DEAN GRAZIOSI: DEAN GRAZIOSI REAL ESTATE

With spring upon us, it is now time to start preparing your home for the warmer months ahead of us.  It is also the perfect time to take on any projects that you may have been putting off until warmer weather arrived.  Spring is the ideal time to tackle any and all projects that you have been putting off all winter.  Below are some of the most regularly performed spring tasks by homeowners.

Spring Cleaning is a task that we are all familiar with.  No matter how regularly and thoroughly you have cleaned your home throughout the year; spring is the common time to tackle any of the areas that you may have missed or not been able to take care during the fall and winter.  During spring cleaning you should dust and vacuum any nooks or crannies that you weren’t able to access while it was colder.  You should also clean behind your larger appliances and remove any dust or debris that may have accumulated.  You may also want to take down your curtains and wash them to rid them of any allergens or dust that may have accumulated while the home was closed up during the winter months.

Before the weather turns unbearably hot and you need to start running the air cooling system of your home, you should inspect and prepare your system to ensure that it is ready to properly cool your home.  You should change any filters that are installed on your system and inspect the hose connections looking for leaks and ensure that your drain pans are in proper working order.  If you noticed that your system was showing signs of problems prior to being shut down at the end of last year, you should take those problems into consideration when prepping your system for use this year.

Spring cleaning is not only a task that should be performed inside your home, there are also some things that you can do on the exterior of your home.  When spring arrives you should take a walk around the exterior of your home looking for things that you should take care of now that the weather is warmer.  During this inspection process you should look for any damage to your roof, siding and foundation.  During winter the snow, ice and colder temperatures can all impact the exterior of your home.  You should also thoroughly clean your deck and patio to notice if any damage has occurred.  Once you have made a list of things that need to be taken care of, you will be prepared to begin your exterior spring cleaning tasks.

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It’s been a long road for the real estate market, the market crash that occurred in 2008, foreclosure rates that skyrocketed, and new construction almost seemed to disappear. But there are some noticeable changes that are happening that should make everyone take more notice.

The foreclosures are starting to show a trend in slowing which is a very good sign for many property owners.  This also means that if you want to get a hold of a property whether for your own use or for an investment purpose, the time is now.  There is a noticeable decrease in the availability of homes on the market that are marked for a quick sale due to a pending foreclosure.

Statistics are also showing an increase in first time home buyers then has been seen in the past several years, also another good sign that the real estate market is starting to take a turn for the better.  These new generations of home buyers have spent the past several years making sure that they were going to be able to actually purchase a new home by improving upon their credit scores.

In the past a prospective home buyer was told that in order to obtain a new home mortgage they would have to obtain a credit score of 760. However, there are indicators from lenders that this credit score requirement will drop. The drop will occur when the lenders will once again have to start competing against each other to offer loans to those that will once again qualify for a new home loan. 

During the past several years, investors have been buying up the homes with the intention to make them their rental property investments. This is going to mean that property rentals are going to increase which is going to be a great opportunity for those in the property management business.  Investors do not have time to manage all of the properties that they have and are purchasing, so they are going to start hiring property management companies to manage them for them. Those investors were thinking ahead because there is going to be an increase of younger generation that will be entering the work force that are not quite ready to purchase their first home.

Now is the time to prepare for a change in the real estate market, home buying trends will make a strong rebound, eventually and for those that planned by either improving their credit scores, invested in distressed properties, saved what money they could for a down payment on a new home purchase will come out on the winning end when the market begins to start working for them and not against them.  

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It happens more than you think; someone hears from a friend that a home they’ve always liked might be going up for sale.  Or someone mentions tells someone that if they ever consider selling their home they would be interested.  This is how many off the market sales get started.  The next thing for both parties is to determine exactly how serious the other side is and where do they go from there.  This type of sale can be beneficial for both sides; but sometimes parties may get a little too excited and begin the process without proper consideration.

In this type of deal the first thing that needs to be considered is whether both parties are serious.  This is the time when buyers need to determine whether the seller is really ready to sell their home.  Sellers also need to use this time to determine whether the buyer was serious when they made the offer.  This is the time of deal where both sides need to open the channels of communication and decide where they stand.

Once both parties have determined that a deal can be worked out, the next step is to agree on a price.  This can often be the trickiest part of a deal being done off the market.  In some cases deals can fall apart over a few thousand dollars.  If this happens to your deal there are many things that you can do to help keep the deal on track.  Both sides may choose to have appraisals done on the property to determine a fair market value for the home.  If the appraisals come up with different values, the two parties can decide to split the difference. 

This type of deal appeals to many sellers because there are no commissions involved.  This means that the seller will not have to pay an agent for their services and all of the money that is made on the sale goes directly to the seller.  Although, in some cases it might be wise to bring in a real estate agent; but it is not required to complete the sale.  The decision to bring in an agent is up to each party involved; there are both pros and cons, ultimately the decision is up to the buyer and seller of the property.

After both sides have agreed on a price, the next step is to decide whether or not an attorney or escrow company needs to be hired.  If the deal is moving along problem free, and there were no major problems discovered during the inspection process it may be time to consider hiring either an attorney or an escrow company that can help close the deal for their normal hourly fee.  By involving either of these parties, it will ensure that the deal is completed in the proper manner.

If you decide to sell or purchase a home in this manner, it is important that you ensure the deal is completed in the proper manner.  It is important that you protect yourself both legally and financially when participating in this type of sale.  If you begin to have doubts about the deal or you begin to feel that things may be moving too fast, it may be time to bring in a professional.  

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The past and current states of the economy have meant foreclosure for many home owners. All the changes that have been brought about over the last several years are making many people antsy about their futures. The good news is there are both temporary and permanent alternatives to foreclosure that just may solve many problems.

The state of each individual home owner’s mortgage has an effect on the real estate market as a whole. The alternatives to foreclosure will help with recovery. If you are in a situation that is prompting you to make such a decision, you’ll want to explore all your options before settling on the one that is best for your specific needs. Below are a few worth examining.

Temporary alternative:  The Advanced Claim

This option is for home owners whose need is truly temporary. If you are having short-term difficulties, this may be the option for you. Here, the insurer will pay the amount of delinquency to the servicer in return for a promissory note from the borrower. The borrower’s mortgage loan is then whole. The insurer, in turn, collects part or all of the borrower’s advance over time.

Temporary Alternative:  A Forbearance Plan

Again, this option is for keeping owners with temporary problems in their homes. It is most often used for borrowers with temporary reductions in income, but long-term prospects for income increases. Here, such increases must be able to sustain the mortgage obligations. It may also work for troubled borrowers who wish to sell properties on their own. The forbearance period may range from six to 18 months, or even longer in some cases. Here, the borrower’s specific circumstances are taken into consideration. During this time, borrowers may be allowed to make reduced monthly payments. As time goes by, the payment amounts will increase, thus eliminating the delinquency. It is important to note forbearance plans may be consider a servicer matter, which can lead to the loss of homes for some owners. Because of this, they are only used when necessary and will certainly not fit every borrower’s needs.

Permanent Alternative:  A Loan Modification

This may be used for home owners who are experiencing a permanent reduction in income. Loan documents can be modified in a variety of ways, but the two that are most common are interest rate reductions and term extensions.

Loans with interest rates that are above market can be modified through refinancing. Here, the interest is adjusted to the market rate, and the borrower charged the amount of the standard origination fee that is affordable. If the interest is either at or below the current market rate, monthly payments can be reduced by extending the mortgage term. This will be a permanent reduction and may even mean a new 30 year amortization schedule.

Permanent Alternative:  Deed In-Lieu of Foreclosure

This is a last resort. Here, the borrower voluntarily conveys the property rights to the lending bank. This bank is known as the servicer. This is not a new practice, but may not be the best permanent option. Though it may appear better than a foreclosure on the borrower’s credit, professional council  is recommended to determine whether or not it is the best option. The process involves the borrower signing over the property deed, so careful consideration is crucial.

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In September, home building surged to a four-year high.  Builders started work on new homes at an annual pace of 872,000 homes, up 15% from the August pace.  They filed for new permits at an annual rate of 894,000 homes, an increase of 11.6% over the previous month.  Both of these numbers were the best since 2008.

Mortgage rates are at record lows, and the Federal Reserve’s decision to buy $40 billion in mortgages every month is likely to keep rates low for a while.  While some would argue with the election year announcement that unemployment has dropped, that news coupled with record low mortgage rates and bargain home prices is seen by some economists to be a possible “perfect storm” of influences that could initiate a boom in housing.  Many others expect a slower and much more orderly improvement in markets.

Barclays Capital released a report forecasting that home prices which have fallen by more than a third since 2007 could be back to peak levels as soon as 2015.  In their view the correction in the housing market has been over-dramatic, and they expect rises in home prices of 5% to 7.5% annually.  Construction is expected to be even stronger.  Some analysts expect that home building could be back to the pre-bubble average of 1.5 million new homes a year by 2016.

Home builder stock prices are spiking, and mortgage and equity mutual funds are jumping as well.  It seems that human nature never changes, and a little good news can go a long way, maybe farther than desired. 

Appraisals could dampen this enthusiasm though. 

An article this week in the New York Times talks about appraisal problems that are slowing a housing recovery.  Appraisers are being accused of being too conservative and letting too much personal bias into their valuations in some cases.  However, more criticism is centered on their conservative approach that is due to their employers, the lenders, and their constant pressure for appraisers to cover their investments.

Part of the problem is said to be Appraisal Management Companies that have come into being due to rules that forbid lenders to choose their appraisers.  These management companies are accused of raking off high fees while referring inexperienced appraisers who will work for less money and increase their profits.

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Whether you are looking to leverage equity in a commercial real estate venture or just wish to borrow working capital in order to expand your existing business, the process is quite complex. In fact, it is much different in nature than obtaining a home mortgage.

Commercial loans are not ultimately backed by a governmental source. This sets them apart from the majority of home mortgages. Because of this, most commercial lenders will charge a higher interest rate than would be received on a comparable home loan. Some lenders will even scrutinize the business itself as well as the commercial property that will be collateral for the actual loan. Because of this, the expectations should be different for a commercial loan than they would be for a residential loan.

There are several questions you should ask yourself and the lender before deciding to apply for a commercial loan. The answers will help you make a well-informed decision.

How will I meet the loan repayment terms? This is an important question with any type of loan, but you’re talking about a lot more money with a commercial loan which makes it even more difficult. Typically, it is required that a borrower pay an entire business loan back much earlier than the stated due date. This is done through a balloon repayment. This means the borrower pays both interest and principle on a 30 year mortgage at the initially stated interest rate for the first few years, and then pays it all off in one balloon payment. The stated interest rate is usually adhered to for 3, 5, or 10 years.

This is often very difficult to do since most borrowers aren’t able to save enough during such a short period of time. This means they have to requalify or refinance the loan at the end of the balloon term. Should the business have any cash flow problems during the years just before the balloon term, a higher interest rate may be required by the lender. It is also possible the borrower may not qualify for a new loan. This can mean no financing for the borrower and ultimately, foreclosure on the property.

How much should I borrow? Go into it with the intent of borrowing enough to meet current business needs. You should have enough money to at least leverage your real estate investments.

How long will it typically take to get a commercial loan? You will begin the process by contacting your bank. Unfortunately, most banks don’t allow you to secure a business loan. It usually takes several weeks before a verbal or written commitment can be obtained. This will come in the form of a letter. Even though this occurs, the credit committee can veto the loan. If this happens, you’ll have to begin all over again with a new lender. If you have a good credit rating and a good relationship with your bank, you may get the lowest stated interest rate from a local bank. Being able to show your profits and having time to wait will also serve you well.

Securing a loan is not an easy task. The key is patience. If you meet all the requirements and can wait for an answer, you’ll have a better chance of getting the loan at an interest rate that will work well for you.

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Your debt to income ratio is an important calculation in trying to determine how much more debt you can take on in your new mortgage. Your real estate agent will want to know, your mortgage lender will demand to know, and you of all people will be better off if you find out before you begin house shopping.

Income

Income, for most people, is the easiest part of the equation to determine. Unless you are very wealthy, you are probably well aware of how much money you earn and where all that money comes from.

There are several different types of income that can be counted. Wages and salaries can be counted of course. Income generated from properties or stocks can also be included. Even lottery payments and unearned sources such as alimony can be used in your calculation. The main thing to remember is that the income must be verifiable and should be included on your yearly tax return.

List every source of your income. Check your records to find the exact amounts of income you have for each. Your real estate agent can help you estimate your earnings from properties or stocks. When you are finished, add up the total. You will come back to this later.

Debt

Now, add up all your personal debts. This may not be as easy as it sounds. It helps to know what debts are considered and how they are added in. Credit cards, for example, may be added into the debt using the minimum required monthly payment as the figure. Installment debts need to be added in with the amount of the payment you make each month. If you are going to definitely pay off a debt within the next six months, leave it off your calculations.

Add in your housing expenses. These include the monthly mortgage payments on the level of home you intend to buy, as well as the taxes and insurance on that home. Your grocery and utility bills are not generally included in this calculation. Finally, add up all these amounts to get a total of all your personal debt.

Figure the Ratio

Calculating the ratio from these two total numbers is a breeze. You simply divide the total debt by the total income. This will come out as a percent, which is used to determine whether you can handle this amount of debt in purchasing a home.

What It Means

As far as the mortgage lenders are concerned, a high debt to income ratio means you will have trouble repaying the loan. They usually look for the ratio to be less than 36%. Furthermore, the total of the expenses for your home itself should not exceed 28%. If you fall above the limits, you will need to find ways to increase your income, lower your debt, make a larger downpayment or find a more lenient mortgage lender.

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With interest rates the lowest they have been in many years, many homeowners are rushing to refinance their existing mortgages only to be met with a process that has become more difficult for borrowers to navigate.  One of the most problematic of these obstacles is the amount of time it now takes to secure a new loan at a lower mortgage rate.  In addition to a long wait time, homeowners are also being met with new credit requirements.  While a person with acceptable credit may have easily acquired a mortgage in previous years, that same person may find it more difficult to acquire the same loan with the new credit requirements in place. 

Once a homeowner has successfully met the credit requirements of a lender they may also be faced with a lower appraisal on their home than they were expecting.  But, if you feel that you can handle all of the additional stress that often accompanies refinancing, you may be rewarded with a lower interest rate and smaller monthly payments.  While many homeowners would enjoy a smaller monthly mortgage payment, they should be aware that refinancing often extends the mortgage payment period.  If you were planning on getting free of your mortgage payments before retirement, those plans may change when you refinance. 

When a homeowner refinances, payments made during their first seven years will pay down approximately 5% of their principal with the remainder being applied to the interest on the loan.  This means that homeowners who refinance won’t be making a noticeable dent in their principal until after the first seven years.  Basically, when refinancing, a homeowner is starting from scratch when it comes to paying down on the principal of their loan.  This is something that homeowners should consider when they are thinking of refinancing their existing mortgage.

Homeowners who choose to refinance are often required to pay the closing costs, which, in some cases can be more than the amount they are saving depending on how long they plan to keep their home.  Closing costs are typically 1.5% of the loan amount, borrowers should compare the amount to the amount they will be saving each month with a lower interest rate and find the break-even point, which refers to how long they will need to hold onto the home before they are able to recoup the closing costs.

Refinancing may also be confusing to homeowners because it now takes longer to process the paperwork required for refinancing.  This may leave the homeowner wondering when they should stop paying their original mortgage.  Typically homeowners do not pay the original mortgage payment the month that their new mortgage is expected to be put in place.  However, if there is a delay in the paperwork and the borrower doesn’t make a required payment they may find themselves behind on their mortgage payments which can put the whole refinancing process in jeopardy.

If you are considering refinancing, these are some things that you should be aware of to help you make a more educated decision.  Be sure to choose a certified mortgage lender to work with when refinancing, this will make the process go much smoother and you should experience a much easier refinancing process.

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Real estate investments are all about earning a return. Even if you are buying a house to live in, you want to know that when you decide to sell that house it will be worth more than you paid for it. If you are adding a new aspect to your investment portfolio with real estate, you will definitely want to know you can earn a return on your investment.

The easiest way to make sure you can get a return on your investment is to pay less for a house than it is worth. Impossible? Not in today’s RE market. In fact, so many sellers are desperate to sell that you can easily pick up properties for lower than the asking price, which is often lower than the value of the property.

Another way you can get more house for your money is to look into foreclosures. Foreclosure homes are usually sold for the amount remaining on the original bank note. This could meant that the house can be sold for tens of thousands of dollars lower than its value, maybe even more. This is even more of a possibility than it has been in the past. There are so many foreclosures on the market that it’s ridiculous. You can easily have your pick of properties by choosing only from foreclosures.

You can also get a lot of house for your money by attending auctions. There are different types of auctions to choose from. Police auctions are those held by police departments and other government agencies that seize property involved in criminal activity. These properties are then put up for auction, and the money goes toward repaying the criminal’s debts.

Another type of auction is a tax lien auction. These houses are put on the market by cities, counties, and states when the owners fail to pay their property taxes. These houses are usually put up for auction with the starting price the amount of money owed in taxes. You can often get the best deals at these auctions.

Estate auctions are also a great way to get more house for your money. Estate auctions are properties that are being put on the auction block because the owners have passed on. Sometimes these auctions take place because it is required by the will or probate court for all assets to be liquidated. Sometimes the auctions take place because those inheriting the property don’t want it. Whatever the case, these auctions are a great way to buy a lot of house for a little money.

If you aren’t sure what your options are for investing in real estate, you can always check with a realtor. An experienced local realtor will be fully aware of what is available in your area. They will have all of the information for auctions being held in the area. They will also have information on properties that are for sale by owner, which are often cheaper than those sold with a realtor. 

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Deciding to build your new home instead of purchasing a pre-existing home is a big decision.  There is a lot that should be taken into consideration when choosing to go this route.  Below we are going to offer you some helpful information that will make the process much easier on everyone involved.

The first thing you should consider is the slope of the property you are thinking of building on.  Building your home on an area that is sloped tends to be more expensive than if the area was flat.  When considering building on a slope you should determine if that is only location on the property where your home can be built.  Building a home on a slope tends to cost more due to the extra materials that are required and any special modifications that are needed to make the home safer.  Before building you should thoroughly consider the financial impact that building in this area will pose. 

The next thing that home builders need to consider is the sun.  If you are designing your home to allow for the sunlight to flood in through all of the expensive windows you have ordered you need to ensure that you have placed the rooms in the correct areas.  If the rooms that you were expecting to be flooded with natural light face north, you may be in for a surprise.  To ensure that the rooms receive the amount of sunlight you would like, it is recommended that you visit the building site at various times throughout the day.  This will allow you to make any design changes before building begins.

You may not give much thought to the soil in the building site but you should.  Different soil types can have a big impact on construction costs.  If you are unsure as to the type of soil that can be found at your home site, you can obtain soil information from the County Extension Service or your local building department.  You can also contact builders and contractors who have performed work in the area and ask their opinion.  Different types of soil drain and hold water differently; your foundation will need to be designed with these factors in mind.

The final thing that you should consider is the type of sewer system that is used in the area.  If you are building in a remote area, the land may not be connected to any utilities.  This will mean that you will need to make changes to your building plans to accommodate the addition of these utilities.  Not only may this be inconvenient, but it can also become expensive.  Before choosing a lot to build your home on, it is important that you find out if the land has been connected to all necessary forms of utilities.

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