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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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

Protecting Your Credit During Divorce

By Don Johnson, Owner/CEO
Don Johnson Realty Group

When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.

Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.

The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.

The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting www.AnnualCreditReport.com.)

Once you’ve gathered the facts, you can begin to address what’s most important. Create a spreadsheet, and list all of the accounts that are currently open. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).

Now that you have this information at your fingertips, it’s time to make a plan.

There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it’s attached to an asset. The most common secured
accounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.

When it comes to a secured account, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. Your last option is to keep your name on the loan. This is the most risky option because if you’re not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not legally own.

In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. This individual will review your existing home loan along with the equity you’ve built up and help you to determine the best course of action.

When it comes to unsecured accounts, you will need to act quickly. It’s important to know which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed immediately. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately.

If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they’ll get paid.

Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also important to know that a divorce decree does not override any agreement you have with a creditor. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.

Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.


Don Johnson is the owner of Don Johnson Realty Group, and a Licensed Broker with the California Department of Real Estate. If you would like to obtain more information regarding this article, please contact Don at findyouahome@msn.com or call 714-856-3992.

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