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Advice for Buyers When the Real Estate Market is HOT!

Advice for Buyers When the Real Estate Market is HOT!

In many towns and cities across America right now (Spring 2017) the market is hot… meaning the demand is high and the inventory is low. It can be a tough market for buyers, so here’s some advice for homebuyers in a hot market from industry veterans:

Setting the Stage for Homebuying Advice

Before I even begin, let me give you a word picture to get you in the right frame of mind: You set out on a nice day-trip from Frederick County, to visit some sights in Washington D.C. You know, take in some monuments or the Smithsonian. You head south at a nice leisurely pace, because, you know…Frederick County. As you get deeper into Montgomery County, you notice the traffic picks up, but that’s ok. You can maneuver just fine in the right lane, pass a slow-poke here and there.

Eventually, though, you’re going to have to face I-270, or the “Big-Ugly”, and then the beltway…I-495.  As you merge into oncoming traffic, it can feel like you’re about to enter the Indy-500…cars are whizzing by.. You (should) realize that if you don’t step into it, you’ll end up in a ditch.

Entering into a hot real estate market is very much like a NASCAR driver coming out of a pit stop at top speed. When competition is high and the number of available homes are low, you must be ready for a fast-paced market. You have to be ready to act quickly and decisively. You Must Bring Your A-Game!  What does it mean to bring your A-Game?

Proper Expectations

When buyers know what to expect in the market, they are better equipped to get the house they want. When they don’t give heed to their agent’s advice, we (agents) often resign ourselves to the fact that we’re going to write a couple of offers with the. We’ll watch them lose out a couple of times in a competitive market. If you believe that your agent is unqualified to provide you with strategic advice, get a different agent.

  • “No,” we tell them, “you’re probably not going to win in a competitive situation when you offer that much below list price. You might even have to offer more than list price to win.”
  • “Well,” we say, “you need to at least have your house listed on the market if you expect to win in a multiple offer situation. You’ll probably even stand a better chance if it is already sold.”
  • “Ok, but if you wait until next week to see it, I can’t promise that house is even going to be on the market anymore.”
  • Actually,” we try to counsel ahead of time, “the inventory is pretty low, so there might not be another one like this next week. Keep that in mind when you write up this offer.”

We get it. You need to learn to trust us. We will work hard to earn your trust. We know that often, the third time is a charm (most of us figure it out by then, no matter what we’re trying to accomplish.) In a hot market, the best homes, when priced well, will go in days. And they’ll most likely have multiple offers. That’s the way it is.

Additional Reading:

  • Lynn Pineda, real estate agent and blogger in South Florida, among many good tips, also agrees with me, “When you locate a home that meets your wants and needs, don’t lollygag…” in her blog post, How to Buy a Home in a Seller’s Market.
  • Angela Duong, Northern Utah real estate agent, in her article 13 Things Buyers Need to Know in a Seller’s Market, has some good tips, like staying flexible and creative. Thinking outside the box can help you win in a competitive situation.
  • In his article Buying a Home in a Seller’s Market, Kyle Hiscock, real estate agent in Rochester NY, points out several considerations buyers should make to help them decide whether buying a home during a sellers market makes sense.

Pre-Approval

When you might face a multiple offer situation, you need to have every advantage. We advise buyers to speak to a local lender (we know a few good ones) before you even start your house hunting. Start the approval process, get your paperwork to the lender and at the very least get a pre-qualification…preferably even a pre-approval. When a seller gets 3 offers and one of them is from a buyer who is already approved, that buyer stands out and is a safer bet for the seller. Take the time to talk to a lender before you begin. You’ll know what you can afford, and you’ll know which loan product is right for you and for each situation. Take time to get your A-game on.

What about cash offers? It’s true, sometimes you’ll get beat out by a cash offer. But not always. It depends on the offer and the situation. The cash offer, as long as it’s within the seller’s expected price range, will be the winner. Everyone has different motivations, and they all play out in the negotiations.

Additional Reading:

  • Joe Samson, Calgary real estate agent, explains that if you’re serious about buying a home in this market, you’ll need to consider getting a mortgage pre-approval, in his article, Reasons Why You Need A Mortgage Pre-Approval
  • Tony Mariotti, mortgage lender and founder of RubyHome, explains the difference between a mortgage pre-approval and a pre-qualification, and why a buyer will be at an advantage with a pre-approval in his article, Mortgage Commitment Letter: How to Seal the Deal

Offer Your Highest and Best

When a buyer is in a multiple offer situation, we always ask them, “if you miss out on this house because you didn’t offer $5,000 or $10,000 more, will you be ok with it next week, or will you be upset? Because the difference of $5000 may only mean $25 to $50 on your monthly mortgage payment.”

If you really want the house, you’ll need to offer your highest and best. When there are multiple offers you can bet that someone else really wants the house, too. This won’t be the time when you get a bargain. You will need to offer current market value to win. This is the time when you have to know your mind, and decide, “how much do I want it?”

Additional Reading:

House to Sell?

If you have a house to sell before you can buy, many times in a hot market, you will find yourself competing with buyers who don’t have a house to sell. Certainly in price ranges below the median, which is about $300,000 in Frederick County right now. Often, in the move-up price ranges, you will find other buyers putting their best foot forward, many times with their home already on the market, maybe even already sold. Again, you’ll want to have every advantage on your side.

real estate successWe advise having your home listed on the market, or at the very least scheduled to go on the market within a certain time frame. Better yet, having the home sold gives you an even greater advantage. In a market with high demand, you can rest assured that your home will probably sell, given it’s in good condition and priced well for the market.

We understand that it is difficult to sell and buy at the same time. But remember, an experienced real estate agent has been helping people buy and sell for years, day in and day out, in all kinds of markets. We can help you thread that needle and maneuver through the process with the best possible results.

Additional Reading:

  • As Jeff Knox points out in his helpful article, Best Tips to Win in a Bidding War, having the strongest possible offer is the only way to win in a bidding war, which means you’re less likely to win it with a long list of contingencies.
  • Being as prepared as you can be ahead of time will always work to your advantage when buying a home in a hot seller’s market. Bill Gassett, Realtor in Greater Metrowest MA, has 20 tips for buyers in his article, 20 Things to Do Before Buying a House.

Trust Your Agent

The average consumer buys and sells a home every seven years. I’ll bet each time they buy or sell, the market is different, so their previous experience is often not relevant to the current market. An industry expert has helped people buy and sell hundreds of times, in all kinds of situations. Find a buyer’s agent who you can trust to guide you through the process. Your agent wants to be your trusted adviser, because they don’t win unless you win. In fact, they don’t even get paid unless you win!real estate agent trusted adviser

Work with an agent you have confidence in. If you aren’t convinced that they know how to navigate the rapids of a hot market, then move on. You need to work with someone you can trust. You need to trust that they have the knowledge and experience to help you get where you want to go, no matter what the current market looks like. You need to trust that they are giving their best to help you win. You need to trust their advice.

Get a good referral. Ask friends, co-workers and, yes, even family. Read online reviews and do your homework. This is probably the most expensive purchase most people make in their lifetime. Choose a trusted adviser. Choose wisely.

Use an Experienced Buyer’s Agent

Interview agents about their understanding of the current trends in the market. Are they familiar with the inventory, time on the market, and year over year trends? Your local real estate market is always changing. A veteran buyer’s agent has helped homebuyers in many different types of markets, whether a buyer’s market or a seller’s market, or transitioning markets. A buyer’s agent will negotiate on your behalf, representing your best interest. The best part is, the seller pays for the buyer’s agent in most situations.

Today’s consumers have a huge number of resources at their disposal with the many real estate portals on the internet, with handy apps and demographics at their fingertips. Many want to keep their anonymity until they are absolutely ready. But far too often, that anonymity costs them when they haven’t gotten ready to “merge onto the real estate highway.” They find the house they love, but they haven’t even talked to a lender, they don’t know what they qualify for, and if they have to sell their home first, they’re not ready.

Buying and selling real estate is a process, not an event. There is no need to go it alone. You can take the advice of a buyer’s agent from the beginning. They can help you find the home that is right for you. They can help you get the loan product that is right for you. They can help you navigate through the best offer strategy. They can help you negotiate in a hot market. Let a buyer’s agent do the heavy lifting for you!

Additional Reading:


Building Trust

The Highland Group has over 25 years of experience helping homebuyers and homesellers in the Central Maryland Area. Our specialty is helping clients successfully navigate the ever-changing real estate journey.


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About the Author: The above Real Estate article, Advice for Buyers When the Real Estate Market is HOT! was provided by Chris Highland, Realtor® and Regional Leader for eXp Realty. Chris can be reached via our contact form, or by phone at 301-401-5119. Chris has helped people move in and out of Central Maryland for the last 25+ Years.

Thinking of selling your home? Put our team’s marketing expertise to work for you, to get your home sold.

Real Estate Terminology – What is Absorption Rate?

Real Estate Terminology – What is Absorption Rate?

What is “Absorption Rate”?

The Absorption rate is roughly how long it will take the current homes on the market to sell. It’s an estimate, based on  the current number of listings and current sales. Because those two factors fluctuate from month to month,  absorption rate is a rough estimate. It’s an average of how many homes sell each month, based on a 6-month calculation, because anything less than 6 months is too small a sample, and anything greater than 6 months wouldn’t give an accurate picture of what’s going on with values in an area.

If I get the total number of homes that have sold for the last 6 months in an area, say a Frederick zip code or a Frederick County town or, better yet, a neighborhood, and then divide by 6, I’ve got an absorption rateAverage number of homes that sell each month.

If I take the total inventory, or how many homes are on the market in a given area, and divide by the absorption rate, I get the months of inventory, or how long it will take to sell all of the homes in the chosen area (if no more homes were listed).

Why is Absorption and Months of Inventory important?

These numbers are important to buyers as well as sellers. An absorption rate of about four to six months indicates a balanced real estate market.   Balanced means a market that does not favor the buyer or the seller.  An absorption rate of less than four months indicates a seller’s market.   An absorption rate of more than 6 months indicates a buyer’s market.

Home Sellers

To a seller, these numbers tell them whether their home is positioned correctly in the market. If they need to sell in 3 months and the absorption rate in their neighborhood is 6 months, then they will need to price their home to sell, without taking months to adjust the price as they test the market.

The absorption rate tells the seller what the normal time on market is for their current market. If their home doesn’t sell in the time that the average comparable home sells, then they know that something is amiss. They will know how accurate, or inaccurate, their pricing is when they find themselves still on the market after the average time for their area.

Home Buyers

For a buyer, the opposite can be discerned. If they see a home that has been on the market for longer than the average time for that neighborhood or community, they will think either two thoughts: 1) something is wrong with the house, or 2) the house is overpriced.  These homes often receive low-ball offers because of these perceptions.

Understanding real estate terminology, absorption rate for one, helps to navigate the market, negotiate and have proper expectations. Both buyers and sellers can learn how to get the best possible outcome in their market by understanding local market trends.

Contact us for a consultation to find out how much your home is worth in today’s Frederick Real Estate Market.

The Highland Group
Chris & Karen Highland 
301-401-5119
eXp Realty – 410-777-5714

Six Things to Consider Before You Buy Your First Home

Six Things to Consider Before You Buy Your First Home

Buying a home is probably one of the biggest purchases most people ever make. It is certainly an important part of a life-long financial plan. If you’re thinking about becoming a homeowner, there are at least six things to consider before you buy your first home:

1. Your creditworthiness

Is your credit healthy? In today’s mortgage environment solid lenders are interested in your credit history.  If you have more than a couple of blemishes Six Things to Consider Before you buy your first homeon your report, some lenders may still provide you with a loan, but you may just have to pay a higher interest rate and fees.

You can request a free copy of your credit report from each of three major credit reporting agencies – Equifax, Experian, and TransUnion – once each year at AnnualCreditReport.com or call toll-free 1-877-322-8228. You are entitled to one free credit report per year.

If you have low scores or very little credit, you can work with a credit specialist to enhance your scores to the level that will help you not only be able to apply for a mortgage, but get better interest rates. [we have recommendations for credit counselors]

2. Determine How Much You Can Afford

To determine how much home you can afford, you can to online and use a “home affordability” calculator, but the results will only be a general figure which may or may not be very accurate. Good calculators will give you a range of what you may qualify for. Then you’ll need to call a lender to get pre-qualified and get a more accurate loan limit. This will also give you an estimate of what the monthly payment will be. Contact us for a list of preferred lenders.

The advice that buyers get ranges, some advise not to borrow as much as you qualify for because it’s wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow.

This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, you are comfortable with it. Consult a financial adviser to see how home ownership fits your long-range goals.

3. How long you plan to live in the home

If you buy a home and get a job transfer or decide to move after only a short time, you’ll probably end up paying money in order to sell it. The value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home.

The length of time that it will take to cover those costs depends on various economic factors in the area of the home. In a normal market, most parts of the country have an average of 3-5% appreciation per year. In this case, you should plan to stay in your home at least 5-7 years to cover buying and selling costs. If the area you buy your home in experiences an economic upturn, the length of the time to cover these costs could be shortened, but the opposite is also true.

4.  How long the home will meet your needs

What features do you want in a home to satisfy your lifestyle now? What about five years from now? Depending on how long you plan to stay in your home, you’ll need to make sure that the home has the amenities that you’ll need. For example, a two-bedroom home may be perfect for a young couple with no children. If they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Will you have money to do renovations, to the best of your knowledge? Having an idea of what you’ll need will help you find a home that will satisfy your needs for several years.

5.  Where the money for the transaction will come from

Most homebuyers will need some money for a down payment and closing costs, unless using a VA loan, which requires no contribution from the buyer. With today’s range of loan options, having a lot of money saved for a down payment is not always necessary.  FHA loans require a 3.5% down payment, making them a top choice for first-time buyers. Some loans allow contributions from parents, some have lender grants attached. Your lender should have various options for you to consider.

In some cases, seller contributions are allowable. If that is necessary, make sure your buyer’s agent knows that upfront, so they can do their best negotiating for you. [contact us for buyer representation]

6.  The ongoing costs of home ownership

Maintenance, improvements, property taxes and home insurance are all costs that are added to a monthly house payment. If you buy a condominium, you’ll have a condo fee. If you buy in certain neighborhoods, a monthly homeowners’ association (HOA) fee might be required. If these additional costs are a concern, you can choose neighborhoods without these fees.

Make sure to do your research. Your lender and your real estate agent should be good resources for the information you need to make the best decisions.

Consult A Financial Planner

You may want to consult with an accountant or financial planner to help you decide how a home purchase fits into your overall financial goals. As Realtors, we are not financial advisers, nor is any content on our blog to be considered financial advice.


Search for Homes in Central Maryland


Chris Highland
eXp Realty
301-401-5119

Explaining the Difference Between A Buyer’s Market or A Seller’s Real Estate Market

Explaining the Difference Between A Buyer’s Market or A Seller’s Real Estate Market

Buyer’s Market or Seller’s Market In Frederick Md? OR Transitioning Market?

In the Frederick real estate market a three-to-six-month supply of homes is normal. Every market is different, so these statistics might not be true for your market. In NW Washington D.C. for instance, four weeks is considered a long time for a home to be on the market.

We call it a buyer’s market when there is a large inventory of homes, more than there are buyers. A buyer then has many more choices and not a lot of competition. A market with more than a 6 month inventory is a buyer’s market. [meaning that it would take six months to sell the inventory, given no more new listings came on the market] Or, in other words, more than an average DOM, Days on Market, of 180 days.

buyers market or sellers market?
A market with an inventory that is below three months, (fewer than 90 days on market) is what we refer to as a seller’s market, with more buyers in the market than homes available. There are usually competing offers on the most desirable homes and we often see some appreciation, depending on other factors.

A balanced market is usually considered when we have 4-6 months inventory. These are generally accepted numbers. [note: In other markets, the numbers would be different, but the “days on market” statistic is the important number to know.]

A Little Market History

In Frederick Md, a “normal” market has an inventory of about 1200 – 1400 homes to be considered a balanced market. For the 2013 year, we saw a very low inventory, around 600 to 800 homes for most of the year. W saw some appreciation during 2013, about 10-11%. In 2014 the inventory grew to about 1000 – 1100 during most of the year and we saw values increase about 2 – 3%, depending on the neighborhood. In 2015, the inventory grew to an average of 1200 and we’re seeing that inventory gradually tick up to a similar number in 2016. As well, we’re seeing a pent-up demand! [to see current inventory statistics, see our latest entry in the market statistics category]


2016 is turning out to be a Balanced Market


frederick real estate

A Market in Transition

Most of the time we’re seeing the market transition. Just when you get used to a market with low inventory and high demand, then very soon the resulting appreciation changes the dynamics, and you see many more sellers listing their homes…then suddenly the see-saw tips and you are in a buyer’s market. It’s worth mentioning that the term “buyer’s market” and “seller’s market” are usually not very useful at best, and misleading at worst.

All Real Estate is Local…Even Micro-Local

Within your own city, wherever you are, there are differences in the various neighborhoods, communities and zip codes. We often see a “buyer’s market” in one community, and a “seller’s market” in a neighborhood only a few miles away. Local businesses and schools, growth and industry…they all have an affect on the local real estate market. All real estate is local.

  • We might see a particular townhouse neighborhood in demand because the local hospital is expanding. The townhouse development on the other side of town languishes.
  • We can see in certain neighborhoods that were constructed during the height of loose lending practices now have a large number of short sales. This affects the prices in that neighborhood negatively, while just a few blocks away, another neighborhood is showing appreciation.
  • Price ranges play a roll in what kind of market we see. In most of our neighborhoods, we are not seeing appreciation in the higher price ranges (above $500,000). We are seeing a longer time on the market and more price reductions to get a home sold.

So, even within the same city, neighborhood trends can create a hyper-local demand that varies from one to the next, for a lot of reasons. Supply and demand still determines the local market.


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Dealing with Multiple Offers

In an appreciating market with low inventory, we naturally see multiple offers on homes that are well-priced and in good condition. How does a buyer navigate a situation with multiple offers?

A few years ago, a buyer had time to consider a home, but didn’t worry about it if they missed out on a house, because more than likely, another home they liked would come on the market soon. Not so today. When the inventory is tight, but the demand is healthy, buyers often don’t have the luxury of time. They may find themselves in a multiple-offer situation.

When a buyer is in a market like this, there are some things to consider:

  • Buyers need to understand that the days of getting a steal are over. Having that expectation will just assure that they miss out on more homes.
  • Buyers should be flexible. Remember that even though you might win the bid with a higher offer, the home still needs to appraise for that amount.
  • Buyers should consider offering their best offer when they are in competition for a home. Having an experienced agent is a big help in planning your strategy.

Keeping a cool head and being flexible are the keys to a successful home purchase when the market is in transition. Is it A Buyer’s Market or A Seller’s Market? It’s most often a market with some aspect in transition.

At the Highland Group, we’ve been maneuvering through buyers and sellers markets, and transitions for over 24 years. We’re here as buyer’s representatives to help you make the best of this transitional Frederick real estate market. Contact Chris Highland for buyer’s representation on your home purchase.

Is it a buyer’s market or a seller’s market? It’s all about supply and demand.

 

Do I Need to Be Pre-Approved For A Mortgage to Make an Offer on a Home?

Do I Need to Be Pre-Approved For A Mortgage to Make an Offer on a Home?

APPROVAL, PRE-QUALIFICATION AND LENDER LETTERS

Buying a house is not an event, it is a process. Most of the time in today’s post-bubble, post-TRID real estate market, the process is a little more complicated and takes longer.

As the process gets more complicated, the anti is upped for everyone, including the buyers. Having a pre-qualification letter from a local, reputable lender is a must before most sellers will consider a buyer’s offer.

  • Bank-Owned properties, or Foreclosures, will not consider an offer from a buyer without a letter from a lender pre-qualifying that buyer for the amount offered. Many times, the bank will insist that the buyer get pre-qualified with their own lenders before they will consider the offer.
  • A short sale requires the approval of the third-party(s), the lender(s) who hold the note on the home. They will want to be assured that the buyer will be approved for the loan, so they don’t have to have the home back on the market if that buyer doesn’t qualify for the loan.
  • Traditionally marketed homes without the encumbrances of bank approval have the choice as to whether or not they will require a pre-qualification letter with the offer. In this environment a homeowner would be crazy not to require a lender letter along with the offer from a potential buyer. Any listing agent will advise their seller client to require a pre-qualification letter. A seller wants to be assured that the buyer can make good on their offer before tying the home up in a contract and taking it off the market.

HOW TO GET A PRE-QUALIFICATION LETTER

A buyer can get a pre-qualification letter in a short time, initiated with a phone call, most of the time. Your lender should tell Frederick Md Lendersyou precisely what you need, but be prepared to include:

  • W2 statements (or 1099 income statements) for the last two years
  • Federal tax returns for the last two years
  • Bank statements for the last few months
  • Recent pay stubs and proof of other income
  • Proof of investment income

When a buyer gets a pre-qualification letter, the buyer isn’t obligated to borrow from that lender; it’s just a conditional promise that the lender is willing to make the loan. We always advise buyers to get pre-qualified with a strong local lender.

Remember, it does no good to hide information, it will eventually come out anyway. Borrowers must be completely forthcoming when it comes to their finances from the beginning to avoid any last minute surprises and disappointments.

PRE-APPROVAL

Pre-approval is exactly that. A buyer can apply for a loan and go through the process of getting approved by the lender before they even make an offer on a home. In a competitive sellers’ market, it can be a good idea. Then when a buyer finds a home they want, they can make an offer with not just a pre-qualification letter, but with a stamp of approval. The extra leverage of having the proof that the buyer can get financing may just be the additional tool that makes them stand ahead of the pack when there are competing offers.

As a buyer, if you’re a planner, this preliminary step of pre-approval might make sense. However, if you are looking in today’s highly competitive sellers’ market and find your dream home…don’t hesitate. If the home is in great condition and priced well, it may not be available for long. There is always a balance between keeping a cool head and knowing when to jump on the right home. (That’s why you need an experienced agent as your trusted adviser…I know, I seem to say that a lot!)

In today’s times where the process is more complicated, it’s a good idea to get the loan process started as soon as possible. Lenders tell us all the time, the best scenarios happen when buyers are prepared and prompt with their paperwork. With the changes in the process because of new legislation (TRID) it is absolutely necessary to be prompt on the paperwork.

Contact us for our list of Professional Local Lenders. Search for homes in central Maryland.

Financing Your Condominium – FHA Rule Changes

Financing Your Condominium – FHA Rule Changes

Buying a condominium has gotten more complicated since the housing crisis.   The effects of so many condos in foreclosure have made financing your condominium difficult. FHA financing for condos is a challenge in many Frederick condominium communities. Conventional financing can also be a challenge, depending on the particular product. Here is the latest info on FHA Financing for Condominiums in Frederick:

FHA Rule Changes

The latest effort of FHA to lower its risks has affected condominiums. Unlike single-family home ownership (fee simple), condo ownership has stricter rules for mortgage insurance. The entire condominium project must meet certain standards for a single condo unit to get FHA financing. As of October 1, 2010, the standards got tougher, with FHA’s rules. Then in November 2015, FHA eased up on some of the rules. financing your condominium

The two rules that particularly apply to our current housing distress are:

  • At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units. (used to be 10%)
  • No more than 15% of units can be arrear more than 60 days. (used to be 30 days)

Because of all the condos in foreclosure or in a short sale, the HOA dues are not paid, and several associations have a large number of their units in arrears. This means that the condos in that entire project cannot be purchased with FHA loans. Financing your condominium in Frederick may take a conventional loan product in many condo communities.


Related: What’s the Difference Between Conventional and FHA Financing?


The second issue is that many units are being purchased by investors, so the percentage of owner occupancy is decreasing in many condominiums.  No FHA financing there. In some cases, even conventional financing won’t work.

Other Basic FHA Guidelines

  • No more than 50% of property can be used as commercial space
  • No more than 50% concentration of FHA Loan
  • At least 10% of the budgeted income of the HOA must go toward a reserve account (with the shortage of condo association funds due to arrears, often this is a struggle to maintain)
  • Insurance must comply with several conditions (expanded with the Nov. 2015 rules)

Where in Frederick?

The HUD Website has a list of Condominium Developments and their current status as far as FHA approval.

As of Spring 2016, the FHA approval has been rejected for one Condominium Development in Frederick: Avington Park

FHA approval has expired for

  • Park Place at Mill Island
  • >The Overlook
  • Audobon Terrace North
  • The Commons of Avalon
  • Riverview
  • Monocacy Overlook Garden
  • Overlook Condominium
  • Ballenger Creek II
  • Stuart Mechanic II
  • Liberty Garden Condominium
  • Amertown Antietam
  • Frederick Heights
  • San Souci

This list is fluid and could change at any time.

Onerous Application Process

The process for applying for FHA approval has become very complicated. Over stressed condominium associations often don’t have the resources to complete the process, so that’s why you see the large number of expired condo communities in the above list. Many times we see that the process of renewing the application for approveal is so onerous, that even condominium communities that are eligible, haven’t completed the process.

NAR Lobbies for FHA Legislation

The National Association of Realtors® (NAR) continues to lobby for more reforms of FHA condominium rules, supporting a current bill, H.R. 3700, the “Housing Opportunity Through Modernization Act of 2015.”

The legislation includes provisions intended to help expand housing opportunities in the marketplace, including measures that would reform current Federal Housing Administration restrictions on condominium financing.

“Condominiums are often the most affordable homeownership option for first-time buyers, small families, single people, urban residents, and older Americans.” NAR President Chris Polychron said in last year’s testimony before the U.S. House Financial Services Subcommittee on Housing and Insurance.  “Unfortunately, current FHA regulations prevent buyers from purchasing condominiums, harm homeowners who need to sell their condominiums, and limit the ability of condominium projects to attract resident buyers.”

Current Status of HR 3700 – Passed and Signed into Law

This legislation is sponsored by Reps. Luetkemeyer (R-MO) and Cleaver (D-MO). It passed the House with a unanimous vote of 427-0 in February 2016, then passed the Senate, and was signed by President Obama on July 29, 2016.

HR 3700 contains provisions to ease FHA restrictions on condo sale and purchase; provides permanent authority for direct endorsement for approved lenders to approve Rural Housing Service loans; and makes reforms to federally assisted rental housing programs to streamline the program.


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Buyer Question: Do I Need to Get Title Insurance?

Buyer Question: Do I Need to Get Title Insurance?

What is Title Insurance?

Owner’s title insurance is purchased when you buy a home, and it protects your right to your home for as long as you or your heirs own your property. It protects the homeowner, and the lender, after settlement from any losses that may result from issues or title defects that were unknown before they purchased the home. Many buyers ask, do I need to get title insurance?

Without title insurance buyers would have no way of knowing if the seller’s actions may have caused future problems for the next homeowner. For example, the seller may have:

  • avoided disclosure of using the property as collateral for an unpaid loan
  • frauduelently claimed to be the sole owner
  • failed to pay real estate taxes
  • even a simple mistake in the recording of legal documents

Owner’s Title Insurance Protects Your Rights

If ownership of the property is ever challenged, the insurer defends your possession of the property. If a challenge to your property title is ever legitimate the insurer will pay for your losses, as your title insurance policy specifies.

  • It protects you against false title claims by previous owners or lien holders.
  • It protects you as long as you have an interest in the property.
  • It insures against events that occured before the policy is issued, unlike other forms of insurance.

How Title Insurance Works

title insurance research
Searching the public records is a lot of work, since only about 15% of public records have been digitized.

As property changes hands, mistakes and irregularities can place your ownership of the home in dispute. The mistakes are often made long before you made the purchase.

The title company searches the public records for documents associated with the property and provides the buyer with an expert, interpretive view of the impact of all recorded matters on the property’s title. If the search reveals recorded defects, liens or encumbrances on the title, such as unpaid taxes, unsatisfied morgages, easements, or restrictions, etc., these are reported prior to purchase, and solutions are put in place to resolve the impediments.

Even when the title search is extensive, problems can still arise after the home is purchased. This is when title insurance prtects the new owner from hidden defects, and protects the owners interest in the property.

29 Issues Where Title Insurance Saved the Day

Owner’s title insurance protects you as well as your heirs from financial loss caused by title trouble. Compared to the damage any of these troubles can cause, the one-time premium is small. Here are 29 title troubles that really do occur:

  1. False impersonation of the true owner of the land
  2. Forged deeds, releases, etc.
  3. Instruments executed under fabricated or expired power of attorney.
  4. Deeds delivered after the death of the grantor or gratee, or without the consent of the grantor.
  5. Deeds to or from defunct corporations.
  6. Undisclosed or missing heirs.
  7. Misinterpretation of wills.
  8. Deeds by peoplee of unsound mind, or by minors, or by aliens.
  9. Deeds by people secretly married.
  10. Birth or adoption of children after the date of the will.
  11. Surviving children who were omitted from a will.
  12. Mistakes in recording legal documents. (human error, it happens)
  13. Errors in indexing.
  14. Falsification of records.
  15. Claims of creditors against property sold by heirs or devisees.
  16. Deed in lieu of foreclosure given under duress.
  17. Easements by prescription not discovered by a survey.
  18. Deed of community property recited to be separate property.
  19. Errors in tax records. (for example, listing a payment against the wrong property)
  20. Deed from a bigamous couple.
  21. Defective acknowledgements.
  22. Federal condemnation without filing of notice.
  23. Descriptions apparently, but not actually, adequate.
  24. Corporation franchise taxes, a lien on all corporate assets.
  25. Erroneous reports furnished by tax officials.
  26. Administration of estates of persons absent but not deceased.
  27. Undisclosed divorce of spouse who conveys as the heir.
  28. Marital rights of spouse purportedly, but not legally divorced.
  29. Duress in execution of intruments.

The Cost of Title Insurance

Many home buyers question whether the purchase of title insurance is really worth the cost. The costs and details of who pays for the owner’s title insurance policy differs from state to state, depending on state laws, local customs and agreements made in the real estate contract.

the cost of title insuranceThere are title insurance calculators on most title company websites; you can get a rough estimate of what title insurance costs will be. To get a general idea, as a very rough estimate, for a home in Frederick Md with the average price of $300,000, basic title insurance will be in the neighborhood of $1400 to $1600, depending on details. An enhanced title ensurance package will be About 10% more. [these are not quotes, but rough estimates]

Even when the title company does a careful search of the public records, title troubles which weren’t disclosed, or mistakes in public records – called hidden hazards – are all possible. Even if your abstract is perfect, your title could be worthless because of any and more of these common issues. Your title attorney’s examination may be the absolute best, but your title may still be fatally flawed. The best remedy is title insurance.


 

Thanks to Salisbury, McLister and Foley, LLP for the information above. We’ve been happy to refer Pat McLister for 24 years, and are never disappointed in the settlement company’s service. They’ve never been late, and always go a step above to provide our clients steller service.

for Buyer Representation in Central Maryland. 301-401-5119. Search for Homes in Central Maryland.

Buyer Questions: Should I Get A Home Inspection?

Buyer Questions: Should I Get A Home Inspection?

Should I Get A Home Inspection?

The question of whether to get a home inspection or not pops up regularly in conversations about real estate. Rewind the RE memory a decade ago, when the market was hot; buyers dared not ask for a home inspection. When they were in competition with 5 other offers, they had better offer more than the list price, and forego as many contingencies as they could feel comfortable with. In some markets today, the same conditions are causing buyers to ask the question again: Should I get a home inspection?should i get a home inspection?

A home inspection is your right, and is almost always a good idea, even in new construction. Most real estate agents will encourage buyers to get a home inspection. Let me relay a couple of stories to illustrate why:

A.   Falling Skies

The buyer’s had ratified an offer on a newly constructed townhouse, with the help of a buyer’s agent. Fortunately the buyer’s listened to the agent’s advice and had a home inspection contingency written in the offer. The afternoon of the inspection, the buyers were sitting in the living room with the inspector as he was finishing up with the last details of the report.   They were jolted out of their metal folding chairs with the sound of a series of loud crashes and clangs  from the garage. They all rushed into the garage to see the jacuzzi tub from the master bath sitting amongst the wet drywall rubble.   With mouths gaping open, they raised their wondering gaze to the huge hole in the ceiling.home inspection

As it turned out, the plumber had neglected to attach the drainage pipe from the tub to the main in the wall. When the inspector filled the tub, then unplugged it, all that water drained into the floor and drywall. One hour later, the floor gave way. Who would have suspected it in a brand new house? There is always the possibility of Human Error.

B.  Fixing the Fix of the Fix

I recently spent 2 hours with a first-time buyer and a home inspector in an historic home, one of my favorite inspection opportunities…I learn so much. The home had over  $50,000 in renovations, all beautifully done. When examining the electric system, we discovered, because a series of fixes had been done by different electricians over the years, that the electrical wiring do i need a home inspectionwasn’t even grounded. Keep in mind, all the electrical work was done by a licensed contractor. He had just missed the fix of a previous fix which altered what had originally been a grounding line. Who would have suspected a licensed electrician would have missed it? Again, Human Error.

The cost of a home inspection can be anywhere between $400 and $500 on the average house. It is so worth it when you find something major. If you discover something that you just can’t live with, ie. a cracked foundation, the inspection is the contingency that gets you out of having to buy the home…off the hook, and gets your deposit back. If you still want the house, the inspection is the contingency that you can use to get the seller to address it.

It’s Just Good To Know

I would also argue that it’s worth it even when you don’t find something major. It is worth the peace of mind. It is worth having a licensed professional going over your future home with a fine-toothed comb, teaching you all about the inward workings of your number one investment. Understanding the systems and physical aspects of your home is important for a homeowner. At the very least, you’ll get an idea of what will need future expenditures.

The home inspection is your safety net. If at all possible, write that contingency in to the purchase offer. At worst, you’ll give yourself an out. At best, you’ll give yourself peace of mind.

Don’t Just Take My Word For It…

  • In his article Tips for Buying A New Construction Home, Cincinatti real estate agent Paul Sian gives an excellent tip to new home buyers:  “Many builders will give a one year warranty on new construction homes, so it is a good idea during the 11th month after moving into your new home to have a home inspector come out and look over the home again.” If the home inspection reveals anything that needs attention, it will most likely be under the builder’s warranty.
  • In this Realtor.com article, Seven Things Your Home Inspector Wishes You Knew, author Jamie Wiebe wisely points out to buyers that anything can be fixed. Some things sound scary, especially after so many news reports, but there is a solution for every problem. All can be negotiated after the home inspection report, if that’s what a buyer chooses. The only issue that might be worth stressing about is a water issue, and the only stress should be that the issue is dealt with before settling on the house..
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  • Bill Gassett, Metrowest Mass real estate agent, gives some sound advice that I heartily agree with: “…the purpose of the home inspection contingency is not to get a better price on a home because of minor issues found during the home inspection…this is one of the biggest things a buyer can do that real estate agents hate” (btw, sellers don’t like it much either). Depending on the type of financing and terms of the contract, major deficiencies found during the home inspection may be used as a reason for a reduction in the price or a concession from the seller towards closing costs, if the buyer decides that course of action. Be sure to check out Bill’s extensive article: How to Negotiate a Home Inspection.
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  • Seven Important Things to Look for When Viewing a Home is a great resource for home buyers. Kyle Hiscock, Rochester Real Estate Agent, lists the seven most costly system fixes in a home, the items that buyers need to watch out for when they are considering a home for purchase.
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  • And finally, here is some Real Home Inspection Advice from a Real Home Inspector. Mike Chamberlain, owner of MC2 Home Inspections LLC, explains in great detail what a home inspector is ACTUALLY required to do during a home inspection. This is according to the standards of practice from the largest home inspection organization in the world, InterNACHI (International Association of Certified Home Inspectors). This will be an excellent resource if you’re a buyer asking the question, Should I Get A Home Inspection?

home inspectionIf you’re in the market, give us a call to get buyer representation and sound advice about today’s Central Maryland real estate market. Feel free to contact us for our pick of superior local home inspectors.

Chris Highland – 301-401-5119.

Four Simple Steps Before You Buy Your First Home

Four Simple Steps Before You Buy Your First Home

Simple Steps Before Buying Your First Frederick Home

Buying your first home in the Frederick real estate market can be exciting, exhausting, fulfilling, overwhelming, exhilerating, and yes, even scary. But every single time we work with first-time buyers, the end result is thrilling! [for the buyers too!]
Buying a home is never an event, it is a process.  The steps in that process have not changed significantly over the years.
 

1.Make sure you have good credit. Gone are the crazy days of the ‘mirror-fog’ test loans. (“If you can fog a mirror, you’ve got a loan!”) We are back to the good old days of 1992 financing.

  • You need to have a job with verifiable income,
  • you need to have some cash for a downpayment, (maybe not as much as you think you need)
  • and you need to have good credit.

Credit Score first time buyersMonths before you get into your Realtor’s car, you can work on your credit score by making payments on time.  Don’t open any new credit accounts right before you apply for a mortgage, it could hurt your credit score.

If you need more help with your credit score, consider a credit counselor. They know how to get the job done in the least amount of time. See the following resources.

Additional Resources:

Check out my earlier post, Understanding Your Credit Score . Or, this informative video: How to Build A Credit Score Lenders Will Love. See our Credit Score Category for several informative videos and articles.

2. Make a list. A list of the things you must have in a house.  Whittle it down to 6 to 8 must-haves, then prioritize them from most important to less important. Make a list of your wants. This is a separate list. The reality is, you’ll more than likely not find your dream house and will have to compromise one or more of the things on your lists.  Most people do.  Keep an open mind. You’ll be ready to X things off of the list as you get out there and see what is available. first time buyer tips

Many times over the years, we’ve watched as first-time buyers go through the searching process. When they actually see what’s available in their market, they often change their minds on what they thought was so important. They are many times introduced to styles and home features that they had not even thought of before.

Additional Resource for Your Home Search:

As you tour homes, you’ll want to find out about neighborhoods and schools, you’ll want details about living in an area. You’ll also want to document the homes you see. There are several apps that will help with the process of searching for a home. Check out my article Mobile Apps for Your Home Search.

3. Work with an experienced buyer’s agent.  If the agent is newer, make sure they are on a team and have the support of an experienced agent.  A buyer’s agent is much better equipped to help you navigate the present market if they have experienced both a buyer’s market and a seller’s market. Realtor

People spend an average of 15 hours researching their next car purchase, but less than 3 hours researching which Realtor they will use.  Ask friends and co-workers for referrals, and do your homework.  Your agent needs to be a trusted advisor on what will probably your largest and most important purchase, your home. [Read our Testimonial Page]

4. Get pre-qualified… and pre-approved.  Before you even start looking, find out how much you can afford.  It makes no sense to fall in love with a house and then find out you can’t afford it.  Getting a pre-qualifying letter involves a phone call to a local, reliable lender. In today’s seller’s market, we recommend not only getting pre-qualified, but starting the process of approval before you even start looking in earnest.

How much house can I afford?Pre-Approval takes a little more time, but when you find the home of your choice, and you run into the possibility of competing in a multiple offer situation, you’ll stand a better chance of winning if you are already approved.

Get a referral for a lender from your Realtor; chances are they have several that they have relationships with and trust.  DO NOT use an internet lender.  DO NOT pick up the phone book. As real estate agents, the last thing we want to see is you sitting at the settlement table, with your kids, the dog, the cat and the goldfish, all packed up with your every earthly possession in the moving van, hearing that your loan didn’t fund.  That is an ugly sight that we cannot tolerate.

Use a local lender with a good reputation to get pre-qualified.  You don’t have to use the lender to get your loan, but they will have clout with local sellers when you want to present your offer.  The “Pre-qual” letter is your first step.  Here’s a tip:  Be candid.  Hiding information only delays the inevitable.  for our list of preferred lenders!

After you are pre-approved, go over your budget and decide what price range you are comfortable with.  Then enjoy the hunt with your trusted Realtor and Loan Officer, and take advantage of one of those great deals out there in the Frederick real estate market!

For an Exhaustive Resource, Peruse these First-time Buyer Articles:

Here is a curated list of some excellent articles written by top real estate bloggers, specifically for first time home buyers.

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Search for Homes: To see homes for sale in the Frederick real estate market: Use our Mobile Friendly Real Estate Search App
The Highland Group
Chris & Karen Highland – 301-401-5119
eXp Realty – 410-777-5714