Posts Tagged ‘home buying’

What Buyers and Sellers Need To Know About the Appraisal Gap

Thursday, September 9th, 2021

Courtesy: Keeping Current Matters

It’s economy 101 – when supply is low and demand is high, prices naturally rise. That’s what’s happening in today’s housing market. Home prices are appreciating at near-historic rates, and that’s creating some challenges when it comes to home appraisals.

In recent months, it’s become increasingly common for an appraisal to come in below the contract price on the house. Shawn Telford, Chief Appraiser for CoreLogic, explains it like this:

Recently, we observed buyers paying prices above listing price and higher than the market data available to appraisers can support. This difference is known as ‘the appraisal gap . . . .’”

Why does an appraisal gap happen?

Basically, with the heightened buyer demand, purchasers are often willing to pay over asking to secure the home of their dreams. If you’ve ever toured a house you’ve fallen in love with, you understand. Once you start to picture yourself and your furniture in the rooms, you want to do everything you can to land the property, including putting in a high offer to try to beat out other would-be buyers.

When the appraiser comes in, they look at things a bit more objectively. Their job is to assess the inherent value of the home, so they’re going to study the facts. Dustin Harris, Appraiser Coach, drives this point home:

It’s important for everyone to understand that the appraiser’s job in the end is to remain that unbiased third party, to truly tell the client what that home is worth in the current market, regardless of what decisions have been made on the price side of things.”

In simple terms, while homebuyers may be willing to pay more, appraisers are there to assess the market value of the home. Their goal is to make sure the lender isn’t loaning more money than the home is worth. It’s objective, rather than emotional.

In a highly competitive market like today’s, having a discrepancy between the two numbers isn’t unusual. Here’s a look at the increasing rate of appraisal gaps, according to data from  CoreLogic (see graph below):What Buyers and Sellers Need To Know About the Appraisal Gap | Keeping Current Matters

What does this mean for you?

Ultimately, knowledge is power. The best thing you can do is understand an appraisal gap may impact your transaction if you’re buying or selling. If you do encounter an appraisal below your contract price, know that in today’s sellers’ market, the most common approach is for the seller to ask the buyer to make up the difference in price. Buyers, be prepared to bring extra money to the table if you really want the home.

Above all else, lean on your real estate agent. Whether you’re a buyer or seller, your trusted advisor is your ally if you come up against an appraisal gap. We’ll help you understand your options and handle any additional negotiations that need to happen.

Bottom Line

In today’s real estate market, it’s important to stay informed on the latest trends. Work with a real estate professional to help you navigate an appraisal gap to get the best possible outcome.

Your House Could Be the Oasis in an Inventory Desert

Tuesday, May 18th, 2021

Courtesy: Keeping Current Matters

Homebuyers are flooding the housing market right now to take advantage of record-low mortgage rates. Many have a sense of urgency to find a home soon since experts forecast a steady rise in both rates and home prices this year and next. As a result, buyer demand greatly outweighs the current housing supply. Here’s how the shortage of houses for sale sets yours up to be the oasis in an inventory desert.

According to the National Association of Realtors (NAR), today’s housing inventory sits at an incredibly low 2.1-month supply, far below the 6-month mark for a neutral market. Inventory of single-family homes a year ago was already very low, and as you can see in the graph below, this year’s levels are even lower:

Due to these market conditions, today’s buyers frequently enter fierce bidding wars while trying to purchase a home. This in turn drives up home prices and gives sellers incredible leverage in the negotiation process, two big wins if you’re going to sell your house this year.

Bottom Line

In such a hot market, it can feel as though the supply of homes has virtually dried up, leaving buyers to wander in an inventory desert. That’s why there’s never been a better time to sell. To a parched buyer needing to secure a home as soon as possible, your house could be a true oasis.

A Big Change in Real Estate

Monday, September 21st, 2015

You Can Always Count on Change

There are so many examples of how things have changed. If you were born in the 50’s you have seen so

many changes. If you are part of the Greatest Generation…WOW have you seen changes. Things that the

Millennials take for granted, Baby Boomers struggle to grasp. How many upgrades to my computer or

cell phone can I ignore before my system is totally obsolete or the computer gurus will refuse to work

on? The home I grew up in had two bedrooms and one bath, a small formal living and dining room and a

small eat in kitchen. There is no such thing as a typical home today. Anything from 2 bedrooms and one

bath; three bedrooms with 2 ½ baths; five bedrooms with 4 ½ baths. A great room or den, a media

room, a FROG (finished room over the garage which can be just an open space finished nicely with

carpet, or it can also have a large closet and a full bath of its own.) You can own the large yard that

surrounds your home, own no land because your property is defined as a condominium, townhome or

patio home. A carport, detached or attached garage which can be one, two, three or even four bays.

As you start to work with your REALTOR® and you want them to have a good understanding of what you

want in a home, defining it might not be as easy as you think. But work together and get started looking.

The best way to define what you want is to let your REALTOR® know what you don’t want. Things seem

to work out when we understand the picture you have in your mind of that perfect place to call home.

One big change that is occurring has nothing to do with style of home, how long it takes to find it, or

what the preferred color pallet is. It has to do with getting your financing lined up and the transactions

successfully closed and recorded. If you have bought a home before and you think you understand the

steps to this part of buying your home… Think again. As of August 1 ( this date may change in order to

allow lenders and lawyers to update the required software) of this year things are changing. If you are

familiar with the term HUD-1, it will now be called the Closing Disclosure Form. This form will contain

the final disclosure that was given to the borrower along with the HUD-1. The final rule has two options

pertaining to who prepares this form. The lender can prepare the form, or the lender and the settlement

agent can prepare it together. There will also be a 3 day rule…A WHAT? This new rule says that the

closing disclosure must be given to the borrower 3 days before closing. There might also be a 3 day

delay if certain changes have to be made, sending the documents back to the underwriter. Those

changes fall into the following categories;

  • Changes to the APR (annual percentage rate) above 1/8 of a percent of the loan;
  • Changing the loan product;
  • Adding of a prepayment penalty to the loan.

 

Why all these changes? The reasons were established in the Truth and Lending Act and the Real Estate

Settlement Procedures Act; To improve consumer understanding of risk factors, overall costs and

monthly payments; To help the consumer realize that they should compare the different loan products

that are available to them and to avoid costly surprises at the closing table. These new rules apply to

most mortgages EXCEPT Home Equity lines of credit, Reverse Mortgages and Mortgages secured by a

mobile home.

 

As the consumer, you would be well advised to start the conversation early on with your real estate

team. Your REALTOR® will be educated on these changes as will the lender and the closing attorney.

The lender and the closing attorney are on the front lines of these changes. My personal advice to you if you

are purchasing a home after August 1st is to stay calm if faced with a delays. It is no one’s fault. We are

all facing a learning curve and we are doing our best to understand any impact these new rules will have

on our clients. Your REALTOR®, Lender and Attorney are working hard to best represent your needs.

Buying and selling real property, especially your primary residence, can be an emotional roller coaster

ride at times. Make sure that you are comfortable with the members of your team. Ask questions. And

remember that delays are normal. Prepare for plan B, if a short delay should occur. Your team members

can help you understand the delay and then help you to manage the situation.

By: Patrice Willetts

 

4 Signals it Might Be Time to Buy vs. Rent Your Home

Thursday, April 28th, 2011

Historic HouseTo buy vs. rent

What used to be a given – that you would buy a home as soon as you could afford to – has become an agonizing conundrum for many a would-be home buyer, in the face of the housing market’s big bust and super-slow recovery. Low prices seem to create a wide-open window of opportunity, but they also create the concern that prices will keep falling after closing. And that Catch-22 has hundreds of thousands of buyers-to-be stuck on the fence.

Fortunately, there are handful of life, mortgage and local market signals which indicate that the time *might* be right to hop – scratch that – leap off the fence and into homeownership:
Mortgage rates are going up. Home prices have been low for the last several years, and in fact are currently looking like they’re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been low – this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon. While prices don’t look like they’ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a long time to come. And I mean a very long time – in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a long, long time. Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.

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Real Estate 101 – What You Should Know

Wednesday, April 27th, 2011

1. Don’t buy if you can’t stay put.

If you can’t commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you’ll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

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