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Tips Give Buyers the Edge Over Multiple Bidders

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | June 8th, 2012

In many parts of the country, and in most price ranges, the best properties are suddenly piling up offers from multiple bidders who know a good thing when they see one. But sometimes the highest offer isn't the one that's accepted.

Here, courtesy of dozens of real estate professionals across the country, is a cornucopia of creative tactics that could help you win the day when you can't go any higher on price.

-- No strings attached: Make your offer as clean as possible by removing every contingency you can live without. Line up your financing in advance so the sale won't be dependent on securing a mortgage. Conditioning the deal on the sale of your current house is the kiss of death.

If you feel confident enough, you can even waive the appraisal contingency. But realize that without that protection, if the valuation comes in low, you'll have to make up the difference between the agreed-upon selling price and the appraised value.

Agents have differing opinions on waiving the inspection clause. Some think it's OK to go commando, but others say it is too dangerous.

If you want an inspection, line up your inspector in advance and offer to get it done fast -- say, in five days instead of the usual 10. That way, says Jonathan Osman of Keller Williams Realty in Charlotte, N.C., if there is a problem that kills your deal, it will be discovered soon enough that the seller can accept another offer.

Also, be sure all the required documents, filled out nicely with no erasures, are submitted with your initial offer. "No mistakes or weird language," advises Steve Crossland of Crossland Real Estate in Austin, Texas. "Make your offer acceptable and ready to sign."

-- As-is condition: Offer to take the place as is. You can still have it inspected and cancel the deal if the exam uncovers something you find unacceptable. But once the inspection period expires, with an as-is clause, the place is yours.

-- Speedy closing: Some sellers want out as soon as humanly possible, so offer to close quickly. One winning deal offered to settle within 24 hours. Of course, that wasn't possible; it takes several days to prepare the closing papers. But the offer to settle the next day told the seller the buyer was ready to go.

A quick close "is worth money and peace of mind" to many sellers, says Linda Walters of Sage Realty in Wayne, Pa. Adds Ed Corbett of Keller Williams Realty in Atlanta: "Lengthy contract periods tend to make sellers nervous since their period of risk is longer."

-- Going long: Some sellers might have a much longer time horizon. So instead of a quick deal, offer to hold off the closing for 90 days instead of the usual 30 or 45. "If you can afford to be flexible on closing dates, that can be a great asset," advises Debbie Battista of Domus Realtors in North Haven, Conn.

-- The personal touch: Write a heartfelt letter telling the seller who you are, why you love the property and how you will cherish it as your own. Write it by hand, and include a photo of your family.

Corny? You bet, but it works. "Sellers want to know that the buyers will love the home as much as they have, and that their efforts to maintain it are appreciated," says Susan Neal of Century 21 Noel David Realty in Fair Oaks, Calif. "I've seen sellers turn down a higher offer to leave their homes in good hands."

-- Face to face: Some agents want the buyer and seller to meet, to get to know each other. At the very least, your agent should present your offer to the buyer directly rather than just handing it over to the seller's agent.

"It's my job to make the seller fall in love with my buyer," says Diane Hughes of the Higgins Group Realtors in Bedford, Mass. "It's a people business," agrees Dorene Slavitz of the Real Estate Group in Culver City, Calif. "If the owners like your client, that can have a positive effect upon their view of your offer."

-- Timing is everything: Sometimes the earliest offer wins the day, especially with anxious sellers who want out quickly with no muss, no fuss.

Kevin Kieffer, a Keller Williams agent in Danville, Calif., likes to submit his offers midweek to beat the competition that shows up on the weekend. Barry and Serene Sulpor of Shorewood Realtors in Manhattan Beach, Calif., work the realty grapevine, and when they hear of a place that might be coming on the market, they quickly contact the listing agent, have their client preview the place and, if they like it, enter a bid.

-- Think big: A typical earnest money deposit is 1 percent of the purchase price, so offer more. This gets the seller's attention, tells him you have the financial wherewithal to follow through and shows him you're serious.

If you really, really want the place, Mark Ruff, a Keller Williams agent in Studio City, Calif., suggests offering to make your deposit nonrefundable -- but applicable to the purchase price -- after the physical inspection period expires.

-- Ducks in a row: It should go without saying that you should be preapproved for financing. Many agents advise their clients to attach a copy of their approval letters to their offers. Some even suggest including bank statements or other proof that you have the funds you'll need to close.

Debra Kroon of Yosemite West Real Estate in Oakhurst, Calif., suggests buyers pick a lender with a reputation for delivering. "A preapproval letter from a lender that the listing agent can vouch for as being reliable will have more impact than one from an unreliable lender or a lender unknown to the listing agent," Kroon says.

Greg Kilroy of Keller Williams Paradise Valley in Scottsdale, Ariz., asks the buyer's lender to call the listing agent "to give him a warm feeling" about his client's ability to obtain funding.

-- Back at ya: To make their move less stressful, offer to allow the sellers to stay on after the close for as long as they need. You can charge them rent, based perhaps on a percentage of your house payment. If you are really feeling magnanimous, let them stay free to clean up loose ends for, what, 30 days?

-- Adoption: If the seller has a pet that he can't take with him, offer to take the pet as well as the house. Ann Wilkins of East Bay Sotheby's International Realty in Oakland, Calif., reports that one of her clients once agreed to adopt chickens as part of the deal. Similarly, Ralph Gorgoglione of California Real Estate in Los Angeles suggests taking over or buying personal property such as a piano that would be too difficult or costly for the seller to move. And Kathryn Copeland of Coldwell Banker Residential in Winter Park, Fla., suggests that offering to keep on gardeners or longtime housekeepers who might otherwise be displaced might tip the scales in your favor.

-- Pay to play: Jim Mellen of RE/MAX Peninsula in Williamsburg, Va., had a client offer to pay some of the seller's moving expenses. A client of Alex Cortez at Island Sotheby's International in Maui offered to allow the seller to come back and use his former vacation property at predetermined times every year.

-- Hang in there: If your contract isn't accepted, ask to remain as a backup in case the other deal falls through, says Christy Walker of RE/MAX Signature in Phoenix, who notes that for one reason or another, more than one in every four contracts fail to close in her market.

Seventeen times last year, Charlotte agent Osman "sold" one of his listings two or more times. "You never know," he says. "The buyer could walk, get divorced mid-contract, lose his job, misstate his assets or income, or lose interest."

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'Good Faith' Is Sometimes Missing From Closing Estimates There's Nothing More Irritating for a Homebuyer Than to Be Told at the Settlement Table That He Needs More Cash -- Sometimes a Lot More Cash -- to Close the Deal Than He Thought.

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | June 1st, 2012

The good faith estimate (GFE) of closing costs that lenders are required by law to give borrowers within three days of their mortgage application is supposed to put a stop to that sort of thing. But a survey taken earlier this year shows the rules don't always work as they should.

Lawmakers already recognize that, which is why regulators were directed under the Dodd-Frank Wall Street Reform and Consumer Protection Act to revamp the GFE, as well as the HUD-1 settlement sheet borrowers receive at closing.

That's a good thing, because the survey of 205 closing agents by the American Land Title Association found that although GFE accuracy is higher than it used to be, it still leaves a lot to be desired.

The poll isn't statistically valid. Nevertheless, title professionals are in a unique position to testify on the topic, because they're the ones who orchestrate closings. And it shines a light on several practices that violate Section 5 of the Real Estate Settlement Procedures Act.

Under that law, lenders' estimates for services rendered by third parties such as appraisers and surveyors are supposed to be within 10 percent of the final figures. If the charges listed on the HUD-1 exceed the tolerance, lenders are required to eat the difference.

But nearly three out of every four closing agents who responded to the survey said lenders sometimes pad their initial estimates so they can be certain they are within the 10 percent limit at closing.

Only a quarter of the respondents said they never see items on the GFE that are not charged at closing. But another 25 percent said they see the ruse more often than not. The other half also sees the practice, but not that often.

According to Michelle Korsmo, ALTA chief executive officer, "overquoting" violates the letter of the law, if not the law itself, which is intended to empower consumers to protect themselves from being gouged at the closing table. Even if borrowers are never charged for things like document preparation and warehouse fees, giving false information prevents consumers from making accurate comparisons when they shop for closing services.

Another troubling finding: More than half the respondents said they've been pressured to cut their fees to help lenders avoid tolerance violations at closing.

Just as real estate agents don't like being forced to cut their commissions to make deals work, closing agents don't like being told to slice their fees. But they don't have a lot of power to push back against the companies that help them find clients, Korsmo says.

Unfortunately, the survey also found, despite the government's and consumer advocates' best efforts, people still don't shop. A whopping 75 percent of the respondents said they don't think people look for the best or least-expensive title and escrow services.

Does that mean borrowers are lazy, or just don't care about saving a few bucks on what may be the largest investment they will ever make?

"No" to both questions, says Korsmo, who believes that by the time buyers pick a house, haggle over the price and secure financing, they are too emotionally drained to do any more legwork.

"When people get to the process of managing the transaction, they tend to disengage and rely on the advice of their agent or lender," the title industry executive says. "Besides, they don't really have an idea of what goes on; it's all back-office work."

Lenders often don't make it easier on borrowers. Besides high-balling their estimates, according to the survey, some flood their clients with a raft of GFEs.

Only one in four borrowers receives just one good faith estimate, according to the ALTA survey. The rest get two or more. Nearly 12 percent have four or five, and a handful sometimes have as many as seven.

Lenders are allowed to revise an estimate if there is a change in the borrower's circumstances. If, for example, your income is significantly less than stated on the application, you may be switched into a different loan program, which can lead to changes in the ancillary closing charges.

In some states, whether or not the borrower opts for owner's title insurance can throw off the GFE. If the borrower declines to buy his own policy, the rate on the lender's policy, which the borrower is required to purchase, can rise.

But still, multiple GFEs only obfuscate the situation. "The intent (of the law) is to give the GFE only once," Korsmo says. Multiple estimates "is not at all what the law intended."

Another thing: Two-thirds of the closing agents in the ALTA survey said the list of settlement service providers that lenders are supposed to attach to the GFE so borrowers can shop around is missing in action.

Then again, more than half the borrowers don't bring their GFEs with them to the closing table so they can be sure they are not paying more than what they were told initially. And 45 percent said they see the document less than half the time.

So what's the point of the GFE anyway, if consumers aren't going to use it?

Hopefully, new forms being developed by the Consumer Financial Protection Bureau -- an "initial loan estimate" will replace the GFE, and a "settlement disclosure" will replace the HUD-1, according to my colleague Brian Collins at SourceMedia -- will put an end once and for all to these kinds of lender shenanigans and make it simpler for borrowers to comparison-shop.

Stay tuned. Under Dodd-Frank, the consumer protection board must release its draft forms and regulations for public comment by July 21.

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Take Survey on Prices With a Grain of Salt

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | May 25th, 2012

House prices rose an average of nearly 10 percent in the first quarter, according to a government survey covering the country's largest metropolitan areas.

An anomaly? Absolutely. The average was skewed higher by some absurd numbers in several markets. There's no way the selling price of new and used homes jumped almost 60 percent in Detroit, or nearly 50 percent in Miami, in just one year!

At the same time, the figures reported for the first quarter as part of the monthly interest rate survey published by the Federal Housing Finance Agency shouldn't be dismissed out-of-hand. They are a signal that the housing market finally may be waking up.

Of course, a single three-month period does not make for a trend. But the fact that prices were higher in 23 of the 32 areas covered in the report -- 13 of them by double digits -- shows that buyers are starting to take advantage of record low loan rates.

That the survey registered such strong gains also indicates that houses in the upper price brackets are starting to move again in many places, in many cases at a faster clip than those in the lower ranges.

Those are repeat buyers, homeowners who must sell their current residences before they can move up the ladder. They are the key to a smoothly running housing market: As they buy new homes, they sell their old homes, which means folks below them on the affordability scale can start buying, too.

Take that all the way down to the ladder's first rung, and it is a signal that first-time buyers, the rookies who have never owned before, are finding some wonderful opportunities that haven't presented themselves in ages.

Maybe sellers are finally getting real about the values of their homes. Maybe the inventory of places for sale has been winnowed down so much that buyers are fighting over the few good houses still left on the market. Or possibly both buyers and sellers are sensing a bottom and are pulling their respective triggers.

The important take-away from this or any other indicator of housing prices is not to be fooled by rip-and-read headlines and news reports that mention only national or regional price trends. Those kinds of reports can do you in.

Whether you are a buyer or seller, you need to find out what's going on in your region, your town, your community, maybe even your block.

You want to know the average number of days houses are on the market before they sell, which will tell you the velocity of your particular market. If houses are moving faster than normal, buyers might want to jump in more quickly.

You'll also want to know how many houses are for sale in your price range. If it is more than usual, there are probably still bargains to be had. But if the unsold inventory is low, the best deals -- and the best houses -- are probably already gone, and prices will start moving up, if they haven't already. Even for the dogs.

To get an idea which way the market is trending in your neck of the woods, you can start right here with the latest FHFA figures. They show that the average selling price of both new and used homes rose 9.7 percent in the first quarter of 2012.

Drilling down, the survey found that prices were up in 23 of the largest metropolitan statistical areas and down in nine. But again, things may be different in your submarket, so find a real estate professional who can read the key housing tea leaves to paint a more exact picture. In the meantime, look at the FHFA's survey, which is more market-specific than just about any other index published for general consumption. Others delve deeper, but they are too detailed for national news outlets and often too tough to find for local reporters.

Of the nine markets that registered falling prices, three of those declines were double-digit. But drops such as nearly 17 percent in Pittsburgh, almost 16 percent in Cincinnati and 10 percent in Cleveland could be aberrations, too.

Most likely, the survey is showing a price correction from previous periods when there were an unusually high number of sales in the higher price ranges. Now, prices are falling back to normal. These are generally the less expensive of the big metro areas, so it's also possible there were an inordinate number of lower-price deals in the January-March period.

Likewise, such ungodly price gains of 59 percent in Detroit, 50 percent in Miami, 46 percent in Chicago, 41 percent in Kansas City and 32 percent in Orlando also have to be taken with a grain of sawdust. Year-over-year gains like those didn't even occur at the height of the housing boom.

As usual, San Francisco is the nation's most expensive city for housing. The average in the Bay Area was $636,000 in the first quarter, an increase of 9.2 percent from $582,300 in the same period last year.

California's two other big markets -- San Diego and Los Angeles – rank second and third on the Top 10 list. In San Diego, the average rose 3.7 percent, from $506,400 to $525,100, while in LA, it was up 6.4 percent, from $481,000 to $511,900.

In something of a surprise, Seattle now ranks as the nation's fourth most expensive housing market at $473,000, a gain of 18.1 percent from $400,500 a year ago.

Washington rounds out the top five at $445,800, a decline of 3.9 percent from $464,000.

No. 6 Boston and No. 7 New York also reported declines. In Beantown, the dip was a slight 0.8 percent, from $438,700 to $435,300. But in the Big Apple, the drop was a more significant 9.8 percent, from $475,900 to $429,300.

Miami is the only other market above the $400,000 benchmark, but that's only because the average there rocketed 49.8 percent, from $279,600 to $418,800.

Rounding out the Top 10 are Denver and Virginia Beach. The average in the Mile High City is $385,400, a 19 percent jump from $323,800 12 months ago, while the average in the sea-level Virginia town rose 7.1 percent, from $348,600 to $373,300.

The cheapest big-city market? Right now, it's Pittsburgh, where the average dropped 16.9 percent, from $227,700 a year ago to $189,200 in this year's first quarter.

AVERAGE SALES PRICES: First Quarter

(New and Used Homes in Thousands of Dollars)

City 2011 2012 Percentage Change

Atlanta GA $304.3 $325.9 7.1

Boston-Worcester MA 438.7 435.3 (-0.8)

Chicago IL-Gary IN 201.2 293.8 46.0

Cincinnati OH 289.7 244.3 (-15.7)

Cleveland-Akron OH 225.5 203.2 (-10.0)

Columbus OH 215.4 262.4 21.8

Dallas-Fort Worth TX 302.6 330.2 9.1

Denver-Boulder CO 323.8 385.4 19.0

Detroit-Ann Arbor MI 168.3 267.9 59.2 Houston-Galveston TX 297.6 367.7 23.6

Indianapolis IN 231.5 260.9 12.7

Kansas City MO-KS 224.8 317.1 41.1

Las Vegas NV 219.2 221.1 0.9

Los Angeles-Riverside CA 481.0 511.9 6.4

Miami-Fort Lauderdale FL 279.6 418.8 49.8

Milwaukee-Racine WI 230.7 300.8 30.4

Minneapolis-St. Paul MN 273.3 247.1 (-9.6)

New York-Long Island NY 475.9 429.3 (-9.8)

Orlando FL 214.4 283.6 32.3

Philadelphia PA-Wilmington DE 306.3 351.1 14.6

Phoenix-Mesa AZ 254.4 285.6 12.3

Pittsburgh PA 227.7 189.2 (-16.9)

Portland-Salem OR 345.1 366.2 6.1

Sacramento CA 297.2 325.7 9.6

San Antonio TX 208.0 201.1 (-3.3)

San Diego CA 506.4 525.1 3.7

San Francisco-Oakland-San Jose CA 582.3 636.0 9.2

Seattle-Tacoma WA 400.5 473.0 18.1

St. Louis MO-IL 253.3 275.7 8.8

Tampa-St. Petersburg FL 250.6 244.3 (-2.5)

Virginia Beach-Norfolk VA 348.6 373.3 7.1

Washington DC-Baltimore MD 464.0 445.8 (-3.9)

U.S. Average (32 Cities) $307.6 $337.5 9.7

Source: Federal Housing Finance Agency

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