dominion University has shown that buyers who find the seller’s real estate agent attractive will pay more. The reason behind this makes intuitive sense. One would assume, buyers are also attracted to personality, charm and poise, but the study doesn’t mention any of these.



4. Selling a property at the right time can be a very difficult thing to do. Usually people who are optimistic about the real estate market will wait for a later time to sell their home, assuming they will be able to sell it for a much higher price a year or two down the line. Similarly, pessimistic sellers tend to sell their homes too early, since they believe prices are going to fall. However, what usually is the case is that the seller is overly optimistic or pessimistic and sells the home either too early or too late. Be aware of market trends and always consult a professional before making any decisions.
   
   The last step is probably the most important because it can make or lose you the most money, but when considering a sale you should keep all of these points in mind.