Archive for the 'Buyers' Category
Should you buy now? Absolutely!
June 30th, 2008 categories: Buyers
There seems to be a tiny bit of buyer hesitation because some buyers don’t think the bottom’s here yet. If you’re a ready and willing and able buyer, but aren’t quite sure when to make your move, here are some important things to consider:
1. The cost of waiting. Interest rates are now beginning to creep up again. To show you how expensive even a 1-point interest rate can be, on a $200,000 loan, and increase from 6 to 7 percent costs an additional $131 per month and $47,340 over the life of the loan. On a $400,000 loan, the same increase costs buyers and additional $263 per month and $94,680 over the life of the loan.
2. There are bargains out there! The inventory is wonderful for buyers right now, and prices have come down considerably. If you were looking at a 2,000 square foot home before, it’s very likely you now could go into a 2,500 sq ft home for the same price range. Or, the opportunity may be there to get in a particular neighborhood that was unobtainable before.
3. Everyone can be creative! If there’s a problem going forward to buy the home you love, think creatively. For example: I had some buyers that were stuck in a lease for six more months. When I explained to the sellers agent the situation, she proposed (with the sellers permission) that the sellers buy out the lease. That was the magic that made it happen! The sellers got a full-price offer minus about $12,000 to cover the lease buyout, which shaved about 4 percent from the seller’ list price. Everyone was happy and everyone was able to move on. This is just one example sellers and buyers can help each other. Don’t be afraid to think outside of the box!
4. Market conditions can change quickly. In the Asheville area, the market slow down began about 2 years ago. This is a window of opportunity to buyers, and usually this kind of opportunity won’t last very long in this area. There can be a huge swing in interest rates at any point and even the smallest increase in rates can shut out many buyers. If you’re looking for a deal, and don’t think the bottom’s here yet, you just might miss the mark. I have always explained to my clients that real estate is like the stock market - when other people are sitting out, that’s the time the deals are happening, that’s the time to buy. Have you ever tried to time the stock market? It can’t be done.
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Don’t miss out on this Biltmore Lake home!
June 2nd, 2008 categories: Buyers
During my weekly trek in previewing new listings, I came upon this lovely home. It has a wonderful location, in a GREAT, historic Biltmore Lake neighborhood of Asheville. It has abundant character and I loved the brick exterior and high lot overlooking the lake. Inside I think will be a renovator’s dream. For example: Right outside the upstairs Master is a flat roof just begging to be turned into a patio that looks onto the lake, it’s the white area on the right of the house. It’s definitely livable in it’s present condition, but the kitchen and baths look like it’s been many years since they were updated. The Seller has owned this property for 40 years. The thought that came to my mind was that this was a diamond in the rough waiting to be discovered.
Built in 1929, it has approximately 2,312 heated square feet, 4 bedrooms, 2 baths and a detached 2-car garage. It is priced at $499,000 which is $76,000 below appraisal (per listing agent). Located off Sand Hill Road in Biltmore Lake. If you would like to see additional photo’s, need more info or simply want to go see it in person, call me and you can see all the details first-hand.
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Calling all Asheville Log Cabin Lovers!!
May 24th, 2008 categories: Buyers
Once a week I get together with a few of my Realtor friends out of the Asheville downtown office to view new listings. We’ve become smart about car-pooling together and minimizing the pain at the gas pumps! Generally, we visit anywhere from 5-10 listings and they’re usually in the North, South, East or Western locales so that we’re not zig-zaging all over the place. It’s a great way to actually see these homes in person and know first-hand the details my clients like to ask about.
The last one on the list for the day that we visited was a charming log cabin I just felt compelled to share with my readers. It was so “Mountain Asheville” and private that I could even see myself living there!
This property is located in the very desireable Cane Creek area and definitely not just a drive-by, it’s charm and uniqueness comes into play once you reach the front porch overlooking your private forest. It has two Master Bedroom suites plus a loft and space in the basement that could be an office or rec room. Is the fireplace great or what? Cathedral ceilings, jetted tub in the master bath. It has a very rustic appeal, yet it delivers all the modern features needed in todays home. The total square footage is approximately 1,945 and was built in 1993. All this on 6.24 wooded acres. You can’t even see who you’re nearest neighbor is from the house! Priced at $489,900.
If you would like to see all the details on this great home, you can go to the MLS Search feature here on my blogsite with MLS number 406134. If you would like to view this property in person, call me and we can go take a look.
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Do you know your “Alternatives” - Part 2
May 21st, 2008 categories: Buyers
Ok, so let’s go over your other choice of “Alternatives”, aptly named Alternative 2. If you haven’t bought or sold a property recently, this is a fairly new addition to the North Carolina Purchase and Sales contract. I’m a fan of this Alternative and I’ll tell you why, it’s short, sweet, uncomplicated and to the point. Frankly, this is the direction of the future with respect to inspections of properties. We may see Alternative 1 drop off from the P & S contract altogether in coming years. Here you are opting to do a property investigation with an Option to Terminate. The Buyer pays an Option fee to the Seller, the amount can vary depending on the property, a normal inspection time frame is stated (Time being of the Essence) and if for any reason the Buyer is disatisfied with the outcome of the inspection report, or even simply changes his mind, he can exercise his option to terminate the contract, and move on.
So what happens to the Option Fee? It automatically goes to the Seller, in fact, the check is made out and given directly to the Seller from the beginning. The Option Fee is not refundable! Why? because the Seller has taken his property off the market and allowed you access for any and all inspections you desire. Now, if the Buyer wants to move forward in purchasing the house, the Option Fee becomes a credit towards the purchase price. If the Buyer decides to terminate the contract, they must deliver written notice to the Seller within the Option Termination date (usually 10-20 days), otherwise it is deemed that the Buyer has accepted the property in its existing physical condition .
So, why would you choose this Alternative? For many reasons, some of which might be you have interest in more than one property, but aren’t quite sure about the condition of choice #1. Alternative 2 allows you to check things out and quickly move on to the next property if it doesn’t meet your expectations, without tying up thousands of dollars in a deposit that may take 30 days to get back. That’s the “bigee”, tying up your funds and have the perfect house get away because you’re waiting to get them back. If you have any questions or scenarios you’d like to run past me, I look forward to hearing from you . . .
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Do you know your “Alternatives”?
May 19th, 2008 categories: Buyers
Part 1 of 2
In the North Carolina Purchase and Sales agreement there are two sections of the contract on pages 5-7 named Alternative 1 (Sec 16.) and Alternative 2. What are they and what significance they hold is what I will be explaining in todays and Wednesdays postings.
Basically, Alternative 1 & Alternative 2 are primarily different ways on handling the necessary inspections and time frames associated with them.
Let’s talk about Alternative 1 first: Alternative 1 is mostly the way inspections have been handled for years. There is a “Repair Notice Date” that the Seller has the option of completing inspections and supply written notice to the Seller. Typically 10-14 days, but this isn’t written in stone. It “depends” on the circumstances surrounding the deal. Most Buyers opt to get this done as quickly as possible, and Sellers want it to be done as soon as possible to avoid keeping their house off the market any longer than they have to if the deal doesn’t work out.
Once the inspections have been done and notice given to the Seller for repairs (if there are any, and I don’t know of one house that has none!), the Seller must give a written response within a stated amount of days, usually 3-5 days - TIME BEING OF THE ESSENCE! These words are extremely important! If the Seller fails to respond within the stated time frame, it constitutes that the Seller has elected NOT to complete the necessary repairs. The Seller doesn’t always repair everything on the list the Buyer asks for, but the Seller still needs to respond on exactly what he’ll repair by the notice date, or it will be taken as he is refusing to make any repairs.
So, what happens if the Seller doesn’t respond, or states he’ll only repair a portion of the repairs? The Buyer has a few options:
a) The Buyer can elect to accept the property in its present condition.
b) Accepting the Seller’s offer to make repairs per Seller’s response.
c) Terminating the contract, in which case all earnest monies shall be refunded to the Buyer.
At this point, the Buyer must respond to the Seller - within 5 days of Seller’s response- in writing- their decision on how they want to proceed - TIME BEING OF THE ESSENCE! If the Buyer fails to provide this written decision within the 5 days, it constitutes the acceptance of the Sellers agreement to make repairs, or lack of agreement to make any repairs.
So, what does “Time being of the essence” mean? It means all parties must operate within the agreed upon dates, or there are potential repercussions.
Now, let’s go over the Cost of Repair Contingency. This section of Alternative 1 deals with the total cost of necessary repairs provided by estimates the buyer has obtained. This particular section has held some confusion on what the intent actually is. An amount is determined and filled in by the Buyer, and if a certain amount of repairs reaches or exceeds this amount, the Buyer can choose whether to accept the house and move forward, or terminate the contract and receive a refund of all their earnest money. Buyer must supply the Seller a written notice no later than 7 days following the Repair Notice Date - Time being of the essence. It does not mean that the Seller is obligated to make repairs up to that stated amount. If the Buyer chooses to decline the purchase of the house based on this amount, they are still responsible for the cost of all inspections done on that property.
So, in layman terms, if the Buyer has filled in an amount of $5,000 for the cost of repairs and the cost of repairs come to $5,001, he can terminate the contract if he is not comfortable with amount of repairs that need to be done to that house. It’s also the Buyers choice to go forward and purchase the property regardless of the repair amount. It all “depends” on the unique circumstances of each deal as to what direction the Buyer will take.
Check back this Wednesday for Part 2 - Alternative 2.
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Is the Fed rate cut really good news for mortgage rates?
May 5th, 2008 categories: Buyers
We’re all watching vigil over what the Fed will do, and this week there was another .25 percentage point reduction to 2%. The general consensus is that Fed rate cuts will automatically equate with a drop in mortgage rates, wrong my friend. Here is an excellent article that explains how this all works.
Why the Fed Rate cuts do not equal lower mortgage rates - by Barry Habib
The Federal Reserve has been on a rate cutting spree once more. Many mortgage applicants are calling their mortgage representative and expecting a lower interest rate. Others who have been waiting to refinance are puzzled as to why mortgage rates have not moved lower during the recent six Fed rate cuts. This is difficult to explain to consumers who have watched a 3.0% reduction by the Fed with very little benefit in mortgage rates.
Is a Fed rate cut realy good news for mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years while a rate set by the Fed can change from one day to another.
It is often said history repeats itself. And if history is any teacher, we can learn from what happened to mortgage rates the last time the Federal Reserve was in a rate-cutting cycle.
The last time the Fed was in a lengthy rate cutting cycle was back in 2001 from January 3, 2001 to December 11, 2001. In the span of 11 months, they cut the Fed Funds rate 11 times with eight of those cuts by 50 bp (basis points). This resulted in a total of 475 bp or 4.75% in short-term interest rate cuts taking the Fed cut rates from 6.00% down to 1.75%. Now most uninformed people would naturally think because the Fed cut rates by so much during this time that mortgage rates would follow suit and trend lower as well. No so. Mortgage rates actually moved higher during this time of significant rate cuts because inflation, the arch enemy of bonds, gradually rose.
Now let’s take a look at what happened with the Fed’s most recent cutting cycle, the first since 2001. On September 18, 2007 the Fed cut the Fed Funds Rate by 50 bp. The mortgage bond market briefly enjoyed a “knee-jerk” reaction to the Fed move by closing higher that day, but lost 140bp over the following two sessions. Then on October 31, 2007 the Fed lowered the Fed Funds rate by 25bp. The mortgage bond market responded by losing 78bp over the following five trading days. On December 11, 2007 the Fed once again lowered rates by 25bp and the mortgage bond market lost 88bp in the next three days. So far this year, the Fed delivered a surprise 75bp rate cut on January 22, 2008 and mortgage bonds lost a awhopping 144bp in just 2 days. Eight days later and as widely expected, the Fed cut rates by 50bp. Within 13 days from theat 50bp cut, mortgage bonds lost 269bp. On March 18, 2008 the Fed cut by 75 bp and morgage bonds lost 113 bp in 6 days and 214bp in 22 days.
So in summary and as my Beverly-Hanks Mortgage officer has explained to me, rates often inch up after a Fed cut. If you’re in the market to purchase or refinance, it may be better to wait a week or two after a rate cut to let things settle down. I would love to hear your comments and experiences on this issue.
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