Archive for the 'Uncategorized' Category

Dealing with a Low Appraisal

by Steve Meyers

April 26th, 2017

In this period of escalating prices in the Seattle Area along with the low number of transactions, appraisers are sometimes finding it difficult to locate comparable sales to substantiate the escalated price, as a true market value for the lenders.  When an appraisal comes back that is lower than the agreed purchase price the buyer and seller have 4 options.  First, the buyer can pay for a second appraisal that, if it comes in at the purchase price, the lender must agree to accept as the best appraisal (this very rarely happens).  Second, the seller can reduce the purchase price to the appraised value.  Third, the seller and buyer can agree on a price above the appraised value but below the original purchase price and, the buyer brings in the additional cash.  Forth, the seller rejects the appraisal and the buyer must then bring in the additional cash between the appraised value and the agreed purchase price.  If the buyer and seller cannot agree, the buyer can terminate the transaction and receive the Earnest Money back.

One tactic that buyers are currently employing in this market is to submit a Form 22AD with their Offer to Purchase that states the buyer will agree to pay a specific dollar amount above the appraised value, if it comes in below the agreed purchase price.  An example would be the buyer submits a Form 22AD which states they will pay $25,000 above the appraised value, up to the agreed upon purchase price.  This is a win-win for the seller because if the appraised value comes in below the purchase price, the seller knows the buyer will pay $25,000 above the appraised value.  It may still be below the original purchase price but, it locks the buyer into a specific dollar amount.

This may seem like a small matter but, it’s causing a lot of sellers to accept Offers to Purchase with this agreement attached.  I would encourage agents and buyers to utilize this Form 22AD to strengthen their Offers.  Buyers should confirm with their agent and lender they have the additional cash on hand to close the transaction.

If you have any comments or questions about this article, please email me at smeyers@kw.com.

Steve Meyers is a Managing Broker at Keller Williams Real Estate in Seattle, Washington.  He can be reached at (206) 972-3328 or smeyers@kw.com.

Understanding your Resale Certificate

by Steve Meyers

February 27th, 2017

As the seller of a condominium in Washington State, you’re required to supply the buyer with a resale certificate and all supporting documentation shortly after you enter into a purchase and sales agreement with the buyer.  The HOA’s professional management company will produce these documents for you and you’ll sign to attest to their accuracy.

There will be numerous items in the resale certificate which may cause the buyer to terminate the agreement.  It’s best to learn about these items prior to listing your condominium for sale with a real estate agent and disclosing those items in the listing information on the multiple listing service.  Those items will include whether there is a “Rental Cap”, any special assessments, the minutes of the general HOA and specific B of D meetings, the minimum rental period, pet policy, the amount in the capital reserve account, information in the most recent reserve study, delinquent assessments, FHA approvals, controlling interests, assigned parking and storage, etc.

Buyers want to know if there’s a “Rental Cap” in the building in the event they’re transferred with their company to another area or, they seek employment in a different location.  There are many scenarios for how to qualify for renting your unit so you should understand these may limit the number of buyers submitting Offer to Purchase.

The biggest issue with buyers will be the amount of capital reserves and the information in the most recent reserve study.  Buyers want to know of any additional financial obligations they may have if the current capital reserve account will not pay for all of the repairs and maintenance items that come up in the future.  Low HOA Dues may result in a poorly funded capital reserve account and high HOA Dues may indicate there’s a significant financial obligation in the near future.

Recently, VRBO’s (vacation rentals by owners) and AirBnB’s (air bed and breakfasts) have become popular.  Some condominium Declarations, Bylaws and CC&R’s address the minimum rental periods within buildings but, there are some buildings without restrictions.  Surveys have found that short-term rentals in condominium buildings have a negative effect on condominium values and are an overall negative impact to the community of owners.

If you have any comments or questions about this article, please email me at smeyers@kw.com.

Steve Meyers is a Managing Broker at Keller Williams Real Estate in Seattle, Washington.  He can be reached at (206) 972-3328 or smeyers@kw.com.

Winning with Multiple Offers

Ways to Increase Your Chances in a Multiple Offer Situation
by Steve Meyers
October 12, 2016

Listed below are the things we can do to make your offer as enticing as possible.

– Building rapport with the listing agent and seller. Early and often. “What do we need to do to make you look good to your seller?” & “What besides money are the terms you are looking for in a perfect offer?”
– Perfect closing date for the seller that might include closing plus 3 days before buyer’s possession or rent back situation at $10/week. Ask the Listing Agent.
– Earnest Money: Should be 2-3%. At 2% at $675,000 is $13,500.00, which is low for a multiple offer situation. 3% looks standard in a competitive market. 5% looks strong.
– Use Seller’s Title & Escrow preferred company
– Down payment: As high as possible or explain loan structure to selling agent and why
– Reduce 10 days (twice) to 1 hour on neighborhood review on pg. 5, paragraph X on the Purchase and Sale agreement. Or strike out altogether.
– Completed a pre-inspection, and waived inspection on the Form 35P.
– Waive Form 17: “right to revoke offer” based upon form 17. Form 17 is the seller’s disclosure.
– Financing addendum (22A): Paragraph 2, A. Decrease the number of days from 30 to a low amount of around 14 days.
– Big escalation increments if includes an escalation addendum.
– Start purchase price above listing price.
– Having our lender call the listing agent to talk the buyer up and why they are the best buyers.
– Include your love letter as part of the offer.
– Submit the offer via email with a well written recap of the offer within the email message
– Make sure the offer is well written, all of the pages in correct order. Everything correct.

Here are some things that are required in the current market if multiple pre-inspections are completed.

– Waiving appraisal – need to understand the risks as the buyer
– Having no or very few ways for the buyer to back out of the agreement once selected
– Waiver of payment of utilities – know what this means
– Pay SELLER’s Title & Escrow Charge

Here are the additional items available to you that we have seen from other agents who have won the offers, but we don’t typically encourage

1) Immediately releasing earnest money directly to seller as non-refundable
2) Writing a check for additional money directly to seller
3) Final & Best without an escalation addendum

Condominium Loan Changes

Condominium Loan Changes
by Steve Meyers
August 29th, 2016

There have been some changes in the policies which govern condominium loans that are insured by Fannie Mae and Freddie Mac.

a.) The most significant change in policy allows for a loan to an owner-occupant, or condominium purchased as a second home (vacation home) to be insured by Fannie Mae and Freddie Mac if more than 50% of the units in the building are non-owner occupied units (rentals). Before this change, Fannie Mae and Freedie Mac would not insure loans if 50% or more of the units were rentals. However, a loan to an investor still requires fewer than 50% of the units to be rentals.

b.) Historically, if there were any litigation matters against the condominium association or the builder, neither Fannie Mae nor Freddie Mac would insure the loan. In general, this meant the borrower would have to seek a non-conventional loan for their purchase which would cost significantly more. Fannie Mae and Freddie Mac have changed their guidelines and now allow “Minor Litigation Matters”.

They still will not allow litigation involving safety, structural soundness, functional use, or habitability.

They will allow some “Minor Litigation Matters” where:

1.)The HOA is the plaintiff in litigation for past due HOA assessments.

2.)The result of the litigation will have an insignificant impact on the financial status of the condominium project.

3.)The litigation does not involve monetary consideration.

4.)The litigation involves a “Claim Amount” that is currently known by all parties, the insurance carrier has agreed to defend the “Claim” and, the HOA General Liability Insurance will cover the “Claim”.

c.) For buildings and complexes with more than 21 units, Fannie Mae and Freddie Mac will now allow a single owner to own up to 30% of the total number of units. Prior to this change a single owner could only own up to 10% of the units.

d.) The amount of commercial space in the building / complex can now be up to 30% of the total square footage in the building. Previously, it was limited to 25% of the total square footage.

e.) These agencies are now allowing the loan underwriter to sign off on a completed HOA Questionnaire without reviewing detailed Budget, Reserves, Minutes, etc. for borrowers of primary residences who put 10% as a down payment and borrowers on their second homes (vacation homes) who put 25% down as a down payment. For investors, Fannie Mae and Freddie Mac still requires the underwriters to perform a “Full Review” of the Resale Certificate and the supporting documents.

 

 

 

Multiple Offers….Wahoo!

Multiple Offers….Wahoo!

by Steve Meyers
April 18th, 2016

So, your full service real estate agent did a wonderful job helping you prepare your single-family home or condominium for sale and he / she did an outstanding job marketing the property on-line, through “Open Houses” and directly to buyers and real estate agents. The date has come to “Review” Offers from buyers and you’re thrilled. There are 7 Offers to Purchase your property from buyers.

Back-up a few steps. Here are some things you may or may not have known. Did you know that you can share the terms and conditions of any of the Offers with one or more of the other potential buyers? Yes, if a seller would like their real estate agent to contact one of the other buyers and tell them what their current highest and best offer is and, allow that buyer to meet or beat the current Offer, the seller is allowed to do just that.

Did you know that a seller cannot accept an Offer based upon any of the protected classes as outlined by the federal government. For instance, a seller cannot accept an Offer because a couple has young children and the seller would like to sell their home to a family. This would be discrimination towards a single person who doesn’t have any children.

Once a seller reviews all 7 Offers and settles on one Offer to pursue, the seller should write on the first page of each of the other 6 Offers that the seller has reviewed the Offer and “Rejects” that Offer. The seller should then initial where he / she has indicated they have “Rejected” the Offer. Their real estate agent should then forward a copy of the first page to the agent representing that buyer.

“Sellers Right to Terminate”

“Seller’s Right to Terminate”
By Steve Meyers
February 29, 2016

The most recent Financing Addendum to the Purchase and Sale Agreement includes new language in Section 2 titled the Seller’s Right to Terminate.   Here is the new language.

a.Right to Terminate Notice: “At any time ______ days (30 days if not filled in) after mutual acceptance, Seller may give notice to Buyer that Seller may terminate the Agreement at any time 3 days after delivery of that notice (the Right to Terminate Notice)”.

b.Terminate Notice.  “If buyer has not previously waived the Financing Contingency, Seller may give notice of termination of this Agreement (the “Termination Notice”) any time following 3 days after delivery of the Right to Terminate Notice.  If Seller gives the Termination Notice before the Buyer has waived the Financing Contingency, this Agreement is terminated and the Earnest Money shall be refunded to Buyer”.  If not waived, the Financing Contingency shall survive the Closing Date.

What does this mean for the Seller?  Once the “Right to Terminate Notice” is provided to the Buyer, the Buyer must waive their financing contingency.  The Buyer has no further ability to terminate the transaction based upon any items within the Financing Contingency.  If the Buyer does not waive this contingency, the Seller can provide the “Termination Notice” and return the earnest money to the Buyer.

Why would the Seller terminate the transaction? If for whatever reason the Seller does not feel comfortable with the Buyers efforts to obtain financing, the Seller can use this “Right to Terminate” to force the Buyer to waive his / her financing contingency.   The Seller may also exercise this “Right to Terminate “  if they received another Offer to Purchase with better terms and conditions as the current Agreement.

What does this mean for the Buyer?  The Buyer needs to actively secure financing for the property prior to the Seller providing the “Termination Notice”.  If they have secured the financing from their Lender such that they are confident that the loan will fund at Closing, they will minimize the risk of losing their earnest money.  Once the Buyer waives their Financing Contingency, he / she can no longer terminate the Agreement based upon anything within that Agreement.  If the transaction fails to Close because of one of those elements in the Financing Agreement, they risk losing their earnest money deposit.

If you have any comments or questions about this article, please email me at smeyers@kw.com.  If you know of someone who would also like the information in this article, please forward it to them.You can find other articles I’ve written at  www.ourseattlehome.wordpress.com.

Steve Meyers is a Managing Broker at Keller Williams Realty in Seattle, Washington. He can be reached at (206) 972-3328 or smeyers@kw.com.

Buyer costs of purchasing a home

Buyer costs of purchasing a home
by Steve Meyers
July 25th, 2014

Many Buyers are unaware of many of the costs they will be obligated to pay prior to Closing on the purchase of a single-family home or condominium. These are called “Closing Costs” or “Settlement Costs”. It’s generally believed Buyers will incur an additional 3% to 5% of the purchase price as costs in their purchase of a home or condominium. In a Buyers’ Market (where there are lots’ of available homes and not many Buyers, sometimes a Seller will agree to pay a portion of these costs). In a Seller’s Market (where there are very few properties available and lot’s of Buyers in the market, it’s unlikely that the Seller will pay a portion of these costs).

Financing Costs(1.5% – 3%);
-Loan Origination Fee
-Loan Application Fee
-Cost of the Appraisal
-Credit Report Fee
-Mortgage Insurance Application Fee
-Prepayment of Mortgage Insurance
-Document Preparation Fee
-Title Insurance for Lender
-Interest on the Loan (From “Closing” to the 1st scheduled payment)

Escrow Fees (Charges vary depending upon the purchase price of the property. These are generally split equally between the Buyer and the Seller.  Example of $1,350+ for a $399,000 Sale Price)

General Inspection – ($350 – $500)

Sewer Line Inspection – ($200)

Homeowners Insurance

Property Taxes (Reserve Account)

Home Owners Association HOA (Condominium or Planned Unit Development)
-Document Transfer Fee
-Move-in Fee
-HOA Dues (one or two months)

If you have any comments or questions about this article, please email me at smeyers@kw.com.
If you would like to read other real estate articles I’ve written and published on-line, go to;

http://www.ourseattlehome.wordpress.com

Steve Meyers is a Managing Broker at Keller Williams Real Estate in Seattle, Washington. He can be reached at (206) 972-3328 or smeyers@kw.com.



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