I’ve been a Realtor for over 20 years. I’ve seen it over and over. At the initial Buyer’s Orientation Meeting I ask the Buyer if they are willing to contribute “sweat equity” to the home? Are you willing to paint? Replace carpet? Replace toilets and sinks? Hang new light fixtures? The eager almost-homeowner always says yes. Then we begin looking at houses and inevitably they walk away from the “ugly” house and choose the “perfect” house. They jump in a “free for all” competing with 10 other buyers for the house which has been shined to perfection by the current homeowner.
What many first-time buyers don’t realize is that houses are not complicated. Cars are far more complicated to maintain and repair than houses. With the exception of the skilled trades: electric, plumbing, HVAC, and roofing there is very little that a somewhat skilled or ready to learn homeowner can’t learn on YouTube. Light fixtures need replaced? That’s an easy 1-hour project and very small investment. Do carpets need replaced? Are you willing to pull up the old carpet? Save some money purchasing wholesale or remnant carpet? You can transform a room with a can of paint and some new flooring.
Doing these kinds of projects, yourself contributes to your investment in two ways: you are going to pay less for the home and are less likely to be competing with other buyers and you are adding value to your home without increasing your mortgage. How do you get comfortable with tackling these projects yourself? Enlist help. Begin watching on-line help videos. Sherwin Williams, for example, has a whole section of helpful videos at www.sherwin-williams.com Visit your local big box hardware stores. These stores are often staffed by men and women who are there because they have interest and skills in their department — they can be a great source of advice and help. Ask friends and family members to walk you through a first project. If you do these things BEFORE you find that “ugly” house, you will be comfortable with the challenge when you walk into the house that needs your love!
The big payoff for doing it yourself is the satisfaction of an improved home that you love that you have made it perfectly “yours” and you put your own money into your investment.
00Brandon Pottshttps://www.downsizecolumbus.com/wp-content/uploads/2017/07/DownSize_Columbus_200h.pngBrandon Potts2021-02-08 18:26:202021-02-08 18:26:20Ten Ways to Win: #5 – Are you willing to hug the ugly house?
You’ve worked hard. You’ve sacrificed. You’ve saved money. You have your down payment and closing costs saved to purchase your first home. Or perhaps you have saved only your down payment because you remember hearing that it is customary for the Seller to pay your closing costs. You have just enough. And you believe that’s enough. Unfortunately, in a market where there are five or more Buyers for the home you want it’s not enough. Not nearly.
In a “hyper” Seller’s market like the one existing today in Central Ohio you’re going to need cash above and beyond the traditional “basics” of home buying. Why? Because you have to offer something that your competitors (others who want the same house) are not offering. All buyers have saved appropriate down payment. All buyers have saved for closing costs. What the winning buyer will have is an extra $2000 or more to give to the Seller in “extras”.
If you don’t have extra cash available to you, you need to plan into your home purchase time to earn extra money above the down payment and closing costs needs. Call it a “side hustle” or pulling from your 401K — you will need to have cash to be used in a variety of ways. The most common way we see cash “win” is in the form of the Buyer (you) offering to pay the Seller thousands of dollars over the appraised value of the home. “Who would do that?!” you might ask. Answer: The Buyer who wants a house in Central Ohio. I have sold hundreds of homes in this market and can count on one hand the number of “winners” in a multiple bid scenario who did not offer to pay some dollar amount over the appraised value of the home. This can be as little as $2000 or as much as $20,000 or more. Another way to use your cash to win is the reverse of a home buying standard: The Seller contributing toward the Buyer’s closing costs. In a Seller’s market we can leverage your cash to pay some of the Seller’s closing costs, thereby increasing their “net” at closing.
Where can you get that extra cash? Look at it as short-term pain for long term gain. Take a second job with a commitment to put all of your earnings in a separate “house” account until you saved $2000 or more. Sell something. I recently helped a young Buyer, Craig. Like many first-time home buyers, he had saved his down payment and closing costs. Understanding the market, he knew he needed a way to come up with an additional $3000 before he was prepared to make an offer on a home. He remembered his non-working truck stored in his parent’s garage. He always intended on getting the truck running. However, after some thought Craig decided that owning a home was more important than the truck. Craig sold the truck for $1800 and took a second job with Lyft. It took three months but by the time we wrote an offer he had $2700 to contribute to “extras” and today is a homeowner.
00Brandon Pottshttps://www.downsizecolumbus.com/wp-content/uploads/2017/07/DownSize_Columbus_200h.pngBrandon Potts2021-02-08 18:23:372021-02-08 18:23:37Ten Ways to Win: #4 – It’s true. Cash is king. (Even if you only have a little.)
We live and work in a “one shot” housing market. What does this mean? It means that, as a Buyer, you have “one shot” to get the Seller’s attention and to move your offer to the top of the competitive bid pile. Critical to your chances in this market is assuring the Seller that you have completed your mortgage due diligence and that you are qualified to buy a home. This assurance is in the form of a “Pre-Approval” letter provided to you by your bank or lending institution. This letter accompanies your offer to be presented to the homeowner and is key to their choice of a buyer for their home.
This letter begins with an on-line application, says Jeff Lichtenstein, a Senior Loan Officer with Ruoff Mortgage in Columbus. In that on-line application the borrower will be asked where they work, how long they have been in their job/s, salary, debts and permission to run a credit report. “When filled out completely,” says Jeff, “I can have a Pre-Approval letter in ten to 30 minutes.” Optimally, that letter should have the address of the home to be purchased, the qualifying amount, the down payment and the type of loan (FHA/VA/Conventional) for which you are approved.
When do you get this letter? Before you walk into that “must have” kitchen. Many times, “dream homes” are found on weekends and scrambling to get a letter on a Sunday afternoon is a challenge.
What else can you do? While the loan officer cannot put additional information into the Pre-Approval letter, they can, with your permission, brag on you in a cover email. Ask your loan officer to add a “cover” email to your letter stating your credit score, your verification of down payment funds, and the security and/or longevity of your job. All of these extras can give you a competitive edge. This is especially important if you are an FHA or VA Buyer in a market where the conventional borrower has the competitive edge (see Ways to Win #1).
Next, get ready to jump through hoops: any and all and instantly when asked. “Most delays,” says Lichtenstein “are because the Borrower doesn’t provide us the documentation we ask for.” It’s important to understand that these requests for documentation are not suggestions or “it would be nice if…”. Your loan officer is working under strict federal guidelines with no room for compromise or workarounds. Lichtenstein, a 33-year veteran of the mortgage industry, has plenty of tales of borrowers who believe delay in providing the documentation will result in “forgetting” the need for it by their loan officer. Not going to happen, says Lichtenstein. “I don’t get the documentation; you don’t get the house.”
Another important suggestion: be honest from Day #1. If you had a car repossessed five years ago: put it on the table now. Secret bank account? There are no secrets when you are applying for a mortgage. (In fact, this is the time to make sure your spouse or significant other knows your financial dirty laundry — it’s all going to come out!) If your loan officer is given negative information up front a solution can be created or save wasted effort by stopping the process and help you “rehab” your credit.
00Brandon Pottshttps://www.downsizecolumbus.com/wp-content/uploads/2017/07/DownSize_Columbus_200h.pngBrandon Potts2021-02-08 18:20:482021-02-08 18:20:48Ten Ways to Win: #3 – What is a Pre-Approval Letter? (And I thought I had one!)
How important is your mortgage provider to the purchase of your new home? Look up the word “cornerstone.” The cornerstone is the first stone set in the construction of a masonry foundation. All other stones will be set in reference to this stone determining the position of the entire structure. Yep. That’s your lender’s role in your home purchase. A good Realtor is essential to making a good choice. A good title company is great for closing the deal. However, with the exception of cash buyers, the lender is pivotal to determining how smooth (or not) your home purchase will go.
Where do start in finding that lender? The temptation is go to the internet and find your lender on line. There are quite a few lenders promising speed and simplicity at your fingertips. But, in a competitive housing market like Columbus having a local lender is important. Why? A logical response from buyer is “If money is at the closing table, why should the Seller care where it came from?” Well, that “if” is the big “IF”. If money is at the closing table. The process of getting your loan is a complicated one with a myriad of eyes on you and your credit worthiness. It ends at an underwriter who gives your loan the final “yes.” One bump in the process can cause stress, anxious nights, delays in your closing date, juggling of movers and utilities and, at worst case, a “no” at underwriting.
So why go local with your lender? Here is why from a Realtor who sells hundreds of homes a year often advising my homeowners in choosing the right Buyer for their home:
Local lenders have local teams. This means that even when your loan is handed off to a colleague — that colleague is a desk over, not a department over or even a zip code over. This also means a good one always has his or her eye on the transaction and is alert to “bumps” and keeping the transaction on track. Rachel May-Sine is the Regional President at American Eagle Mortgage. American Eagle has offices all over Columbus. The May-Sine team works the loans of hundreds of Buyers a year. “I have worked with the same underwriter for over 25 years. We read each other’s minds.” What this means to the Buyer: Rachel can make a quick decision knowing that her underwriter will approve when called upon to keep a loan on track.
Local Lenders depend on the business and referrals of local Realtors. Does this mean they break the rules or do unethical “favors?” No. But it means that just a like serving a great meal at a restaurant, pleasing us means we will be back. The loan officer in Detroit knows they will never see me again. They do not owe me superior service because this transaction is likely a “one and done.” My urgency is not their urgency. This doesn’t mean they don’t or can’t do a good job — but I often tell my buyers: I want a lender who has a brick building with steps and a door in Columbus, Ohio. Why? So that I can stand on the steps and pound on the door if a transaction is not being handled well.
“We give exceptional service to all of our clients,” says May-Sine. “But we know ‘our’ Realtors. This means we know and service their systems and clients with an eye to their unique businesses and personalities.”
Shop local? That includes lenders. Your Columbus, Ohio loan officer goes home to a home in Central Ohio. They shop in our stores, and their kids go to our schools. Putting money in their pockets is as important as your determination to shop at your local bakery.
Next week we continue our series Ten Ways to Win in a Competitive Market. What is a good pre-approval letter? How can my lender help push me across the winning finish line?
Columbus, Ohio is experiencing a severe single family home shortage. In some areas and price ranges there can be as many as 15-20 potential buyers for every home on the market. For homeowners, this imbalance is like winning The Lottery. For those wanting to purchase a home it can feel like the television show “The Bachelor.” Buyers put their best offer forward and go home without a rose. Again, and again.
One piece of advice given out to potential buyers by real estate professionals (including this one) is to do your best to get pre-approved for conventional mortgage financing as opposed to FHA or VA financing. Many a sensible buyer has asked “Why? Money is money at the closing table no matter how it got there.” The argument makes sense. And it’s an argument that makes sense to a homeowner looking at one offer. But what happens when a homeowner has 6 or 8 or ten offers ~ which is not unusual in this market? Homeowners often bypass VA or FHA financing in favor of conventional or cash. Why? Here is what I tell homeowners. I will test my argument against one of the best loan officers in Central Ohio:
In the absence of additional qualifying data, choosing a buyer for my home from multiple offers is much like internet dating: decisions must be made on perception when the reality may not at all reflect that first impression. As an FHA or VA Buyer, how are you being perceived?
FHA and VA loan programs allow the purchaser to have a) less money as a down payment, as low as 3.75% for FHA or 0% for VA b) lower credit scores, as low as 640-660, c) to take advantage of $0 down payment programs which fall under the umbrella of FHA, and d) to have a higher percentage of debt relative to their gross monthly income. (Often called “debt-to-income” or DTI.) While this widens the net for potential Buyers it widens skepticism of the person holding the rose: The Seller. True or not: The seller could interpret this as a Buyer with little savings, less reliable credit and no “skin” in the game. In addition, there is an outdated notion that FHA and VA loans take longer, are more complicated and because they involve the Federal Government, have potential to get bogged in bureaucracy. Throw that onto a pile of offers sitting on the dining table of the homeowner: true or not, you just lost to a Conventional Mortgage Buyer.
Is the conventional buyer always better? While there are 3% down payment options for the conventional Borrower, most have 5% or more down payment, conventional mortgages require a minimum credit score of 620 and a lower debt to income ratio, and the most boastful of lenders claims a contract to close time of 15 days or less. All of this translates to the Seller as a ‘better’ buyer i.e., a buyer most qualified to get to closing on the contract terms agreed upon.
David Arocho is Team Leader of the Arocho Team and a Branch Manager with NFM Lending. Arocho and his staff closed over 440 loans in 2020 and is considered one of the top loan officers in Central Ohio. I asked David to “weigh in” on common perceptions. Says Arocho: “FHA doesn’t mean a lesser quality buyer and Veterans who use their VA benefits rarely have no money or questionable credit. The vast majority of Veterans come in with very high credit scores but want the benefit of the lowest interest rate, no PMI and $0 downpayment required. In many cases, the Veteran is just as strong as the Conventional buyer.”
How does a Buyer combat this? First, is the perception true? Do you have little savings beyond the required down payment, a lower credit score and a high DTI? If so, the harsh truth is that it is going to be difficult to purchase a home in the wildly competitive Central Ohio market. It’s a challenge for lenders as well, Arocho says sometimes a Conventional mortgage just isn’t a long-term “fit” for the buyer. “As a lender, I am challenged to put an FHA buyer into a Conventional mortgage product when their payment goes up $100-150 a month with a higher interest rate and private mortgage insurance. It’s just not a ‘win win.’”
So, how does a Buyer change the often-erroneous perception? Many buyers will write what I call “Queen for a Day” letters. If you don’t know what Queen for a Day is, Google it. Instead of writing a fawning letter to the homeowner which screams “choose me!” (which we can no longer legally deliver, BTW, but that’s another blog) ask your loan office to add some “love” to your preapproval letter: How long have you been in your job? How much money are you putting down? What IS your credit score – (if it’s good,) and how solid are you as a borrower? How quickly can your loan realistically close and is there any cause for delay concerns? With this kind of help and a competitive offer, your offer could rise to the top. Is a good loan officer willing to help with this kind of letter? “Yes, we sure can!” Says Arocho “Some Realtors like me to note how much down payment the Buyer has or indicate buyer can pay any difference between the appraised value and offered purchase price. I can do that – or anything else the Buyer gives me permission to share.”
00Brandon Pottshttps://www.downsizecolumbus.com/wp-content/uploads/2017/07/DownSize_Columbus_200h.pngBrandon Potts2021-02-08 18:14:212021-02-08 18:14:21Ten Ways to Win: #1 – Is Conventional Financing on a Mortgage “better” than FHA or VA financing?
Really old wallpaper. It stops me in my tracks every time. A sobering reminder of my own mortality. Here’s what happens: I’m a Realtor showing a client a really old house. Somewhere, usually tucked in the back of a closet or stairwell I find the original wallpaper. It’s often peeking through the peeling layers of subsequent coverups or it’s in such an obscure place that future homeowners never bothered to cover it up.
Wallpaper Trivia: Wallpaper dates back to hundreds of years BC when Chinese artists would hand paint wall coverings to adorn the milieu of the rich. The heyday of wallpaper was the mid-1800’s when steam-powered printing presses allowed wall-sized art to be available to the average consumer. YAY! It came to the Everyman and they loved it! It was not unusual in the 1800s for every inch of interior wall and ceiling to be covered by wallpaper as an extravagant salute to access to excess.
Fast forward to 2021, it’s not unusual for that wallpaper to still be hanging around somewhere. While my clients wander through the house I stop and stare at the filigreed print refugee from the 19th century. I think about who picked it? How did she pick it? (Forgive my sexism but I’m going to assume that most wallpaper was picked by a ‘she’ in 1891.) How many rolls of wallpaper did she go through to end up with this? What did she love about this particular pattern? What matched it? Did her husband like it?
But mostly I think about my own mortality.
This wallpaper spoke to a woman now dead. It made her happy and ‘feathered her nest.” She likely thought, like we all do, that the choice of that wallpaper was an important one and it (and she) would live forever. It did. Or might. She didn’t. Decades later I’m looking at her handiwork and thinking about this anonymous woman. I am reminded that one day the choices I make will be evaluated by someone who thinks that the prime of their life is eternal. It isn’t. I’m not.
It makes me want to order my life accordingly. Seize the Day. Do the important things. Finish strong. Leave a legacy that won’t be stripped because I made frivolous choices in my last laps.
This blog is written by Kathy Chiero. Kathy is the Team Lead for The Kathy Chiero Group of Keller Williams Greater Columbus Realtors. Thinking of Buying or Selling? Find us www.OurOhioHome.com