Real Estate Buy and Sell

Currently the median price for a home in the Mount Clemens MI real estate listings is $138,900, but prices start at $54,900 for a one bedroom condo with a view of the Clinton River. If you are interested in buying Mount Clemens Michigan real estate, but have past credit issues and can’t get a lender to give you a loan for a mortgage, there are solutions.

On the flip side, if you need to sell a home quickly, because of a job transfer, to avoid foreclosure or for other reasons, there are ways to sell a property quickly that you may not know about.

Here we have accumulated some information on these strategies after a brief history of the area.

The city is named for Christian Clemens, who surveyed the area in 1795 and liked it so much that he decided to settle there four years later. He and his friend John Brooks built a distillery there, which helped to attract other settlers. The discovery of mineral wells by Dorr Kellogg in 1870 attracted both settlers and tourists to the growing city. The city was incorporated in 1879.

The Mount Clemens Michigan real estate market boomed during the early years. Many fine hotels and bath houses lined the streets. It is said that people came from all over the world to take the “healing” baths. Most of the hotels and bath houses closed during the Great Depression, but one, the Arethusa, remained open until 1974.

Today about half of the Mount Clemens Michigan real estate market is residential. The other half is commercial or industrial property. Industrial areas are located mostly on the city’s northwest side or near I-94 at North River Road.

Retail businesses, shopping centers and restaurants are found along Gratiot Avenue, Groesbeck Highway and in the downtown area. Since it is the county seat of Macomb, government offices and county courts are located within the city.

124 acres of city parks, playgrounds and ball fields, as well as the Clinton River provide outdoor activities. The Art Center offers classes and a museum for hobbyists or professionals. The downtown night life includes numerous restaurants, bars, billiards and theaters. With all the activities, festivals, historic areas and beautiful scenery, it is no wonder that many people are interested in buying Mount Clemens Michigan real estate.

At the last census, there were 17,312 people living in the four square miles covered by the Mount Clemens MI real estate market. Some work in the industries or retail establishments in town. Some commute easily to other towns in southeast Michigan for work.

If you can afford to rent, you can probably afford to buy one of the homes in the Mount Clemens Michigan real estate listings. Interest rates are low, but qualifying is more difficult than it used to be. If you have been denied financing because of past credit issues or little established credit, then the way for you to become a homeowner is to simply buy the home with no bank involved.

Well, that’s great you may say, but how? The answer is you find a homeowner willing to sell his property via seller financing. In effect, the owner becomes the bank and therefore, there is no real bank involved to get into the home. One of the most common strategies for this is called the lease option (also known as the rent to own).

Of course, most people who will do seller financing don’t want to do it forever. At some point they want to be cashed out of the home so that you become the new owner. This is why while you are paying the mortgage on a lease option, you will be re-establishing your credit. The duration of the option term in a lease option is usually all the time you need to do this. Once your credit score has improved enough so that you do qualify for a bank loan you then get it, and exercise your option, thus buying the home.

Now you are the new legal owner of the home! A lease option is a powerful way to achieve home ownership now even if you don’t think you can.

Yes, there are some requirements. Generally, you need to have reliable employment and a down payment (called option consideration, which is usually about 3 to 5% of the property’s price). So, for example, if you want to buy a $100,000 home, then the seller will generally want $3,000 to $5,000 down as option consideration for you to move into the home. The good news is you will get the consideration back when you exercise the option because it comes off the sales price of the home.

For example, if you buy a home on a lease option for $100,000 and put down $5,000 option consideration, and then after a few months when your credit score has improved, you exercise the option, the purchase price of the home becomes $95,000 because the option consideration you put down to get into the home is applied toward the purchase price when you buy!

If you already own Mount Clemens MI real estate, but need to sell quickly, your solution is the flip side of the coin. Meaning: instead of just trying to sell it to people with a mortgage loan approval from a bank, offer seller financing and you will open up your home to a much larger segment of the market.

The Mount Clemens Michigan real estate market is “soft” right now, as it is throughout the state and much of the country. This means that many properties stay on the market for months and foreclosures are not uncommon. Seller financing is the key.

Currently there are over 100 properties in the Mount Clemens MI real estate classifieds that are listed as foreclosures. Foreclosures can damage a person’s credit rating irreparably, sometimes making it impossible to buy another home for years. If you can’t make payments anymore and need to sell your home quickly, seller financing (even if you owe to the bank what the home is worth) may be the solution you are looking for to avoid foreclosure.

For example, if you living in a $150,000 home and have little to no equity in it and basically owe that amount to the bank but suddenly lost your job, you will eventually face foreclosure unless you regain employment. Trying to sell your home with all of the other thousands of homes on the market is difficult. But if you offer seller financing — such as selling your home on a lease option — you will open up your home to a large segment of the home buying populace who cannot get bank financing upfront but may otherwise be serious buying prospects.

Mount Clemens Michigan real estate investors who do rehabs are one source of great seller financed homes because after they rehab them, they are often flexible in their financing.

In summary, whether you are a buyer with damaged credit ow own one of the homes in the Mount Clemens MI real estate listings, or elsewhere in the state, you should start thinking of buying and selling with no bank involvement upfront.

In the world of real estate, people are always asking if it is a good or a bad time to buy and sell. The real way to answer this is one property at a time. If properties didn’t sell until it was the best time, we would be waiting for an eternity. From a buyers perspective, I understand that they want to wait until the prices have bottomed, however, unless they have that crystal ball, how are they going to know what that time has arrived. If the numbers make sense, then move forward, if they do not make sense, then don’t give it another thought.

On the other hand, if you are a seller, I have often heard people suggest that they would like to sell, but it was the worst time to sell. What they need to consider, is that it is all relative. The next property they buy is also going to be selling low. If they wait for prices to go up, the house they want to buy may go up as well. Chances are, if you wait, you may not have as many opportunities at the real estate auctions.

Another tip that people have found helpful is to take every offer seriously. Some have suggested that you should be firm on your price and not even consider offers that really undercut your asking price. The reality is that they want a good deal too, and they may be testing to see how good of a deal they can get. If they don’t ask, they will never know if they could have done better. I’m not saying to accept low offers, but you can counter offer back near your original offer, to let them know you can be flexible, but not stupid.

In today’s real estate market the challenge for homeowners who want to sell their home quickly is that they must compete with banks and other mortgage lenders who have taken back many homes via the foreclosure process. These foreclosed homes are then placed on the open market in a given community and are frequently being offered at eighty percent or less of their appraised value. This is having a significant downward effect on house prices. But, there are things you can do if you want to sell your house for cash today.

The residential real estate price challenge: Foreclosure homes weigh on market

America’s housing market is currently staggering under a glut of unsold home inventory because of the biggest foreclosure crisis to hit the country since the Great Depression of the 1930′s. There are many reasons why the country is in the middle of a foreclosure crisis, and other articles can provide the background for the downturn. Some topics to explore include: adjustable rate mortgages, subprime mortgages that swiftly became unaffordable, Alan Greenspan’s Federal Reserve monetary policies, real estate speculation, and more.

This article explains some options available to a home seller to help them sell a house quickly even in a falling market whose bottom has not yet clearly been reached.

House selling option #1: Sell your house to a real estate investor

Homeowners who need to sell a house quickly because of unaffordable mortgage payments, job loss, transfer, or relocation, divorce, inheritance, or any other of number of reasons can look for a company that buys houses on the internet or via their local ‘real estate wanted’ section of their local newspaper to find a real estate investor who can buy a house for a cash offer in a short period of time. There are investors who advertise “we buy houses” on plastic signs on fences and telephone poles, but many of these signs are placed by investors of dubious backgrounds.

Do your homework on the internet if possible: make sure to research the person or company you are considering doing business with to see if they’re reputable. If the investor claims to have professional licenses check their online records if available. In general, the ‘simpler’ the transaction the better chance you have of dealing with a straightforward purchaser. This means that you should sell the house directly and completely in the traditional formal manner at an escrow or title company of your choosing or with representation of an unbiased real estate attorney that is not working exclusively for the investor.

The upside of selling a home to a real estate investor for a cash purchase is that you can, if you meet certain criteria, walk away with cash in hand or a mortgage that will be paid off in a very short period of time. The downside is that investors will want to guarantee that they make a profit upon the resale of your house and their profit comes out of your equity in your home or your pocket.

Most real estate investors who buy single family homes and then re-sell them quickly (house flipping) and those who use a buy-and-hold strategy are looking for deep discounts on a home. This figure for an offer typically starts at 70% of current Fair Market Value (FMV). Of course most investors would prefer to purchase a home at far less than 70% of current FMV. There are some investors who will pay closer to 80% of current FMV for properties that they buy, but these buyers are difficult to locate at times. (Current FMV also means that a house’s value is determined only after repair costs, if any, are subtracted.)


House selling option #2: “List Smart” with a real estate agent or broker

If you are the kind of home seller who wants to get top-dollar for your house, then this section may not give you the type of advice in terms of price you’re looking for. But, if you’re looking for a quick sale of your real estate read this article carefully and repeatedly.

The key to selling a house can be learned from the previous discussion of real estate investors’ criteria for buying a house in terms of discount from current FMV. For your home to ‘jump off the page’ at a retail buyer if you have it listed with an agent or broker it must be priced significantly below the competition. It’s really that simple. If your neighbor’s identical house is listed for $210,000 and yours is priced at $195,000 whose home is going to be sold first?

Do you really want to be a FISBO and sell your house yourself?

For-sale-by-owner (FSBO) home selling strategies have always been popular in concept, and for people are sophisticated in terms of contract law, they can result in saving some money. But, for people with little experience buying and selling real estate the use of an experienced and licensed real estate professional can be an invaluable aid. Statistics published by the National Association of Realtors indicate that the typical FSBO home sold for $187,200 compared to $247,000 for agent-assisted home sales in 2007. Many do-it-yourself home sellers eventually sell or buy a home with the aid of an agent even if they have tried by themselves for a short or long while.

Create a real estate auction environment

You’ve probably seen the advertisements for real estate auctions in your area. Want to know the secret of how these auction companies stay in business? It’s auction frenzy psychology.

By offering people looking to buy a home at an auction an opportunity to buy a foreclosed home at a very low price the auction companies are appealing to the greed of the bidders. Once this emotion of greed and a spirit of competition with the other buyers has kicked in many people will bid a price up on a home far in excess of the original asking price. An auction environment can definitely work against a buyer, especially if there are a lot of other bidders involved!

You can use this lesson to your advantage. If you price your home at an almost ridiculously low level you should expect to start receiving bids from potential buyers. Remember, it’s better to have lots of low bidders, initially, that you can play off against each other and watch the price rise to close to the current fair market value or sometimes in excess of it. Also remember that you don’t have to accept any offer you consider too low. Make sure you know the federal, state, and local laws that govern real estate law, contract law, and especially the non-discrimination provisions that apply.

House selling challenge #1: How to determine fair market value for my real estate

In today’s real estate market determining the current FMV of a home is a very difficult thing to do. Most economists agree that home prices will continue to fall nationally for some time to come and that a true stabilization of US home prices may not occur for one to two years or more.

One quick and dirty to come up with a home’s approximate FMV is to average the price that zillow.com and cyberhomes.com (and other online home appraisal sites) give to the house and then multiply that number by 85%. This should get you to a price that would make a retail home buyer or first-time home buyer jump at your house over the competition.

It is very, very important for home sellers to understand the competitive landscape. Without a house priced at a deep discount from ‘competitively’ priced homes on the market a seller has little chance of getting top dollar or even any offers to purchase at all.

The only working definition of current fair market value that is worth remembering is that it is whatever a willing retail buyer will actually end up paying for your house in a 2 to 4 month period of time. These buyers, especially first-time homebuyers and people with less than perfect credit, are also facing their own challenges to qualify for a mortgage loan because of tighter underwriting standards imposed since the unfolding of the credit crisis in the United States.

House selling challenge #2: Low, no, or negative home equity

This is a tough situation and it’s responsible for many of the foreclosures that are occurring in today’s housing market. For people who purchased homes since 2003 (or even earlier) the chances are that their home does not have a lot of equity built up unless a substantial down payment was made on the house. For many of these homeowners who want to sell a home fast they are faced with an less than ideal situation of paying money at closing to sell their house to cover the amount they owe their mortgage lender in excess of the sales price and the closing costs.

When this can’t happen because of limited financial resources on the seller’s part the lender usually ends of taking the house back in foreclosure and it becomes part of the real estate owned (REO) inventory mentioned above that is acting as a drag on house values.

Conclusion

Whatever your situation is you can learn more about all things related to real estate simply by researching here at Ezine Articles, on Google, or on your favorite search engines or websites. Happy learning!

There are always stories of smart investors who take advantage of the downturns in real estate cycles, downturns in the stock markets, or overall downturns in the economy. While some people ‘hunker down’ or even panic during the difficult periods, others look for opportunities, or specifically wait for the opportunity cycle to come, as it has now.

While one of the mantras of investing is to ‘Buy Low-Sell High’, this doesn’t always work out, does it? What we inevitably see is this: when something is ‘hot’ (like home rentals or condos recently), everyone rushes in to buy, but when it drops or freezes up, everyone panics and sells (or tries to sell). Often we ‘Buy High – Sell Low’, and that is a pity. Of course, when it comes to the realty world, an added culprit has been financing. Some investors over-financed, or when everything else in their portfolio and life crashed, they had trouble meeting debt service. It certainly seemed that in some cases, credit was too easy – just as now it is extremely difficult to obtain. A majority of lenders have not been open to working with borrowers who are in a jam, either.

When market conditions are in an opportunity state, as they are now, two points seem clear: cash is king and opportunities abound. Many investors are nervous about values or wonder if the economy will soften further. If they are suffering with under-performing real estate bought at the height of the market, they understandably become fearful of new acquisitions or frozen into inactivity. However, others are just nervous in general and fail to see the opportunities in front of them. There is no question that property can be picked up at deep discounts in many parts of the country, whether it be a home for rental or a commercial property. Thorough due diligence is needed, of course, and a basic analysis of cost of ownership should be weighed. It is a buyer’s market and a buyer should negotiate hard, as they usually will have the upper hand. One who may acquire a property at a deep discount today with the mantra to hold the property until a solid recovery is in play, and then sell, may find success in their strategy. Timing is key.

For those investors holding under-performing property they acquired during the “up” market, the theme for this year is to “ride out the storm” and make it through whole. But for those investors who have cash, interest and a strategy, look at the great buying opportunities that exist today. The window of opportunity will not last forever. Always make sure to confer with your expert team when considering a real estate acquisition (CPA, attorney, real estate agent, title agent, spouse and lender, etc).

Northwest Arkansas is one of the fastest booming areas in Arkansas. The NWA area covers some of the most blossoming cities in Arkansas history. Its expansion and new development have held strong in an otherwise dim economy. Businesses continue to pop up all around, new homes are continuously being blue-printed and built. For some people, these hard economic times cause a sudden halt in home buying or building plans. In some states and regions, it is just too scary of a market and not a good idea to make any real estate purchases for some perspective home buyers. This is not the case in the northwest corner of Arkansas. Northwest Arkansas, more specifically Bentonville, Bella Vista, Fayetteville, Rogers, Springdale and the ever popular tourist town, Eureka Springs are ripe for the picking when it comes to investing in real estate.

The key to making a smart real estate investment is to know the facts. There are a lot of things to take into consideration before either buying property or selling the property you already have. This can be overwhelming to some, so here are the three most important things to remember when it comes time to invest in or sell your investment properties.

First, you need to have a good firm grasp on what the economy is doing in your specific area. For instance in Northwest Arkansas, home prices have plummeted to surprising lows. This is a good thing for perspective home owners. Buy low and sell high. With the surrounding towns continuing to grow and develop, stabilization for the Northwest Arkansas area economy is not far off in sight. With all the extended tax credits, foreclosed homes and rock bottom prices, it has never been a better time to make a real estate move. Whether your goal is to sell your existing property to free yourself up to purchase a better investment property or if your plan is to purchase your first home in the area.. Now is the time to make a move.

Second, you need to have a solid game plan established with a set amount of money you are planning to invest. This will make searching and finding your dream home or property much easier to narrow down and execute. With the prices of homes at an all time low, setting a lower budget and sticking to it, is much easy to do. Setting a budget and sticking close to it sounds simple enough, and with the help good solid real estate representation by a knowledgeable professional, becoming a smart home buyer is very accomplishable. This brings us to the last but most important key to buying a home.

Lastly, You need good buyer’s representation. There are many different kinds of representation to get these days, but for a home buyer, particularly a new home buyer, a Buyers Agent is the way to go. A Buyers Agent represents the buyer’s interests at no cost to the buyer. A typical real estate agent, or a listing agent, represents the seller and tries to get the highest price for the seller. This is why picking your representation is very important. Of course, if you are selling your home, you would go with a typical real estate agent with good knowledge of the area you are working with. A listing agent should have the tools to get you the most for your property taking into consideration the economy toady. You want someone with your best interests in mind. It is important to distinguish clearly between the two distinct types of real estate representation so that you, the home buyer, or seller, gets the very most out of your real estate investment.

Using these simple keys to investment, you can easily make the transition into the great world of being a home owner or a smart real estate mover. Find a good area with lots of expansion and development, know your economy for that given area, know your budget and find yourself good buying or selling representation, for whatever your real estate needs might be.

Northwest Arkansas Real Estate

These are confusing times for anyone who wants to buy or sell a home. It’s national news that homeowners in higher priced markets are taking a beating on their investment. Both foreclosures of sub-prime and now quality borrowers of second-lien loans are on the increase. Many owners are being forced into compromising positions. And while this may seem like good news for home buyers, it isn’t if the home they buy today is worth less tomorrow or next year when an unforeseen personal problem may force them into a short sale that often requires taking money from their savings to essentially pay someone to take their home. This is what is happening every day in formerly hot markets across the country. Add to this the increasingly difficult aspects of obtaining cheap credit and the American dream of owning a home, and profiting from its appreciation, seems ever more unobtainable.

It should be easy. Buy low and sell high, right? But to do that we need to know just where in the buyer/seller cycle the market actually is. Unfortunately, conflicting reports come from every quarter.

Even the National Association of Realtors has reversed it’s predictions of a 1% national drop in home prices and instead predicts that prices will bottom out this quarter (3rd Q 2007). If this is true, It looks as if the ride–however uncertain–may be a short one for long suffering buyers forced to pay ever escalating prices for less and less home. However, predictions, especially by an organization with a vested interest in a robust real estate market, tend to be, well, just that, predictions.

The reason for this confusion is that real estate markets are extremely local with many areas of the country never experiencing even the slightest bubble, or, unfortunately, as is the case of some rust belt towns, the slightest appreciation. So, no national prediction by any organization, even one generally considered reliable, applies but generally to any local market.

How then will buyers know when the time is right and the bottom has truly been reached, that a corner has been turned and a return to a seller’s market and possible double digit appreciation lies just ahead? Of course, this information is also essential to the seller, since a return to an appreciating market may be the light at the end of the tunnel. Here are four telltale signs that the downward trend, for those buyers lucky enough to have one, is reversing.

1) Declining Inventory

Chief economist at the Real Estate Center of Texas A&M, Mark Dotzour [http://www.dotzour.com/main/?p=bio] sees it like this: The balance between a buyer’s and a seller’s market can be expressed by the estimated time it would (theoretically) take to sell all the homes in a given market at the current rate of sales.

If it would take less than 61/2 months to sell all the homes in a given market then home prices are appreciating faster than inflation. This is a seller’s market.

If it would take more than 61/2 months prices are lagging behind inflation. Above 9 or 10 months and it’s a buyers market.

Besides these generalities, a clearer picture can be seen by comparing the quarterly or even monthly inventories. When inventories decline it’s a good sign that prices will increase.

2) Time on Market

In addition, if houses are selling faster than before it indicates stronger buyer demand which pushes prices up. This indicator is found by looking at the average time on market for a given area. Of course, as in the use of any “average” extenuating factors should be considered. But if the basic economic foundation of a community remains stable, averages are an effective way of timing the market.

Generally, if homes are selling in less than 30 days it’s a sellers’ market; more than 90 days it’s the buyer’s advantage.

3) Price Reductions

When sellers are no longer forced to take price reductions on a market-wide scale it’s a sure sign that the market is turning.

This can be gauged by noting the “reduced” headlines on real estate ads in the local newspaper or by noting the lack of “reduced” sign riders on homes in the neighborhood. Another solid sign is fewer open houses per week and the lack of incentives offered by sellers to tempt buyers into acting when they want them to instead of when it may be more advantageous for the buyer. Of course, if an incentive happens to appear at the same time the market is deemed to be right for a buy then so much the better.

Since this last indicator can be observed casually by reading real estate ads or noting the for sale signs in a given neighborhood it is ideal for anyone just thinking about a move.

A more accurate way to judge price reductions as well as time on market and inventory utilize statistics available from a local real estate broker who will probably have these figures at his or her fingertips. Real Estate professionals live and breathe the market. It’s their profession and their livelihood.

4) Your Broker is Certain a Market Change is in the Wind

As noted, real estate brokers are deep in the market on a daily basis. They feel the subtle vibrations almost as if the market were a living breathing thing. However, also as noted, if even the National Association of Realtors might be biased, how can we rely on someone who wants to sell us a house or sell our home?

We can’t rely on every broker. In a tough market some agents get desperate and might feel forced to exaggerate. But an experienced broker who has been in the business more than a few years knows better. These men and women succeed or fail on their reputation. In addition, a large percentage of a top broker’s clients are referrals. Give bad advice and lose the client plus everyone they know. Getting burned on something as important and expensive as our home is not soon forgotten. Nor is there any valid reason for a broker to exaggerate the truth. A good broker sells in a buyer’s market and a seller’s market just as well. The difficult time is when the market needs a correction, for instance, when prices are just not affordable or when prices are so affordable there’s no inventory.

Even more than the data, a good broker with a sense of the market and where it is heading is an invaluable resource for anyone buying or selling a home.

If you are considering buying or selling, you are probably noticing price movements in your area. The question is how big a role these movements should play in your decision to buy or sell.

The first rule of real estate is, of course, location, location and location. The second rule in the minds of many has to do with pricing issues. Specifically, is the real estate market trending upwards or downwards? Considering pricing trends is a smart move, but fixating on them is not.

Why are real estate pricing trends so discussed? Well, it all has to do with getting the best possible deal. For buyers, the goal is to buy property when prices have bottomed out. The buyer can then reap the benefits of appreciation when the prices eventually start rising again. On the flip side, sellers are looking to sell when property prices are at the top of the market. Doing so, of course, maximizes the profit in the property being sold.

While pricing trends are something to note, they are not nearly as critical as people think. First off, it is important that you focus on the correct trend. National price trends up or down are not all that important. The local price trend may differ. If prices are dropping 10 percent on average across the nation, it doesn’t really matter to you if prices are up 5 percent in your area for the same period. In short, think local.

As a seller, trying to time the real estate market can be a catch-22. Yes, you want to sell at the top of the market to maximize your profit, but there is often a subtle problem with this approach. Once you sell, you are probably going to want to buy another home to live in immediately! If you sell at the top of the market, you are also going to buy at the top of the market. In short, it tends to be wash transaction. You could rent for a bit until prices drop, but most people move home to home as quickly as possible. This makes pricing trends pretty irrelevant.

At the end of the day, trying to time the real estate market is a futile gesture. You can do so in a general way, but you will never buy at the absolute bottom of the market or sell at the absolute top. Real estate has always appreciated over time, so focus on location and don’t get too caught up in pricing trends.

We hear about the subprime mortgage crisis daily, but are you too embarrassed to admit you don’t understand what the fuss is all about? What exactly is this predicament the nation finds itself in? How did this debacle arise, and does it affect you? To answer these questions, let’s start at the beginning…

Understanding Mortgage Lending

Traditionally, mortgages were financed by banks. This meant that a bank was limited in its lending based on the deposits they received from their customers.

Recent changes to this model, however, paved the way for the current situation to arise. Banks moved to a new lending model in which the mortgages they held were sold to the bond markets. This freed banks from lending based solely on their customer deposits.

The boon to this new model was that more money was available to help people buy homes. The downside, unfortunately, was that banks no longer had as much pressure to verify that the mortgages they issued were solid. Knowing that the mortgages they created would eventually be sold, banks took on riskier loans than would have been prudent in the more traditional lending era.

The Mortgage Bond Market

Until recently, the mortgage bond market was heavily dominated by government-sponsored agencies such as Freddie Mac. Since 2002, however, the private sector asserted itself in this market with a vengeance.

With new mortgage vehicles such as jumbo loans, and sub-prime loans to borrowers with poor credit histories and/or weak documentation of income who were rejected by prime lenders like Freddie Mac, the private sector significantly increased its role in the mortgage bond market.

The rise of private sector participation catapulted the mortgage bond market to a worth of $6 trillion, making it the largest part of the $27 trillion bond market. The mortgage bond market is now even bigger than the Treasury bond market.

Foreclosures Emerge

Many homeowners were lured by brokers selling subprime mortgages who explained that the equity in homes could be turned into cash by refinancing. What brokers failed to explain in many cases was that the mortgage interest rates would double after 2 years.

A wave of foreclosures began appearing, first in inner-city areas, then across the entire country, starting in 2005.

By that point, 20% of all mortgages were subprime. They were especially popular among recent immigrants in the competitive housing markets in New York City, Arizona, Nevada, Washington, D.C. suburbs, and Southern California.

Consequences

Foreclosures are predicted to rise over the next two years as many sub-prime mortgages fall outside of their initial 2-year period, causing interest rates to become variable and, in many cases, double. It is estimated that as many as 2.4 million homeowners are in danger of foreclosure because of subprime loans.

The dramatic rise in foreclosures has had such a strong impact on the price of homes that we now see the first national decline in housing prices since the 1930s. A glut of 4 million unsold homes is depressing prices, forcing builders to lower prices to rid themselves of remaining inventory.

The building industry, comprising 15% of the economy, is expected to halve its output, causing a loss of over one million jobs. Related industries such as manufacturers of durable goods, e.g. washing machines, home improvement stores, furniture makers, may also take a hit.

Banks and the bond market are also feeling the crunch. Banks have already lost $60 billion, and bondholders (such as pension funds) who have bought subprime mortgage bonds have seen a sharp fall in value of those instruments. Estimates of the total financial loss for these institutions run as high as $450 billion.

Since lenders have suffered badly, they are more stringent with any new loans they make, resulting in a tightening credit supply for consumers. Mortgages, especially non-traditional ones such as subprime and jumbo loans, are now more difficult to obtain.

Buying and Selling Real Estate During the Crisis

The crisis has reached historic levels. President Bush signed The Mortgage Forgiveness Debt Relief Act of 2007, Congress has pushed through tax rebates, and the Fed has lowered interest rates sharply all in response to the weakening of the economy caused in large part by the subprime mortgage crisis.

In these unsure economic times, acquiring the services of a qualified real estate professional to navigate your local real estate market is more important than ever. Regardless of whether foreclosures have increased in your neighborhood, the psychological effects of the subprime debacle have been felt everywhere. With the help of a realtor, however, you can determine the best strategy for buying or selling a property so that you not only survive the current real estate market situation but perhaps even profit in spite of it.

You don’t get what you deserve – you get what you negotiate for.

If you’ve spent some time on homekeys.net, you probably noticed we generally don’t carry a torch for tradition or conventional wisdom. Having said that, the well-worn cliché above still holds true, especially in real estate transactions.

Many buyers and sellers put in countless hours carefully searching properties or preparing their homes for sale, only to see their sweet deals vanish at the negotiating table. Even if you’re not an experienced negotiator, there are steps you can take to improve results whether you’re buying or selling property. Negotiation doesn’t need to be a confrontational process if you set priorities, plan ahead and stay focused on issues, not personalities.

By far the largest expense related to traditional real estate transactions is the agent/brokers’ commission, and independent buyers and sellers should take advantage of this fact. Without the “overhead” of a 5-6 percent commission, both buyer and seller have a little more flexibility to come to an agreement that’s acceptable to both parties. Here are some negotiation tips for independent buyers and sellers.

Seller negotiating tips:

Set realistic priorities before you start.

When selling, be sure to outline realistic goals before negotiations begin. If you’ve decided that you need to sell your home for at least $250,000, expect to have very different negotiations than if your goal is to sell within 30 days. If money is your primary concern, be prepared to turn down some offers as you wait for the right buyer. If time is more important to you than money, be sure to include some flexibility in your asking price.

Ultimately, the market sets the price.

Set your price too high and your house may sit on the market, becoming less attractive to buyers (some sources estimate a monthly decline of 1.5 percent). Price too low and you’ve got less room to negotiate and may be leaving money on the table. Homekeys.net Subscribers can quickly obtain an objective estimate of property value using our online valuation tool before listing. Another option is to hire a professional property appraiser prior to listing. You may find the cost of either option to be modest compared to making an expensive mistake in your selling price.

Take inventory and take advantage.

Typically, property sales include anything that’s installed or built in to the home. If you’ve got appliances, furniture or fixtures you’re willing to part with, you may be able to entice prospective buyers by including them in the deal. Would buyers be interested in your BBQ grill or pool equipment? It can’t hurt to ask.

Buyer negotiating tips:

Clean up your credit

A great way to strengthen your case as a buyer is to demonstrate excellent credit. The time to check credit is well before negotiations begin so you can square away problems. Many credit issues are not difficult to fix and can be straightened out fairly quickly. Here’s how to check your credit.

Get pre-approved, not just pre-qualified

Pre-approval is another way to flex your buyer muscles because it lets you demonstrate to a prospective seller that your lender is prepared to give you a loan. Many sellers will choose a lower offer from a pre-approved buyer over a higher one from one who hasn’t been pre-approved. Pre-approval is free and can prevent that worst-of-all situation where a buyer successfully negotiates the purchase of his or her dream home and then cannot complete the purchase when financing falls through. Get pre-approved today.

Look for areas other than price.

Even though independent sellers can avoid some or all commission costs, there are still other fees that might apply: property and termite inspections, escrow or attorney’s fees, a title search, insurance costs and applicable taxes. Even if sellers don’t offer much flexibility on asking price, they may be more willing to make a deal with buyers who offer to share the costs of necessary repairs or transaction expenses.

Be prepared to compromise.

Approaching negotiations with a confrontational “win-at-all-costs” attitude is unlikely to yield positive results. Many professionals who teach negotiation skills to executives say a more realistic goal is to find a mutually beneficial solution in which both parties can “win.” This means being aware that you may have to sacrifice something to reach agreement at some point. In this case, be sure to identify in advance what you will and will not give up to ensure you’re happy with the deal in the long term.

Back up your offer

When offering to buy a property, you don’t have to explain how you arrived at a particular dollar amount. But you may fare better in negotiations if you have some objective basis, such as examining comparable sales. If you’re a Subscriber, try Homekeys’ ValueKey valuation tool for an objective estimate of value. If you’ve got a substantial down payment that you’re ready to put into escrow, now’s the time to mention it.

All participants in a negotiation should be prepared to walk away from unacceptable terms. You may be reluctant to give up after all the time you’ve invested in the buying or selling process, but emotionally tense negotiations can sometimes benefit from a cooling-off period. Walking away (or watching the other party walk away) may be uncomfortable, but it is always preferable to accepting terms you can’t live with.

Finally, remember that there’s often value in being direct. Don’t be afraid to ask questions to learn more about the other person’s concerns and objectives. “What do you need from me right now?” “What’s making you uncomfortable?” “It seems we are stuck on this particular issue. Can we set it aside for a moment and see if there is somewhere else we can gain agreement?” Questions like these can help signal your good faith and may help to restart negotiations that become bogged down in details.

If you’re a foreign national thinking about investing in the real estate market in Canada here’s a run down of the typical buying process you should expect to encounter together with a general explanation of mortgages available to assist with the purchase.

First things first though, you have to find your ideal property of course!

But let’s assume you’ve done that with the help of a good estate agent and you’re ready to move forward with an offer.

It’s important to know that from the outset the entire process surrounding the buying and selling of real estate in Canada is a regulated process. This means the process should follow the basic format as described below and that you will be protected throughout by the rules governing the process and the actions of those involved in it.

Once you find your dream home in Canada you make a financial offer to purchase to the vendor – probably via your agent – which your estate agent is legally bound to submit to the vendor whether or not it matches the asking price. Negotiations proceed until a purchase price is agreed upon between you and the vendor, at which point both parties sign the ‘Offer to Purchase’ – also known as ‘Agreement of Purchase & Sale’.

This is a preliminary contract and it is either ‘firm’ or ‘conditional’

A conditional preliminary contract usually contains terms relating to the successful securing of finance to buy, or to the satisfactory completion of building surveys etc., and it only becomes firm when all the conditions have been met.

If you are using a mortgage to purchase your home it is essential to have this noted as one of the terms, because if you fail to secure your mortgage and the contract falls through you will want your deposit back!

A firm preliminary contract is not subject to any terms or conditions, if it is broken by the purchaser they lose their deposit, if it is broken by the vendor they may be subject to a financial penalty.

Your deposit will be required when signing the Offer to Purchase, and the contract will contain your completion date.

When the completion date is reached and all conditions for the fulfilment of the contract have been met, the remainder of the purchase price together with all fees will be payable.

Monies are paid to the vendor via the solicitor or notaire handling the legalities of the sale. At this point both the purchaser and the vendor sign the ‘definitive contract’ which is called ‘Acte de Vente’ in Quebec.

If purchasing in Quebec this final part of the sale is managed by a notaire who in this case is a government official – s/he is responsible for the conveyancing and as a result s/he represents both the purchaser and the vendor…it therefore makes sense to employ your own legal representative in Canada to make sure your best interests are served and protected throughout the process.

Fees you will likely incur on top of mortgage arrangement fees, legal and survey fees include provincial fees and land transfer taxes.
Provincial fees are around CAD 100 depending on the province in which you’re purchasing, and they are charged for transferring the title of the property etc.
Land transfer taxes are again determined by each province and they are calculated as a set percentage of the purchase price.

If you are interested in securing a mortgage to fund your purchase it is interesting to note than depending on your country of origin and circumstances, there are a number of major financial institutions in Canada willing to lend to non-resident buyers.

The following is only meant to serve as a general guide to Canadian mortgages – it may not apply in every case.

Most Canadian mortgages are what’s known as “full status” – a full status loan is where complete checks are made on the borrower’s credit history and income.

To apply for such a mortgage you will have to have proof of income and outgoings. Such finance can be raised for the purchase of property, the renovation of real estate or for house construction purposes.

Generally a 35% deposit is required and the purchaser is also responsible for all legal fees involved in the arrangement and purchase process.
35% is just a guideline, some provinces require deposits of up to 50%, and in special circumstances a deposit lower than 35% may be acceptable.

Most mortgages are repayment over a maximum of 25 years with pay back due for completion before the purchaser’s 70th birthday.
Most lenders make life cover a further lending requirement.

When it comes to eligibility for a loan and size of a loan you need to know the following: -

- Eligibility is based on the applicant’s current ability to fulfil the financial terms of the loan, it is not based on any potential rental income the applicant may generate from the property he is hoping to purchase with the mortgage.

- Taking the applicant’s gross income into account, 40% should cover all existing outgoings and commitments AND the monthly repayments for the proposed new mortgage.

- If you’re self employed then your income will be taken as the average of your last three years’ net income.

- If you have existing rental and/or investment income this may be taken into consideration as well.

- Outgoings in this context are any current mortgage or rent you pay, any personal loans or credit card payments you have and any child support payments you have to make.

If your mortgage application is successful it will of course be secured on the property you’re buying in Canada and not on any property you currently hold in which ever country you are a resident.

The mortgage company carry out a valuation of the property you’re looking to buy to make sure it’s worth the purchase price, and you’ll probably end up paying any fees they incur making this valuation. Finance arrangement fees can sometimes be charged as well, they are usually 1% of the loan amount.

The money you borrow will be paid to the vendor via the solicitor or notaire responsible for the completion of the purchase contract and process.

That’s it in a nutshell!

As stated though, the entire real estate purchase process and application for a mortgage will depend on personal circumstances.