Something for nothing????

One of the biggest pet peeves in my life is the famous $10 off your next purchase of $50 coupon. It is a big fat scam. All I can think of when I see this is, "I get to spend $40 in order to utilize the $10 worth of savings." Now, if I am on my way to Best Buy to buy a new iPod...this is a good deal. But, this is just not the case. Usually it comes from a store that you just bought something from (notice the past tense...YOU JUST BOUGHT SOMETHING) and it is good on your next purchase...oh, and don't forget it is only valid for 20 days...or some other artificial way of tricking us to spend money on something we don't need...so we can save 20%.

Zip Realty's rebate does not work this way at all. In fact, it only has 2 requirements...1.) you buy a house, and 2.) you buy it using a Zip Realty agent. There are 2 vital pieces of information that I want you to get out of this...1.) how the Zip Realty rebate works, and 2.) who pays real estate commissions.

Alright, the rebate is simple. Zip credits people who buy homes through Zip 20% of the commissions paid. This is different from the above situation because I happen to believe that I am a pretty decent salesman, but I have never been able to convince someone to buy a house. It is just not something that people jump into with a lot of thought. My point is, if you are not interested in buying a house then the lure of a rebate has no attraction to you. However, if you are, Zip pays you to use us. Therefore, let me illustrate how the rebate works. You want to buy a house for $300,000. The commissions that are to be paid to the selling broker are 3%.

$300,000 x 3% = $9,000 in commissions
$9,000 x 20% = $1,800 in rebate

You can either have the 20% assigned to you straight out of escrow. Or, you can have Zip mail you a check after the close of escrow. If you chose a check, it can take up to 30 days for it to be mailed.

Now for the best part. In most real estate transactions the commission is paid by the seller. So, the seller pays the commission. Zip Realty passes a portion of it along to the buyer. So unlike the above mentioned coupon you literally get something for nothing. Because remember...you were going to buy a house anyway!

Having said all of this...why would you buy a home from anyone besides Zip Realty?

How hot is the market?

The sun is blazing as we arrive at our first home to tour. It is a spring day in Southern California, it feels like we are in the middle of summer. I glance down on my dashboard and catch a glimpse of the outside temp...106 degrees. My client climbs out of their truck, "I bet it is over a 100 degrees today," she says. We are about to tour our first home of the day and it is already after 2pm...with 10 more to follow. My day is really busy, with a 4:30pm and a 7pm appointment still ahead of me, so there is a little spring in my step. All of the homes on our list today are bank owned.

The first home is beat up. The carpeting is destroyed, the paint leaves a little to be desired, the house is covered in dirt because of the broken out windows. There is an empty pool in the backyard and the back fence is falling down. Not a great start to the day. Second and third home...more of the same. By the time we peer into our fourth home, we have no idea what to expect. The lot is huge. The house is a lot bigger than the previous homes. There is a lot of potential. "This one goes down as a yes," my client says as we depart for the next house.

We are standing across the street from the last house. She is huge...2,500 square feet. But, as usual with a bank repo...she is in need of some love (new carpet - the owners ripped most of it out, new paint, holes in a lot of the walls, etc...). "We want to offer on 3 of the homes that we have seen today," my client says as we are about to part company. Last week we found a home that they liked...but it was gone before we could get our offer submitted. They understand the sting of being so close. As do scores of my other clients. A few of them have resorted to writing offers in bulk, and hoping that one sticks.

I hear all the news about tighter lending restrictions...I hear all of the news about more bank repos coming on the market...I hear all of the news about the doom and gloom of the economy. BUT, in my little corner of the world...the real estate market is as hot as that Southern California sun!

Short Sales pt. 2

I was on the phone with a listing agent yesterday. He told me, "I am still collecting offers," and he said, "I am going to send you a counter offer." I have heard this a million times before. A listing agent doing his job in collecting the absolute best offer he can for is client. However, this home in particular is a short sale...a wonderful property in Southern California...just a shade under 2,000 sf, with a nice swimming pool...a swimming pool that we have never seen because the listing agent will not allow us to gain access to the home because tenants reside in the home. My clients love the home. So, we wait...we hope for the best.

The problem is that the listing agent does not have a good grasp of the short sale process. He is working under a set of rules that just don't apply right now. When the home is a short sale, the home owner does not make the ultimate selling decision. This decision is made by the bank. The bank gathers all of the information and then makes a decision (which they send back to the listing agent for selecting the offer).

The process of a short sale:

1.) List the property
2.) Gather financial documents (to show financial hardship)
3.) Accept an offer
4.) Submit "short sale package" (#2 & #3)
5.) Decision about financial hardship (2-6 weeks)
6.) Decision about price (2-6 weeks)
a. Appraisal
b. BPOs
7.) Lender Approval

The listing agent should have submitted the offer to the bank so that #5 could be started. Instead, we are stuck in limbo...having waited weeks since submitting the offer...knowing that weeks of waiting lie ahead of us.

For now, my clients wait...I wait. Feeling somewhat paralyzed by the idea of getting the house that we want, but not knowing. There are a lot of land mines that we have to navigate in the coming weeks (2 approvals, inspections, tenants, etc...). Ultimately, we are waiting on a home that may not even be for sale.

The Rule of 72

The Rule of 72 is a fast and easy way to determine has fast your money will double. All you do is divide the number 72 by the interest rate that you project to earn. It will demonstrate that higher rates of return will double tremendously faster. Let me illustrate:

Years	4%	6%	12%
0	100,000	100,000	100,000
6			200,000
12		200,000	400,000
18	200,000		800,000
24		400,000	1,600,000
30			3,200,000
36	400,000	800,000	6,400,000

As you can see, 2% is very important when considering your investments. Just a note to consider when thinking about your investments…here are the statistical averages of the S&P 500.

Years Yield 1871-2005 9.40% 1926-2005 11.00% 1945-2005 11.60% 1980-2005 13.90%

Plug those numbers into the rule of 72 and you can see the power of investing properly. The moral of the story…you need to start saving today!!!

Zip Realty

Zip Realty combines the power of the internet and the service of a traditional Realtor (me). You have access to search the same homes other Realtors search, putting you in control of your home buying experience. Additionally, our website offers a wealth of information such as financial calculators, information on schools, and demographics. Having said all of that, Zip Realty, really does have an amazing website. We allow all homes onto our websites…not just home listed by Zip Realty. Also, our search engines are very powerful. You can include/exclude/etc short sales or fixers…and you can search either by home value or monthly payment. Please click on the Zip Realty logo to the left...and you can visit our site. IF YOU DO...PLEASE REGISTER AND SELECT ME AS YOUR REALTOR!!! I will do an amazing job helping you buy a home.

I will write more later on a HUGE benefit of Zip Realty!!!

Closing Costs

What are closing costs? This is a VERY common question that I am asked. And it is very quickly followed up with...how much are closing costs? Most of the time they will be less than 3% of the purchase price. The percentage might be higher, the lower the purchase price. Let me first describe closing costs...they are the costs associated with escrow.

Title Insurance: $1,000
Escrow fees: $500
Notary fees: $150
Misc fees: $500

This is not the end of the story...closing costs also include the fees associated with obtaining a mortgage. Typical fees for a mortgage are 1-1.5%...to the mortgage officer (this is also known as "origination fee"...or "broker fee"). The lender is also going to add fees. As you can see we are quickly approaching the 3%.

Lastly, pre-paids are part of closing costs. When you close a loan...you are required to pay interest for the rest of the month in which the loan funds (example...the loan funds on May 15th...31 days in May...you would owe pre-paid interest for 16 days...the actual cost depends on your interest rate). Also, the lender may require you to pay pre-paid insurance. And it is likely that you will be responsible for paying a portion of the years taxes.

When negotiating closing costs with your lender..the areas with the most wiggle room are the "mortgage fees". Title insurance and escrow fees are going to be mostly the same from company to company...however, a lot of mortgage officer's require a lot of other fees (like processing fees, etc...). The biggest area of negotiating is the "origination" or " broker" fees.

Financial Health Quiz...

1. What % of your income do you save each month?
a. 10%
b. less than 10%
c. none

2. How many times during the past 6 months have you paid a bill late?
a. 0
b. 1-5
c. 6+

3. How many credit/store cards do you have?
a. 0-3
b. 4-6
c. 7+

4. Without your main source of income, how long can you meet your financial obligations?
a. 3 months
b. 1-2 months
c. less than 1

5. How would you come up with cash quickly?
a. savings
b. credit
c. establish new credit/borrow from family

6. How often do you budget?
a. Always
b. Sometimes
c. Never

7. Most purchases are...
a. planned and saved for
b. needs based
c. spontaneous

8. When you think about finances you are...
a. completely at ease
b. moderately concerned
c. very concerned

a = 1
b = 2
c = 3

1-10 points = you are doing great
11-15 points = you are on track...need a little tweaking
16-21 points = you are in need of some help
21+ points = you need to call me ASAP!

Short Sales

Short sales are very hard to read, and are not always a good deal. Let me try to explain the process. In order to sell property as a "short sale"...the owner must "qualify". In order to "qualify", they (the owner) must submit documentation (bank statements, financial statements, tax returns, etc) proving that they can no longer afford their mortgage. A "short sale" is an attempt by the owner to sell the property short of foreclosure AND what they owe. In order to get the lender to look at the "short sale", they need to submit an offer from someone willing to purchase the property. Therefore, the primary motivation of the owner and the listing agent is to get the initial offer...NOT listing the property at market value. After the lender gets the initial offer (and the owner's financial statements), the lender orders an appraisal and BPOs (this is where the lender asks a few Realtors in the area how much the Realtor thinks the property is worth). This process takes 2-6 weeks...to just get an approval! After the approval, they must now accept an offer from a buyer. After they accept an offer, escrow is opened, which typically last 30 days.

Short sales are not necessarily a good deal because...1.) they are often listed below market value and banks are typically trying to sell the property for approximately market value, 2.) you are agreeing to a price on a property 10 weeks before closing the transaction. This can cause 2 problems, 1.) the buyers lender may not approve of the deal after that much time (interest rates may rise, loan programs may go away), 2.) the buyer is agreeing to a price on a property 10 weeks before it may close escrow (in a declining market the home may actually be worth significantly less before escrow closes).

The primary thing to be considered when making an offer on a short sale is the market value of the property NOT the list price.

I really want to buy a home...where do I start? pt. 3

The fun begins after the offer is accepted. In a normal environment...you have 17 days to remove all contingencies. Contingencies...

1.) home inspection
2.) home appraisal
3.) loan approval

The home inspection is a vital part of any home purchase. This is where an inspector comes out to the home and thoroughly inspects the property. He looks at the condition of the property (nothing cosmetic...i.e. carpet, paint, etc.). He is going to check the appliances, the utilities, and see if there are any other major items that he believes need to be further inspected.

The home appraisal is another inspection. However, the appraiser is inspecting the property compared to other properties...in an effort to assign a value to the property.

For both of these inspections...it is recommended to have a licensed inspector. Also, remember...most of the time these inspections are going to be paid for by the buyer. This means typically in the first 10 days of escrow...the buyer will be responsible for paying approximately $750.00. Here are some links to look into inspectors and appraisers...

http://www.ashi.org/
http://www.nachi.org/

http://www.appraisalinstitute.org/

I really want to buy a home...where do I start? pt. 2

3.) Write an offer. Writing an offer sounds a little easier than it is. I am not saying that it is difficult...but it is a tad more complex than calling the listing agent and saying, "we want to offer $300,000 for that house". Components of an offer:

A. Offer Price
B. Deposit
C. Financing
D. Closing Costs
E. Contingency Periods

The offer price should be based on something. This sounds reasonable...but a lot of people say, "I want to offer $275,000." To which I reply, "why?". Usually they have no reasoning behind their offer...it is just what they want to offer. I recommend relying on a REALTOR to help you determine the market value for a home...and then making an offer around the value.