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Appreciation, is it real?

Appreciation, is it real?

by Steve Meyers

On the surface, the generic statistics given to reporters and the media may be correct.  The single statistics that are accumulated by the aggregators of this information like Zillow and provided to reporters and the media leaves out an explanation of how these statistics can be misapplied or mis-interpreted.  Here are two examples.

In downtown Seattle if you were to compare the sale of two-bedroom condominiums over the last 12 months the appreciation may be reported to be, say twelve percent (12%).  So, if in June, 2015 the average sale price of 2 bedroom condominiums were, say $700,000 and in June of 2016 the average sale price of 2-bedroom condominiums were $784,000, that would be your 12% appreciation.  However, when you understand that Tower 1 of the new Insignia Condominium Project closed a significant number of 2-bedroom units during that same time frame with sale prices between $800,000 and $1,000,000, that will skew the average sale prices of other condominium projects in downtown Seattle.  What was the appreciation in those existing condominiums, say 5% or 6%.  I don’t know but, it wasn’t 12%.

Let’s look at single-family homes in the Ballard Neighborhood.  If the media reported the appreciation rate of single-family homes went up 14% in the last 12 months in Ballard, that would be wonderful.  However, if you take out, or consider, there have been a significant number of single-family homes that were purchased by developers to construct 3, 4, and even 5 townhomes on those single-family home sites, how will that skew the appreciation rate?  If your Ballard home were outside the areas in Ballard that allowed the re-development of your single-family parcel into 3, 4, 5 townhomes, would your site have increased in value by 14% …. No.

Granted, there has been significant appreciation in the two sectors above but, the statistics reported to reporters and the media by the aggregators of this information is many times incorrect because they take a broad brush look at the prices and have no idea what other things to consider.

If you have any questions or comments about this article please contact me.  Steve Meyers, Managing Broker, Keller Williams Greater Seattle, (206) 972-3328, smeyers@kw.com

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.

“Under Contract”, dont jeopardize your loan

By Steve Meyers
August 1st, 2014

I “Close” on the purchase of my new home next week, Thursday. It’s a much larger home than I previously lived in so I purchased some additional furniture for the third bedroom and living room. I put it on my credit card. I’m so excited.

Unfortunately, it’s very likely this Buyer no longer qualifies for the loan they needed to purchase the home. They purchased the furniture using a credit card and the minimum monthly payments on the card went up, thus reducing his available cash flow to pay his monthly mortgage. He just lost his dream home.

OR….I “Close” on the purchase of my new home next Thursday. Because it’s further away from work and my old car was on its’ last leg, I decided to lease a car for 2 years until I could afford to purchase a used car. Unfortunately, the periodic monthly car lease payment will reduce his available cash flow to pay his monthly mortgage. He just lost his dream home.

OR….I “Close” on the purchase of my new home next Thursday. I made an application for my loan back in November and it’s finally closing. At Christmas time I only had 8 people to purchase gifts for so I opened credit cards at Macy’s and JC Penney because of the fantastic deals when using store credit cards. Unfortunately, opening the two new lines of credit lowered his FICO Credit Score. The lender must now increase the interest rate on the loan which impacted his ability to buy his dream home.

What are the do’s and don’ts when looking for a home to purchase and prior to “Closing” on the transaction. When you meet with your lender to get Pre-Approved for a loan, ask him/her to supply you with a list if the important financial do’s and don’ts. There are many things that you might do that will jeopardize your ability to borrow money to purchase a home.

The Do’s and Don’ts of Borrowing
Employment:

a.) Changing jobs
b.) Trying to qualify for a loan with a recent raise
c.) Losing your job or reduction in hours
d.) Not working full time or on the job for less than two years
e.) Having a paycheck that does not have your name, address or year-to-date income on it
f.) Being self employed with declining income
g.) Being self employed less than two years
h.) Declining income

Credit:

a.) Late mortgage payments
b.) Credit lates, collections, or judgements
c.) Recent inquiries into your credit – they need to be explained
d.) Undisclosed litigation including filing for separation or divorce
e.) Address discrepancies
f.) Undisclosed debt that we discover during processing including child support/alimony
g.) Fraud alerts/homeland security

Assets:

a.) Recent deposits over $ 250 – they will need to be explained and documented to the lender
b.) Missing pages of bank statements or brokerage statements
c.) Internet print outs that do not have names or account numbers
d.) Transfers between accounts that are new and unable to trace
e.) Gift funds not documented properly

Rules to follow:

a.) Do not make any changes to your job. If something changes involuntarily advise the lender immediately
b.) Do not apply for any new credit cards or obtain any new debt. Do not let anyone look into your credit without telling your lender ahead of time
c.) Do not make any late payments. Pay all fines, traffic tickets and, return all library books.
d.) Do not spend assets over $ 1000 without discussing it with your lender
e.) Do not go on vacation or out of town without advising your lender
f.) Respond to your lenders requests for documentation within 24 hours
g.) Understand that the underwriter will “find out”. There are no secrets.
h.) Understand that if your lender asks you for something it’s because they need it not because they want it.
i.) Understand that this process is stressful but as a team you’ll get through it together.
j.) Understand that your lender must follow federal regulations and agency rules and guidelines even if they don’t make sense.

I’m looking forward to working with you on your purchase. Send me an email and let’s schedule an appointment to meet and discuss your needs and wants. If you know someone else who would like to read this article, please forward it to them.

Steve Meyers, Managing Broker
Keller Williams Greater Seattle
smeyers@kw.com
(206) 972-3328

1031 Exchanges, how do they work?

1031 Exchanges, how do they work?
by Steve Meyers
January 23rd, 2015

So…what is a 1031 Exchange and does it make sense for me to pursue this mechanism to defer my tax liability when I sell my property? Does my property qualify for a 1031 Exchange? What needs to happen to defer my tax liability into the future?

A 1031 Exchange is a method for deferring the tax liability on the sale of real or personal property into the future. Using this mechanism created by the IRS, you’re allowed to sell your real or personal property and not pay taxes on the Capital Gains if you re-invest the proceeds into another Like-Kind property within a specific period of time. This allows the owner to defer taxes they would have paid at the time of sale, to a later period when it is more advantageous to the owner. The common threshold is that if your tax liability is less than $10,000, there’s no real advantage to a 1031 Exchange.

What qualifies for a 1031 Exchange: Property that is held for a “trade, business, or investment” purpose qualifies for a 1031 Exchange. The definition of Like-Kind real property is very broad. For example, you can trade raw land for income property, a rental house for a multiplex, or a rental house for a retail property.

What does not qualify for a 1031 Exchange: Your primary residence or second home do not qualify for a 1031 Exchange.

The law requires you to work with a registered “Qualified Intermediary” to facilitate your 1031 Exchange.

To qualify for the 1031 Exchange you need to follow very specific rules and time-frames. You need to “designate specific properties” that you intend to purchase within 45 days of the sale of your property, known as the relinquished property. Here is a very simple explanation. If you intend to purchase between one (1) and three (3) properties, you must identify those properties within the 45 day time period and, you need to “Close” on any, or all, of those properties within 180 days from the “Closing” of the sale of your relinquished property. If you intend to purchase four or more properties (4+), you must identify all of those properties within the 45 day time period and, you must “Close” on all (100%) of those properties within 180 days of the “Closing” of the sale of your relinquished property.

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.

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.

Your FICO Credit Score

Your FICO Credit Score
By Steve Meyers
August 31st, 2014

One of the three key items that a mortgage lender will look at in evaluating a borrower to commit to lending him / her money is their history of repaying their prior debts. The other two are available cash and cash-flow (monthly income). Lenders contract with a company originally called Fair, Isaac and Company, today its’ referred to as (FICO) to put together a “FICO Credit Score” based upon its’ research into your debt payment history.

There are several significant changes that have been proposed by FICO for its’ future analysis. They may incorporate these changes in their analysis by the end of 2014. They’ thinking about placing less weight on your outstanding Medical Debt, and removing “Past Due Collection” items that you recently paid off, in their analysis.

However, please recognize that the Capitol Markets and Mortgage Lenders may not immediately follow suit and incorporate those two changes in their analysis, especially reducing the weight of the outstanding Medical Debt. Mortgage Lenders may still look at your financial obligation and responsibility to pay off any Medical Debts that you’ve incurred.

Here are some “Do’s” and “Don’ts” to increase your “FICO Credit Score”

1.) Revolving Credit (credit cards)
a.) You should have two (2) or three (3) lines of Revolving Credit but, no more than four (4).
b.) Never exceed 25% to 30% of your credit limit on any one card. If you have a credit card limit of $5,000, never have more than $1,500 on that credit card.
c.) Once you have a positive history with a Revolving Line of Credit, request an increase in your credit card limit to the next higher level. Continue to request higher limits. The higher your total credit limit on all of your lines of Revolving Credit, the higher your FICO Score.
d.) Do not cancel a Revolving Line of Credit unless you have more than four (4) credit cards.
e.) There is a high weight in evaluating your credit worthiness is your consistency in payments on your Revolving Line of Credit.

2.) Installment Loans (student loans, car loans, real estate loans)
a.) FICO will look at the consistency in you payments on these Installment Loans
b.) You should never let any of your Installment Loans go to a Collection Department or to the point where you have a court ordered Judgment against you.

3.) Past Due Collection Accounts
a.) Paying off Past Due Collection Accounts currently has a negative impact on your credit score. It takes a negative “old item” that has less weight in the scoring system and brings it to the forefront and makes it negative “Recent Activity” which has a much higher weight in the scoring system.
b.) If you have some extra cash, it may be more advisable to pay down your revolving Lines of Credit so the outstanding balance(s) are below 25% of your credit limit on those accounts.

Your should seek the counsel of an expert prior to making any decisions regarding your credit.

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.

Purchasing with a Reverse Mortgage

Purchasing with a Reverse Mortgage
By Steve Meyers
August 22nd, 2014

Most of my clients are to young to utilize the option of a Reverse Mortgage but you may have parents or acquaintances who would qualify for this type of program. If so, pass this article along.

A Reverse Mortgage is a Home Equity Conversion Mortgage (HECM). It allows someone over 62 years old to purchase a home using a mortgage that does not require monthly payments to pay down or pay off the loan. Instead, the interest is added back onto the principal balance until the home is sold in the future. If the mortgage balance is higher than the sales price at the time of sale, the homeowner is not obligated to repay the amount above the sales price.

To qualify for a Reverse Mortgage;
a.) The borrower(s), and non-borrowing spouse, must be 62 years old.

b.) The home must be occupied by the borrowers within 60 days of “Closing”.

c.) The borrowers must properly maintain the property.

d.) The property must be a single-family home or a building of 2 to 4 units.

e.) The borrowers must pay the real estate taxes, hazard and flood insurance, Homeowners Association Dues, if any.

The available loan amount is determined by;
1.) The age of the youngest borrower or non-borrowing spouse.

2.) The current mortgage interest rate.

3.) The lesser of the; purchase price, appraised value or, FHA maximum lending limit.

4.) Initial mortgage insurance program.

What questions should you ask yourself;
i.) Will this home accommodate our long term needs? Are there steps in the home that we may find difficult to climb in 10+ years? Are we capable of personally maintaining the home in the future or, are we willing to pay for the maintenance services when we’re unable to maintain the home?

ii.) Will we be able to pay the real estate taxes, insurance, and upkeep in the future?

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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