Low Housing Inventory Means Buyers Must Be Smart When Making Offers

In areas all over the country, the supply of available homes for sale is down… way down in many areas. It’s down about 50% here in parts of California. That means fewer homes for buyers to buy, and fewer buyers to actually get their offers accepted.

It’s like 2002 – 2005 all over again, which means very few homes on the market and LOTS of buyers. That means multiple offers are received on most homes, even the fixers. The net result is that many buyers are frustrated with the market because, of course, only ONE buyer “wins” on each house.

It’s interesting, though, because even though Realtors counsel their buyers about this market (low inventory and multiple offers on each property), buyers often “don’t get it” and still want to write low-ball offers. The market is changing, again, and that means buyers have to be “smart”, along with their agents, and write good offers that will get accepted. So, what does that all mean? Read on.

While I strongly recommend buyers work closely with their Realtors in this area, here are some basic guidelines when submitting offers in the current market:

1. Listen to your Realtor. Realtors work the market every day. They know the market. They know what works and what doesn’t.

2. Don’t think you can low-ball the seller and win the property. While this works occasionally, it’s working less and less in today’s competitive marketplace… even with fixer-uppers. Offer a reasonable price. In our current competitive market, it’s not uncommon for properties to sell for ABOVE the list price. I’ve seen properties with 20+ offers, so you can imagine, many of those offers end up well-above list price. Work with your agent to determine a “smart” price, since too high an offer can hurt you, too (because of appraisal – ask your agent to explain this).

3. Don’t ask for “everything”. There are many different items on a contract that are negotiable and paid by either seller or buyer. Sellers like it when buyers pick up many of the “additional costs” that accompany the selling process. The more that buyers offer to pay for, the more attractive those offers are to sellers.

4. Get pre-approved by a lender… and not just pre-qualified. The more “solid” the buyer looks in the seller’s eyes, the better the offer.

5. Put down a larger deposit. This shows the seller the buyer is more serious. Ask your agent what a good deposit is in your market.

6. Listen to your Realtor. No, writing this a second time was not a mistake. I write it again because it’s important to listen to your agent and take his/her advice when writing an offer. They have a vested interest in ensuring you get the property, so listen to their advice.

If you have questions about how best to compete in the current market, please contact me today.

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group DRE#01398835, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending. If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

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Is Buying a Home Right Now a Smart Plan?

With the burst of the housing bubble, credit crisis, and millions of foreclosures across the country, you may wonder if buying a home is such a good idea after all. However, it’s important to consider all of the facts. The important message to take away from these events is not that buying a home is a bad idea, but that you must be smart about buying your home.

The housing market, like every type of market, unavoidably has its ups and downs. That doesn’t mean buying a home is a bad investment. As a long-term investment, homeownership is still one of the best investments for individual households. Historically, real estate has consistently increased in value, despite shorter periods of depreciation due to local markets and/or national economic conditions. The data shows that homes generally appreciate about 5% per year.

Savings & Investment

Five percent may not seem like a great return on investment, but you have to think about it in the context of the situation. For example, let’s say you put 10% down on a $200,000 house. That’s a $20,000 down payment, or initial investment. At a 5% annual appreciation rate, your $200,000 home would gain $10,000 in value during the first year. Earning $10,000 on an investment of $20,000 is a whopping 50% return.

For further perspective, let’s say instead of spending that $20,000 on a down payment, you invested it in the stock market. With a 5% return, you would gain only $1,000 in profit.

Tax Benefits

So now you’re saying that a home may have a higher return, but that’s before you consider all of the costs of home ownership, such as taxes, etc. Well, think of it this way: your property taxes as well as the interest on your mortgage are both tax deductible. You can deduct those costs from your income, thus reducing your overall taxable income. In other words, the government is subsidizing your home.

Other Benefits

It’s easy to get carried away with all of the economic reasons for home ownership, but it’s important to remember that not every reason is financial. Have you ever wanted to paint the walls of your apartment? Well when you’re renting, you can’t. Has anything in your apartment ever needed updating, but the landlord refused to do it? When you own a home, you can make the space yours in almost any way you want. And you benefit when you do home improvements, both financially and psychologically. Homes generally have more space, for storage, living, etc. than other living arrangements. Not to mention that you have space outdoors for barbecuing, pets, and kids. Owning your home carries with it a sense of pride, accomplishment, and even an elevated social status.

So when you’re considering buying a home, consider the broad range of benefits that owning a home can have. And always make sure you have an experienced real estate agent and loan officer to help make sure you’re getting a home that is right for you, both financially and psychologically.

 

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group DRE#01398835, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending.

If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

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How Much Home Can You Afford? You May Be Pleasantly Surprised…

Provided by Lending Tree

If you’re like many first-time homebuyers, chances are you’ve been spending your weekends driving around visiting open houses and new model homes. This is a great way to get a feel for what you want. The problem is that what you want isn’t always what you should get.

Before you start touring homes for sale, it’s important to start off with a budget so you know how much you can afford to spend. Knowing what mortgage payment you can handle will also help you narrow the field so you don’t waste precious time touring homes that are out of your reach.

Where to begin

The key factor in figuring how much home you can afford is your debt-to-income ratio. This is the figure lenders use to determine how much mortgage debt you can handle, and thus the maximum loan amount you will be offered. The ratio is based on how much personal debt you are carrying in relation to how much you earn, and it’s expressed as a percentage.

The ideal ratio

Mortgage lenders generally use a ratio of 36 percent as the guideline for how high your debt-to-income ratio should be. A ratio above 36 percent is seen as risky, and the lender will likely either deny the loan or charge a higher interest rate. Another good guideline is that no more than 28 percent of your gross monthly income goes to housing expenses.

Doing the math

First, figure out how much total debt you (and your spouse, if applicable) can carry with a 36 percent ratio. READ MORE OF THIS ARTICLE

Renters Have Much to Gain by Pursuing Home Ownership

By Don Johnson, Broker/Owner/CEO
The Don Johnson Realty Group

MURRIETA, CA – Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be on your way toward building equity. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop lower than the rate you’d currently be locked in at, and this would cause your monthly mortgage commitment to go down.

And not only would your own home give you added space, your own back yard and overall privacy—home ownership would also give you some tax advantages. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” down payment mortgage programs. The most common and beneficial loan for people buying their first home is the FHA loan, which only requires a 3.5% down payment. In addition, FHA allows a seller to cover up to 6% of a buyer’s closing costs which really helps decrease the amount of money it takes to buy a home. Many people also don’t know that FHA allows the lowest credit scores of any loan available today, only needing a 640 score in most cases.

If there is any time to buy it is NOW! Why? Because home prices are low today. Low home values are surely not good for people selling homes but they are great news for people wanting to buy a home. Don’t miss this opportunity to take advantage of the current market before home values rise. Call me today for a free consultation: 714-856-3992.

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group DRE#01398835, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending. If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

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Life After Bankruptcy

By Don Johnson, Owner and Broker, Don Johnson Realty Group

Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.

• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.

• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.

• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit:

• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.

• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)

• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.

While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending. If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

Credit report error holding up your home purchase? How to fix it

If there’s a mistake on your report, whom do you tell — and how long will it be before it’s corrected?

By MSN Money partner Fri 2:53 PM

This post comes from Jeanine Skowronski at partner site MainStreet.

By far the most questions we receive from readers for our weekly credit Q&A series concern credit report disputes. And while we’ve previously covered the option of contesting information appearing on a credit report, we’ve never actually delved into what happens after a consumer has done so. That is, until now.

The infographic at the end of this post illustrates how a dispute is handled by the three major credit bureaus — Equifax, TransUnion and Experian. As previously reported, the big three furnish varying reports to a vast majority of the nation’s lenders.

Under the Fair Credit Reporting Act, both the credit reporting company and the information provider (typically the lender or collections agency) are responsible for investigating and/or correcting inaccurate or incomplete information appearing on a person’s credit report and are given 30 days to do so.

But careful observers will be quick to notice that, under current operating procedures, this investigation is handled by the lender, not the bureau who is being notified of the dispute.

“We go back on behalf of the consumer to the source to verify the records are being reported accurately,” says Rod Griffin, director of public education for Experian. “They let us know if the information should be updated or Read More of This Article…

The Don Johnson Realty Group is a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending.  http://www.djrealtygroup.com