This week, my buyers specialist Susan and I experienced yet another contract fall apart only days before closing. This time we were dealing with an investment property that sounded great on paper but when the buyer discovered the reality of what he was buying, the entire deal soured. It was a total disappointment from our camp because the only reason why this portfolio of properties are not closing is as a result of a lack of disclosure.

Regardless of what you’re selling, it is important to paint an accurate picture to buyers. You may be able to trick a few people into believing that your 25 year old Hyundai is as nice as a new Mercedes but when the buyer comes to see, touch, and feel, they’ll always walk away. The same holds true for real estate. Agents are notorious for “puffing” and so much so that it’s covered in real estate text books in pre and post licensing. Puffing is the act of over-stating a home’s attributes within certain limits.

When a home is small, it’s referred to as quaint.

When a home is near a highway, easy commute.

When a home is on fire, motivated seller…you get the idea.

The harm in puffing comes when you have to disclose what you’ve been saying isn’t at all accurate. Take this transaction: listed as a portfolio of occupied and rented properties - winner! The reality: two tenants are being evicted and 2 units are rented by the room. Until this week, the leases didn’t even exist. Also, the properties were sold as completely renovated, which again can disappoint when it comes to ones expectations as to what they’re anticipating.

In real estate, it’s best to disclose every bit of information up front, especially anything that may affect whether or not a buyer would make an offer. If not up front, what other time would be opportune to disclose improtant information regarding the transaction you’re working on….at closing, after closing, during the inspection, or never. Also, agents who play the “don’t ask, don’t tell” rule with regards to material facts will quickly discover that they are liable for what they knew and should have known. Sorry guys, ignorance isn’t an excuse.

I’m big on real estate disclosure because I like my job and I plan to be doing it for a very long time. Agents whom omit important details that are discovered by the seller later on are quickly ushered out of the business as a result of a number of lawsuits or sanctions by the real estate commission.

It’s a shame that my client wasted his time and money to discover the truth of what was being held back in the situation. For us, we’re now 30 days into a failed contract and have to start over to find another opportunity to sell this client. Had everything been as it was sold, we would be going to closing this week and everyone would be happy. Instead, because of a lack of property disclosure and probably too much puffing, it’s back to square one.

Charlotte NC Homes For Sale

A brownfield is an abandoned industrial property that is available for re-use, redevelopment once an environmental clean up has been performed. In many major cities like Charlotte, the industrial complexes have either closed or relocated to industrial parks in order to expand or to meet new zoning regulations. In their place is now a brownfield, usually surrounded by retail or a residential area which is in need of redevelopment.

Enter the EPA, which has a program to clean up a brownfield area for reuse and redevelopment. This is different than a superfund site, which contains hazardous substances like toxic waste which may endanger public health. Typical brownfield contamination include hydrocarbon spillages, solvents, pesticides, heavy metals, tributyltins, and asbestos. A prime example of a brownfield location would be a former gas station or dry cleaning establishment.

I know what you’re saying…this sounds like an awful place to live. Well, properly remediated brownfields are completely safe and they are continuously tested by the EPA to ensure that they remain that way. Additionally, there are incentives for buyers to purchase homes constructed on top of a brownfield site.

In North Carolina, improvements made on a brownfield are taxed on only a portion of the improvement’s assessed value (not the land). For the first year, the property taxes are only 10% of the improvement.

• Year 1: 10% of the improvement value
• Year 2: 25%
• Year 3: 50%
• Year 4: 70%
• Year 5: 90%

So you’re probably wondering…how can I find out if the home I’m living in or moving in is located in a brownfield site? This is something that should be disclosed to you as the buyer however do you own homework. In Mecklenburg county, visit http://maps.co.mecklenburg.nc.us/geoportal/. There, you can view the environmental status of any property in Mecklenburg just by the address or tax id. Other counties have similar GIS sites however it may take calling more than one agencies to get a list of brownfields in your area.

With the push in many cities to redevelop existing lots in many cities to increase density, brownfields are becoming a lot more common. Just think: that new hot urban waterfront neighborhood was probably the brownfield of an old sea port. Here in Charlotte, many of the new and newer “urban” residential developments are constructed in former industrial areas and may well be in a place that was once a brownfield. The important part is to get educated and know what you’re buying before you buy.

Charlotte NC Homes for Sale

The entry level new construction home is the current lifeblood of the housing industry. With over 41% of all homes sold in the U.S. in 2008 being to first time home buyers, home builders have redesigned their amenities and plans to capture this ever-growing segment of the market. However, the question becomes as a first time home buyer, should you buy a new home an existing one.Personal feelings aside, here are a few factors that you should consider when considering a new or existing home:

What is the current cost to construct a home in your area?Depending on your price point and your area, it may actually be cheaper to buy an existing home than it would be to build a new one. I’ve found this to be true in many newer neighborhoods that have been hit by a wave of foreclosures. Quite often, I have run across a foreclosed home or a short sale for less than what the builder can offer and some have never been occupied. Others may need nothing more than a fresh coat of paint. So my first step would involve checking what a builder is offering vs what is selling currently in their neighborhood. If, with the upgrades that you will surely add the new home costs more, it would be a wise move to go existing.

How much are the unexpected costs?So if new is still the way to go, consider the unintended costs associated with a new home. Not every home builder will include appliances, which you may have to acquire shortly after move-in. Almost no home builder offers blinds, which can get expensive depending on style and type. For example, it is not uncommon to spend $1,000 on faux wood blinds in your average home.On the exterior, items like decks, fences, and patios are all items that can fall into the “unexpected cost” category that must be taken into consideration.

How many homes are left to be built?The question of how many homes are left to be completed should be of the utmost concern for any buyer looking in a new community. In today’s economic climate, it is not uncommon that a builder may sell a large portion of their remaining lots to another builder that may offer a different type of home. Your community of 200 single family detached homes may become 150 single family and 100 town houses.Another scenario is that it takes YEARS to build out the neighborhood and in that time, the builder or developer pulls out. Depending on the situation, this could leave an unsightly neighborhood. Therefore, ask the sales team how many homes are left to be completed, how many phases are left, and the stability of the builder.

Charlotte First Time Home Buyer

Throughout the last few years, the number of specialty mortgage programs has dwindled from around 2,000 in 2005 to less than a hundred today. As many of these specialty mortgage programs have been phased out, one vital program remains and is going strong.

Known as the Suntrust Mortgage Doctor Loan Program, it is one of the last remaining specialty mortgage programs designed exclusively for the medial community. This program allows licensed medical physicians (including those who are residents / interns) the option of up to 100% financing without the need of costly mortgage insurance.

The Doctor Loan Program offers competitive fixed, adjustable, and even interest-only options so that the consumer can choose the loan that’s right for them.

Currently, the Doctor Loan Program is only available in Alabama, Alaska, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia, and Washington DC.

For more information, consult with your local Suntrust Mortgage Loan Officer or Kristi Hooks with Suntrust Mortgage here in Charlotte at 704-362-8561. Charlotte NC Homes For Sale

In addition to the decrease in home prices and the historically low mortgage interest rates available today, the United States Federal Government was you to invest in a home. As a result, the First Time Home Buyer Tax Credit was extended and revised in November 2009 to enable more home buyers to take advantage. Here is a summary of the newly enhanced Home Buyer Tax Credit. For more information on the credit as well as a video, visit our First Time Home Buyer section of our website.

Eligibility

The Home Buyer Tax Credit is now available to first time home buyers as well as existing homeowners. For the purposes of the program, a first time home buyer is defined as anyone who has not owned a home in the last 3 years. For first time home buyers, the tax credit remains at a maximum $8,000 and existing homeowners are eligible for a credit of up to $6,500. Existing homeowners are classified as those who are selling or have sold a primary residence that they occupied for five of the last eight years.

Married couples, who file their tax returns separately, are limited to a maximum tax credit of $4,000 for first time home buyers and $3,250 for existing homeowners.

Income Limits

Single home buyers with incomes up to $125,000 and married couples with a combined income up to $225,000 may receive the full benefit of the tax credit. Between $125,000 and $145,000 for single home buyers and $225,000 and $245,000, the credit begins to phase out, eligibility ceasing over $145,000 and $245,000.

Ceiling on Home Price

Unlike the previous version of the tax credit, this new version does have a home purchase price limit of $800,000 for both existing homeowners and first time home buyers.

Deadline

The Home Buyer Tax Credit expires April 30, 2010 however buyers need only to be under contract by the deadline. Home buyers that close by July 30, 2010. This provision was added to assist home buyers considering a new construction home or one that is involved in a bank sale or short sale.

Incentive for Active Duty Service Members

Members of the Armed Forces, as well as certain federal employees, serving outside the United States, are eligible to claim the tax credit on purchases until April 30, 2011 as sale occurs before June 30, 2011.

Potential Repayment

If you claim the home buyer tax credit on your taxes and do not remain in the home for at least 3 years, the entire amount of the credit will be recaptured upon the sale of the home. For most home buyers, this shouldn’t be a problem as the typical homeowner remains in their home between 5 - 7 years.

Tax Credit Use as a Down Payment

In some states, home buyers who utilize a FHA mortgage through that state’s Housing Finance Agency will be eligible to use a portion of the tax credit towards the down payment. Neither North Carolina or South Carolina Housing Finance Agencies participate in the program.

Charlotte First Time Home Buyer

When determining how much money you will need to bring to the closing table as first time home buyer, you must take into account your closing costs in addition to your down payment. Below are a schedule of fees for a home buyer in North and South Carolina. As a general rule, we instruct our clients to plan to having at least 4.5% set aside from their down payment to cover their closing costs.

Down Payment: 3.5% - 10% minimum of the purchase price depending on loan program.

In today’s real estate world, there are only a limited ways that you an avoid having to have a down payment to obtain a home. If you are given the option of making a down payment or not, I would always recommend doing so except in very special circumstances. Some look at the down payment as how much you have at risk should the home go into default. However, your down payment is also what will save you from a short sale or bankruptcy if you have to sell your home in a declining market.

An FHA mortgage requires a minimum 3.5% down payment at closing, which is separate from your closing costs. There has been talk for quite some time that they are looking to increase the limit to 5% but as of 12/24/2009, 3.5% is the minimum. Conventional mortgages typically allow a minimum 10% down payment but depending on price, you may be asked for 20%. Consult with your lender to find out which program is right for you and the closing fees up front.

With either mortgage type, unless you are making a down payment of 20% or more, you will be required to pay mortgage insurance for a period of time. Depending on the mortgage, this could add $70 - $150 a month to your monthly payment.

Pre-Paid Fees: Prepaid fees are those that are paid either at the time of contract or during the contract to close period.

• Earnest Money or Option Fee: Earnest Money is a deposit collected at the time of contract as “good faith” money. If, as the buyer, you abide by the terms of the contract and close on the home, the money is credited to you at the closing. Also, the money may be refunded to you if the contract is canceled and is done so during a contingency period. The Option Fee is a separate non-refundable fee that is paid directly to the seller at the time of contract and allows you time to back out the contract for any reason or no reason. Some contracts have both however most will require either Option or Earnest Money.
• Real Estate Agent Retainer Fee: Some real estate professionals charge a retainer fee that is credited to you at the time of closing. Consult with your agent to see if they charge one, how it is handled, and applied at closing.
• Inspection Fees: Depending on how many inspections you perform on the home and the size and age of the structure, consider needing at least $500 minimum for a home inspection.
• Mortgage Application Fees: Once a contract is secured on the home, your lender may charge an application fee, credit report fee, or the cost of the appraisal. You should plan at least $500, which is credited back to you at the closing.

Up Front Mortgage Insurance Premium: 1.5% of the mortgage amount (FHA Mortgages Only)

A relatively new phenomena, the Up Front Mortgage Insurance Premium is paid at closing in the case of a default in the first year of ownership. Elsewhere on the HUD will be line for mortgage insurance that is held in escrow by your lender and paid to the M.I. company at the end of the year.

Lender Fees:

• Origination Fee: 0% - 1%
• Discount Point: 0% - 1%
• Appraisal: $400 - $800
• Flood Certification Fee: $35 - $80
• Various “junk fees” (printing, faxing, wiring funds, credit reporting): $200
• Interest from the Closing Date to the end of the month

Escrows:

• 3-6 months of Property Taxes: varies depending by property
• 3 Months of Homeowners Insurance: varies
• Mortgage Insurance: 3-6 months: varies

Attorney’s Fees:

• Attorney Fee: $450
• Settlement Prep: $200
• Courier Fees: $50
• Title Insurance Premium: Rates mandated by the state in which you’re purchasing in. In North Carolina, the rates are a follows:
  • Up to $100,000: $2.00 per thousand
  • 100,001 to 500,000: 1.50 per thousand
  • 500,001 - 2,000,000: 1,00 per thousand
  • 2,000,001 to 7,000,000: .75 per thousand
  • 7,000,001 and above: .5 per thousand.

Taxes:

• Deed Recording: Varies by county
• Mortgage Recording: Varies by county

Adjustments:

• Property Taxes: varies by property but are usually calculated that you’re paying the seller back for the portion that they are not living in the home.
• Homeowners Association Fees: Same as with property taxes, you should plan an adjustment to reimburse the seller for any fees they have paid in advance.

Our general rule of thumb when determining closing costs is to estimate about 4.5% of the sales price. When you sit down with a lender to discuss the financing on a specific home, they can calculate a good faith estimate that will have your closing costs outlined.

A common question we are asked is if the seller can pay the closing costs for the buyer and the answer is yes. Consult with your lender but generally speaking, the seller may cover up to 3% of your closing costs in addition to their own.

Charlotte First Time Home Buyer

Free First Time Home Buyer Workshop

January 6, 2010 at 6pm

The Charlotte House Hunter Group Office
2115 Rexford Road, Suite 102
Charlotte NC 28211

Register for this Event
With the new year fast approaching, a tradition that the Charlotte House Hunter Group is continuing into the new year is the Smart Home Buyer University series of workshops, which includes our first home buyer workshop.  This free seminar is designed help first time home buyers understand the buying process, enable you to ask questions of local real estate professionals, and learn in a group environment.

We will be discussing the steps to the home buying process, purchasing a foreclosure property, taking advantage of the $8,000 home buyer tax credit, and home inspections.

Seating is limited so register for this event today.

Charlotte First Time Home Buyer

This week, Kristin Ayers - our group’s transaction manager - forwarded me an article that cited a number of reasons why a buyer should avoid purchasing a short sale or pre-foreclosure property.  Of the 11 reasons they provided to avoid short sales, 10 were inaccurate.  Therefore, as someone who lists and sells a number of short sale properties in the Charlotte Metro area, here are a few tips to aid you when offering on a short sale property.

1. What the Seller Owes Really Doesn’t Matter

The article on short sales this week noted that buyers should be concerned with the amount the seller owes when compared to the market value of today.  That is false.  The reason why a home is listed as a short sale is that the seller owes more than the home is worth.  In some neighborhoods, the banks are settling short sale properties for 40-50-60% of the previous purchase price because those sales figures are no longer relevant.  As a buyer, you shouldn’t focus on that number either but rather the market value of the property today.  If a seller had private mortgage insurance, it can occasionally complicate the transaction but with so many mortgage insurers going belly up, their impact is becoming less and less.

2. Your Offer Should Be Within 10% of Market Value

No the banks are not giving these homes away but neither are they giving away bank-owned homes.  Short sale offers within 10% of the fair market value of the property are accepted 9 out of 10 times.  Some buyers prefer to low-ball the bank because they do not understand the bank’s valuation process.  However, low-ball offers are typically countered to by the bank at full market value.  Therefore, a buyer who is not willing to pay 10% of fair market value should step aside.

So who determines what fair market value is: a local real estate agent or an appraiser.  Depending on the price of the home, the values may be set by a local real estate professional (often not the listing agent) after the contract between buyer and seller.  Often times, the agent who set’s the price for the bank will be the one to list the property for sale should the short sale fail and the home ends up in foreclosure.  As a result, they want a low-priced listing they can sell and routinely price the home low for the market.  Also, bank owned homes are priced in the same manner (usually it’s the short sale price) with the banks accepting within a percentage of the listed price.

3. Ask Questions of the Listing Agent

Ask 10 agents the way a short sale should be handled and you’ll get 10 answers.  Therefore, ask your agent to quiz the listing agent as to how many offers the property has, how your offer will be treated by the bank, where the seller is the short sale process, if a title search was done to reveal additional liens, etc.  Our group handles short sales in this manner:
1. When an offer comes in from a buyer, it is negotiated between buyer and seller then signed by the seller creating a binding contract.
2. All other offers after the time of contract are accepted as backup-contracts only.
3. If the bank asks for all offers, we respond that we have 1 contract and x backup offers.  We take a counter, if any, to the primary buyer and negotiate the sale with them.  If they fail to consummate the transaction, we move to the next buyer with a backup contract.  If we do not have a backup contract, the property is relisted for sale.
4. Once we have all parties in agreement, the buyer moves to closing.

4. Do Not Ask for Repairs to be Made

Short sales, like bank-owned properties, are sold in ‘AS-IS’ condition.  Let’s face it: the sellers are broke! If they hired someone to make the repairs, chances are they won’t have the funds to pay them. We recommend that buyers to perform their home inspections even though the property is being sold ‘AS-IS’ because there are usually a host of latent issues that need to be resolved.  Proactive buyers should consider performing their inspections pre-contract and use any repair work as leverage in their negotiations.  For example, if the home has a bad roof, price the home with a bad roof, make your offer with the idea that you will need to replace that roof, and let the listing agent know the roof is bad.  Word will travel and it will work in your favor to encourage a lower price.

5. No Contingencies and Be Prepared to Wait

Unfortunately, there’s nothing short about a short sale.  The banks are under staffed to meet the needs of sellers and think that with a 10+% unemployment rate, how many sellers are requesting assistance?  Therefore, you need to be patient.  That also means that you should not even think about asking for a contingency on the sale of your current home.  Once the bank approves the short sale, you must close within 30-45 days.  As a result, you must be flexible - preferably living with friends, family, or in a month-to-month rental - in order to consider a short sale.  However, bank-owned homes are the same way so what’s the big deal?

Never say no to a short sale in spite of what your agent may tell you.  You’re getting a great home for a great deal but like all good things, they take some time.  The banks are getting easier to work with and routinely, the banks are paying real estate agents their full commissions so it’s a win-win.  In fact this entire year, we only had 1 short sale that did not pay well and it was one where we represented the buyer and the listing agent was very inexperienced.  Even in that scenario, we were able to close the home in less than 60 days.  By all means, do not expect that every short sale will work out and unfortunately, those are the ones you hear about most.

Good luck with your short sale purchase!

Charlotte NC Homes

Over the last few months, I have received a number of phone calls from potential buyers of foreclosed properties who identify themselves has having bad credit.  At first, I thought this was a fluke -a random buyer or two who thought I may know of a program to sell distressed properties to people with a history of not paying their bills on time.  However, as of late, the calls have become numerous and as a result, I am posting this as a reality check for would-be home buyers.

First: if you know for certain that your credit is lousy, buying a home is probably the last thing you should be thinking of doing.  The best advice would be to figure out what you owe and then develop a plan to pay down those debts.  It may mean sacrifice or even taking a second job but there’s not a single solitary bank that wants to lend money to people who have demonstrated that they pay their bills occasionally.  While lenders will say to you that you only need to pay down your debts to a certain level, I would say pay down your credit cards and other lines to zero - then cut up your cards.  Granted, there are mortgage programs that are not credit score driven however they don’t ignore your credit history all together.

Second: if your home that you own is going into foreclosure, don’t expect to purchase another home before the sale date.  Mortgage lates are reported on your credit report even before the foreclosure.  While not the end of the world credit-wise, no one in their right mind would lend a mortgage to someone who has chosen not to pay on the home they currently own.  Many buyers a year or two ago purchased a new home and then let their old home go into foreclosure instead of selling it.  The banks are wise to this practice and exercise every precaution to ensure that they do not end up with such a client.

Third: if you’re broke, you’re not buying a house.  Best practices say that you should invest at least 20% of the purchase price as a down payment.  Most mortgage minimums are 3.5% for FHA and 10% for conventional.  There are mortgage products that will finance a home for up to 100% of the purchase price however this isn’t for everyone.  If you are going to go that route, you should at least have the money you would have used for a down payment in your reserves for an emergency or for when you sell.  The problem many buyers run into is that when it comes time to sell, they cannot afford to because of a lack of equity and then must request a settlement or short sale from the bank.

My work with sellers that have fallen on hard times has driven the point home that it is absolutely necessary for you to live debt free and well below your means.  If that doesn’t suit you, then you should either change your standards or increase your income.  When I purchased my first home in 2002, I put 20% down and had a little left in reserves for a rainy day that I had anticipated on growing.  Six months after moving into my new home, I was out of work and now relying on my savings.  Thankfully, I was able to find work in a few months, hold on to the home, and later sold it for a big profit.  There were many nights where I lied in bed, heart pounding, mind racing, as I was wondering how i was ever going to put that money I was not living on back.  However, as stressful as that situation was, it would have made it a million times more stressful if I was absolutely broke and facing the reality of losing everything.

So if you have bad credit or no money, start today with a game plan to improve your situation before you start thinking of purchasing a home.

Charlotte NC Homes

It is fairly well publicized that “first time home buyers” (i.e. haven’t owned a home in 3 years) are eligible to receive up to an $8,000 tax credit for purchases before November 30.  What you may not be aware of is that if you are a first time home buyer in one of twenty three counties in North Carolina, you may be eligible to receive an additional $14,900 in down payment assistance.

A flaw with the $8,000 first time home buyer tax credit currently is that you cannot use any portion of the $8,000 for a downpayment.  On a $200,000 home purchased using the minimum downpayment for FHA (3.5%), a buyer would have to invest $7,000 of their own money to receive $8,000 back.  A program through the North Carolina Finance Agency will enable first time homebuyers to take advantage of a zero percent interest free loan to cover the downpayment and closing costs; alleviating the need for a substantial downpayment.

Qualifications

To qualify, the buyer must purchase a foreclosed (bank owned) single family, townhome or condominium built after 1978, below $210,000, in one of the twenty three available counties:

• Alamance
• Brunswick
• Buncombe
• Cabarrus
• Catawba
• Cumberland
• Dare
• Davidson
• Durham
• Edgecombe
• Forsyth
• Gaston
• Guilford
• Iredell
• Johnston
• Mecklenburg (Charlotte)
• New Hanover
• Pitt
• Randolph
• Rowan
• Union
• Vance
• Wake

Second, the buyer must meet certain income restrictions, which vary by household size and by county.  For Mecklenburg, Union, Cabarrus, and Gaston, that limit is $55,850 for a household of one.  Iredell’s limit is $50,300 for a household of one.  As the household size increases, so does the ceiling on the income limit.  While a single person household may be capped at $55,850 for the counties around Charlotte, a household of four has a limit of $75,000.

Next, the buyer must obtain eight hours of HUD-approved home buyer counseling.  Information on course locations and times may be obtained by your lender or by contacting the NCHFA.  In addition, the buyer must utilize the NCHFA’s FirstHome Mortgage and must contribute $1,000 of their own funds.  Finally, the home’s purchase price must be, at most, 99% of the current appraised value.

As long as you keep current on your payments and own the home for at least five years, the $14,900 downpayment assistance loan will never need to be repaid.  For every year of on-time mortgage payments, the loan will be forgiven 20% per year for five years.  At the end of five years, the debt is eliminated completely.

For more information, contact the NCHFA or your preferred mortgage lender.

Charlotte NC Homes