Home sales decline 5.7% in August; median price up 3.3%

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Benefits of a Buyer's Agent

For most of us, buying a home is the biggest single investment we’re likely to make – and we’re only likely to do it maybe once or twice in a lifetime. The process is, by nature, filled with checks and balances – and many complex details. Traditionally, agents were legally obligated to protect the interests of the home seller. Today preferences are changing. One of these changes is that more home buyers are choosing to have their own real estate agent, known as a buyer's agent, to legally represent them.                                                      A buyer’s agent represents you, the buyer, not the seller, and has full fiduciary duties, including loyalty to you. By definition, the buyer’s agent has your best interests in mind throughout the transaction. The percentage of homebuyers with buyer representation has grown significantly in the past decade. According to a recent National Association of Realtors® survey, nearly half (46%) of home buyers used the services of a buyer’s agent last year, and four out of every five buyer’s agent agreements were in writing. The benefits of buyer representation is the dedication of a buyer’s agent to the home buyer. The buyer’s agent and homebuyer establish a mutual agreement, known as a buyer agency agreement, that will entitle the homebuyer to, but is not limited by: Loyalty The real estate agent must act in the best interest of the buyer. Disclosure All material facts such as relationships between agent and other parties, existence of other offers, status of earnest money, seller’s financial condition, property’s true worth, commission split with other brokers, and legal effect of important contract provisions. Confidentiality Any discussions, facts, or information that should not be revealed to others but does not include responsibility of fairness and honesty in dealings with all parties. Accounting in dealings Reporting of where any money placed in the hands of the broker is kept. Reasonable Skill and Care Arriving at a reasonable purchase price and advising the buyer of such, affirmatively discovering material facts and disclosing them to the buyer, investigating the material facts related to the sale. With a buyer agency, the interests of the homebuyer will be represented in the purchase of the home. This scenario is different from a typical transaction where the buyer is not technically represented.

Your Credit Score

Consumer lending executive Neekia McCoy answers questions about credit scores that can help customers about this key instrument to credit access in the latest Your Money Matters financial planning video from REALTOR Magazine.

Click the link below to watch the 5 minute video.

http://youtu.be/KPLcg1lHRXA

Think Like a Lender: It’s a Critical First Step

Most people know that discussing options with a mortgage professional is an important step to finding out how much house you can afford to buy. However, few realize that understanding what lenders look for is also critical to the home-buying process.

First, you need to calculate your current debt load and your price range. To determine your price range, your debt load is determined by two ratios – your Front End Ratio and your Back End Ratio. These limits may vary, but it’s wise to stick to the guidelines.

The first guideline is that your monthly housing costs  should not exceed 28 percent of your gross monthly income. This is the Front End Ratio. The housing cost is your monthly mortgage payments, which includes principal, interest, taxes, and insurance. Lenders add up your housing costs and figure out what percentage they represent of your gross monthly income. Note that the better your credit score, the higher your ratio can be.

Your entire monthly debt should not be more than 36 percent of your gross monthly income. This is your Back End Ratio. Again, the better your credit, the higher the ratio. Your entire debt load includes housing costs plus all other debt payments – car loans, credit card payments, loans, lines of credit, alimony, etc.

The maximum home price you can realistically afford depends on a number of other factors as well. These include your household gross monthly income, your down payment, and the mortgage interest rate.

If your calculations show that you are ready to begin the home buying process, then the next step is getting preapproved. Not only is this confirmation that you are approved for a set amount, it will also lock in a favorable interest rate.

The hardest part for many first-time home buyers is saving for the down payment. There are options available, and first-time home buyers should speak to their mortgage professional.

Don't fall victim to the real estate scam

The scam first targeted home buyers in Madison and the northwest part of Wisconsin, but in the past few months has had some success soliciting home buyers in Milwaukee.

Click here to read more.

Information for Buyers about Bank (Foreclosure) Property

When a lender forecloses on a person’s property, a sheriff’s sale will eventually occur. The lender will often bid the outstanding mortgage amount that is still owed by the homeowner at the sheriff’s sale and receive a sheriff’s deed to the property.

Property owned by the lender is referred to as a Real Estate Owned (REO) property. 

Rather than manage and sell the REO property itself, the lender often turns the affairs of the property over to an asset management company, which negotiates the new sale on the lender’s behalf, working through a Wisconsin real estate agent to list and sell the property.

Frequently, neither the lender nor the asset manager is in Wisconsin and they are unfamiliar with Wisconsin real estate forms and laws. They have not seen the property so they are in no position to make meaningful disclosures about the property condition. They do not know whether there are serious defects like frozen/leaking pipes, etc.

REO sales are “as-is, where-is” transactions: the seller (lender) does not make property condition disclosures and often will not make any repairs.

Negotiations to purchase an REO property typically start on the Wisconsin offer to purchase form (required to be used by licensed real estate agents in Wisconsin), but the REO seller (lender) typically has a lengthy REO addendum that they want added to the contract that overrides many of the Wisconsin offer to purchase provisions. 

This REO addendum is written by the lender’s legal counsel, favors them, as the seller, and is often difficult to understand. The REO seller (lender) usually will not allow any changes to this addendum by the buyer.

Because it is not a Wisconsin form, Wisconsin agents cannot explain the meaning and implications of the lender REO addendum provisions to the buyer (to do so would be illegal,) so the buyer is encouraged to speak with an attorney who can interpret the addendum and answer the buyer’s legal questions.

REO sellers and asset managers often respond verbally to offers and will not provide written counter-offers. It is up to the buyer to re-write the offer, based on the verbal terms provided by the lender. Until a purchase contract is in writing and signed by both parties, it is not final and 100% binding under Wisconsin state law.

An asset manager or listing agent may only have the ability to give a conditional acceptance, while final acceptance requires the corporate lender’s approval. Sometimes the lender might change the terms of your offer or even sell to another buyer, while still in negotiations with you.

Many REO sellers also use a title company that is not in Wisconsin and not familiar with Wisconsin law; some also appear to try to short-cut the process (and save money) by providing less coverage and protection than under a traditional Wisconsin title insurance policy. 

There also may have been title errors if short cuts were taken by the lender during the foreclosure process, which may lead to additional risks and expenses for the buyer.

Because of these issues, it’s always a good idea to remember that a property sold by a distant lender or asset manager (REO property) often was acquired through a foreclosure.  REO sellers do not make disclosures about the condition of the property and may include an addendum that minimizes the seller’s responsibility to provide proper proof of title and modifies other contract provisions, which may take away your negotiating advantages as a buyer.

I recommend that you consider the following measures to protect your interest in an REO transaction:

1.       Have your attorney review the offer to purchase; other purchase documents, including any REO addendum; and the title evidence.

2.       Either (a) purchase the loan title insurance commitment for the your lender from a local title insurance company, or (b) purchase your own title insurance commitment (in addition to that provided by the seller) from a local title insurance company to double check the title work (this may involve additional costs). Be sure the local title agent checks all pertinent municipal information including city orders and zoning.

3.       Obtain inspections and tests to determine the property condition.

4.       Take direction from the attorney before closing or providing any closing funds.

Things are looking better!

The article below helps illustrates that the market is continuing to turn around. It is a seller's market in many areas of SE Wisconsin and that's the reason it's more important than ever to be represented during the home-buying process.

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