Wednesday, July 25, 2007

The Dangers of Overpricing

1. MINIMIZES OFFERS
An overpriced house discourages prospective buyers form making offers since the difference between the asking price and market price becomes substantial.

2. AGENT ENTHUSIASM AND RESPONSE
Agents lose interest in property that is overpriced. They do not spend as much time in moving the house as they would if it were priced right.

3. QUALIFIED BUYER EXPOSURE
Overpriced houses fail to attract qualified buyers, or attract "wrong" buyers.

4. DECLINE IN SHOWINGS
Agents avoid showing overpriced houses in order not to lose credibility with buyers.

5. LOOSES PROSPECTS INTEREST FROM SIGNS
Prospects who learn about the house from the sign get turned off if it is overpriced. They do not pursue the matter to see the house.

6. LIMITS FINANCING
Financial institutions and mortgage companies finance only a percentage of the real value of the house. If the house is overpriced, they usually will finance a lower percentage, thus reducing the available financing.

7. WASTE OF ADVERTISING DOLLARS
A house that is unrealistically priced fails to get normal advertising response. This reduces the effectiveness of advertising and results in the loss of advertising dollars.

8. LESS FOR SELLER
Eventually market interest in the overpriced property completely declines. As this stage is reached, the seller becomes desperate and he begins to feel he would sell at any price. In the meantime, he or she must bear maintenance and holding costs. The net result is that the seller gets much less than he could have if the house was correctly priced in the first place.

Monday, July 23, 2007

Can't Pay Your Mortgage?

REALTORS® are in the business of helping people become homeowners and want to do everything they can to make sure you can afford to stay in your home.

• The best and least expensive option will often be working with the current lender (or the “loan servicer” hired by the lender to oversee your loan). Read more about your options on the next page.

• If your current lender isn’t willing or able to help, you may be able to refinance your current mortgage with another lender. REALTORS® can help you find responsible lenders that make fair and affordable loans.

• To address the growing foreclosure problem, especially with subprime loans, some state and local governments and nonprofit organizations are offering financial assistance. Ask your REALTOR® or counselor about who to call.

• Counseling agencies are in the business of helping borrowers like you. Check out Counseling Resources for some ideas.

• Remember, you should shop just as carefully for a mortgage as you do for a car or anything else you buy. Getting the lowest possible rate and fees can save you many thousands of dollars over the life of the loan.

• Sometimes the only option is selling the home. Of course, no one is better at helping a seller than a REALTOR®. It is better to sell than go through foreclosure because it will be easier to
qualify for credit in the future and buy another home.

Be wary of advertisements like “Cash for Houses/Any Situation” or “We Buy Houses for Cash.” Consumer groups have learned that many of these are scams that bait homeowners with the promise of rescuing them from imminent foreclosure. Unfortunately, the “rescue” often
involves the borrower signing over the house and the family being evicted from their home. You can read more about these scams by clicking this link: Foreclosure Rescue Scams in the San Fernando Valley.

Richard's notes: A great senior loan officer I can recommend is Tom Cortesi with First Financial. Tom is by far the best loan officer I have worked with. He is honest, professional, and does not overcharge. Tom's fee is around 1%. Compare that with the average loan officer who charges 3-5%. That is a substantial savings over the life of the loan and will save you money every month. He is a trusted advisor for my clients and friends and he has never let me down. You can contact Tom Cortesi by visiting his website here: http://www.fcff.net/la/tcortesi.html

If you are having problems paying your home loan, contact Tom today. If Tom is unable to help, the next option might be to list and sell your house. Even if you have not paid for many months, it's a better option selling your house as a short sale, rather than losing your house to foreclosure. Don't wait to the last moments to make a decision.

Sincerely,

Richard Johnston, RE/MAX OTB Estates
San Fernando Foreclosure Expert

Wednesday, July 18, 2007

The Secret to Pricing Your Home to Sell

by Jim Remley, Pro Performer Seminars

Contrary to popular belief, when selling your home its value is determined by one thing and one thing only - what a qualified buyer is willing to pay for it. No more and no less. Sure, many sellers will argue that their home has an insurance replacement value, or an appraised value, or a tax assessed value, but unless your insurance agent, your banker, or your tax assessor is willing to write you a check for the home - guess what? None of that matters. A home without a buyer has no value in the market place. Sure it might have a value to you the seller, and it might have a value to your banker, and to your insurance agent, and to your appraiser. But none of these people are buyers.

So here is the secret to pricing your home to sell - It's not what you think the home is worth that matters, it's what a reasonable buyer will think your home is worth that will ultimately determine if your home will sell.

Now you maybe thinking - Hey wait, if I left it up to a buyer, they would pay me as little as possible for my home. True, they would. But in the real world every buyer knows that you, the seller, have no obligation to sell your home at any price. To purchase your home the buyer will have to make you an offer you can't or won't refuse. One that will motivate you to pack up your Ken and Barbie collection, hire a local mover, and wave good bye to a home full of memories.
But here-in lies the trap that many sellers fall into (myself included), which is the mistaken idea that we can hold out for an inflated price and eventually the market will come to us. Wrong! Buyers are under no obligation to buy any particular home, and no amount of marketing, open houses, websites, or signage will motivate a buyer to purchase an overpriced home. Why? Because they can buy one of your neighbors homes for less!

Richard's Notes.. I agree with Jim on this issue. Even though price is an important factor, it in itself does not help contribute to the sell of the home. Location, condition, negotiability and availability will help to sell your home quickly. If you come to the realization that you might possibly owe more than what your home is worth, click here to learn how to sell your home short.

Monday, July 16, 2007

Mortgages with "Payment Shock"

Mortgages like these can give you a “payment shock”:

2/28 and 3/27 Mortgages. A 2/28 or 3/27 adjustable rate
mortgage gives the borrower a fixed payment for the initial
two- or three-year period before adjusting the mortgage up as
often as every six months. After the initial “teaser rate” period,
your mortgage payments typically adjust up every six months.

Interest-Only Mortgages. An interest-only mortgage lets
you pay only the interest on the loan for the first 5 or 10
years and nothing to pay off the loan amount (principal).
After the interest-only period, the mortgage requires much
higher payments covering both interest and principal that
must be repaid over the remaining years of the loan.

Payment Option Adjustable Rate Mortgages. Payment
option mortgages let the borrower decide how much to pay
each month. You can even pay less than the interest, and add
the unpaid interest to the total amount of principal you owe.
Or you can pay just the interest or an amount sufficient to
pay off the loan in 15 or 30 years. These mortgages can have
an especially big payment shock.

Be careful if your mortgage has any of the following features:

• A “teaser rate” or “no interest” period that expires and leads
to a big jump in your monthly payment.

• An option to pay less than the full interest due in any given
month. Taking that option makes the amount you owe go up
instead of down, since the interest you don’t pay is added to
your loan balance.

• An adjustable interest rate with very high or no limits on the
amount your payment can go up.

• A payment that doesn’t include an amount for paying
property taxes and homeowners insurance. This means
you may be hit with big bills you didn’t expect.

Thursday, July 12, 2007

Home Prices Expected to Recover in 2008 As Inventories Decline

WASHINGTON, July 11, 2007 - Home prices are expected to recover in 2008 with existing-home sales picking up late this year and new-home sales rising early next year, according to the latest forecast by the National Association of Realtors®.

Lawrence Yun, NAR senior economist, said a good buyers’ market has evolved. “Buyers now have an overwhelming advantage given the wide selection of homes available in many markets,” he said. “But with profit margins coming under pressure, homebuilders will limit new construction well into 2008. This should help the overall inventory level to move steadily into a more balanced state.”

Existing-home sales are expected to total 6.11 million this year and 6.37 million in 2008, down from 6.48 million last year. New-home sales are projected at 865,000 in 2007 and 878,000 next year, compared with 1.05 million in 2006. Housing starts, including multifamily units, are forecast at 1.43 million units this year and 1.44 million in 2008, down from 1.80 million last year.

Existing-home prices are likely to rise 1.8 percent to a median of $222,700 in 2008 after a 1.4 percent decline this year to $218,800. The median new-home price should rise 2.2 percent to $245,400 next year following a 2.6 percent drop in 2007 to $240,100.

“Markets that sharply reduce new construction in 2007 will generally experience respectable price increases in 2008,” Yun said. “Local conditions vary considerably, but with historically low mortgage interest rates this summer and sustained job gains, it could be a good time for first-time buyers with a long-term view to test the housing waters.”

The 30-year fixed-rate mortgage is estimated to average 6.7 percent during the second half of this year, and fluctuate around 6.6 percent in 2008.

Growth in the U.S. gross domestic product (GDP) will probably be 2.0 percent in 2007, compared with a 3.3 percent growth rate last year; GDP is forecast to grow 2.8 percent in 2008.

The unemployment rate is likely to average 4.6 percent in 2007, unchanged from last year. Inflation, as measured by the Consumer Price Index, is projected at 2.6 percent in 2007, down from 3.2 percent last year. Inflation-adjusted disposable personal income should rise 3.0 percent this year, up from a 2.6 percent gain in 2006.

Search for available homes in the San Fernando Valley including Sherman Oaks, Encino, Studio City, Tarzana, and Van Nuys.

Friday, July 06, 2007

POSSIBLE WARNING SIGNS OF A PREDATORY LOAN

• Sounds too easy. “Guaranteed approval” or “no income
verification” regardless of borrower’s current employment,
credit history, and assets. These claims indicate the lender
doesn’t care about whether you can afford to make the
payments over the long haul.

• Excessive fees. Higher lender and/or mortgage broker
fees than are typical in your market. Because these costs
can be financed as part of the loan, they are easy to
disguise or downplay. On competitive loans, fees are
negotiable. It is common for home buyers to pay only one
percent of the loan amount for prime loans. By contrast, a
typical predatory loan may cost five percent or more.

• Large future costs. High-risk adjustable rate mortgages
where the payment rises a lot after a short introductory
period are seldom appropriate for families who already
have had problems repaying other loans. Home buyers also
should avoid a large single “balloon” payment (a lump sum
due at the end of the loan’s term).

• Closing delays. The lender deliberately delays closing so
the commitment on a reasonably-priced loan expires.

• Over-valued property. Inflated appraisals that allow
excessive fees to be included in the loan and result in the
borrower owing more to the bank than the home is worth.

• Barriers to refinancing. Prepayment penalties that make
it hard for a borrower to refinance in order to pay off a
high-cost loan by taking advantage of a low-cost loan.

• No down payment loans. These loans may be split into
two mortgages, with one having a much higher cost. Home
buyers should be sure they can afford the payments.

• Unethical document management. An ethical lender or
broker will always require you to sign key loan papers, and
they will never ask you to sign a document dated before
the date you sign it.

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