Getting a mortgage in 2010 is a little more complicated than it has been in the past due to the challenging economy and increased government regulation of the mortgage industry.

In fact, Michigan REALTOR® Michael Price compares the process to a giant hurricane that has swept through the housing and mortgage markets, leaving chunks of debris and danger in its wake. He offers advice to home buyers about how to successfully obtain a mortgage now.

“Here are a few of the challenges that we will tackle together as we navigate the danger zone known as the 2010 mortgage process!

New Good Faith Estimate
The US Government has created a new version of the disclosure form known as the Good Faith Estimate (GFE). The old GFE itemized all your closing costs and illustrated your ‘cash-to-close’ – the amount of cash you would need to bring to the closing if you are buying a home, or the net proceeds you would receive at the closing from a cash-out refinance. The new GFE lumps in your closing costs under certain categories instead of itemizing them, and does not illustrate your cash-to-close. Also, if the seller is paying closing costs or points on your behalf, this is not reflected on the new GFE. In other words, it will look as though you are paying these fees even though the seller is paying them.

New Appraisal Guidelines
Most mortgage loans these days are either insured by the Federal Housing Administration (FHA) or sold to Fannie Mae or Freddie Mac. This means that mortgage banks and brokers need to follow the rules set by Fannie, Freddie, and the FHA. In 2009, Fannie and Freddie adopted new rules surrounding the home appraisal process. In 2010, the FHA followed suit and implemented many of the same guidelines. What this means for you is that the appraisal process is going to be more stringent and inflexible, costly, and time consuming than it has been in the past.

In fact, many appraisals are now conducted by appraisers who may not live in your community, resulting in value estimates that may not agree with your own opinion of what your home may be worth. Also, many appraisals now go through multiple layers of screening and are handled by Appraisal Management Companies, resulting in higher costs and fees.

Finally, loan originators are prohibited in most cases from ordering appraisals or communicating with appraisers. Even so, it is important to keep in mind that an appraisal is simply somebody’s opinion of what your home would sell for in today’s market. You and I are entitled to disagree with the appraiser and have a different opinion, but the lending guidelines that we need to follow require us to use the appraiser’s opinion when calculating your loan amount and strategy.”

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 Q: What are some common road bumps when buying a home for the first time?
~Robyn

A: Robyn, your question regarding road bumps when purchasing a home is great because there are things that all buyers should be aware when entering a transaction. I’m touching on some of the most common for this market right now.

1. First and foremost, when a buyer has a contract on a property, they must begin the mortgage application process. It is very important that the buyer provide all requested documentation needed for the application to be approved. This is different than the pre-approval letter and when you delay providing documentation for the application, you delay the forward movement of the transaction.

2. The home inspection is another area that can cause delays to a home purchase. An inspection is meant to make the buyer aware of any small or large issues that pertain to the property. An inspection isn’t a check list that is handed to a seller to be completed before the close of the transaction. A buyer needs to understand that certain items are part of home ownership and the seller does not have to fix any or all issues addressed. This can be a pivotal point in a transaction. Who is willing to repair/replace items and what will the seller agree to per the buyers request. This can cause a “bump” in the road, but try to remember, certain things are just part of what you may have to repair yourself. Focus on the major issues.

3. The next potential snafu could be the appraisal. Depending on what part of the country you are purchasing your home, some appraisals are coming in under the agreed upon purchase price. There are a couple of things that can then happen. First, both parties will have to renegotiate the purchase price, or, send out another appraiser (I suggest at the sellers expense) to defend the agreed purchase price, or the bank will define to the buyer that you will then have to put a larger amount of money down on the purchase if you want to continue with the transaction.

4. Lastly, the closing date may change. Be prepared for this scenario based on any or all of the above mentioned items. Any one of these can impact the closing date, especially the paperwork portion.

With all this in mind, remember that the buyer does have to be diligent in some regard to their responsibities, but you must be prepared for anything to happen and just be reactive to the situation.

Good luck with your home purchase!
~ Emily Lopez

Emily Lopez is a Realtor with Keller Williams GCW in Cleveland, Ohio.

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When you enter into a contract to purchase a home, how do you know the home will appraise for what you have offered to pay for it, and what would you do if it didn’t? 

Atlanta, GA REALTOR® Mike Sherrard says there is a way to protect yourself.

“If the home does not appraise for the purchase price you will probably not be able to get a mortgage.  Without the proper protection in the contract it is possible that you, the buyer, would be in default and you could lose your earnest money.  Sounds crazy, doesn’t it?

The way to protect yourself is to be sure the contract includes an Appraisal Contingency Exhibit.  With an Appraisal Contingency, you, the buyer, have the right to request that the purchase price be reduced to match the appraisal.  If the seller will not agree to reduce the price, you can terminate the contract without penalty.  This is one of several reasons that you should be sure to have professional representation when negotiating a real estate contract.”

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Q: How can I guarantee that my offer on a house will be accepted over another?

A: Here are my Top Ten tips for being the #1 Buyer!

1. Do your homework and work with a REALTOR®. You need to be fully informed about your local market in order to truly understand the current value of the property. Trust your Realtor’s insight and experience for guidance regarding their opinion of true market and appraisable property values.

2. Money wins! Pay cash if you can.

3. If you can’t pay cash, get Pre-Approved, not just Pre-Qualified. Pre-Approval means you are fully credit approved, subject only to having an accepted purchase contract and an appraisal at or above the purchase price.

4. Hot Properties hit the market 24/7. Work with local lenders who can be available seven days a week to personalize your Pre-Approval letter with respect to the property and price you are offering.

5. Get multiple Pre-Approval Letters. Many foreclosures require you to be Pre-Approved by the bank who did the foreclosure (i.e. Wells Fargo or Bank of America). If these banks are not the lender you happen to be working with, you should consider getting Pre-Approved by each of them so you are ready to go when the right foreclosure property comes on the market.

6. Be prepared to pay more than the asking price. If the property is undervalued, as is the case with many foreclosures, you’ll be competing with numerous other buyers. Your homework, combined with your Realtor’s expertise, will guide you.

7. It’s usually all about price. Regardless of what you offer, don’t leave “negotiation” money on the table. Don’t have regrets because you were waiting for your “chance” to negotiate!

8. Offer a sizable Earnest Money Deposit. If two offers are identical, the larger deposit may be the tie-breaker.

9. Minimize or eliminate your contingencies. Are you prepared to purchase the property “as is”? If so, then eliminate a property inspection.

10. Learn, let go and move on. You may not be successful on the first property you make an offer on. Try to determine what, if anything, you could have done differently to position yourself as the number one offer. Continue working with your Realtor and lender because there will be another home waiting for you to call it home!
~ Candis Dorsch

Candis Dorsch is a Broker and Owner of the Bozeman Broker Group in Bozeman, MT.

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According to Central Texas REALTOR® David Huffaker, 50 percent of the people who protested their appraisal received an adjustment. This can make a difference of thousands of dollars to homeowners each year.

“Protests are typically for one of three reasons:

Appraisal does not reflect market value.

Appraisal is not fair and equitable.

Appraisal does not reflect current property condition.

I don’t know of anyone that wants to argue that his or her property is in such poor condition that it is not worth what the appraisal district claims.

Fair and equitable is also hard to quantify unless your neighbors’ properties are just like yours, they bought at the same time and have the exact same exemptions you have.

So most people I talk to protest their Appraised Value based on market value. In order to do this you have to show that your home is valued higher than similar homes are selling for in your neighborhood.”

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Realtor David diCecco blogs that while you can ask whatever you want for a home, that doesn’t mean someone is going to pay that price. So, a pre-appraisal is a must.

“Today the market is constantly changing. Every day there are new homes going on the market and other homes going into foreclosure.

Banks are trying to liquidate inventory quickly so as not to have a glut of homes on the market at one time. In addition, people are working with banks on short sales to help alleviate the burden from banks’ foreclosed books. These are all factors that affect the value of a home.

Recently, two of my last five sales came back with an apprasial that was less than the agreed upon price. The strange thing was not that I couldn’t justify either the price my client was selling the house for,or my buyer was purchasing the house for. But it was subjective by the apprasier.

The appraiser may use the same comparables I utilized to arrive at the number. However, I am seeing all too often in the appraisal that the ‘market conditions show a decrease in home values for the past twelve months’. Thus their value of the home is less than mine on the same property. So as a buyer’s agent, I cannot nor will not support my client paying more than a home is valued at.”

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How do I know I’m getting a good price on the property I’ve selected?
~ Judith

The question you’ve asked is one of the most common questions that buyers ask, especially in this current market. In my opinion there are really three stages at which the fair market value of a property is determined.

The first stage is when you yourself are looking for homes that are for sale and comparing prices. If the home that you have chosen is less than the other homes for sale that are comparable then that is one indicator that the home may be a good value.

But the price that a seller is asking for their home is exactly that…an asking price. It doesn’t mean that they will get that price or even close to that price. That is where the second and third stages come in.

The second stage is when your REALTOR® that you have chosen to represent you (your buyer’s agent) will do a comparative market analysis (CMA) for you on the home that you have chosen (or multiple homes if you are deciding between two or three). The CMA will look at not only active comparable homes but, more importantly, recent sold homes that are similar to the one that you are interested in.

The third and final stage, and nowadays the most critical one, is when your bank has the appraisal done. An appraisal is the final say on the fair market value of a home in a transaction where the buyer is getting a mortgage. This third and final stage protects first and foremost the bank’s investment in your property and consequently your investment.

Everything begins though with choosing the right Realtor to represent you.

Sunil Varghese is a Real Estate Broker with Keller Williams in Greenville, SC.

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How do I find a Realtor who can advise me if my home is priced correctly? I gave some info to a Realtor in my neighborhood in New Jersey, but I don’t think he is aggressive enough to find the right type of buyer. How do you interview a Realtor?

~ Eleanor

Eleanor, chances are the home you’re about to sell is your single most important investment and with so many local real estate practitioners in your area, the dilemma many home sellers face is, How do you go about selecting the agent that is going to give you the guidance you need to ultimately get your house sold?

Referrals are in my opinion the best way to find a Realtor in your local area. Consider asking friends, neighbors, family members or co-workers if they can recommend someone.
Some other suggestions would include:

Q. How long have you been in residential real estate sales? Is it your full-time job?
While experience is no guarantee of skill, real estate–like many other professions–is mostly learned on the job. Additionally, if your agent doesn’t work full-time in the business, they may not be able to offer you the level of service or time commitment that a full-time Realtor could.

Q. How many days did it take you to sell the average home and how did that compare to the overall market in the area? Additionally, how long do you believe it would take to sell my home?
The Realtor you interview should know these facts and should be able to present market statistics from the local MLS to provide a comparison. Their past performance could be an indicator how quickly they may be able to sell your home.

Q. What is your average list-to-sale price ratio?
This is one indication of how skilled the Realtor is at pricing homes and marketing the property to suitable buyers. In some areas that I service for example–the average list-to-sale price ratio is approximately 92%. My ratio is typically 96% or more depending on the property type (single family, condominium etc).

Q. How often will we hear from you?
The last thing you want is to list your home, and never hear from your agent again until they have found a buyer. Communication is essential! A skilled agent should be responsive, and proactive.

My last piece of advice is: if you feel the property is worth more or less than the price suggested, then don’t be afraid to challenge the agent’s conclusion.

Good luck!

John Agnello is a Realtor in Cherry Hill, NJ, specializing in residential real estate sales and purchase.

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REALTOR® Donna Battle blogs about some of the reasons why closings get held up and what you should do about it.

“From time to time closings are delayed. Unexpected problems sometimes happen in real estate transactions. It’s how you handle the speed bumps that can ultimately affect the outcome of your transaction.

Reasons for Delays in Closings:

Short Sales -  Bank approval-final negotiations may not be complete or final approval letters after a verbal approval may not have arrived

Sellers encounter an unexpected problem with the property-pipes burst and must be repaired prior to settlement

Buyers are still waiting on lender’s final approval

Buyers are waiting on appraisal re-inspection

Buyer’s loan is affected by new underwriting disclosure guidelines

Buyer is responding to new underwriting documentation requirements

All contracts include a settlement date that both parties agree to. Most regular sales close on time without a hitch. However, there are sometimes complications, even in a regular sale (appraisal re-inspections).

But, if you are involved in a short sale, these are a horse of a different color. Buyers are interested in moving in as quickly as possible. If a buyer has been waiting on a short sale to close, they are more than eager to move in. Most regular sales have a closing date that’s at least 30 days from ratification. With a short sale, final approval of the contract is provided by the bank.

Choosing a closing date less than 30 days from the bank’s approval can be accomplished, but is more challenging on everyone involved. The Realtors involved will have a good idea if the shorter timeline can be achieved. For those involved in appraisals and inspections, it leaves little room for delays or solving unexpected problems.”

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REALTOR® Sandy Lovett advises in her blog that as you ponder all of the reasons not to sell, stop and take a fresh look at what you’re basing your decision on. Make sure you have all of the facts – here is some food for thought.

“Evaluate what you hear in the media. Just because the national real estate outlook seems to be on a downslope does not mean your area is impacted to the same extent. Research home prices in your state, county and immediate neighborhood to obtain a firm understanding of your local situation.

Ensure you understand your financial situation and are aware of the assessed value, as well as, the market value of your home. The assessed value you receive from the county does not predict how much a home buyer is willing to pay for your home. Tour homes that are similar to yours and talk with a Realtor about local market conditions.

Make a plan and be realistic about your home’s appeal, inside and out. Have a Realtor come through and provide a critique for you. It does not obligate you to anything and will provide you with some helpful information about what today’s buyers are looking for in a home, as well as how much value is being given to certain upgrades – do this before you start to make renovations to be sure your changes are adding value.”

You don’t have to go it alone when researching the market. Use all the resources at your disposal to conduct your analysis. Talk with lenders, review online information and talk with your local real estate agent. You may be surprised at how close you are to moving on up, scaling down or vacationing in the tropics.

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