Great NJ Properties.com

What's The Plan?

2010-01-12T07:54:00.000-05:00

I had an interesting listing presentation last night. Everything went smoothly. I was well prepared with a ton of useful information for my prospective sellers, an empty nest couple in too much house. We all got along very well, the home was impeccable, we agreed on the fair market value for their lovely home, and then I asked the fatal question: where are you planning to move next?

They both looked at each other, and what ensued was the kindhearted quibble / debate / semi-argument that only married couples can have. I sat quietly for a few minutes while they discussed what they wanted to do and it was clear they couldn’t agree because they simply did not know themselves.

He wanted a backyard to grill and have alone time (but no yard maintenance, please), she wanted a big kitchen to entertain, and while they didn’t want five bedrooms anymore, they didn’t want too small either, and the list went on. They wanted to stay local, but further away was also OK. You get the idea, they were all over the place because they were just not ready.

We spent the next hour discussing possible alternatives and the couple was genuinely grateful that I could give them several options they hadn’t considered. We looked at rentals, sales, houses, garden apartments, condos, units. I pulled out my handy dandy spreadsheet and we did some calculations comparing rent vs. Buy based on how long they might stay in their next home. I gave this lovely couple a new perspective on their prospects and said my good nights.

This morning I sent them a quick note thanking them for their time. The next sentence is copied from my email: I would absolutely encourage you to have a set plan for where you are going next before moving away from your existing home.

I was happy to give them that advice and I would be even happier to help them develop their plan. The old adage is true, it’s better to move toward something than to move away from something, specially if you don’t know where the next step ought to be.

Interest Rates Are On The Rise - Who more do you need to hear it from?

2010-01-07T12:17:00.000-05:00

The Wall Street Journal has been saying it, the NY Times has been saying it, I’ve been saying it, and only a few consumers are hearing it.

Many self described ‘savvy’ buyers that are waiting for the spring market to get into full swing will be surprised to learn that their dream home just got much more expensive.

Just today interest rates in my local market crept to 5.375%, which is a 3/8% difference from two weeks ago. What does this mean? On a $400K mortgage for 30 years, that house just got $32,000 more expensive!

What will happen to those buyers that are on the fence? The cost of sitting will get costlier, and it that dream home will be much more difficult to afford. Some economists are predicting more than a 2% rise in interest rates. Personally, I think that’s a doomsday scenario for many markets which is unlikely. Not that anyone knows for sure, but rates over do 6% seem right around the corner.

What makes a sophisticated investor? One that recognizes trends just a bit sooner than everyone else that’s playing it safe. I just came back from a fabulous open house. This home is a steal in this area (no, it’s not my listing) and will go right away. I can think of two buyers specifically who would think this house is their dream home. Both will see it, both will fall in love with it, one will jump on it, and the other will wait.

One will call me in three months and tell me how happy they. The other will compare every home they see to the one that got away, and pay more when they do get off the fence.

A Guy Walks Into A Party…

2010-01-01T10:47:00.000-05:00

We were at a fun New Year’s Eve party* last night where we started chatting with another guest and as soon as she found out we were realtors, proceeded to tell us her tale of real estate woe.

Several years ago she decided to find a bigger home for her family and was working with an agent; Agent Nice. Her agent handled the transaction smoothly and professionally. Agent Nice had not asked if her client was interested in selling her current home since she was looking for another home.

Our home owner thought the market was hot, so she decided to try selling her home on her own. Her plan was to run an ad for a public open house, and if the house didn’t sell within two weeks, she would then engage an agent.

We all know that one agent who sticks his or her nose in everyone’s business, and in this case this agent (agent Nosey) noticed that there was an ad for an open house from agent Nice’s client, and called agent Nice about it.

Agent Nice was surprised, humiliated, and horrified so she called our home owner and berated her for not telling her about her plans, embarrassing her, how could you do this to me, and on and on.

At first she was apologetic, “but she wouldn’t let me off the hook”, she said. After a minute or two of getting a telephone knuckle sandwich our home owner gave agent NotSoNice what she had coming to her.

We were completely stunned that this agent would speak to our home owner the way she described it, and couldn’t for the life of us think of a circumstance when we:

Wouldn’t have asked about the sale of her current home, and
Speak to a client that way.

We assured her that as the professional, it was her agent’s responsibly to have asked, and while sure, she could have called her agent about it, she really hadn’t done anything wrong.

I won’t tell you how this story turned out (did she sell her house?), but I can tell you that this home owner hasn’t spoken to NotSoNice or Nosey, and in her eyes, this is how the profession operates.

Resolution for new year: If you wished things were different, you be different yourself.

* It was a surprise birthday party hidden inside a New Year's Eve party. We thought it was a bit cooky, especially when the birthday girl called to invite us to her New Year’s Eve party, which we had to decline because he had already made other plans (with her husband!). Our host pulled it off and everyone had a great time.

Refinancing Window Closing?

2009-12-28T14:04:00.000-05:00

Anyone that has been following the government’s involvement in buying out mortgage backed securities is aware of the impact this has had in keeping interest rates as low as they have been.

This program is set to expire in March 2010, and the glimmer that the economy has stabilized and growing ever so modestly, further suggests that the program will not be renewed.

Home owners that are staying put and are considering refinancing are not on the top of most people’s minds, however there is an opportunity that exists now, which is rapidly closing.

Most experts agree that interest rates will go up by half to a full percentage point when banks can no longer dump their bad mortgages. The backdrop to this is that several large lenders have closed many of their regional call centers creating a severe backlog. Some lenders have also started pulling back lines of credit for second mortgages.

Anyone interested in refinancing in the next several months should seriously consider doing so now rather than later as the backlog may create unforeseen delays and create an environment where considerable savings will be lost.

This also applies to those whose financial institutions provide for loan recasting (re-adjusting the balance of their loan to current rates). Check with your lender.

Where Do Resolutions Come From and How to Keep Them

2009-12-26T07:51:00.000-05:00

Humans have been faithfully breaking new year's resolutions for 4,000 years since the ancient Babylonians resolved to return any borrowed farm equipment as the new year, then in March, coincided with the start of the farming season. Sometimes the equipment was returned, and sometimes the resolutions were feckless (sorry, couldn't help myself).

Ancient Romans (meaning Romans a long time ago, not really old ones) joined the party by counting the previous year's stock and setting goals to accomplish more the coming year. The Chinese are said to have had a special new year's resolution to clean their house squeaky clean. I myself avoid house cleaning for the new year, but I do enjoy visiting my Chinese friends right after they've cleaned.

Wikipedia tells us (therefore it must be true) that only 52% of participants in a resolution study were confident of success with their goals, and only 12% actually achieved their goals. Men achieved their goal 22% more often when they engaged in goal setting, a system where small measurable goals were used (lose a pound a week, instead of saying "lose weight"). Women succeeded 10% more when they made their goals public and got support from their friends. Guys, the gals score an extra 10% by talking to each other. Someone ask for directions and take note!

In the US, resolutions generally involve doing more of something or doing less of something:

Less of something:

Lose weight
Get out of debt
Eat right, Drink less
Quit smoking
Reduce stress
Be less grumpy.

More of Something:

Get more organized
Save money
Improve grades
Get a better job
Exercise more
Get a better education
Take a trip
Help others
Be more independent
Learn a foreign language or a musical instrument
Get up earlier in the morning
Help the poor.

Resolutions have the best chance of succeeding when one starts with realistic goals.

People often make ambitious resolutions with little hope of achieving them. Ambitious goals can be motivating and inspire you unless you are the kind of person that gets overwhelmed by the enormity of the goal. Many people give up because they think there’s no way to get there from here.

Resolutions must be broken down into bite sized chunks. If a goal is to lose 20 pounds in three months, then there ought to be twelve goals, one for each week where one loses 1-2 pounds. These 'bite sized chunks' must be accompanied by yellow stickies you put in your bathroom mirror so they're the first thing you see in the morning and the last thing you see at night. When you achieve that week's goal, take the sticky away. Any goal has to have a strategy to achieve that goal. Gym memberships and weight loss books examples of good intentions, not strategies.

If you can't bear the thought of staring at stickies as reminders of the decisions you make each and every day and each and at every meal (using the weight loss example), then save the paper and go have a hot dog; It ain't happening.

It's also key create a plan for setbacks. What will you do if you fall off the wagon, as we all do from time to time? The key is to rebound from setbacks, rather than letting them snowball into full-blown failures. Avoid all-or-none thinking that triggers the snowball effect. Then, create a “setback plan” that you will enact at the first sign of a slip. If you find you missed a week's goal for example, have a plan that you will take one item out of your lunch every day until you get back on track.

Great luck to everyone with his and her goals or the coming year and a very happy start of Kwanzaa!

Pursuit Mode or Attraction Mode: What’s a better website strategy?

2009-12-22T16:29:00.000-05:00

Most agents are not particularly tech savvy, so when choosing a website for their business, the default choice is often one of the many turnkey systems that provide websites without requiring any technical expertise. Although it sounds good at first blush, not all systems are the same (although most look the same).

Agents can choose from systems that require registration before any real information is served up so they can follow up with visitors (pursuit mode). Agents can also choose systems that freely allow searches, providing items of value so that visitors regard them as sources of vital information and entice those visitors to come to them (attraction mode).

As a consumer, I happen to prefer not to register on websites because I know the avalanche of emails and phone calls that will ensue if I do, but that’s just me. As an agent, I prefer a custom website and allow anonymous searches for most things. If someone wishes to save a search or download some specific information, then I get that information but that’s the vast exception, not the rule.

Whenever I’ve tried to catch our puppy with a Sharpie in his mouth, I know my best bet is to get a juicy treat and entice him to come to me. Chasing the puppy around the room generally leads to zebra walls.

Websites that have timely information, original content, and create value tend to provide quality clients. Interestingly, websites that require registration wind up with many Donald Ducks with phone number: 1234567890.

As a consumer and as a provider, make sure you work with the system and people that best represents your style and needs.

Happy Holidays, or the word for the day: feckless

2009-12-21T11:51:00.002-05:00

As the holiday season is well underway, I can think of no greater example of impersonal dribble as wishing someone ‘happy holidays’. What does that even mean?

If someone is Christian, shouldn’t they be wished a merry Christmas? If they are Jewish shouldn’t they have been wished a happy Hanukkah two weeks ago? Don’t even wish someone a happy Ramadan as it passed months ago and is not about happiness that way. Perhaps a happy Kwanzaa might be more appropriate for some this week.

What is this rant about? Get to know who you are talking to beyond the superficial fear of being politically incorrect. Wishing someone happy holidays is phoning it in (yes, I don’t like waiters singing happy birthday to me, either).

There are people I wish happy holidays to also, and that is my internal clue that I don’t know them well enough. When I know someone well enough to wish them a happy Setsubun, then good things tend to happen.

Feckless

1 ineffective; incompetent; futile.
2 having no sense of responsibility; indifferent; lazy.

www.greatnjproperties.com

Happy Holidays, or the word for the day: feckless

2009-12-21T11:36:00.000-05:00

Today's Great Deal: Bank Approved Short Sales

2009-12-18T16:01:00.000-05:00

Most people are not stupid, and treating them as if they were leads to less than ideal results (euphemism for it's stupid to treat others as if they were stupid).

Lenders have reputations, and some are more deserved than others. Anyone who's attempted to buy a short sale would feel that negative reputations were earned. Banks have been notoriously slow to respond to the extent that purchases have been regularly in limbo for 9-12 months.

Lenders that are more proactive have begun working with home owners and realtors and have begun approving the sale price much earlier in the process. This has allowed agents to list the homes as bank approved. This is huge difference to the purchase, making a 30 day close realistic as opposed to unheard of.

Today's recipe for a great real estate deal: Be well qualified and ask your agent (which should be me, by the way) for bank approved short sales!

Continuing Education and Brokers Offering Rebates?

2009-12-15T16:47:00.000-05:00

Today, the New Jersey Senate Commerce Committee approved two bills, which could have a profound effect on our business.

The first creates a mandatory requirement for continuing education for real estate brokers, broker-salespersons and salespersons.

If signed into law, the bill will require up to 16 hours of continuing education before a real estate license can be renewed. This in and of itself cannot be bad unless the course work is irrelevant gimmes.

I’m a firm believer in a challenging continuing education system as a means of avoiding mental calcification and I can think of a realtor or two that could benefit from some computer skills, ethics, or simple manners, but I digress.

The second bill would allow brokers to offer rebates to home buyers and require those rebates to be documented in a contract at the beginning of a brokerage relationship or in a buyer agency agreement.

This one I’m much more on the fence over as it sets the stage for rebates to be offered for in-house listings only (and only sometimes). If a broker offers a home buyer a rebate because they have both sides of the transaction and don’t have to split the commission, would that create even more incentive to only show those homes? Does this further set the stage for unscrupulous agents to only show other office’s dogs and their very own darlings? While these incentives exist today, does this legislation ratchet them up even more? How are consumers protected if they don’t have full visibility to what is available?

These legislations must be approved by the full state senate before they go to the governor’s desk.

Love ‘em or hate them, call your legislators.

Continuing Education and Brokers Offering Rebates?

2009-12-15T16:30:00.000-05:00

November's Numbers Are Out!

2009-12-12T11:55:00.003-05:00

As wise investors know, once a trend is obvious, the greatest opportunities are already past. We certainly are hearing that we’re in the throes of a mild recovery, however many buyers are still cautious about taking the plunge.

November’s numbers from Otteau confirm that our local market is rebounding ahead of the curve.

Essex, Morris, and Union Counties all hover between 7-8 months of inventory, which is the equilibrium point between a buyer and a seller’s market. This is in sharp contract to the same time last year where it was a strong buyer’s market.

Towns like Millburn, Maplewood, South Orange, Chatham, Madison, Berkeley Heights, New Providence and Summit are already well ahead of their respective counties availability. If we take the Summit numbers, we see that 37 homes are in the $1MM plus range. If we take out those, we find the under a million dollar price are closer to the other towns.

Buyers are not rolling into these towns, offering 20% less than asking, and walking away with the bargain of their lives. Check the arrogance and preconceptions at the door; It won’t get you a house.

There is even an article in Newsweek that goes as far as calling buyers that are able to buy but don’t as stupid.

Many prospective home buyers will jump in after TALF expires, after the tax credit expires, and after interest rates are higher than they are now, and kick themselves for not having acted sooner.

November's Numbers Are Out!

2009-12-12T10:23:00.000-05:00

Lenders Aren’t Lending, Real Estate Isn’t moving, And The World Is A Bad Bad Place

2009-12-09T17:37:00.002-05:00

This is all true in some places, just not in my little corner of the universe (thankfully). I constantly see local articles on various versions of doom and gloom, and they make me wonder whether the authors know something I don’t, whether media hysteria is at play, or whether different realities coexist side by side. More on that later...

A local article yesterday bemoaned how buyers were struggling to get financing and even well qualified buyers needed a 20% downpayment because of the uber stringent requirements that banks have implemented.

Is it that that lenders are being more stringent or is it that they're brought back the standard lending practices they became lax on? Do some agents still think that a warm body is a qualified buyer (apologies to all warm bodies)?

Just the other day I came across a buyer, who while very nice, had no savings or income, making her very nice, but not a real buyer. Although frustrating, I would not say stiffer requirements were at play or that the sky was falling. I also have seen my share of 10% down with PMI loans recently. Are those good for the buyer? Certainly debatable either way, however their existence and availability are not debatable!

I have seen deals stumble because offers that financed through FHA or VA loans were discouraged by the seller’s agents, which had more to do with fearing a low appraisal killing the deal than anything else (see terms matter).

I have also seen large ‘name brand’ lenders delay the process significantly because they’ve gone from six call centers to one (as an example) so they are backlogged, overwhelmed, and bureaucratic.

It's very important to work with top brokers that have access to different lenders, both large and local.

Steve Lupton from ISB Mortgage, who I work with very closely, confirms my own experience, “We have never not been able to finance qualified buyers”.

In every market, in every area, there are experts that seem to thrive where others stumble. Do other folk know something that I don’t or do we have parallel realities that coexist side by side? Just in case you like my reality, Steve can be reached at 908-522-6500.

Lenders Aren’t Lending, Real Estate Isn’t moving, And The World Is A Bad Bad Place

2009-12-09T17:04:00.000-05:00

Economy loses 11,000 Jobs. Dow is at 10,490, Nasdaq at 2210. Huh?

2009-12-04T10:20:00.002-05:00

In the most positive report in almost two years, the labor department has reported the smallest job loss since the recession began.

The smallness of the bad news is extraordinary. Most experts agree we’ve emerged from the recession and expect mild growth next year.

There are still over five million long term unemployed people, and many more that are working reduced hours so the picture is far from great. We’ve heard the term ‘jobless recovery’, which is a euphemism for corporate not personal recovery.

What does this mean for real estate?

The affordability index in my local markets is at historic heights but is already starting to come down (your buying power is still great, but just a wee less great). If you are considering real estate, this is an outstanding time to plunge in. Real estate still represents a fantastic investment. There are down markets and there are boon markets, but over time home ownership is a great way to build wealth.

It will take a very long time for us to forget the new millennia silliness where homes appreciated 15-20% a year, and that’s a very good thing.

People that have a realistic sense of their market, are open to good advice, and buy well will do very well. People that have been dispirited because they can’t flip, earn 20% a year, or feel the market is iffy will miss out.

We can only determine if a trend has reversed after it already has and has been reported in the news. Those that will do well are those that can recognize those trends just a bit sooner.

Economy loses 11,000 Jobs. Dow is at 10,490, Nasdaq at 2210. Huh?

2009-12-04T10:10:00.000-05:00

Can you get the big picture by looking at the big picture?

2009-12-01T13:58:00.000-05:00

People that follow real estate trends by studying media reports and surfing diligently certainly can get a feel for the general state of a market. Unfortunately that general overview is only helpful if one is interested in macroeconomics. People that are looking at real estate in a given community are very likely to miss both the really big picture, and that special house.

What does that even mean? The real estate market nationally is a mess. There are areas that won’t recover for many many years. We hear about that daily and that’s certainly one reality and one of the big pictures.

Looking at New Jersey specifically there is roughly a nine month inventory of houses, which suggests a pretty decent market that ever so slightly favors buyers. We could stop right there and conclude that the national scene and the state scene are very different but there is way more story to tell (you knew that).

If we were to look at homes over $2.5MM in New Jersey, we would find 95 months of inventory. Homes in the more mainstream $600K-$1MM would find 13 months of inventory.

Not only is the state market on average way better than nationally, but within the state by price point there is a huge difference between healthy and get the crash cart.

Where is the big picture so far? Clearly at the specific detail level.

How about if we were looking for a home in Maplewood? There is a three month inventory of homes. Going in with a buyer’s mindset is a recipe for disappointment.

Last year this month there was a nine month inventory. In October more than double the number of homes sold than last October. Try justifying a strong buyer’s market on that one. Essex County as a whole has almost a 7 month inventory (a neutral market).

Let’s look at another town in Essex County; Millburn, which is next door to Maplewood.

Millburn has a four and a half month supply of inventory as opposed to a nine month supply a year ago. If we looked further to homes that have been on the market for more than four and a half months, we would find that only four of them are under $1MM and twenty two of them are over $1MM.

National Market: Big Ugly Mess?
New Jersey: 9 months of inventory (slight buyer’s market)
Essex County: 7 months of inventory (neutral market)
Maplewood: 3 months of inventory (strong seller’s market)
Millburn: 4.5 months of inventory (strong seller’s market)

I’m pretty sure that neither Maplewood nor Millburn changed locations since last year or that either of these adjoining desirable bedroom communities are so unique.

The big picture of value is specific and focused. Everything else is macro informational. That is the big picture.

Here are the latest figures for some of my favorite towns:

Figures courtesy of The Otteau Valuation Group.

Can you get the big picture by looking at the big picture?

2009-12-01T13:31:00.000-05:00

Finding that great home in the next few months

2009-11-28T13:59:00.001-05:00

I am thankful that Thanksgiving is behind us, and as I study my local market, the next few months present some interesting facts:

Inventory levels are extremely low (lowest in years).
Home values have stabilized and in some instances are on a slight climb.
Homes are selling close to asking price.
Prospective home buyers get general ‘summary’ information about markets from web searches and the media, but they are often delayed or even wrong in understanding local conditions.
Savvy agents will list homes, which will be sold before the spring market starts (It’s easier for a home to appear as the best value when there are fewer competing options for buyers).
Prospective buyers that are not prepared to act quickly, have their finances in order, or can present a clean offer, are simply losing out and are stunned at the loss.
Interest rates do remain attractively low, but TALF and the home buyer tax credit will expire in the spring, which will negatively affect interest rates.

Keep these seven points in mind, and you will find your next home. If you don’t believe them because your market is different, ask your agent what your truths are, and to give you the data behind it.

If you don’t believe them because they sound like ‘sales’ talk’, then insist that your agent provide the data to support their view of the market. Better yet, ask me to give you my source data it; I dare yah, I double dare yah.

Reality is local and it’s very important for home buyers to work with agents that they trust to provide accurate local conditions.

Only when local conditions are well understood, will buyers be able to get from showing to accepted offer.

Finding that great home in the next few months

2009-11-28T13:14:00.000-05:00

I am thankful that Thanksgiving is behind us, and as I study my local market, the next few months present some interesting facts:

Inventory levels are extremely low (lowest in years).
Home values have stabilized and in some instances are on a slight climb.
Homes are selling close to asking price.
Prospective home buyers get general ‘summary’ information about markets from web searches and the media, but they are often delayed or even wrong in understanding local conditions.
Savvy agents will list homes, which will be sold before the spring market starts (It’s easier for a home to appear as the best value when there are fewer competing options for buyers).
Prospective buyers that are not prepared to act quickly, have their finances in order, or can present a clean offer, are simply losing out and are stunned at the loss.
Interest rates do remain attractively low, but TALF and the home buyer tax credit will expire in the spring, which will negatively affect interest rates.

Keep these seven points in mind, and you will find your next home. If you don’t believe them because your market is different, ask your agent what your truths are, and to give you the data behind it.

If you don’t believe them because they sound like ‘sales’ talk’, then insist that your agent provide the data to support their view of the market. Better yet, ask me to give you my source data it; I dare yah, I double dare yah.

Reality is local and it’s very important for home buyers to work with agents that they trust to provide accurate local conditions.

Only when local conditions are well understood, will buyers be able to get from showing to accepted offer.

What's There To Be Thankful Of?

2009-11-24T10:26:00.000-05:00

As we go officially go into the holiday season (ignoring holiday creep: Halloween), this has been a tumultuous year for many, but do we have things to be thankful for?

Family and friends come first, off course, but then comes business. Can money buy you happiness? It can’t really, but it can buy you a boat big enough to sail right up to happiness and wave hello with a margarita in your other hand.

Interest rates look like they’re going to remain low for the next few months and there are tax credits to be had. In my market: inventory is the lowest it’s been in four years, prices have stabilized (and even increased over last year in some cases), and there are more homes sold than last year. All this and the spring market is ahead of us.

If you’re considering selling you may have less to be thankful for than you wish, but you have much more to be thankful for than you might be giving credit for (read some of my previous posts on that one; you’re probably still way ahead of the game).

If you’re considering buying, these are unprecedented times and you’ve never had as much to be thankful for.

Nurture your family, celebrate your friends, don’t buy into the tryptophan myth (you don’t eat enough turkey to feel it; maybe it’s the wine). The next month is about focus. Focus on your circle of family and friends first, focus on what you want the coming year to be, then break it down into bite sized chunks so you get there.

Happy Thanksgiving to most, happy Tofurkey to some.

What's There To Be Thankful Of?

2009-11-24T10:06:00.000-05:00

The bottom line, sometimes…

2009-11-19T09:33:00.000-05:00

When prospective buyers decide to make an offer for a home, they predominantly focus on the price they will offer, and often think about the other terms as something that will get worked out later.

In my local market, that has led to some very surprised rejections, even in this economy. Any offer that doesn’t come with a pre-approval letter from a reliable lender is not considered worthy. Having an offer that’s contingent on a property to sell is also a non-starter to most sellers. The closing date can also be a critical factor. That much is pretty well travelled ground. Is there more?

In the areas I focus, 454 homes closed since 9/1. Of those, we have data on 312 of them (come on guys, update the MLS), so we’ll just look at sales we have data for.

For homes under $300K, 48% were financed through conventional loans, 24% were financed through VHA loans, and 28% were paid cash (In our system cash means that the mortgage contingency was either waived or the home was purchased in cash). This means the buyers had the means to close without a mortgage, whether they used one or not, and made the purchase on that basis, making for a much stronger statement to a seller.

In this range, one quarter of the purchases fell into this category. If a buyer were using an FHA loan (with 3% down) and competing with another offer that was effectively a cash deal, we see that from a terms standpoint, the FHA offer would be blown out of the water, even if it was a little higher.

Between $500K-$600K, the number of deals classified as cash drop to 5%. FHA loans are 10% and conventional loans are 85%. Since the majority of buyers fell into the ‘conventional loan’ category, then other terms could become more important, such as the size of downpayment. We don’t have numbers to support that self evident truth, but we do know many agents discourage offers with lower down payments because they recognize the risk of having a home not appraise for the borrowed amount, which effectively kills the deal.

In the $900K-$1MM range, 24% were classified as cash. A full one quarter of them either waived their mortgage contingency or paid cash altogether. We saw a surprising amount of multiple offers and bidding rounds in this range and its fair to say that in this economy perfectly good buyers lost homes to stronger terms. We’re not privy to the prices each offer submitted, but we can guess that the cash deal was not necessarily the highest price.

Up to $300K terms could make a huge difference in determining if an offer was accepted. Between $500K-$600K perhaps not as much, between $900K-$1MM it could make the difference again between getting your offer accepted or not. Analyzing specific markets, towns, and price ranges can reveal very different things going on. Don’t generalize!

Make sure you understand the dynamics around the particular purchase you’re considering so that you can make an offer that will give you the strongest chance of moving into your new home!

The bottom line, sometimes…

2009-11-19T09:16:00.000-05:00

I’ll give A $23,000 and B will lose $20,000 of it. Good business?

2009-11-16T08:48:00.000-05:00

We’ve seen our share of home negotiators beat up the other side over a few thousand dollars under the guise of getting the best deal. Is that a good practice for home buyers? Many prospective buyers get into a competitive position when negotiating with sellers and miss out on larger issues that have a bigger effect on the overall cost of their purchase.

When negotiating for a home, buyers should remember that it’s not a two party negotiation (buyers and sellers). It’s at least a three party negotiation (buyers, sellers, mortgage rate). Most buyers simply forget about the interest rate variations and focus on the seller’s concessions (price, inclusions, etc). Perhaps it’s the one on one nature of negotiating with ‘the other side’, which is easier to focus on than an anonymous corporation and an ever moving bank rate.

In my local market, the interest rates have wandered one quarter of one percent in the week. If buyers are not focused on these nominal rate movements and the timing of their rate lock, they are not considering a pricey component of their purchase. While 1/4% is not a particularly alarming swing, what does it mean?

Let’s compare a purchase where the buyers and sellers are $5,000 apart and spend a week splitting the difference, which delays attorney review and their rate lock. If we compare a $500,000 mortgage at 5%* to a $497,500 mortgage at 5.25%, we would find that a quarter percent increase $23,000 more expensive over the life of the loan, for a net loss of $20,000.

Should a buyer be fixated on that last concession? Are buyers cognizant of interest rate movements at the quarter of one percent level while in the heat of negotiations? How many buyers won or split the $5,000 battle but lost the $20,000 war and didn’t even realize it? Although interest rates are set to increase over time, that quarter of one percent could easily drop this week, go back up the following, etc.

Buyers should keep in mind all the elements that make up their total cost of ownership and not treat any negotiation as a personal two way contest. Buyers should also get their financing in place earlier in their home selection process so their lender can give them daily updates on rates. This will help them get a feel for the saw tooth nature (up and down) of interest rates and help them time better.

The numbers:

*30 year conventional.

I’ll give A $23,000 and B will lose $20,000 of it. Good business?

2009-11-16T06:55:00.000-05:00

*30 year conventional.

It’s Official! Tax Credit Extended and Expanded. What Does It Mean? A Different Perspective.

2009-11-10T16:16:00.000-05:00

President Obama signed into law on Friday the extension of the first time home buyer’s tax credit, putting in our hands $24 billion of stimulus money. This is huge any way you slice it (and it can be sliced a couple of ways), but first the particulars:

First Time buyers can get up to a $8,000 tax credit if they buy a home before April 30, 2010. The salary limits have been raised from $75K / $150K (individuals / couples) to $150K / $225K. That alone qualifies many buyers that were not eligible before. Existing home owners who have lived in their home for five years are also now eligible for up to a $6,500 tax credit. That, too is a significant change. Only homes under $800K are eligible.

What does this mean? Let’s look at a $500K house (which in my market is a first time buyer). $8,000 can certainly help with closing costs, or improvements. Those are good things.

If we do some math however, we see that $8,000 is just over 1.5%. If I were to borrow an extra $8,000 for 30 years at 5%, I would be paying $43 more a month. I’m not looking at $43 a month gift in the mouth. I’ll take it, but I’m not buying a house I wouldn’t have otherwise because of it.

Is the value more psychological? If it is, I don’t discount its impact, I just put it in a different category. Those of us that have been frustrated at expensive deals falling apart over much much less than $8,000, know how much can ride on stubborn positions and clients that just have to beat the other guy.

Move up buyers can benefit as well (to to $6,500), but they are already in great shape. They are presumably buying a home that has depreciated more than theirs has, and are getting an interest rate that’s likely lower than they already have. Let’s assume our trade up buyer is buying a $700,000 home, the tax credit for him or her is less than 1%. Again, not nothing, but is anyone in their right mind walking away from their dream home for less than one percent when they are already getting a great relative value with amazingly low interest rates?

The 800 pound gorilla in the room are move down sellers; either empty nesters or people simply wanting or needing less. If they bought at the height of the market, their home will need some time to appreciate there again. Clearly if they don’t have to sell, that might be their best option, but I would have liked to see some relief for those folk, too. They may not be able to claim capital losses (depends on their particular situation) and they have the homes that trade up buyers want. If they bought seven years ago, they’re golden (even with the downturn), but if they bought more recently...

I don’t want to be a wet blanket on the extension, and I don’t agree with the naysayers that it won’t have a positive impact. It’s going to provide for a very interesting spring market for many buyers and sellers. That said, I disagree with all those 'free government money' claims. It's not free if our tax dollars have to cover it or we dump the debt on our kids.

It’s important to keep this in perspective though so that people make the best choices for their particular situation taking all the factors into account with the appropriate importance. I put the tax credit as a solid C plus in importance behind home price, taxes, INTEREST RATE, and the single most important thing: Is this your dream home and is this the right time for you?

Agents out there, you know where to send your hate mail.

It’s Official! Tax Credit Extended and Expanded. What Does It Mean? A Different Perspective.

2009-11-10T15:55:00.000-05:00

Bedroom & Bathtub for Sale By Owner

2009-11-07T14:51:00.001-05:00

Most home owners would not dream of selling their bedroom or the bathtub in their bathroom, but when they take out the equity in their homes, they are doing just that.

One of the most revered goals in our great nation has been the promise of home ownership. People taking the plunge and little by little building equity over the years so they can have a retirement nest egg is the American dream. Markets go up and markets go down, but until someone figures out how to make more land, real estate is still one of the best economic choices most of us can make.

Some national lenders are dramatically scaling back their home equity loan programs (reducing the available credit or just downright canceling HELOCS). They have their reasons for doing this, but we should take notice, and know better if we can avoid it.

As a realtor, one of the most heartbreaking things is when sellers have to bring money to close. Yes, the downturn is a piece of that, but an all too common cause is when people take the equity out of their homes leaving them with far less financial strength when they do eventually sell.

I certainly am not passing summary judgment of people that leverage their homes. Not everyone uses their home as an ATM or as a supplemental form of income. Many people find themselves with financial difficulties that leave them facing poor options. This is not for you, the troubled homeowner. This is for you, the homeowner that can take out the equity but shouldn’t.

If you can avoid home equity loans, avoid them. Try to remember the advice our parents gave us (don’t buy it if you can’t pay for it). As an adult, I certainly don’t like to hear that I have to wait for what I want, but that medicine is exactly what I need sometimes. I’m not particularly old fashioned, but saving up until I can buy something feels fundamentally right.

If you must take out a home equity loan, understand the market; you could get caught selling in a down cycle and not have the equity you thought.

For many of us, our home is our future. Make sure you understand the equity you have, the interest you’re paying, and the compound cost to you of a home equity loan. Never use a long term investment (a home) to fund a short lived commodity (a car or a boat).

If you can help it, don’t sell parts of your home today. That will come to haunt you tomorrow and leave with you with fewer choices. Thanks for the advice mom. I should have heeded it more early on, myself.

Bedroom & Bathtub for Sale By Owner

2009-11-07T14:37:00.000-05:00

Senate Passes Homebuyer Tax Credit Extension!

2009-11-05T09:54:00.000-05:00

You’ll be reading about this all day!!!

Yesterday (November 4, 2009) the Senate officially passed a six month extension on the first time home buyer tax credit of $8,000, which is intended to encourage more people to buy homes and spur economic activity. The bill has expanded to include ‘trade up’ buyers (present home owners that have lived in their home for at least five years can get up to $6,500).

The bill will now move into the House, and then to President Obama’s desk for his signature, at which point it becomes law.

If you have any doubt that this is huge, don’t! This is huge. Read some of my other posts on the need for every tax deduction we can get. We’re going to need it!

There is an $800,000 maximum for the purchase price of the home, and the income caps which has been raised to $125,000 ($225,000 for a couple).

If you are so inclined, you can find the bill here.

Senate Passes Homebuyer Tax Credit Extension!

2009-11-05T09:35:00.000-05:00

How Much Is My House Worth? - Parth II

2009-11-03T12:38:00.000-05:00

Thanks to everyone that commented on 'How Much Is My House Worth?' post. Certainly what one's home value might be is a topic near and dear to many people, but I was surprised at all your responses and kind words, thank you.

Some of you were wondering how the numbers might affect your particular markets and situations and the spreadsheet below might be helpful. Simply plug in the year a home was purchased and what the appreciation or depreciation rates for EVERY year your particular market uses and you are interested in. This will allow you to mix and match whatever values you feel are most appropriate, and if you are so inclined, to forecast future performance. Immediately below the spreadsheet is a chart that may be easier to visualize.

Note that while the spreadsheet is 'live' and will update automatically based on your input, the values are not stored in any way and its use is completely anonymous.

How Much Is My House Worth? - Parth II

2009-11-03T09:59:00.000-05:00

Thanks to everyone that commented on 'How Much Is My House Worth?' post. Certainly what one's home value might be is a topic near and dear to many people, but I was surprised at all your responses and kind words, thank you.

Some of you were wondering how the numbers might affect your particular markets and situations and the spreadsheet below might be helpful. Simply plug in the year a home was purchased and what the appreciation or depreciation rates for EVERY year your particular market uses and you are interested in. Enter values in the WHITE cells. The values there are samples ONLY!!!

This will allow you to mix and match whatever values you feel are most appropriate, and if you are so inclined, to forecast future performance. Immediately below the spreadsheet is a chart that may be easier to visualize.

Note that while the spreadsheet is 'live' and will update automatically based on your input, the values are not stored in any way and its use is completely anonymous.

How Much Is My House Worth?

2009-11-02T17:09:00.000-05:00

As it frequently happens when I’m at a party, the subject of occupation comes up and when people discover I’m a realtor, the conversation usually gets very personal because people immediately want to know from an insider how they’ve been affected.

This weekend was no exception. We were at an excellent Halloween party (no you don’t get pictures of my costume) and the subject of a particular market came up. Although it seemed as if different price ranges were talking, the question was the same: What is my house worth and when will I get my money?

How should someone who is contemplating the value of their home feel?

As always, it depends when one bought, and when they are thinking of selling. If someone bought their home in 2001, they enjoyed six unrealistic and unsustainable years of 10-20% appreciation, while traditional appreciation had been closer to 4-5% per year.

Let’s compare a hypothetical 25% loss of value between 2007 to today with what reality should have been. Yes, I’m using a post bubble lens but bubbles are only real for brief periods, and that’s the best lens we have.

If a $500K house were bought in 2001 and appreciated 12% yearly until 2007 then depreciated 25% from 2007 to today, the house would be worth just over $764K. On the other hand, if that house appreciated a consistent and mere 5% (boy doesn’t that sound good), that house would be worth less than $739K!

Yeah, I know it hurts, and it’s not politically prudent to tell you, but you shouldn’t be complaining. That $45K was monopoly money you get to keep.

If you bought that same house in 2006 for $881K, then things are a bit different for you as it will take you four years (at 4% appreciation) to get back there. The good news for you is that get back there you will, if you don’t need to sell sooner.

Many have genuinely suffered over the economic downturn in the past year and a half, but many also are still enjoying the benefit of the crazy price climb.

The financial crisis has been a bitter pill to many people, but we shouldn’t be quick to forget the honey we’re still tasting.

You know where to send your hate mail.

How Much Is My House Worth?

2009-11-02T16:38:00.000-05:00

Will the Tax Credit be Extended?

2009-10-30T08:56:00.000-04:00

Bloomberg news and now everyone is reporting that congress is about to not only extend the first time home buyers tax credit, but also will expand it to include trade up buyers!!!

Bloomberg article can be found here.

TARP, Tax Credits, and TALF... Huh?

2009-10-28T21:08:00.000-04:00

Unless you’ve been under a real estate rock, you’ve heard about the first time home buyers credit that’s about to expire. Unless that rock is under a larger rock, you’ve also heard about the $700 Billion dollar bank bailout (TARP).

What gets much less press is the Term Asset-Backed Loan Facility (TALF) which will cost the Fed $1.3 TRILLION. Does that affect real estate? You could bet what you can afford it does!

Tax Credit & Tarp? How about $1.3 Trillion? What does it mean to you?

TARP, Tax Credits, and TALF... Huh?

2009-10-28T15:39:00.000-04:00

$8000... $700,000,000,000...$1,300,000,000,000. What does it mean to your real estate plans?

When You Love What You Do...

2009-10-22T11:46:00.000-04:00

When we love what we do, it's not work. Labors of love don't quite feel like labor, and sometimes good deeds do go unpunished.

This is about a very small contribution I'm very proud of. About a year ago, I started a not for profit collective of musicians to bring live music back to our community. Maplewood and South Orange are some of the communities I serve, and in very short order the three clubs that staged live music closed. Business acumen, musicians, and alcohol don't seem to be a recipe for success (imagine that). The economic downturn was simply too much for the local clubs to ride out.

Solely with the selfless help of local musician volunteers, we staged our first show to rave reviews (much to everyone's surprise). We got coverage from the NY Times, several local newspapers and websites. The first show was an experiment, and we subsequently put on several more shows.

We were invited to participate in South Orange's Outdoor Music Series this summer and had an amazing concert for close to 600 people on the hill. That was our fifth show.

Just a few days ago, NJ.com asked me to write a few words about my favor place to play in New Jersey, which is in South Orange. Our sixth show is tomorrow night and will be our biggest yet. How is this about real estate? It's about community and about one very small contribution that make our communities special. There are many more meaningful examples, but this small corner is one that brings me great joy.

When we love what we do, it's not work. I love our communities, and I'll tell anyone that will listen how great they are.

I hope to see you tomorrow!

NJ.com article can be found here.
Event website can be found here.

When You Love What You Do...

2009-10-22T11:17:00.000-04:00

Negotiating The Offer - Seek to understand first, then to be understood

2009-10-21T14:57:00.000-04:00

Regardless of market conditions, no buyer in the history of buyers has wanted to pay a dime more for a home than absolutely necessary**. In the equal history of sellers, no seller has wanted to sell their home for a nickel less than they possibly could get.*

Buyers and sellers each has had to face the emotional and intellectual comfort zone of what he or she is willing to pay or trade even though they don’t know what the other party’s comfort zone is.

When the conditions are relatively moderate great negotiating skills aren’t needed as the area of compromise can be wide. Many people have the tools and skills to negotiate in this scenario.

In strong buyer or seller’s market the area of possible compromise is much tighter. The negotiating skills required to make a deal happen need to be much more sophisticated and nuanced, and fewer people can do it well.

Unfortunately many sales fall apart even as areas of compromise do exist. How many transactions couldn’t come to terms over less than a one percent difference only to find too late that a wider compromise existed?

It’s too easy to blame a failed negotiation on the irrational or demanding other side when in truth, we are all demanding and want the best for ourselves.

As agents, we can serve our clients best by treating everyone in a transaction as real people with real motivations, thoughts, and feelings. It’s crucial for agents to humanize the other side so we can better understand their thought process and feelings, and to humanize our clients to them. It’s also important for us to try to help our clients come to terms with their motivations and comfort zone.

The surest way of serving our client’s needs and wants is take the time to know them so we can continually work toward a win win solution that works for them. We must constantly improve our communication skills and remind the sellers they were once buyers, and the buyers that they were once sellers. First time buyers, call me. I’ll remind you of something.

*Perhaps that’s an exaggeration, but I think I can get away with that one.

Seek First to understand, then to be understood belongs to Stephen Covey - The Seven Habits of Highly Effective People

Negotiating The Offer - Seek to understand first, then to be understood

2009-10-21T13:58:00.000-04:00

When the conditions are relatively moderate great negotiating skills aren’t needed as the area of compromise can be wide. Many people have the tools and skills to negotiate in this scenario.

How Buyers Can Find Their Money Sooner

2009-10-19T10:34:00.000-04:00

The Basics

If a buyer earns $100,000 per year and pays 20% taxes, they must have withheld $20,000 throughout the year to not owe anything. If our buyer has $25,000 in deductions (reductions to their gross income), their taxable income would be reduced to $75,000.

If we can assume the same tax bracket, their tax liability would then be $15,000, which is 20% of $75,000.

Can that $5,000 provide a nice refund? You bet it does, however it can also serve another even more important purpose many people don’t consider. Our buyer can decrease his withholding by $400 a month ($4,800 to make the math easy), and essentially have an extra $400 in hard cash to pay for their mortgage or other living expenses.

This is not Enron monopoly money. This is simply figuring out your taxes for the coming year and adjusting your withholdings so they match your taxes prospectively.

I certainly grew up thinking about tax refunds (a retroactive adjustment) as the only option but I learned this was not the only way to think about it. For me, it was not even the best way to think about it.

Taking a real world scenario where a buyer has a 30 year $400,000 mortgage at 5%, the interest the first year will be $19,866. Now let’s assume a realistic yearly property tax of $10,000. This creates a simple gross income deduction of $29,866.

Having this deduction can be thought of as a traditional refund or as having an extra $500 a month by withholding less! Plug your numbers into the live spreadsheet below to see how your interest and taxes can be used monthly.

Speak with your accountant to validate how this affects your particular situation as Uncle Sam doesn’t like people not withholding enough to cover their taxes. Do it well however, and you can use the money when you need it and break out even at tax time. Talk to your accountant, then talk to me!

How Buyers Can Find Their Money Sooner

2009-10-19T10:00:00.000-04:00

One of the scariest financial mysteries to many home buyers surrounds the tax advantages of mortgage interest and property taxes. Although most buyers conceptually get that there are advantages to home ownership, the actual numbers don’t generally make their way into most people’s financial planning and typically come as news at tax time.

Buyers that so understand these tax advantages can lower their monthly withholdings and get the advantage when they need it most: when paying their monthly bills.

The Basics:

If a buyer earns $100,000 per year and pays 20% taxes, they must have withheld $20,000 throughout the year to not owe anything. If our buyer has $25,000 in deductions (reductions to their gross income), their taxable income would be reduced to $75,000.

If we can assume the same tax bracket, their tax liability would then be $15,000, which is 20% of $75,000.

Can that $5,000 provide a nice refund? You bet it does, however it can also serve another even more important purpose many people don’t consider. Our buyer can decrease his withholding by $400 a month ($4,800 to make the math easy), and essentially have an extra $400 in hard cash to pay for their mortgage or other living expenses.

This is not Enron monopoly money. This is simply figuring out your taxes for the coming year and adjusting your withholdings so they match your taxes prospectively.

I certainly grew up thinking about tax refunds (a retroactive adjustment) as the only option but I learned this was not the only way to think about it. For me, it was not even the best way to think about it.

Taking a real world scenario where a buyer has a 30 year $400,000 mortgage at 5%, the interest the first year will be $19,866. Now let’s assume a realistic yearly property tax of $10,000. This creates a simple gross income deduction of $29,866.

Having this deduction can be thought of as a traditional refund or as having an extra $500 a month by withholding less! Plug your numbers into the live spreadsheet below to see how your interest and taxes can be used monthly.

How Effective Are Web Searches?

2009-10-15T09:00:00.001-04:00

Many elements of real estate are counter intuitive and even sophisticated buyers can get caught making poor choices because they can't manage the media overload around them.

I love Google as much as anyone, but two major problems constantly crop up on the web when it's your main source of information:

Number one, and most obvious is that there is so much of it out there, that it can be near impossible to distinguish usable information from the flotsam.

For ha has, I did a Google search on real estate this morning, and Mr. Google returned 433,000,000 pages. That’s four hundred thirty three million pages. We all know that 90% of everything is dreck, so even if we discounted the noise, we’d have to sift through 43,000,000 pages. Better get a cup of coffee. This leads to the second, and less obvious result...

Many of us see the sheer breadth of information out there and simply assume that if it's not on Google, it most not exist.

In truth, there is a great deal of real estate information that never gets onto public sites like Google. How many homes are sold because a realtor that is plugged into the community knows about it before it’s publicly listed and presents it to buyers he or she is working with? More than you think.

How many publicly listed homes are simply not available because the information is not updated? Again, more than you think since the data is proprietary and only given to licensed agents.

Research suggests that 90% of initial home searches are done on the web, and that’s a great thing, but people shouldn't think of initial searches as anything other than that. Getting that great deal can only happen when you work with a savvy insider.

How Effective Are Web Searches?

2009-10-15T08:40:00.000-04:00

Many elements of real estate are counter intuitive and even sophisticated buyers can get caught making poor choices because they can't manage the media overload around them.

I love Google as much as anyone, but two major problems constantly crop up on the web when it's your main source of information:

Number one, and most obvious is that there is so much of it out there, that it can be near impossible to distinguish usable information from the flotsam.

For ha has, I did a Google search on real estate this morning, and Mr. Google returned 433,000,000 pages. That’s four hundred thirty three million pages. We all know that 90% of everything is dreck, so even if we discounted the noise, we’d have to sift through 43,000,000 pages. Better get a cup of coffee. This leads to the second, and less obvious result...

Many of us see the sheer breadth of information out there and simply assume that if it's not on Google, it most not exist.

In truth, there is a great deal of real estate information that never gets onto public sites like Google. How many homes are sold because a realtor that is plugged into the community knows about it before it’s publicly listed and presents it to buyers he or she is working with? More than you think.

How many publicly listed homes are simply not available because the information is not updated? Again, more than you think since the data is proprietary and only given to licensed agents.

Research suggests that 90% of initial home searches are done on the web, and that’s a great thing, but people shouldn't think of initial searches as anything other than that. Getting that great deal can only happen when you work with a savvy insider.

Is the $8000 Tax Credit for First Time Home Buyers a Boon or a Distraction?

2009-10-14T14:55:00.001-04:00

You can't do a real estate search today without getting inundated with the $8000 tax credit for first time home owners. There is a frenzy as the credit is set to expire on November 30th. Should buyers that qualify rush to the closing table or is the value of the credit overblown?

As the deadline nears, many buyers will feel pressured into acting on a purchase decision and not negotiate as well as they should. Is it possible that a buyer may be able to get a better price if there weren't a time crunch? As an experience negotiator, I can say that when time was not on my side I generally couldn't get the best deal.

Now, let's compare the tax credit to a quarter of one percent difference in a mortgage rate that can change daily.

As an example, let's look at a $480,000 home with a $400,000 mortgage. If rates changed on us from 5% to 5.25%, our buyer would pay an additional $22,000 over the life of the loan. Yes, $8000 today might still be better than $22,000 over 30 years for some buyers, but for others that focus on the total cost of ownership of a home, a scant quarter of one percent increase in interest rate will suck the $,8000 and take another $14,000 with it. In fact that first year alone, that quarter of one percent will cost $1,000 in additional interest costs. Where would you focus?

For some buyers the $8,000 credit will be the last little bit that gets them over the hump, and that's a good thing. However since we are predominantly talking about first time buyers, it's just as likely they won't understand the impact of interest rates, negotiating well, or many of the other aspects of home ownership, and might get swept in the moment.

Let that perfect home be your call to action, not the hype. Make sure you speak to a knowledgeable real estate professional who can guide you and protect you every step of the way. I look forward to hearing from you.

Is the $8000 Tax Credit for First Time Home Buyers a Boon or a Distraction?

2009-10-13T15:57:00.000-04:00

You can't do a real estate search today without getting inundated with the $8000 tax credit for first time home owners. There is a frenzy as the credit is set to expire on November 30th.

Should buyers that qualify rush to the closing table or is the value of the credit overblown?

As the deadline nears, many buyers will feel pressured into acting on a purchase decision and not negotiate as well as they should. Is it possible that a buyer may be able to get a better price if there weren't a time crunch?

As an experience negotiator, I can say that when time was not on my side I generally couldn't get the best deal.

Now, let's compare the tax credit to a quarter of one percent difference in a mortgage rate that can change daily.

As an example, let's look at a $480,000 home with a $400,000 mortgage. If rates changed on us from 5% to 5.25%, our buyer would pay an additional $22,000 over the life of the loan. Yes, $8000 today might still be better than $22,000 over 30 years for some buyers, but for others that focus on the total cost of ownership of a home, a scant quarter of one percent increase in interest rate will suck the $,8000 and take another $14,000 with it. In fact that first year alone, that quarter of one percent will cost $1,000 in additional interest costs. Where would you focus?

For some buyers the $8,000 credit will be the last little bit that gets them over the hump, and that's a good thing. However since we are predominantly talking about first time buyers, it's just as likely they won't understand the impact of interest rates, negotiating well, or many of the other aspects of home ownership, and might get swept in the moment.

Let that perfect home be your call to action, not the hype. Make sure you speak to a knowledgeable real estate professional who can guide you and protect you every step of the way. I look forward to hearing from you.

Buy Now, Or to Wait…Has The Market Stabilized?

2009-10-11T07:58:00.000-04:00

Stabilization and recovery, what does this mean for buyers?

Most buyers and sellers see the massive media onslaught and walk away with an incorrect perception of what is going on their local market. There is an old saying that you can't tell time by staring at the second hand. Much of the daily news is just that.

Most experts agree that we've emerged from the great recession, and that we ought to see a modest recovery over the next year or two. The reality is that market trends happen before the public is aware of them and we can only tell the market has bottomed once it's going back up. What does this really mean to a buyer or a seller?

Rule of thumb is that six months of inventory is the boundary between a seller's market and a buyer's market. In other words, if ten homes sell a month, and there are sixty homes available, then there is six months of inventory. If there are fifty homes available, then it's a seller's market, if there are seventy then it's a buyer's market.

The reality is that markets are local. It's hard to see this when hearing the media generalize nationally. There are certainly many communities that are sitting on years worth of inventory, however in the areas that I serve, the opposite is true. For the sweet spot of homes (three to four bedroom mid-priced homes), the inventory is fairly low, and there are multiple offers and there are bidding wars. In the higher end, the movement is not so robust.

Taking today's local stats, there are 35 active listings for three bedroom homes, and 67 active listings for five plus bedroom homes in one of my towns. During this period 8 three bedroom homes sold and 5 five plus bedroom homes sold (35/8 as oppose to 67/5). This simply tells us that for three bedroom homes there is just over four months worth of inventory, while for five plus bedroom homes there is a thirteen month inventory. It stands to reason that the higher priced homes would not sell robustly in the current climate, however we see a stark difference for three bedroom homes. if anyone thinks that three bedroom homes in this town with 38 average days on market is a buyer's dream, they need a reality check. Those homes are a seller's market.

For first time buyers, there are fewer homes to see, but the available homes are very well priced, coupled with near record low interest rates. When was the last time that interest rates and home prices were both low? Trick question. The answer is never. Let's take as an example a $400,000 mortgage and 5% interest for a 30 year conventional loan (has anyone had a reaction already? 5%!). Interest rates will likely go up so let's compare that to a year from now to an interest rate of 6% with our home having appreciated $10,000 more (a modest 2 1/2 percent increase). The monthly mortgage payment would be $310 less per month, and overseer the life of the loan, waiting a year would cost $111,000 more! A modest half a percentage point change in interest (say it goes to 5.5%), would still make that purchase $65K more!

Is this a cup is half full no matter what the media tell us? Reality is local, and while much of the market has been affected in predictable ways, not every market has. Make sure you speak to a superb realtor, who has access to all the information so you can make the best decision for you.

Rock The House 6 - October 23rd!

2009-10-06T17:20:00.002-04:00

How much should you afford?

2009-10-06T17:20:00.001-04:00

Bear in mind, however, that lenders will look at more than just your income to determine the size of the loan. Likewise, you may find that there are some creative financing options that can help boost your purchasing power.

Loan prequalification vs. preapproval
One of the best ways to determine your budget is to have your real estate agent or lender prequalify you for a loan. Prequalification is different from preapproval, because it is only an estimate of what you'll be able to afford. On the other hand, preapproval is a more formal process where a lender examines your finances and agrees in advance to loan you money up to a specified amount.

What factors are important to lenders?
Banks and lending institutions will use several criteria to determine how much money they'll agree to lend. These include:

Your gross monthly income
Your credit history
The amount of your outstanding debts
Your savings--or the amount of money you have available for a down payment and closing costs
Your choice of mortgage (i.e. 30-year, FHA, etc.)
Current interest rates

Two important ratios
Lenders also use your financial information to figure out two, very important ratios: the debt-to-income ratio and the housing expense ratio.

Debt-to-income ratio
Many lenders use a rule of thumb that the amount of debt you are paying on each month (car payment, student loan, credit card, etc,) shouldn't exceed more than 36 percent of your gross monthly income. FHA loans are slightly more lenient.
Housing expense ratio
It is generally difficult to obtain a loan if the mortgage payment will be more than 28 to 33 percent of your gross monthly income.

Down payments make a difference
If you can make a large down payment, lenders may be more lenient with their qualifying ratios. For example, a person with a 20 percent down payment may be qualified with the 33 percent housing expense ratio, while someone with a 5 percent down payment is held to the stricter 28 percent ratio.

Other ways to improve your purchasing power

Gifts
If you're having trouble saving money, many lenders will allow you to use gift funds for the down payment and closing costs. However, most lenders require a "gift letter" stating the gift doesn't have to be repaid, and will also require you to pay at least a portion of the down payment with your own cash.
Negotiating Closing Costs
Through negotiation, some sellers may agree to pay all or most of your closing costs (for example, if you agree to meet their full asking price). If you choose to try this, make sure to ask your real estate agent for advice.
Loan Programs
Many local governments have special loan programs designed to help first-time homebuyers. Loans may be available at reduced interest rates, or with little or no down payments. Check with your local housing authority for more information.
Loan Types
Some homebuyers choose Adjustable Rate Mortgages (ARMs) because of low initial interest rates. Others opt for 30-year loans because they have lower monthly payments than 15-year loans. There are significant differences between different loans, so make sure to discuss the pros and cons of different loans with your agent or lender before making a decision.

Although we consider this information accurate, always consult with your lender.

Closing Costs - Why Are So Many People Nastily Surprised?

2009-10-06T17:19:00.006-04:00

Many people (especially first time buyers) don't consider closing costs when they are assessing their finances.

Closing costs are the bundle of fees associated with the buying or selling of a home. Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiable or dictated by local custom.

Buyer closing costs
When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate of their closing costs. The fees vary according to several factors, including the type of loan they applied for and the terms of the purchase agreement. Likewise, some of the closing costs, especially those associated with the loan application, are actually paid in advance. Some typical buyer closing costs include:

The down payment
Loan fees (points, application fee, credit report)
Prepaid interest
Inspection fees
Appraisal
Mortgage insurance (typically 1 years premium plus an escrow of 2 months)
Hazard insurance (typically 1 years premium plus an escrow of 2 months)
Title insurance
Documentary stamps on the note

Seller closing costs
If the seller has not yet paid for the house in full, the seller's most important closing cost is satisfying the remaining balance of their loan. Before the date of closing, the escrow officer will contact the seller's lender to verify the amount needed to close out the loan. Then, along with any other fees, the original loan will be paid for at the closing before the seller receives any proceeds from the sale. Other seller closing costs can include:

Broker's commission
Transfer taxes
Documentary Stamps on the Deed
Title insurance
Property taxes (prorated)

Negotiating Closing Costs
In addition to the sales price, buyers and sellers frequently include closing costs in their negotiations. This can be for both major and minor fees. For example, if a buyer is particularly nervous about the condition of the plumbing, the seller may agree to pay for the house inspection.

Likewise, a buyer may want to save on up-front expenditures, and so agree to pay the seller's full asking price in return for the seller paying all the allowable closing costs. There's no right or wrong way to negotiate closing costs; just be sure all the terms are written down on the purchase agreement.

Prorations
At the closing, certain costs are often prorated (or distributed) between buyer and seller. The most common prorations are for property taxes. This is because property taxes are typically paid at the end of the year for which they were assessed.

Thus, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won't come due until the following year! To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for half the taxes at closing.

Although we consider this information accurate, always consult with your lender.

Understanding Different Types of Loans

2009-10-06T17:19:00.005-04:00

While the different choices may seem overwhelming at first, the overall goal is really quite simple: you want to find a loan that fits both your current financial situation and your future plans. Though this article discusses some of the more common loan types, you should spend time talking with different lenders before deciding on the right loan for your situation.

General categories of loans
Most loans fall into three major categories: fixed-rate, adjustable-rate, and hybrid loans that combine features of both.

Fixed-rate mortgages
As the name implies, a fixed-rate mortgage carries the same interest rate for the life of the loan. Traditionally, fixed-rate mortgages have been the most popular choice among homeowners, because the fixed monthly payment is easy to plan and budget for, and can help protect against inflation. Fixed-rate mortgages are most common in 30-year and 15-year terms, but recently more lenders have begun offering 20-year and 40-year loans.
Adjustable-rate mortgages (ARM)
Adjustable-rate mortgages differ from fixed-rate mortgages in that the interest rate and monthly payment can change over the life of the loan. This is because the interest rate for an ARM is tied to an index (such as Treasury Securities) that may rise or fall over time. In order to protect against dramatic increases in the rate, ARM loans usually have caps that limit the rate from rising above a certain amount between adjustments (i.e. no more than 2 percent a year), as well as a ceiling on how much the rate can go up during the life of the loan (i.e. no more than 6 percent). With these protections and low introductory rates, ARM loans have become the most widely accepted alternative to fixed-rate mortgages.
Hybrid loans
Hybrid loans combine features of both fixed-rate and adjustable-rate mortgages. Typically, a hybrid loan may start with a fixed-rate for a certain length of time, and then later convert to an adjustable-rate mortgage. However, be sure to check with your lender and find out how much the rate may increase after the conversion, as some hybrid loans do not have interest rate caps for the first adjustment period.

Balloon payments
A balloon payment refers to a loan that has a large, final payment due at the end of the loan. For example, there are currently fixed-rate loans which allow homeowners to make payments based on a 30-year loan, even though the entire balance of the loan may be due (the balloon payment) after 7 years. As with some hybrid loans, balloon loans may be attractive to homeowners who do not plan to stay in their house more than a short period of time.

Time as a factor in your loan choice
As has been discussed, the length of time you plan to own a property may have a strong influence on the type of loan you choose. For example, if you plan to stay in a home for 10 years or longer, a traditional fixed-rate mortgage may be your best bet. But if you plan on owning a home for a very short period (5 years or less), then the low introductory rate of an adjustable-rate mortgage may make the most financial sense. In general, ARMs have the lowest introductory interest rates, followed by hybrid loans, and then traditional fixed-rate mortgages.

FHA and VA loans
U.S. government loan programs such as those of the Federal Housing Authority (FHA) and Department of Veterans Affairs (VA) are designed to promote home ownership for people who might not otherwise be able to qualify for a conventional loan. Both FHA and VA loans have lower qualifying ratios than conventional loans, and often require smaller or no down payments.

Bear in mind, however, that FHA and VA loans are not issued by the government; rather, the loans are made by private lenders. FHA loans are insured to the actual lender and VA loans are guaranteed in case the borrower defaults. Remember too, that while any U.S. citizen may apply for a FHA loan, VA loans are only available to veterans or their spouses and certain government employees.

Conventional loans
A conventional loan is simply a loan offered by a traditional private lender. They may be fixed-rate, adjustable, hybrid or other types. While conventional loans may be harder to qualify for than government-backed loans, they often require less paperwork and typically do not have a maximum allowable amount.

Although we consider this information accurate, always consult with your lender.

Best Damned Chinese Food

2009-10-06T17:19:00.003-04:00

Cathay 22

124 US Highway 22

Springfield, NJ 07081-3143

(973) 467-8688

Many such things are esthetic, and tastes vary. Disclaimer now stated, Cathay22 is our favorite Chinese restaurant in the area. maybe Wo Hop in Chinatown is better, maybe not....

Go on the weekend (before 2PM) and have the soup dumplings. TO DIE FOR!

The sweet soybean soup is lovely (ask for the long bread sticks to dunk) as is the Peking duck. For those less adventurous, the simple steamed chicken with broccoli is delicious (cooked on woks that have been seasoned for years).

Your First Home

2009-10-06T17:19:00.001-04:00

You’ve been renting, and through market highs and market lows have wondered whether the advantages of homeownership outweigh the risk, and have finally determined that they do!

How does the process of buying a house work? How is it different for first time buyers, and how are you protected?

You’ve come to the right place, and together we’ll step through buying your dream home!

The following is a basic summary, and once we get together and discuss your details, you’ll have the information you need to begin your search in earnest. You should also consult with your lender so you can understand the various options for financing as well as the different ways people think about numbers (lowest monthly payment, ways to build equity, how long you plan to be in the home, and many more).

As you’ll see very shortly, the entire process is designed with protections and safeguards for buyers.

Location Location Location

Many first time buyers are unfamiliar with the various towns, what they have to offer, and how those items might be more important to some buyers than to others.

Savvy buyers select the towns they want to live in first, then find the house that best fits their needs and wants. This simple first step will go a very long way toward avoiding surprises in the future.

In many of our areas, the local market does not behave as the larger markets do. While we may be in a downturn, the inventory of homes in our towns can vary from a big amount (a buyer’s market) to a very small amount (a seller’s market). Even in the same community there may be a glut of five bedroom houses (a buyer’s market) and very few three bedroom houses (a seller’s market).

Regardless of what’s going on across the street, if a well priced, well appointed home in a good neighborhood comes on the market and there isn’t much inventory, people will clamor to it and for that house, it will behave as a seller’s market. Forget the Case-Schiller index, forget CNN; that house will get multiple offers.

Once you’ve narrowed your search to the community you want to live in, comes the house search! As a top real estate agent, I’ll help you choose the right town for you and then I’ll prepare you to find your next home.

Be Ready To Act

When you are ready to begin your search, you won’t know whether it will take a while to find the right house, or if it will happen the very first day! Yes, it happens all the time.

Many home buyers are caught by surprise when they find their next home but are not ready to make an offer.

The first step to being ready is to consult with your lender (we can provide you with a list of very reputable ones). Your lender will quickly check your credit and your finances at a high level and give you a very good idea of how much you can borrow comfortably. He or she will also give you a pre-approval letter stating so. This will not only help you decide your realistic price range, but will also help us narrow your search. Having this information will help you make a bid on a home because you will already know how much you can afford.

The time to figure your financial comfort level is not in the middle of a bidding process, where things can happen very quickly. Trust me when I tell you that it’s very stressful for buyers to determine the value of a home they must bid on right away when they don’t really understand how much they can afford!

Customarily, a pre-approval letter is included with an offer. This tells the sellers you are a willing, ready, and able buyer. Most listing agents will discourage a seller from treating an offer as legitimate without one.

Making The Offer

Your offer will include how much you will pay for the house, how much you will put as a down payment, and how quickly you will be able to complete the purchase (close).

For example, if you wish to buy a $500,000 house from a seller that must move quickly and will be financing 80%, your offer might include an earnest deposit check for $3,000, a commitment from you to put another $47,000 within ten days, another $50,000 upon closing, and a mortgage commitment to finance the remaining $400,000 within 30 days.

Compare this to presenting an earnest deposit check for $100, committing to put down another $15,000 at closing, and to finance $484,900 within 90 days). This is a legitimate offer as well, however to most sellers the first offer is much more attractive. Terms matter!

Your Safeguards

In New Jersey, the attorney review period is three days, and during this time, your attorney can amend, cancel, or with your permission approve the contract. Only once this has happened is your offer a legitimate and enforceable contract. Note that sellers can continue to receive offers from other buyers while you are in attorney review and neither the seller nor the buyer are committed to each other until the buyer and seller attorney agree. This is a very important safeguard for any buyer. If agreement cannot be reached, then any deposit monies are returned to the buyer.

Another very important safeguard is your home inspection. A home inspector is a licensed professional that adheres to ASHI standards and can provide a very detailed understanding of the condition of a home, as well as how to maintain it. If your inspection reveals major issues with the house (all houses have minor issues) that the seller does not wish to address, you can walk away from the purchase (and get all your deposits back). In most cases, your attorney will negotiate the needed repairs with the sellers attorney.

If you are financing your purchase, you will also have a mortgage contingency so that if you cannot get your mortgage within a specific period, the sale is nullified.

The contingencies vary according to the property and your needs as a buyer, however when all the contingencies have been met, you will be committed to complete the purchase.

Typically within 30-45 days, you will get a commitment from your lender, and that is when you can finally close!

Your attorney will order a title search. This is a search through all public records that insure the seller can give you free and clear title of the property and that there are no restrictions on the property. Your attorney will also prepare an itemized list of all expenses you are responsible for (the property taxes you are responsible for, any fees, remaining fuel in the oil tank, etc.).

Buyers are sometimes surprised because they did not take into account these ‘closing costs’. Note that as a buyer, you pay no broker fees whatsoever. These are paid from the proceeds of the sale by the sellers.

Just prior to closing we’ll conduct a walk through inspection of your new home to make sure it’s still in the same condition it was when you signed the contract.

As you can see, there is much to do when buying a home and this is why it’s so important to work with a top agent that can walk you through the entire process.

Moving From NYC

2009-10-06T17:18:00.001-04:00

When I was an Urban Pioneer...

I remember my first New York City apartment. It was 1981 and the lower east side was a very different place. There was no Gap. there certainly was no Whole Foods. Those were the most glorious three hundred square feet with a kitchenette complete with a bathtub smack in the middle of it. Today we call them walk in closets. Back then they were called living rooms. All we ate came from the corner bodega and the only people selling anything organic disappeared when the police came near.

We all had a love hate relationship with the city that lives to this day. We loved knowing that we could get a pizza at three in the morning, although no one we knew ever did it. We loved that we could find anything on the street, even though ‘real’ New Yorkers never bought on the street).

We scoffed at the bridge and tunnel crowd that clamored into the city every weekend, never in a million years imagining that a few short years later, that would be us.

Those of us that are NY transplants fondly recall the way we lived, and for the life of us can’t imagine how we ever did it.

There are many reasons to consider not living in the city, while staying close enough to commute to work daily, or simply romp on occasion.

Whether it’s the insane apartment prices, ridiculous co-op boards, stratospheric maintenance, parking or lack thereof, trying to raise a family, having elbow room, having a yard, or for altogether different reasons, many people decide to move out!

Brooklyn is certainly attractive, but the value proposition is just not there. Any place you’d want to live will still cost you a kidney in the black market. You want a great community, you want great public schools, you want it all!

Broadway stars would never live in New Jersey (actually a ton of of them do), sports stars would never live in New Jersey (actually, many do), captains of industry would never live in New Jersey (actually, you get the idea; yes, they do). Cool, normal people would never move to New Jersey (actually, yes, people like you, do every day of the week).

Some 28-60 minutes due west of Manhattan, there are some outrageously good places to live.

You want superb free schools? We got that. You want artistic communities? We got that. You want fantastic architecture and glorious hiking or biking trails? We got that, too. You want amazing places to eat? We got lots of that! You want places to play? Boy, do we got that! Don’t worry about the question, we have it!

Take a deep breath and explore our side of the pond (the Hudson, that is).

Being Close enough to play.

The US Census Bureau reports*: “New York City residents spend an average of about one full week a year getting to work — the longest commute time in the nation among large cities, according to a new ranking of American Community Survey data released today by the U.S. Census Bureau.

New York City residents take an average of 38.4 minutes to get to work each day…” If you commute to midtown from Millburn, the midtown direct train will get you there in 35 minutes. Compare that to longer time transferring subways while standing next to someone with questionable hygiene as opposed to reading or napping in your cushy train seat... You do the math.

People that work on Wall Street certainly have done the math, and they happily commute from many of our towns.

*http://www.census.gov/Press-Release/www/releases/archives/american_community_survey_acs/001695.html

Rock The House

2009-10-02T17:03:00.000-04:00

Join on on October 23rd for Rock The House 6, the not for profit music collective that I started. This all began as an experiment almost a year ago to bring back live music to our community in light of the local club closings. Never did i imagine we'd get rave reviews from the NY Times, Examiner, Patch.com, and the News Record.

More on www.rockthehousenj.com

Not to mention that you'll see a video interview from the Newark Examiner where I discuss the not for profit and how we're expanding to the community.

Moving From NYC

2009-09-06T14:34:00.000-04:00

When I was an Urban Pioneer...

I remember my first New York City apartment. It was 1981 and the lower east side was a very different place. There was no Gap. there certainly was no Whole Foods. Those were the most glorious three hundred square feet with a kitchenette complete with a bathtub smack in the middle of it. Today we call them walk in closets. Back then they were called living rooms. All we ate came from the corner bodega and the only people selling anything organic disappeared when the police came near.

We all had a love hate relationship with the city that lives to this day. We loved knowing that we could get a pizza at three in the morning, although no one we knew ever did it. We loved that we could find anything on the street, even though ‘real’ New Yorkers never bought on the street).

We scoffed at the bridge and tunnel crowd that clamored into the city every weekend, never in a million years imagining that a few short years later, that would be us.

Those of us that are NY transplants fondly recall the way we lived, and for the life of us can’t imagine how we ever did it.

There are many reasons to consider not living in the city, while staying close enough to commute to work daily, or simply romp on occasion.

Whether it’s the insane apartment prices, ridiculous co-op boards, stratospheric maintenance, parking or lack thereof, trying to raise a family, having elbow room, having a yard, or for altogether different reasons, many people decide to move out!

Brooklyn is certainly attractive, but the value proposition is just not there. Any place you’d want to live will still cost you a kidney in the black market. You want a great community, you want great public schools, you want it all!

Broadway stars would never live in New Jersey (actually a ton of of them do), sports stars would never live in New Jersey (actually, many do), captains of industry would never live in New Jersey (actually, you get the idea; yes, they do). Cool, normal people would never move to New Jersey (actually, yes, people like you, do every day of the week).

Some 28-60 minutes due west of Manhattan, there are some outrageously good places to live.

You want superb free schools? We got that. You want artistic communities? We got that. You want fantastic architecture and glorious hiking or biking trails? We got that, too. You want amazing places to eat? We got lots of that! You want places to play? Boy, do we got that! Don’t worry about the question, we have it!

Take a deep breath and explore our side of the pond (the Hudson, that is).

Being Close enough to play.

The US Census Bureau reports*: “New York City residents spend an average of about one full week a year getting to work — the longest commute time in the nation among large cities, according to a new ranking of American Community Survey data released today by the U.S. Census Bureau.

New York City residents take an average of 38.4 minutes to get to work each day…” If you commute to midtown from Millburn, the midtown direct train will get you there in 35 minutes. Compare that to longer time transferring subways while standing next to someone with questionable hygiene as opposed to reading or napping in your cushy train seat... You do the math.
People that work on Wall Street certainly have done the math, and they happily commute from many of our towns.

*http://www.census.gov/Press-Release/www/releases/archives/american_community_survey_acs/001695.html

Your First Home

2009-08-06T14:52:00.000-04:00

You’ve been renting, and through market highs and market lows have wondered whether the advantages of homeownership outweigh the risk, and have finally determined that they do!

How does the process of buying a house work? How is it different for first time buyers, and how are you protected?

You’ve come to the right place, and together we’ll step through buying your dream home!

The following is a basic summary, and once we get together and discuss your details, you’ll have the information you need to begin your search in earnest. You should also consult with your lender so you can understand the various options for financing as well as the different ways people think about numbers (lowest monthly payment, ways to build equity, how long you plan to be in the home, and many more).

As you’ll see very shortly, the entire process is designed with protections and safeguards for buyers.

Location Location Location

Many first time buyers are unfamiliar with the various towns, what they have to offer, and how those items might be more important to some buyers than to others.

Savvy buyers select the towns they want to live in first, then find the house that best fits their needs and wants. This simple first step will go a very long way toward avoiding surprises in the future.

In many of our areas, the local market does not behave as the larger markets do. While we may be in a downturn, the inventory of homes in our towns can vary from a big amount (a buyer’s market) to a very small amount (a seller’s market). Even in the same community there may be a glut of five bedroom houses (a buyer’s market) and very few three bedroom houses (a seller’s market).
Regardless of what’s going on across the street, if a well priced, well appointed home in a good neighborhood comes on the market and there isn’t much inventory, people will clamor to it and for that house, it will behave as a seller’s market. Forget the Case-Schiller index, forget CNN; that house will get multiple offers.

Once you’ve narrowed your search to the community you want to live in, comes the house search! As a top real estate agent, I’ll help you choose the right town for you and then I’ll prepare you to find your next home.

Be Ready To Act

When you are ready to begin your search, you won’t know whether it will take a while to find the right house, or if it will happen the very first day! Yes, it happens all the time.

Many home buyers are caught by surprise when they find their next home but are not ready to make an offer.
The first step to being ready is to consult with your lender (we can provide you with a list of very reputable ones). Your lender will quickly check your credit and your finances at a high level and give you a very good idea of how much you can borrow comfortably. He or she will also give you a pre-approval letter stating so. This will not only help you decide your realistic price range, but will also help us narrow your search. Having this information will help you make a bid on a home because you will already know how much you can afford.

The time to figure your financial comfort level is not in the middle of a bidding process, where things can happen very quickly. Trust me when I tell you that it’s very stressful for buyers to determine the value of a home they must bid on right away when they don’t really understand how much they can afford!

Customarily, a pre-approval letter is included with an offer. This tells the sellers you are a willing, ready, and able buyer. Most listing agents will discourage a seller from treating an offer as legitimate without one.

Making The Offer

When we’ve found the one, we write up a contract with the terms you are willing to offer and you provide an earnest deposit. This is usually a check for a nominal amount (it can be as little as $50), however all your choices will telegraph to the seller how seriously to consider your offer.

Your offer will include how much you will pay for the house, how much you will put as a down payment, and how quickly you will be able to complete the purchase (close).

For example, if you wish to buy a $500,000 house from a seller that must move quickly and will be financing 80%, your offer might include an earnest deposit check for $3,000, a commitment from you to put another $47,000 within ten days, another $50,000 upon closing, and a mortgage commitment to finance the remaining $400,000 within 30 days.

Compare this to presenting an earnest deposit check for $100, committing to put down another $15,000 at closing, and to finance $484,900 within 90 days). This is a legitimate offer as well, however to most sellers the first offer is much more attractive. Terms matter!

Your Safeguards

In New Jersey, all real estate contracts must be in writing, and allow for an attorney review period. While you are not required to have an attorney, we strongly urge you to use one! Unless you are specifically a real estate attorney in this area, get one. As an attorney friend of ours constantly reminds us that any attorney that represents himself has a fool for a client.

In New Jersey, the attorney review period is three days, and during this time, your attorney can amend, cancel, or with your permission approve the contract. Only once this has happened is your offer a legitimate and enforceable contract. Note that sellers can continue to receive offers from other buyers while you are in attorney review and neither the seller nor the buyer are committed to each other until the buyer and seller attorney agree. This is a very important safeguard for any buyer. If agreement cannot be reached, then any deposit monies are returned to the buyer.

Another very important safeguard is your home inspection. A home inspector is a licensed professional that adheres to ASHI standards and can provide a very detailed understanding of the condition of a home, as well as how to maintain it. If your inspection reveals major issues with the house (all houses have minor issues) that the seller does not wish to address, you can walk away from the purchase (and get all your deposits back). In most cases, your attorney will negotiate the needed repairs with the sellers attorney.

If you are financing your purchase, you will also have a mortgage contingency so that if you cannot get your mortgage within a specific period, the sale is nullified.

The contingencies vary according to the property and your needs as a buyer, however when all the contingencies have been met, you will be committed to complete the purchase.

Typically within 30-45 days, you will get a commitment from your lender, and that is when you can finally close!
Your attorney will order a title search. This is a search through all public records that insure the seller can give you free and clear title of the property and that there are no restrictions on the property. Your attorney will also prepare an itemized list of all expenses you are responsible for (the property taxes you are responsible for, any fees, remaining fuel in the oil tank, etc.).

Buyers are sometimes surprised because they did not take into account these ‘closing costs’. Note that as a buyer, you pay no broker fees whatsoever. These are paid from the proceeds of the sale by the sellers.
Just prior to closing we’ll conduct a walk through inspection of your new home to make sure it’s still in the same condition it was when you signed the contract.

As you can see, there is much to do when buying a home and this is why it’s so important to work with a top agent that can walk you through the entire process.

Best Damn Chinese Food!!!

2009-07-01T14:55:00.000-04:00

Cathay 22
124 US Highway 22
Springfield, NJ 07081-3143
(973) 467-8688

Many such things are esthetic, and tastes vary. Disclaimer now stated, Cathay22 is our favorite Chinese restaurant in the area. maybe Wo Hop in Chinatown is better, maybe not....

Go on the weekend (before 2PM) and have the soup dumplings. TO DIE FOR!

The sweet soybean soup is lovely (ask for the long bread sticks to dunk) as is the Peking duck. For those less adventurous, the simple steamed chicken with broccoli is delicious (cooked on woks that have been seasoned for years).

Understanding Different Types of Loans

2009-05-06T15:07:00.000-04:00

Today's homebuyer has more financing options than have ever been available before. From traditional mortgages to adjustable-rate and hybrid loans, there are financing packages designed to meet the needs of virtually anyone.

While the different choices may seem overwhelming at first, the overall goal is really quite simple: you want to find a loan that fits both your current financial situation and your future plans. Though this article discusses some of the more common loan types, you should spend time talking with different lenders before deciding on the right loan for your situation.

General categories of loans
Most loans fall into three major categories: fixed-rate, adjustable-rate, and hybrid loans that combine features of both.

Fixed-rate mortgages
As the name implies, a fixed-rate mortgage carries the same interest rate for the life of the loan. Traditionally, fixed-rate mortgages have been the most popular choice among homeowners, because the fixed monthly payment is easy to plan and budget for, and can help protect against inflation. Fixed-rate mortgages are most common in 30-year and 15-year terms, but recently more lenders have begun offering 20-year and 40-year loans.
Adjustable-rate mortgages (ARM)
Adjustable-rate mortgages differ from fixed-rate mortgages in that the interest rate and monthly payment can change over the life of the loan. This is because the interest rate for an ARM is tied to an index (such as Treasury Securities) that may rise or fall over time. In order to protect against dramatic increases in the rate, ARM loans usually have caps that limit the rate from rising above a certain amount between adjustments (i.e. no more than 2 percent a year), as well as a ceiling on how much the rate can go up during the life of the loan (i.e. no more than 6 percent). With these protections and low introductory rates, ARM loans have become the most widely accepted alternative to fixed-rate mortgages.
Hybrid loans
Hybrid loans combine features of both fixed-rate and adjustable-rate mortgages. Typically, a hybrid loan may start with a fixed-rate for a certain length of time, and then later convert to an adjustable-rate mortgage. However, be sure to check with your lender and find out how much the rate may increase after the conversion, as some hybrid loans do not have interest rate caps for the first adjustment period.

Other hybrid loans may start with a fixed interest rate for several years, and then later change to another (usually higher) fixed interest rate for the remainder of the loan term. Lenders frequently charge a lower introductory interest rate for hybrid loans vs. a traditional fixed-rate mortgage, which makes hybrid loans attractive to homeowners who desire the stability of a fixed-rate, but only plan to stay in their properties for a short time.

Balloon payments
A balloon payment refers to a loan that has a large, final payment due at the end of the loan. For example, there are currently fixed-rate loans which allow homeowners to make payments based on a 30-year loan, even though the entire balance of the loan may be due (the balloon payment) after 7 years. As with some hybrid loans, balloon loans may be attractive to homeowners who do not plan to stay in their house more than a short period of time.

Time as a factor in your loan choice
As has been discussed, the length of time you plan to own a property may have a strong influence on the type of loan you choose. For example, if you plan to stay in a home for 10 years or longer, a traditional fixed-rate mortgage may be your best bet. But if you plan on owning a home for a very short period (5 years or less), then the low introductory rate of an adjustable-rate mortgage may make the most financial sense. In general, ARMs have the lowest introductory interest rates, followed by hybrid loans, and then traditional fixed-rate mortgages.

FHA and VA loans
U.S. government loan programs such as those of the Federal Housing Authority (FHA) and Department of Veterans Affairs (VA) are designed to promote home ownership for people who might not otherwise be able to qualify for a conventional loan. Both FHA and VA loans have lower qualifying ratios than conventional loans, and often require smaller or no down payments.
Bear in mind, however, that FHA and VA loans are not issued by the government; rather, the loans are made by private lenders. FHA loans are insured to the actual lender and VA loans are guaranteed in case the borrower defaults. Remember too, that while any U.S. citizen may apply for a FHA loan, VA loans are only available to veterans or their spouses and certain government employees.

Conventional loans
A conventional loan is simply a loan offered by a traditional private lender. They may be fixed-rate, adjustable, hybrid or other types. While conventional loans may be harder to qualify for than government-backed loans, they often require less paperwork and typically do not have a maximum allowable amount.

Although we consider this information accurate, always consult with your lender.

How Much Should You Afford?

2009-03-06T15:11:00.000-05:00

Understanding how much you can afford is one of the most important rules of home buying. Depending on your individual situation, your budget can affect everything from the neighborhoods where you look, to the size of the house, and even what type of financing you choose.
Bear in mind, however, that lenders will look at more than just your income to determine the size of the loan. Likewise, you may find that there are some creative financing options that can help boost your purchasing power.
Loan prequalification vs. preapproval
One of the best ways to determine your budget is to have your real estate agent or lender prequalify you for a loan. Prequalification is different from preapproval, because it is only an estimate of what you'll be able to afford. On the other hand, preapproval is a more formal process where a lender examines your finances and agrees in advance to loan you money up to a specified amount.
What factors are important to lenders?
Banks and lending institutions will use several criteria to determine how much money they'll agree to lend. These include:

Your gross monthly income
Your credit history
The amount of your outstanding debts
Your savings--or the amount of money you have available for a down payment and closing costs
Your choice of mortgage (i.e. 30-year, FHA, etc.)
Current interest rates

Two important ratios
Lenders also use your financial information to figure out two, very important ratios: the debt-to-income ratio and the housing expense ratio.

Debt-to-income ratio
Many lenders use a rule of thumb that the amount of debt you are paying on each month (car payment, student loan, credit card, etc,) shouldn't exceed more than 36 percent of your gross monthly income. FHA loans are slightly more lenient.
Housing expense ratio
It is generally difficult to obtain a loan if the mortgage payment will be more than 28 to 33 percent of your gross monthly income.

Down payments make a difference
If you can make a large down payment, lenders may be more lenient with their qualifying ratios. For example, a person with a 20 percent down payment may be qualified with the 33 percent housing expense ratio, while someone with a 5 percent down payment is held to the stricter 28 percent ratio.
Other ways to improve your purchasing power

Gifts
If you're having trouble saving money, many lenders will allow you to use gift funds for the down payment and closing costs. However, most lenders require a "gift letter" stating the gift doesn't have to be repaid, and will also require you to pay at least a portion of the down payment with your own cash.
Negotiating Closing Costs
Through negotiation, some sellers may agree to pay all or most of your closing costs (for example, if you agree to meet their full asking price). If you choose to try this, make sure to ask your real estate agent for advice.
Loan Programs
Many local governments have special loan programs designed to help first-time homebuyers. Loans may be available at reduced interest rates, or with little or no down payments. Check with your local housing authority for more information.
Loan Types
Some homebuyers choose Adjustable Rate Mortgages (ARMs) because of low initial interest rates. Others opt for 30-year loans because they have lower monthly payments than 15-year loans. There are significant differences between different loans, so make sure to discuss the pros and cons of different loans with your agent or lender before making a decision.

Although we consider this information accurate, always consult with your lender.

Closing Costs - Why Are So Many People Nastily Surprised?

2009-01-06T15:09:00.000-05:00

Many people (especially first time buyers) don't consider closing costs when they are assessing their finances.
Closing costs are the bundle of fees associated with the buying or selling of a home. Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiable or dictated by local custom.
Buyer closing costs
When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate of their closing costs. The fees vary according to several factors, including the type of loan they applied for and the terms of the purchase agreement. Likewise, some of the closing costs, especially those associated with the loan application, are actually paid in advance. Some typical buyer closing costs include:

The down payment
Loan fees (points, application fee, credit report)
Prepaid interest
Inspection fees
Appraisal
Mortgage insurance (typically 1 years premium plus an escrow of 2 months)
Hazard insurance (typically 1 years premium plus an escrow of 2 months)
Title insurance
Documentary stamps on the note

Seller closing costs
If the seller has not yet paid for the house in full, the seller's most important closing cost is satisfying the remaining balance of their loan. Before the date of closing, the escrow officer will contact the seller's lender to verify the amount needed to close out the loan. Then, along with any other fees, the original loan will be paid for at the closing before the seller receives any proceeds from the sale. Other seller closing costs can include:

Broker's commission
Transfer taxes
Documentary Stamps on the Deed
Title insurance
Property taxes (prorated)

Negotiating Closing Costs
In addition to the sales price, buyers and sellers frequently include closing costs in their negotiations. This can be for both major and minor fees. For example, if a buyer is particularly nervous about the condition of the plumbing, the seller may agree to pay for the house inspection.
Likewise, a buyer may want to save on up-front expenditures, and so agree to pay the seller's full asking price in return for the seller paying all the allowable closing costs. There's no right or wrong way to negotiate closing costs; just be sure all the terms are written down on the purchase agreement.
Prorations
At the closing, certain costs are often prorated (or distributed) between buyer and seller. The most common prorations are for property taxes. This is because property taxes are typically paid at the end of the year for which they were assessed.
Thus, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won't come due until the following year! To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for half the taxes at closing.

Although we consider this information accurate, always consult with your lender.