Real Estate News and Commentary

August 27, 2008November 23, 2021

Being Organized Will Facilitate the Mortgage Process

by Dan Krell
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Are you ready to jump into the real estate market? Maybe you already own a home but need a larger home; or are you thinking of downsizing to a condo near the town center. If you’re like the average home buyer, you’re planning to finance most of your purchase. Although the mortgage landscape has changed, many things remain the same. Whether you are a first time home buyer or a seasoned home owner, getting organized and being prepared will make the process more enjoyable.

Some home buyers have an idea of how much home they can afford, while others are unaware. Talking to a loan officer can give you an idea of mortgage rates and trends as well as how much you can afford. Putting things in perspective at this stage will shape your home search as you decide the type of home you want as well as where you want to live.

Although many things about mortgages have recently changed, qualifying is still based on your income, credit and assets. Before you talk to a loan officer, get your financial information organized so you can provide accurate information. Providing accurate information to the loan officer will allow them to provide you with an accurate price range; this will save you the time and heartache of looking at homes you cannot afford. Although mortgage rates change daily, the loan officer can guide you with any necessary corrections.

Maryland mortgage applications now require you to provide proof of your income to support your mortgage payment, so getting organized prior to talking to a loan officer is a good idea. Start your own mortgage file; your file should have your recent paystubs, W-2 statements, bank statements, 401k statement, and any other financial information you think you may need (which may include child support or disability income). Self employed individuals will need whatever documentation they can muster (including tax returns) to support their declared income.

Checking your credit report should be considered a sensitive issue as having too many credit checks within a short period of time will lower your credit score, and in some cases alter your ability to obtain a loan. Rather than having your credit checked by every loan officer you talk with, it is a good idea to request your own credit report from three credit bureaus (and place it in your mortgage file).

You are entitled to a free annual credit report from the three credit bureaus. Although many credit companies advertise “free” reports with snappy jingles, you can request your credit report directly from the three credit bureaus (Equifax, Experian, and Trans Union). Be careful, however, many web sites (even the credit bureau websites) will bombard you with offers to watch your credit as well as other credit products for a fee.

Loan officers will request your recent paystubs, bank statements, W-2’s, and your permission to check your credit. However, until you choose a mortgage lender, you may decide to protect your personal information by providing verbal information derived from your documents.

The lender you ultimately choose will require original documents as well as your authorization to check your credit. Your up-to-date file should assist the loan officer in making the mortgage process easy and enjoyable.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of August 18, 2008. Copyright © 2008 Dan Krell.

August 13, 2008November 23, 2021

De-mystifying Home Staging

by Dan Krell © 2008
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Home staging is often thought of as a fancy name for decorating or cleaning a home prior to it being sold. In fact, “home staging” is a term that is used to describe the process of preparing your home for sale that goes beyond normal maintenance. The purpose for staging your home is to make your home as appealing as possible to potential home buyers so your home will sell quickly. Surveys conducted by the Accredited Staging Professionals a (StagedHomes.com) and Homegain (Homegain.com) indicate that staged homes sell faster than non-staged homes.

Although home staging has been around for over thirty years, it only gained wide acceptance this last decade. Many home staging techniques are derived from interior design; home stagers often sketch rooms to analyze the best use of space.

Staging your home’s exterior is just as important as staging the interior because a home buyer’s mood is set by their first impressions. You should consider the condition of your home’s landscape, façade, roof and gutters. Unkempt flower beds and cracked walkways can quickly give the impression that the home is in disarray. Additionally, missing shingles and misaligned gutters give the impression that the home has been poorly maintained.

The basics of home staging include decluttering, rearranging, and sometimes redecorating. Home sellers often have tunnel vision about their homes. Removing the clutter of your daily life from your home is the cornerstone to home staging. Decluttering goes beyond cleaning and storing unused items. Because home buyers can get distracted by the home seller’s lifestyle when viewing a home, home stagers talk about “depersonalizing” a home.

You may have spent years making your home personal to your lifestyle, however now that you are selling it you need to depersonalize it. Depersonalization means to neutralize your home by removing as much of your lifestyle as possible from the home so anyone can feel as if this could be their home. Personal items, such as family photos, can focus the home buyer’s attention on your lifestyle and away from the home.

Additionally, the layout of each room needs to be considered so it feels bright and roomy. Properly placed furniture can assist home buyers to feel at ease and “at home.” Too much furniture in any room tends to make a large room look small and feel cramped. Additionally, misplaced furniture can make a room feel awkward and unsettling.

Let’s face it, sometimes a room needs a makeover. However, redecorating does not have to be an expensive affair. Sometimes having an extra lamp or even painting a wall can make the difference between shabby and chic. If your furniture is out of date or in poor condition, furniture rentals can be a short term solution.

If the home you are selling is vacant, staging each room tastefully can facilitate your sale. An Appraisal Institute study indicated that a decorated home sells faster than an empty home.

Although many real estate agents have been certified in home staging, professional home stagers usually have a background in interior design. The International Association of Home Staging Professionals (IAHSP.com) is a source of information about home staging, including tips on staging your home and finding a home staging professional.

August 6, 2008October 5, 2019

President Signs Historic Housing Legislation

by Dan Krell

The lack of fanfare over the signing of The Housing and Economic Recovery Act of 2008 on July 30th by President Bush was the anticlimax of the long Congressional battle of proposed housing legislation. The long awaited and highly anticipated legislation is historic for its wide reaching changes in the mortgage and housing industries as well as foreclosure assistance.

For the mortgage industry, the Housing and Economic Recovery Act of 2008 changes how the Government Sponsored Entities (GSE’s), FHA and VA will conduct their mortgage businesses. In addition to the recent loan limit increases ($625,000 for conforming mortgages and $625,000 for FHA loans in high cost areas) becoming permanent for Fannie Mae, Freddie Mac, and FHA, the new law will increase oversight and offer more options and protections to home buyers.

For the GSEs (which include Fannie Mae, Freddie Mac, and Federal Home Loan Banks), the new law provides temporary assistance to the financially beleaguered Fannie Mae and Freddie Mac from the United States Treasury in the form of discount loans to help stabilize the mortgage giants. Additionally, a new and “independent” regulator to oversee the GSEs will act like a federal regulator to ensure that the GSEs are financially stable.

The new law includes the FHA Modernization Act of 2008, which gives the venerable government insured mortgage a face lift. There have not been such significant changes to FHA since its inception in 1934. Among the many changes, FHA will have a more streamlined process, increase the down payment to 3.5% of the purchase price, bar down payment assistance programs, and require home ownership counseling for home buyers.

The new law seeks to prevent mortgage fraud by launching efforts to license all mortgage originators. Although many states now require mortgage originators to be licensed, the new law will focus on those originators who are exempt from current laws (which typically include mortgage originators who are employed by federally chartered banks).

New mortgage disclosure requirements expand the Truth In Lending Act (TILA) to require lenders to provide meaningful information to consumers about their loans. The time frame will be three days from application and seven days before settlement. This is meant to allow consumers to compare mortgage rates and terms within a reasonable time frame.

Home buyers who purchase a home between April 9, 2008 and June 30, 2009 will have the opportunity to qualify for a tax credit which is repayable over fifteen years. However, the credit is limited to ten percent (up to $7,500) of the purchase price of a principal residence, and only for first time home buyers who meet income restrictions. Other restrictions apply, so you should consult your accountant for additional information.

For home owners facing foreclosure, the new legislation includes the HOPE for Homeowners Act of 2008. The program will allow the home owner’s present mortgage be refinanced through FHA. However among other qualifications, the program requires the home owner’s present lender to agree to accept losses to 85% of appraised value of home.

To the average person, these sweeping changes may seem dull and unimportant; many remain critical of the new legislation. However, because the Housing and Economic Recovery Act of 2008 is so wide reaching, it is truly historic.

July 30, 2008October 5, 2019

Are Real Estate Concierge Services a Fad or the Next Trend?

by Dan Krell

Have you ever used a hotel concierge? It is sometimes amazing how some provide spot-on service and great advice about where to eat and the sights to see. Once only offered to wealthy clients, real estate concierge services are becoming more popular and offered to everyone as way to provide a value added service by real estate brokers and agents (who are now trying to scrape out extra market share in a quickly shrinking real estate market).

The origin of the concierge is rooted in serving others. According to Miriam-Webster.com, the word concierge is a French word derived from Latin meaning “fellow slave.” Although historical references agree that the origin of the concierge originated in medieval times as a royal trusted advisor, the described function differs from an officer of the royal court who executes justice to a member of the court who kept the room keys of visiting nobility (concierge is often referred as the French definition of “keeper of the keys”), while fulfilling the desires of the nobility.

Concierge services developed into an indispensible part of European culture. Concierge services were found everywhere, from apartment buildings to the government; the concierge only served those who lived or worked within their service areas. Modern concierge services are commonly found in hotels and spas; because they often obtain the hard to get items for guests, concierge services often have the reputation of obtaining the unobtainable.

Concierge services (sometimes known as errand services) are becoming more popular to save us time in our hectic lives. Real estate concierge services often range in services from preparing the home for sale to moving home owners to their new home. Some real estate concierge services offer expanded services where you can find just about any service in and out of the home! In fact, one prominent real estate concierge service that is provided by a real estate broker lists over one hundred services; incredibly, the list is described as being “a partial list!”

Home builders have also begun to offer concierge services. Additionally, home builders are adding the concierge services as a “premium service” built-in to communities as a way to lure home buyers to their communities.

Offering services other than real estate, these real estate concierge services are another attempt for real estate brokers and agents to be a “one stop shop” for home related services. Needless to say, the quality and level of service of real estate concierge services may vary. Many real estate concierge services enlist the services of highly regarded local professionals to provide their services, while some real estate concierge services only “recommend” professionals who are willing to pay for the privilege of having their service listed.

Taking Ben Franklin’s advice, “an ounce of prevention is worth a pound of cure,” it is good idea to investigate unknown service providers with local consumer advocacy groups. For example, the Montgomery County Office of Consumer Protection offers advice to consumers about some service specialties. Additionally, it is also a good idea to research the license status of service providers who are required to be licensed, certified, or insured. The Maryland Department of Labor, Licensing and Regulation Division of Occupational and Professional Licensing (www.dllr.state.md.us/pq) allows you to check the status of home improvement contractors, plumbers, electricians, and HVACR services (among other professionals).

July 23, 2008November 23, 2021

Can Title Insurance Save Your Home?

by Dan Krell © 2008
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Would you sign a hold harmless letter if you decided not to purchase an owner’s title insurance policy? Prior to her recent home purchase, a local home buyer was asked to sign an affidavit holding the attorney, the real estate brokers, their agents and employees harmless from any future claims arising from any title problems. She declined purchasing an owner’s title insurance policy. However, once the attorney explained the potential problems that may occur and how the title insurance could protect her interests, she decided to purchase the title insurance.

Believe it or not, the actual number of paid title insurance claims is relatively low (about four to five percent). Fortunately, many title problems are resolved without a claim, while some problems are resolved in an effort to not pay a claim. According to a 2005 survey conducted by the American Land Title Association (ALTA is the national trade association of the abstract and title insurance industry), about one third of all residential transactions have title problems; title issues in the previous 2000 survey were reported at being 25% (ALTA.org).

Although title problems do occur, most are resolved. According to ALTA, the most frequent title problems that occur (and need to be resolved) include unreleased and unpaid liens (including first and second mortgages, unpaid child support, tax liens, and other judgments). Other frequent title problems that occur include unreleased mortgage or deed of trust assignments and recording errors (legal documents having the wrong names, addresses, and legal descriptions).

The reason for the increase of title issues is twofold. The recent real estate market expansion saw a significant rise in the number of real estate closings, which gave rise to the opportunity to find additional title blemishes. Additionally, the fast paced environment of those years gave rise to the opportunity for mistakes to be made by overworked and/or inexperienced title agents and county employees.

Title insurance critics say that purchasing an owner’s title insurance policy is an unneeded closing expense placed on the home buyer for the title agent’s benefit (who makes a commission). Some passionate critics describe title insurance as a “scam” or “rip-off” because most title problems are easily resolved.

The few title problems that cannot easily be resolved can be catastrophic, as was the recent case first reported by the Columbus Dispatch on May 31, 2008 (Dispatch.com). The Ohio family’s home is being foreclosed on because of a typo that appeared on the previous owner’s line of credit. The line of credit was filed under the misspelled name of the previous owner.

The present owner reportedly felt it unnecessary to purchase an owner’s title insurance policy because the title search showed no problems. Unfortunately, the line of credit went unnoticed and the previous owner did not pay off the line of credit (reportedly being $150,000) at closing. Needless to say, the present owner was shocked to find out the previous owner’s mortgage company decided to foreclose on his home after years of non-payment. Could the foreclosure have been averted if the owner had title insurance?

State laws governing title insurance vary; purchasing owner’s title insurance is optional in many states. If you are planning to purchase a home, consult an attorney about title insurance.