FHA … more that meets the eye !

                                                                                                                                      

So much as changed in a few short years. It seems like only yesterday that buyers were coming through the office door wielding approval letters that far out paced their ability to pay. In those days, buyers found no doc, no verification, no down payment, no interest, no common sense loans available from anyone that had a dime to lend. They filled open houses, created a buying frenzy that rivaled filenes wedding dress rush and created a demand that spiked housing prices across the country.

Then the bills came due, rates went up, resetting occured, the economy stalled and that large housing bubble popped like a prom night pimple. We are reeling as the market returns to normal. I think most people feel that there must be pent up demand out there. All the life events that created a need in the past continue to occur.

                                                                                                               Yet, homes remain unsold.

So, I thought something is amiss. We keep hearing the phrase that interest rates are at historically low values. Money is cheap. We keep reading about the wave empty homes. Supply is there. We keep hearing that based on all the financial data, now is a great time to buy.

                                                                                                               Yet, homes remain unsold.

                                                                                                                            

If you put the situation under a microscope, you find that one of the problems that exists today is related to the lack of information being provided buyers. For some crazy reason, the NAR and others keep harping on the INVESTMENT value of a home. In my opinion, too much is focused on the “long term” gain and tax advantages of home ownership. People buy homes because they want to own a home. They want to have the security and well being provided by all the rights of ownership that are inherent in a deed of trust.

                                                                                                                            

                                                                                                            But let’s look at the obvious.

Most loans being made today are FHA loans. It was a culture shock for the industry when the change was made from sloppy sub-prime, state income, 80-10-10, 80-15-5, 110%, teaser rate, etc. loans that had become the standard. Agents were uneasy. No one had been writting FHA loans. Behind closed doors people feared it would be the end of us. Au contrare, it may be the very thing that saves us and the industry. Not just today, but down the road as well.

You see, no one is focusing on one of the sweetest features of an FHA loan. Oh, they talk about the modest down payment and ease of underwriting. They talk about a certain comfort level that the loan will close. We don’t hear many folks mentioning the biggest asset about FHA loans.

                                                                                                               They are assumable!

Stop for a minute and think about 3 years or 5 years or 10 years from now. What do you think mortgage rates might be in 2012 or 2014 or 2019? Do you really believe that in the face of increased government spending, increased inflation, increased devaluation of the dollar that rates will hold around 5%?

                                                          You won’t find many economists that agree with you.

                                                                                                            

Let’s just suppose that one of those buyers waiting to purchase bought the house on the right for $255,000. The neighbor on the left bought their home two years ago and paid $300,000. Now that chap on the right got a good deal. He put 20% down and has a mortgage of $240,000. The new owner put his 3.5% down and has a FHA mortgage of $246,075.

Fast forward 5 years. Both owners have outgrown the home and decide to sell and move up. They both have good agents and the market value of the homes are about $320,000. They both put their home up for sale for $320,000. Fair enough, but the fellow that paid $255,000 will have more to put down on his next home as he moves up. You might say he will move farther.

Oh, and why might the lad on the left sell sooner? His 5% mortgage rates is assumable. Now, the new buyer will have to get a “wrap around” mortage for the difference between what is still owned on the FHA loan and the sales price and yes, that loan will carry the going rate at that time. The seller on the left will have to try to move his home at time when money surely will cost a bit more. It doesn’t take an MIT grad to discern that 5% on the bulk of a loan is much more attractive and affordable than the 8%, 9% or 10% or more that will be the rate in five years.

Why buy now? Seems to me that not only are you buying a home at a very good price, you are also buying an interest rate that will only become more attractive as rates go up in the future. You see, this really is a great time to buy but it is also a dynamic time to borrow at a rate to day that you can sell in the future.

Take me for a ride in your car..car …..

This used to be the way people searched for a new home.

Mom and Dad would gather up their brood and walk down the street to the home with the for sale sign. Communities grew. Walking around town just didn’t do it anymore.

We progressed

Newspapers began to carry “homes for sale”. Sunday morning would be spent circling the possible choices. Mom and Dad would load the brood into the car and begin a journey from house to house.

Sure, there were real estate agents available. Back in the day, they had books filled with mimeographed pages. They kept the information about their listings behind closed doors and the general public did not have easy access to the homes that were for sale.

Early Real Estate Agent

Now this system came to a crashing halt when the internet opened the doors of information to anyone with a computer. Every listing could be found on line. As a matter of fact, there were hundreds upon hundreds of sites that offered the opportunity to view listings. Those sites still exist today. The majority of agents offer access to the MLS on their personal sites.

Seems like progress.

But a funny thing happened driving around looking at homes. There were more homes for sale than the most meticulous searcher could find on the computer.

If you wanted, you could have your agent ride around with you. If you agent was worth their salt, they could access information about homes you missed on your search.

This is 2009. We have just gone through a whirlwind of price adjustments. Most people looking for a home are not prepared to tour a house for 10 minutes and decide………this is the one…..let’s buy it. At least, I hope no one is still buying a home that way. Now, some agents will say, don’t worry, if we miss something, a home inspection will uncover it. Really, and how many home inspections do those agents think you want to pay for?

It would seem to me, that a lot of folks want to do the search on their own. They want to sort of wander and get a sense of a neighborhood and then see some houses. Some of them go to open houses. That decision limits them to touring homes on Sundays between 1 and 4 and limits them to the homes that are being held open.

What about all the rest?

This old dog has a new trick !

What if you could just stop in front a home for sale, dial a phone number and get all the information about the home? What if you didn’t even have to write it down? What if you didn’t have to go back home and search the web to find out the price, how many bedrooms or bathrooms or other info?

301-703-2698

301-703-2698

Try this on for size. Pull up in front of a home in my market area (DC, Montgomery County, Frederick County, Howard County, Anne Arundel County, Prince Georges County), dial that number 301-703-2698. Follow the instructions.

Pretty cool, huh?

There is a reason that all agents are not the same. There is a reason that if you look closely, you will see why my clients feel they get service that is above the standards in the industry. 

Times have changed. You can text me at 301-537-4377. I understand your desire to have me around when you need me. I’ll be there.

In an industry filled with look alikes, JMac isn’t hard to find!

My name is John MacArthur. I am the Branch Manager of the Long and Foster Office in Olney, MD. I can be reached at 301-537-4377.

I approve this message.

 

And Where the Hell is YOUR Agent?

This business of being a real estate agent is ever changing. There are more styles in this profession than any other. Agents not only come in all shapes and sizes….they all bring their baggage with them.

Now I will admit that I have neglected signing on and sharing thoughts lately. I have been busy. Spring has sprung and many of you have made the move to buy…..now. I don’t know what they put in the water in this area, but some of those unidentified chemicals must have created buyer urgency. You know who you are and you have been sipping the kool aid.

Not a bad time to storm the DC market. Lots of inventory out there. Lots of over priced inventory. Lots of undervalued inventory. Lots and lots of houses, townhouses and condos for sale. Did I say…lots of them?

In recent weeks, there have been multitudes of buyers doing the price range and location procession. You may have seen them. They form the unstructured caravan travelling from one open house to another on Sundays.

They rush from door to door, computer print outs of listings in hand, hoping to discover “home sweet home”. Don’t see many agents. Don’t understand that.

It is one of those things that made me go……hmmmmmmmm.

So I decided to investigate just what are these people thinking. I made up a little checklist and positioned myself outside a popular open house (I am sure the agent loved having me out there…but it was a free sidewalk, and I only talked to folks as they left and I never once shared that I was an agent and God knows I told no one I was the Naked Realtor).

I heard some very interesting things. Some of you have an agent(?). Really? And your agent told you to go out and visit open houses and if you found something you like…give the agent a call. What part of no representation don’t you understand? You are walking into home after home, heart in hand, dreams in your eyes, unarmed in quagmire of legal issues that quietly put you at risk. You are spending the better part of 20 minutes to determine the quality and value of the largest purchase of your life. You carry the false belief that on your own, you can evaluate the merits of homes.

Let me share a secret. Everyone selling a home has done as much as possible to put lipstick on that pig and make her the belle of your ball. You are ravished and they are offering all the sizzle your senses can bear. A pretty red door may suit feng shui but it is no indicator of the energy efficiency of the home. Those new stainless steel appliances may gleem in the kitchen, but they are no indicator of anything other than the sellers ability to polish up the area. All that glitters is not gold. Do you realize that the agent sitting at home, watching t.v. is supposed to be representing you, ferreting out fact from fiction?

Some of you have decided to go it alone. You have read all about buying a home online and you have heard that you can strike quite a deal if you don’t have an agent. You might be able to get the seller to reduce the price of the home a bit because they don’t have to pay an agent. Sounds like a plan.

Of course, the listing agent is the one that has to make the concession. In Maryland, they can write up the offer for you. They can promise that things will be as smooth as silk. There may be a scintilla of truth in that statement. They represent the seller. They can not represent you. They can not say or do anything that is not in the best interest of their client………the seller. They can not negotiate for you. They can not advise you. They can just smile……maybe make a little less for their effort……….and smile all the way to the bank. You get the keys and absolutely nothing else.

Now that sounds like a plan when making the biggest purchase of your life.

Actually, running out on your own and reporting back to your agent(?) is pretty stupid. Your agent works for you. They will be paid fairly at the close of the transaction. Don’t you agree that they should earn the money? I do.

Taking your best shot on your own, with no representation, is absolutely the riskiest way to go about purchasing. Most agents will represent you and be willing to accept the commission offered by the seller. That arrangement seems like a win-win to me.

Of course, I am just the naked realtor, I do this for a living. If you want to receive further information or send hate mail or ask a question or maybe you can tell me..where the hell is your agent?…you can write me by clicking on this link.