About Mike Hunter

http://HhunterTheHouseHunter.com

friendly, approachable, and an expert on the Metrowest real estate market

Posts by Mike Hunter:

Meet My Best Friend

Meet My Best Friend

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Buy or Rent, What Makes More Sense for You?

Buy or Rent, What Makes More Sense for You?

Why It Makes Sense to Own Your Own Home

You’ve probably seen lots of financial arguments about why you should own your own home rather than rent. This includes budgeting (no rent increases) and the tax savings you’ll most likely have. Here are some reasons you probably haven’t heard.

Freedom to pursue other goals in life once the major goal of home ownership is achieved: Strange as it sounds, many of my first-time buyers have told me that once they bought the house, other things in their life started to fall into place. It’s as if not owning took so much of their mental energy that other goals were not worked on until that big goal was reached. So buy a home and get on with your life.

A greater sense of belonging to the community: Once you own a home, you feel more attached to the city in which you live. You’re more interested in what happens in town, to the roads, schools, and shopping areas. Some people even become involved in local politics, which you seldom see a renter do.

A commitment to something, a sense of stability: Home ownership is an anchor, something that cannot be pulled out from under you. You’ll never get a notice that you have to move. You’re kids will never have to change schools. It gives you freedom to plan years ahead.

You can change things, a feeling of being in control: It’s your home. You can add to it, remodel it, change the landscaping, do whatever projects you want. You have a feeling of being in control of something in your life. At work we don’t always have control of what happens, but your home is your castle that you have dominion over. You can see what you’re building take shape before your eyes.

More control over the children than in an apartment complex: In a neighborhood, kids usually play in the yards or go to friend’s houses a few doors away. My clients have told me that in an apartment complex they never knew where the kids were. They could be in any of hundreds of apartments, doing who knows what. In a home you get to know the neighbors and watch out for each other’s kids.

Children do better in school and feel more secure: This one surprised me, but buyers have reported to me that their kids calmed down in school after they bought a house. I don’t know why, but it seems to work that way. I remember a single mom watching her son play in the yard, making steps in the slope and building things. She didn’t have to tell him to leave everything alone, like she did at the apartment complex. I guess kids feel the same need for control we adults do.

Time and money saved by not going to the Laundromat: A small point, but if you have kids, you know the value of this one. You gain a whole evening a week when you buy a house! The wash gets done in between other things, or while you’re at work. What would you do with the extra evening you’ll have? How about going out for dessert with your spouse with all those quarters?

Why It Makes Sense to Rent Your Home

It seems that buying a home is more costly – and time demanding – that renting a home. However, if you can comfortably afford to do so, and you have plans to stay at your location for a while, buying a home has significant advantages.

Financially, owning a home is often promoted as a better choice than renting. Currently, there are significant federal and state tax breaks … homeowners can claim deductions for real estate property taxes and for the interest paid on their mortgage each year. In addition, long term homeowners build equity both by paying down their mortgage and when their home appreciates in value.

Many savvy home buyers increase their equity more quickly by buying homes that need cosmetic improvements (such as decorating) rather than structural renovation (walls need moving). These minor improvements can significantly increase the value of a home over a relatively short period of time with a modest investment.

However, there are times when renting a home is the more sound choice to make. For example, if you are only going to be at your place for a couple of years, it makes no sense to buy the home, as this would be the more expensive endeavor. If you buy or sell in a short period of time, you may actually lose equity.

Also, renting also makes good sense if you’ve identified the general area in which you want to live but haven’t made a final decision as to the specific neighborhood. If you don’t know whether you’ll feel comfortable in a particular neighborhood, it may be better to rent a house or an apartment there for 6 months or a year, to get more comfortable with it.

You Really Want to Buy a Short Sale?

You Really Want to Buy a Short Sale?

Mr. Seller goes to his mortgage company(s) and says, “I want to sell, but I don’t have any equity and the house is worth less than the amount I owe you. I need to sell anyway because based on my current circumstances, continuing to keep the home is a serious hardship and I can’t hold on, so what do I need to do to get out?”

What the Seller has just done is to ask his Mortgage Holders/lienholders to take a loss when his property is sold, this is called a SHORT SALE. Lienholders don’t like to take losses (an understatement) and they are going to be resistant to this request from Mr. Seller. However, the current “perfect storm” of poor market conditions has forced them into a position where they may agree to Mr. Seller’s short sale as long as it is going to be more favorable to them than going to foreclosure – in time, trouble or money lost.

But, (and there is a big, whopping BUT …) the mortgage companies reserve the right to approve EVERY term, condition and cost of the sale. So not only are we in a Buyer’s Market with lots of inventory to choose from, we have a seller who is virtually powerless in the transaction.

ARE THESE NOT THE PERFECT CONDITIONS FOR BEING A BUYER?!!!

There is another short-seller we should discuss, the reluctant seller. While Mr. Seller above is so very motivated, let’s take the case of the family that is forced to sell thanks to their loan being one of those adjustable rate or combination loans that has adjusted and is now beyond the point of their ability to pay. They have to sell, they are going through the short sale process, but they really aren’t motivated. Why? Because they have to move. And where are they going to move? Depending on their situation their credit may be less than stellar because of late payments and the short sale itself may show as a delinquency on their credit report. Who will rent to them?

Let’s say you get into a home to view it and you love it and want to put in an offer. You can do very well by buying a short sale house, but there are some things you need to know about this process. This is the point at which you need to put aside everything you have learned about the sequence of how a home is sold. Below are guidlines to going about it.

GET TO KNOW ALL YOU CAN ABOUT THE HOME

You are advised by your buyer’s agent that this home, typical of most short sales, is being sold “As Is” (see my blog post, “What does ‘As Is’ Mean?”, for more detailed information on this legal term)

The seller might provide you with a seller’s disclosure of property condition if you’re lucky, but that’s about all you’ll get. They may or may not have pulled permits for upgrades or work done on the house – you’ll need to investigate.

They definitely will not negotiate issues you uncover during a home/pest/lead paint/radon/mold/septic inspection.

Do you spend money to have inspections done or wait for the bank’s response? My advice, wait, but be prepared to move forward very quickly once you hear back from the bank.

Also if the property is a condominium or governed by a home owner’s association, your bank/mortgage company will most likely require a full set of condominium documents, meeting minutes, recorded deeds, occupancy rates, tenancy ratios, and more (what’s called a Full Review).

The condominium association can and will charge you money for this. Your mortgage is contingent upon receipt of this, but it’s going to cost you around $400 for copying charges.

What do you do? My advice is to ask your mortgage broker, and don’t do anything to jeopardize your pre-approval/commitment.

You have decided to submit your offer and now the wait is on…

PATIENCE IS A VIRTUE, GET READY TO HURRY UP AND WAIT

A short sale is the sale of a parcel of real estate that is short of the equity needed to sell it and pay off all liens. It is not short “time-wise”. You should plan on at least 120 days from your offer, but the amount of time can vary widely depending on the lenders, and if anyone says you will hear back in “x” number of days, you can’t believe them.

What happens during the wait? Well, besides Mr. Seller getting anxious waiting for his departure, the short sale file/package/request gets in line in the lender’s short sale department (also called the Loss Mitigation Department). This line is long, sometimes very long.

So, what happens during the wait is just that….the wait. Oh, the agent for the seller will be in contact as needed to re-fax lost documents, explain their research, answer questions about the local market, re-fax lost documents, etc. But you, the buyer…you just wait. It’s like the military … hurry up and wait. Or better yet it’s like the hospital … wake up and take this sleeping pill.

Many sellers’ agents do not give your buyer agent status updates on what’s happening while you wait…you just wait. When I represent the seller, I email the buyer agent every week to say what I know, even if it’s nothing, just to make sure that you, the buyer, are still there and somewhat paying attention. But as your buyer agent, there’s nothing I can do … if there were, rest assured, I’d be doing it.

Oh, as the buyer’s agent I know what’s going on….the paperwork is collected, the file is assigned to a “negotiator” who “negotiates” the short sale with the seller’s agent/attorney, and once the negotiator has the file’s required documents (exactly what that is varies by the lender) complete, it has to be signed off by their “team leader” or upper management, or a committee of managers. I check with the seller’s agent regularly to ask what is happening but again, often there is nothing happening, just waiting….

KNOW THAT YOU MAY GET “BUMPED”

Here’s the big elephant in the room: you have no guaranteed place “in line.”

If this short sale’s turn in the line comes up on the 120th day after submission, and someone else submits an offer slightly better than yours on day 119, you will be bumped! It is not impossible that a seller’s agent will work with offers one at a time until an acceptance is granted and you won’t get bumped, but this is a rare occasion, hasn’t ever happened to me yet.

It’s not fair, it’s not right, but it is reality. This is because the lienholders are losing money and need the most they can get, and it is the seller’s agent’s fiduciary responsibility to get the highest and best price for their sellers.

AFTER A LONG WAIT YOU MAY BE DISAPPOINTED

If you are willing to be patient, knowing that you could get bumped, and you’re convinced you want to purchase a home that is a short sale, I might advise you to submit multiple offers on multiple short sales. You may get the one you kind of like, and not the one you love, which might be a disappointment. You might not get any one at all, which can be very disappointing. The question then is, how well do you handle disappointment? Can you accept the lost short sale?

YOU JUST MIGHT GET A GREAT HOME AT AN EXCELLENT PRICE THAT MAY MAKE YOU SOME GOOD MONEY SOME DAY WHEN YOU SELL

So why would anyone consider buying a home that is subject to a short sale?

Quite simply – price!

If a seller is not going to make any money on the sale of their home anyway, you can imagine they are much more flexible on terms and price of the sale of their home. If you are the only person making an offer on the home (which it has been my experience you are), the bank will need to take your offer very seriously, even if you offer significantly less than the asking price for the house.

In many Metrowest Boston neighborhoods, short sales represent some of the best deals around.

There is no reason to be afraid of a home that will be subject to a short sale. In fact they may be some of the best values out there.

Just be prepared for a longer timeline, a little more hassle and be sure to use an attorney, mortgage company and if I may be so bold, real estate agent with some experience in short sales.

You may just find that incredible hidden gem at a bargain basement price.

Happy House Hunting!!!

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