Frequently Asked Questions... 

Q: The media keeps saying that prices will drop a lot further. Should I wait to buy?
 

A: Many foreign buyers are actively purchasing in this area now, as their dollar is much more valuable than it’s been in years. Deep pocketed investors are positioning themselves well for the next market cycle by buying now. The expert’s crystal balls aren’t accurate enough to predict the exact bottom of this cycle but if knowledgeable investors are buying now, I pay attention! If you are a speculator looking only to make a short term profit, you may want to wait for market statistics to prove we have hit the bottom of this cycle and are on the way back up. If you are a potential homeowner who intends to occupy your home for a few years and aren’t living paycheck to paycheck, this may be an opportunity to make a smart purchase. 

Q: I hear that there are a lot of foreclosures right now and short sales. I bet the bank will take a lot less than market value for short sales and foreclosure properties.
 

A: Unfortunately, there are a lot of bank owned and over encumbered properties on the market right now. Short sales and foreclosure properties are different. Banks own foreclosure properties and have had appraisals and several broker price opinions completed before putting the home back on the market. A short sale occurs when a property is still owned by the homeowner and the bank approves a payoff that is less than the current principle balance. 

A short sale can be approved by the lender under certain circumstances. The first requirement is that the homeowner has a documentable hardship and is willing to provide the extensive written documentation required. Unfortunately, a declining market value doesn’t count as a “hardship” under the short sale requirements. If the seller has a documentable hardship and is willing to jump through all the hoops required for short sale approval by the mortgage company, they will not sell it for less than market value. Regardless of whether it is a foreclosure or a short sale, if a home in the same neighborhood with the same floor plan sold two weeks ago, the bank may not be willing to accept a sales price less than that property sold for. 

A final note on buying distressed properties: In the case of a foreclosure property, there may be significant deferred maintenance. If you are unable to complete repairs yourself, it may cost more in the long run to hire professionals to bring the property back to reasonable condition. Professional home inspections are highly recommended for any potential property purchase. In the case of a short sale, the lender can take a month or more to consider whether they will approve a reduced payoff. If you are on a specific time frame, waiting for a long time for bank approval to proceed can be frustrating and ultimately cost you money with a higher interest rate.
 

Q: With so many properties on the market, the seller has to take a lot less. If I can’t “steal” it I’m not interested. There are plenty of other houses for me to buy.
 

A: There are a lot of homes for sale and buyers have more choices and more negotiating room than they’ve had in years and interest rates under 6% make homes more affordable than they have been in recent years! Many builders have dramatically curtailed the building of spec homes and some have begun to raise prices slightly on homes to be constructed for a specific homebuyer. The prices of new homes are once again higher than the price of a similar resale home. 

Q: I have heard that it is impossible to get 100% financing anymore. Just how much are the down payment requirements and can family members” gift” down payments and closing costs?
 

A: 100% purchase financing is available, but very restrictive. Most buyers will be required to pay a down payment. Certain programs allow a family member to gift the down payment. FHA, for example, has a 3% down payment requirement. The down payment and closing costs may be gifted by a family member, without limitation on amount. This process must be carefully documented to verify the funds are in fact a gift and not new debt.
 

Q: I’ve heard that your credit score determines whether you will get a loan and what the interest rate is. How important is credit?
 

A: Credit is very important, more than in the past due to the elimination of aggressive sub-prime lending. Not only is a lender reviewing the credit to determine loan eligibility, the mortgage insurance industry has also tightened standards to lessen their risk. The result is that certain loans may not be approved, even when the borrowers can afford the payment.