Working with the right Realtor makes a huge difference in your success in home buying or home selling.The ‘right’ Realtor will be different for each person as well depending on personalities and goals.Here is a list you can use for a general rule of thumb when looking for a Realtor to help you buy or sell a home.
TOP 5 THINGS TO LOOK FOR IN A REALTOR:
This is a big one, you want your agent to be extremely knowledgeable in the areas you are looking to buy or sell a home.Having deep local knowledge of the nuances in pricing in an area, familiarity with other local agents and lenders is huge and working with an agent that really knows their marketplace will help you be successful.
#2 EXPERIENCE = YEARS IN THE BUSINESS + NUMBER OF SALES PER YEAR
With each real estate transaction I have done, I learn something new every time.I have been selling homes since 2004 and the amount of knowledge I have attained is crucial to my client’s successIt helps when a tricky or difficult situation comes up in a sale that I can draw on my experience to make things happen and solve problems.Make sure to look up an agents average number of sales per year.You don’t want to work with a part time agent that is not fully invested and knowledgeable about the real estate business.
Do your research on the Realtors you are considering and see if they have any reviews online on sites like Zillow, Google, Realtor.com, LinkedIn.Read about other people’s experience with the agent and if they do not have any reviews or very little I would be wary.
Everyone is different and has distinct ways of interacting and even a very experienced Realtor might not be the right one for you if you don’t mesh with their personality.You could be spending a lot of time together and potentially dealing with stressful issues that come up. If your Realtor’s personality rubs you the wrong way, even if they are great at what they do, you may want to consider working with someone that you are more comfortable with on a personal level.
You want a Realtor that keeps on top of the newest trends and technology in real estate, especially when you are selling a home.Understanding how to leverage technology and social media to bring the greatest amount of exposure to the home you are selling will potentially get your more money for your home in a shorter amount of time. If your Realtor is not using professional video, photos and a social media strategy to sell your home, they are doing you a disservice.
When it comes to selecting someone to help you through one of the biggest financial transactions of your life, make sure to chose wisely my friends.
More about the Author:
Jessica Wallace is a Realtor in Santa Cruz with Coldwell Banker and has been selling homes since 2004. As a native of Santa Cruz, Jessica uses her local knowledge and years of experience to help her clients be successful and achieve their Real Estate goals while making the process as enjoyable and stress free as possible.
Education & Value is what our blog is about. Yapping about ONLY mortgage related business is boring and not what we strive for as a company. This is why we bring in guest bloggers to talk about all areas of business.
Today’s topic is: Private Money aka Hard Money Lending
Private money financing has always been around. It was thrown for a loop, however, when the Dodd/Frank Act passed in 2010. No longer were consumer loans a viable option for private money financing. Dodd-Frank basically eliminated balloon, equity-based loans as an option for homebuyers or homeowners. So, instead, private money lenders have focused on business purpose loans to continue to provide short term, equity based loans. Business purpose loans for 1-4 unit residential properties are exempt from RESPA, TILA and some of the other state regulations enacted to protect consumers and homeowners.
What is a business purpose loan? It is the opposite of a consumer purpose loan. A consumer purpose loan is defined as a loan to a natural person on a residential property (1-4 residential units), when the purpose of the loan is to obtain funds for a personal, family or household purpose. A business purpose loan is a loan on residential property primarily for business, commercial or agricultural purpose (includes loan to acquire or improve rental property), NOT occupied by the borrower, OR 2.) Loan to business entity (i.e. Inc., or LLC) (Note: A Trust is NOT considered business entity.)
Private money loans are typically short term, 1 to 3-year bridge loans, interest only, with interest rates around 7-12%, depending on the equity of the property and credit rating of the borrower. Little or no regard is paid to the borrower’s income when determining the approval of the loan. Equity is king. Loan to value ratios rarely exceed 70 or 75%.
Another factor that influenced the growth of the private money market were fix n flippers – entrepreneurs who purchased foreclosed and run-down homes for renovate and resale. These homes would typically not qualify for conventional financing because of the condition of the property or the need to purchase them very quickly to get the best price possible.
A second growth factor was the boom in 1-4 unit properties being rented out. Many people lost their homes during the 2008 financial crisis and many people do not qualify for homeownership financing because of the newer, stricter Dodd-Frank rules and rapid home price increases in many parts of the country.
Why borrowers choose Private Money Financing
Real estate investors choose private money for a variety of reasons. Often times, it’s a timing issue. If the close of escrow date is coming due and conventional financing fell through, investors will go to private money as a last resort. Other times investors might choose hard money because they need construction rehab financing and institutional lenders don’t have a lot of lending options for that. Finally, if the borrower’s credit rating or income do not meet institutional requirements they will choose to go the private money route.
Pros vs Cons of Private Money
Like most things in life, there are two sides to every option. Private money allows for a lot of great options like fast closings, little documentation, and looser credit standards. Downsides include larger downpayment or equity requirements, higher interest rates and the uncertainty of future financing, since these loans are typically 1-3 years in length.
Most private money lenders offer a wide variety of loan options. There are purchase loans which are especially well suited for real estate investors that are trying to obtain an under-market home and close as fast as an all-cash offer. These typically can range up to 75% of the purchase price. There are also the options for a cash-out refinance that allow borrowers to take equity out of their property in 10 days or less to use towards renovation of other rental property or other business purposes. These might have more conservative LTVs, usually around 65% for a good credit borrower. Finally, private money gives fix and flip developers the ability to leverage multiple projects at a time, since they can borrow most of the funds needed to purchase and remodel the home. These are typically up to 75% of the purchase price of the home and up to 100% of the rehabilitation dollars, as long as the after repaired value is under 70%.
This financing category is not for everyone. It is, however, something you should be knowledgeable about because you will have customers that fit these specialized uses. You will want to work with an experienced private money lender because they will know the ins and outs of this financing option. And what a great opportunity for conventional lenders. Borrowers who obtain private financing for the acquisition of rental property will need you for permanent financing for their rental properties.
More about the Author:
Mark has been responsible for all phases of the firm’s sales growth since 2009 having originated over 500 private money loans for $200,000,000. Mark is a graduate of The University of Southern California’s Price School of Policy with a Bachelors in Planning and Development and a Masters Degree in Planning with an emphasis on Economic Development. Currently, he is an Alumni Board Member with USC Price School of Policy as well as a mentor with USC’s career services.
Buying your first home is a big deal! There’s a whirlwind of feelings involved from the excitement of getting your house keys to the stress of trying to figure out what exactly is it going to cost. First time home buyers (FTHB) have a lot of questions along the way, and your home buying team should be able to answer each and every one, but reading this list of 10 tips/FAQ answers will put you on the road to home ownership, feeling comfortable and confident.
Get Pre-Approved (or better, pre-underwritten)
The worst feeling in the world is finding your dream home, saying “YES! Let’s put in an offer!”, and then swiftly losing the house to someone else while you’re getting a pre-approval, which every serious seller will require with an offer. Getting a pre-approved long before looking at homes will help you in several ways. Your loan officer can help you figure out how much you
qualify for and how much house leaves you with a comfortable payment. They can also review your credit and offer tips on improving your scores (better credit scores = more loan options, better rates, and lower costs).
Even better, many lenders -we may be biased, but we recommend Mason McDuffie ; ) – will get a full underwriting approval for you before you even find a home! This gives you a huge advantage over other buyers who only have a pre-approval, especially in a seller’s market. You can put in an offer with no financing contingency, and have the same power of a cash buyer! To learn more about pre-underwriting, discuss it with your loan officer when applying and being pre-approved.
Build Your Credit
As we mentioned above, if you start your pre-approval process early, you’ll have time to maximize your credit scores. This gives you the most loan options along with better rates and terms when compared to lower credit score borrowers. This can save you money up front, and even more money in the long run, as even small differences in interest rates add up over time.
Organize Your Funds
Lenders will usually require a 2 month history of the assets you’ll be using to buy your home (down payment and closing costs). This means 2 months complete statements for things like checking and savings accounts. If you have many large deposits, money transfers, and cash moving around a lot, this could create a headache in documenting your assets for the lender.
If you can, get your cash together in an account you’ll be using, and keep it there. This way, your lender can simply review your statements and call it a day without asking you for additional documentation.
Freeze Your Credit
Since you were smart and went over your credit before looking for homes, you’ve had time to get it maximized and in the best possible spot. Now don’t move! Opening new accounts, having people look at your credit, and increasing balances on credit cards can all damage your credit scores, and financing large ticket items like furniture or a new car could sabotage your home buying dreams altogether.
If you must make a financed purchase or open a new account, talk with your loan officer first to make sure it won’t have any negative impact on your home buying plans.
Find a Great Real Estate Agent
Why is this so low on the list? It’s not because it’s not one of the most important moves you’ll make in buying your first home. A real estate agent’s job is to help you find the right home and guide you through the contract process. But they can’t help you if you aren’t in a position to buy a home, or aren’t even close to prepared. So we recommend getting well prepared first, but…
It’s strongly recommended that you use a great real estate agent (emphasis on great). Sure, your 3rd cousin Eddie may have his real estate license, but if he’s not a good agent and isn’t going to give you a professional level of experience and guidance, it’s best to take a hard pass.
Your real estate agent will help you search, negotiate, and get your offer accepted, but that’s only the start – a home buying experience is a paperwork-abundant tornado with multiple people (and their personalities) involved. When you have a good real estate agent, you have an advocate in your corner, and you won’t notice the craziness behind the scenes (well, at least not as much). Without a good agent, that craziness is guaranteed to keep you awake at night and turn what should be an exciting time into a miserable one. Trust us on this one – a good real estate agent is worth their weight in gold, especially when buying your first home.
Consider More Than the House
You may come to hate even the most perfect house if the commute to work is killing you every day. You may love the space in your master bedroom, but never sleep there because of street or train traffic right outside your window. Do you love the house enough to live there 24/7 because you have no local recreation or entertainment?
When buying a home, you need to consider the house, the yard, the neighborhood, and the surrounding areas. For the best buy, make sure you’re buying a home you love in an area you’ll enjoy living.
Get Inspections (and a Survey)
When buying your first home, you’ll want to know what kind of shape the house is in, even the parts of the house not shown in listing photos. A professional inspector will be able to give you the good, the bad, and the ugly on the investment you’re about to make. There’s nothing worse than spending a ton of money on a new home, then getting hit with even bigger bills when the home repairs start piling up. A home inspector can help you avoid that pitfall, and offer up great advice on maintaining your new home.
If you’ve got land or property boundaries you’ll want to have a survey as well (some states require one). Knowing what land belongs to you is incredibly important when it comes to using your yard, and putting on additions (and knowing what land is yours when your neighbors do additions to “their” property).
If your lender says you’re pre-approved for up to $300,000, don’t buy a $350,000 house. A beautiful house means nothing if you can’t enjoy your home. A mortgage payment that leaves you strapped for cash each and every month is a major mistake if it means you have no room for savings, financial planning, or fun. Sure, you’re going to love your home, but make sure you’re buying with enough financial room to enjoy getting away from it from time to time, too.
Keep Reserves and Savings
Though there are positives to putting down a larger down payment, and sometimes buying points, spending more up front isn’t always a wise move. Life happens, so you want to make sure you’re leaving room for emergencies. Having money to address things like a leaky roof or water heater replacement, along with life’s other curve balls, is a smarter move than dumping all of your money into your new home, even if it means putting less than 20% down.
Your loan officer can guide you through the options, and work with you to determine how you can get the most financially savvy mortgage while making sure the other areas of your financial life remain in great shape, too.
Think Today and Tomorrow
When you’re buying a home, how long will you be calling it ‘home’? You may need to consider short and long term goals in determining your perfect home. Do you plan on having a family within a few years? Maybe that extra bedroom isn’t a bad idea. Do you regularly have guests and entertain? Additional bathrooms and an outdoor entertaining area can make the post-party clean up much more pleasant. Keeping in mind your short term and long term plans & goals will ensure that you enjoy your house today, tomorrow, and however long you call it home.
Buying a home is a big deal, but it doesn’t have to be a stressful process. If you use our tips and hire good professionals for help with your home search and mortgage, the process can be streamlined, and the road to home ownership can be an easy one to travel. For questions on the home buying process and help with getting prepared, call your Mason Mac loan officer today.