Pre-Approval versus Pre-Qualified....

If you were taking a home buying class, the first thing you would talk about is getting pre-approved by a lender.  Unless you're in the fortunate position of being able to pay for your new home up front, you will have to borrow money. 

When the real estate market was slow, the sense of urgency to get financing was not very high. Buyers figured they could take their time to find a home and then they'd firm things up with their lender. Now the market is starting to improve,  but financing remains difficult to get, so the first thing a serious buyer should do is line up their financing.  This means getting pre-approved to borrow a certain amount, not just being pre-qualified.

There is a big difference.  A pre-qualification is just an initial step, typically a phone conversation about your overall financial picture. The lender may discuss income, debts, and go over different payment options, but it should not be confused with a firm pre-approval.

In order to grant a pre-approval letter,  a lender will probably complete a formal application, pull the buyer's  credit report and collect specific documentation such as pay stubs, W-2's and tax returns. This will allow them to better define your maximum price range and that that they can make the loan.

Being pre-approved will make you a stronger buyer and allows you to move quickly if needed. In an active market, you never know when you'll find the home for you, but when you do, you should act quickly.  If you have to wait while you get your financing in order, you may lose the home to other buyers.

Another benefit to being pre-approved is that real estate agents will take your interest more seriously and be willing to devote their time and money to helping you find a home. Many top agents require their clients have a firm pre-approval letter before they will show property. The same with sellers.  A buyer who can demonstrate that they can actually buy the house is more likely to have their offer accepted and is in a stronger negotiating position.

Grand Strand 2012 Market Report

The Grand Strand Market Report is out--here's a quick summary:

Nationally late 2012 appears to be the turn around for the real estate market and the Grand Strand is tracking along, perhaps a few months later.  

• Property sales are up by double digits over 2011
• Inventory (number of properties for sale) continues to decline
• Distressed inventory (short sales and foreclosures) continues to fall
• Single family homes sales were up 18.1% over 2011; condos up 11.7%
• For 2012 median home prices was $168K down 2.6% from last year; condos, $104K a 3% drop
• Both home and condo prices were up in December benefiting from declining inventories and low interest rates.

The big picture:  inventories are declining, number of sales are up, prices are trending up, read the full report here:  Grand Strand MarketReport, December 2012

News You Can Use: Free Music

Amazon.com has announced that anyone who has bought a CD on Amazon over the last 15 years is entitled to a free digital copy of that album and the deal applies to all purchases going forward.

Your tunes will automatically appear in Amazon's Cloud Player and will be immediately available for download.  If you've never accessed your account, you'll find the music there when you do.

A great deal especially if you've lost your CD or had them stolen from your car.  But think about it, it's a little creepy that Amazon keeps all your purchases on file, apparently forever.....

Now if they'd just make the same deal for books....

Good bye to Adjustable Rate Mortgages?

The Feds have changed the rules for adjustable rate mortgages making it harder for buyers to qualify and probably forecasting the end of ARMs.

They've instituted an ability to repay rule, effective January 2014, requiring lenders to evaluate whether a borrower can repay if the loan adjusts upwards.  Unlike fixed rate mortgages which have the same interest rate and payment over the life of the loan, ARMs fluctuate with interest rates, usually being pegged to LIBOR, a world wide reference rate computed in London.

Instead of qualifying buyers with an ARM's low introductory rate, the lender will be required to use the loans loan's "fully indexed rate" or LIBOR plus the lender's margin.  This will make it harder for some buyers to qualify,  but once they do it's less likely they'll be forced out of their home if (really when) interest rates rise.

One thing for sure, interest rates will eventually go up,  it's just a matter of when and how far--how can I be so sure, easy, they can't go much lower unless we start paying banks to hold our money....

So why bother with an ARM?  An ARM with a low introductory rate might make sense if you know you will be moving around the end of the introductory period; otherwise a fixed rate mortgage is likely to be a better deal for the long term.

Mortgage Forgiveness Debt Relief Act

On January 1, 2013, Congress passed an extension of the Mortgage Forgiveness Debt Relief Act. This great news for struggling homeowners in the Grand Strand.

The Mortgage Forgiveness Debt Relief Act was originally passed in 2007 to aid the millions of homeowners who suddenly found themselves in danger of losing their homes to foreclosure following the housing market crash.

Under the Mortgage Forgiveness Debt Relief Act, any debt forgiven in a short sale, foreclosure, or loan modification, is exempt from federal taxes on primary residences.

For homeowners facing foreclosure, this exemption may save them from paying thousands, or even tens of thousands, in taxes on top of losing their homes. For another year, homeowners can take advantage of this exemption if they must  do a foreclosure, a short sale or a loan modification. 

Apartment Rents Continue to Rise

Landlords along the Grand Strand are finding that demand for apartments and rental houses is strong and high rents aren't deterring people from renting. But as rents continue to rise and and mortgage rates remain at near record lows, more folks are finding it's cheaper to buy than rent, if they can qualify for a mortgage.  However scraping together a down payment to buy a home remains tough for many consumers and tight mortgage standards are forcing some who might like to buy a home to continue renting.

Part of the high demand for rentals is driven by changing demographics as many people like the flexibility to be able to pick up and move; the improving job market makes people think twice about putting down roots if they believe relocating will be a good career move.

What's the impact for the Grand Stand?  If your job is secure and you're happy with the area, now is the time to buy; if you're looking for a better opportunity, keep renting.  As the economy continues to improve, developers are dusting off those apartment projects they put on hold; once new units hit the market, rents will stabilize.

Price Your Property Right

One of the biggest problems that we have in the Grand Strand  market is sellers still expect to get 2006 prices
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​Buyers in general are well informed and have done their homework on the Internet and always ask for market comps. All to often sellers ​say, “Well, my property is special which is why I bought it”. All those wonderful reasons are good points for potential buyers, but every buyer has their own list of dreams and desires and they’re all watching current sales on line.
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​In this market your property must be priced competitively AND it needs to be one or two best values in its market category to get agents' attention and on their show list. It has to be in great condition, because buyers are now looking for every flaw possible and are making objections for the smallest of items. If you're lucky enough to get a contract, there'll be an inspection and everything found will have to fixed, no matter how trivial, if the buyer doesn't insist, their lender will.

The end result for sellers that don’t price to the market is being just behind the selling price range and risking further price declines. If you are a property owner and truly want to sell, ask you listing broker to do a very thorough market analysis and ask what it will take to be the first one or two properties shown in your property's market niche. You might not like the answer, but pricing to market will greatly improve your odds of making a fast sale and time is money too.