The “Dos And Don’ts” During The Loan Process

When getting ready to purchase a home, a buyer needs to get a prequalification or preapproval letter from their lender. The thing to remember, is that these “prequalifications and preapprovals” are just that…the beginning stage of the loan process. These letters DO NOT mean that a buyer is 100% approved for the home loan. As such, there are things that may affect the outcome of your loan request. There are certain “Dos and Don’ts” that remain in effect before, during and after loan approval until the time of settlement when the loan is signed, funded and recorded.

As a buyer it is crucial that nothing is done that may alter a credit report. This is because, many times a buyer’s credit report, income and assets are verified within hours of the buyer signing final loan documents, and any changes may put obtaining the loan at risk. Not only could these changes put your loan at risk, it can also put the earnest money deposit at risk.

The Don’t List:

• Absolutely do not quit or change jobs. Without a proven and steady source of reliable income, it is likely the loan will get denied.

• Do not allow anyone to make a credit inquiry, with the exception of the lender.

• Do not apply for credit anywhere else, except the lender. Applying for credit creates inquiries on the credit report and reduces the credit score. Thus, it can have a detrimental effect on the lender’s determination of creditworthiness.

• Changing banks or transferring money within an existing account can raise serious red flags. A buyer needs to keep their accounts open and with limited changes during the loan process.

• Never co-sign for anyone, for any reason, for anything! It may be that a buyer wants to help their child purchase a car or rent their first apartment. No matter how much a buyer wants to help, do not do it, as that debt reflects on a credit report and becomes a factor into the buyer’s debt-to-income ratio.

• This next one is crucial. I have seen it happen: A buyer gets preapproved for a loan and then gets so excited and goes out to purchase the perfect living room set for their new house. Or the perfect car for the new garage. No matter how much it may seem like a good idea; it is NOT! Do not purchase anything else on credit; not a car, truck, boat, furniture or other real estate. Purchasing on credit directly affects the debt-to-income ratio, and lenders definitely do not look favorably on new debt.

• Coinciding with the above, do not charge large or abnormal amounts to existing credit card accounts.

• Finally, do not send in any late payments or incur late fees for anything!

Now, what does a buyer DO during the loan and escrow process?

The “Do” List:

• Absolutely, with no exceptions, a buyer needs to keep all accounts current, including mortgages, car loans, credit cards etc.

• If any questions arise, contact both the lender and real estate broker immediately.

• Make all payments on or before the due dates of all accounts.

• Stay in direct contact with buyer’s broker, lender and escrow officer. Meaning, if they call or email, make it your first priority to get right back to them.

Following these guidelines will help to manage the loan process and create a smooth path for loan approval.

Also see this column in The Source.
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Be Prepared for the Unexpected Delay

The dream property is in escrow, the home inspection contingency has been removed and it looks like it’s smooth sailing to close the transaction. What could go wrong? Is there anything that can delay closing and moving dates?

It was late May 2017 and I was working on the listing side of a transaction that was set to close in three days. It seemed like everything was going smoothly and on time. Then a freak spring storm graced Bend with howling winds and a torrential downpour of rain. Thirty minutes after the storm hit, I got the call—the call no real estate broker, or anyone else, for that matter, wants to receive from the Bend Police Department. An officer told me a tree had fallen onto the roof on what appeared to be a property I had for sale.

My stomach took an immediate free-fall dive to my toes. As I drove up the street to the house, there it was; a 100-foot Colorado blue spruce with a 9-foot-wide root ball freed from the ground, the tree lying on the house. The tree had punctured the roof and eaves on the southeastern corner of the roof. Its precarious position was all that stood between it and the neighboring home.

I tell this story as a precautionary tale to be prepared that not all escrows will close on time. This is an extreme and colorful example. That said, it was a situation that was out of anyone’s control and resulted in the delay of close. Thankfully, the sellers and I were able to work swiftly to remedy the situation and the buyer hung in there to close a week and a half later.

There are several things that can delay a closing. More often than not, they’re out of the buyer’s and seller’s control.

Appraisal-related delays are one of the most common reasons a closing date gets delayed. If an appraisal comes back late, or outlines conditions that must be met in order for the property to meet lender requirements before a loan application can go to final underwriting, it can cause delays.

Also causing delays are vendors not completing repairs within the time frame necessary to close. Sometimes there are repairs negotiated between buyer and seller to be completed before close of escrow, including plumbing, roofing or electrical repairs. As many of us have experienced in recent years, vendors are booked out and oftentimes cannot meet the time constraints of a pending sale. As a result, the escrow closing may be delayed in order to get the necessary repairs completed.

A lender’s underwriter may also require additional documentation or verifications of employment prior to close of escrow. The inability to obtain these documents in a timely manner could delay final loan approval and the close of escrow.

Buying and selling a property is an exciting and stressful process, so it’s best to be prepared for anything. From my experience in this industry, and as my experience with the fallen tree demonstrates, I’ve learned that anything truly can happen.

Landlord/Tenant Law: Part 2

My last column on landlord/tenant law covered 24-hour notices, transfer of leases and lease buyouts. As I mentioned then, when purchasing or selling a tenant-occupied property, it’s crucial to be aware of state landlord/tenant laws. An incorrect step from a landlord can result in a massive headache and potentially financial loss.

It’s also important to be aware of the new laws and regulations under SB608, the recently passed law concerning rent control, rent increases and ban on no-cause evictions.

Rent Increases: Under the new laws of SB608, a landlord may only increase rental rates once per calendar year. In addition, the rental rate can only increase by 7% plus Consumer Price Index. For 2019, that dollar amount is equal to approximately 10.2% of the current rent rate. This formula and rent stabilization law apply to all landlords statewide. The only exemption to this law is landlords whose dwellings are fewer than 15 years old. Properties that are fewer than 15 years old are not held to the rent stabilization law, and as such, don’t have to abide by the 7% plus CPI standard when raising rents. It’s important to note that all rent increases must be given in writing with no fewer than 90 days’ notice.

Notices of Termination: Of the questions I’m asked by buyers and sellers of tenant-occupied properties, termination of tenancy and notice of termination of tenancy tends to be one of the more confusing areas. This is particularly true under the new laws of SB 608.

When a tenant has occupied the dwelling for fewer than 364 days, a landlord, under the law, can issue a 30-day notice of termination of tenancy without stated cause. This notice can be issued up to the 364th day of tenancy. This applies to both leases and month-to-month agreements. For example: A tenant moves in on Aug. 15, 2018. On Aug. 14, 2019, a landlord may issue a 30-day notice to vacate and will be valid under Oregon law.

What happens when a tenant has occupied a dwelling for 365 days or more?Once a tenant has occupied for more than one year, under the new laws of SB 608, a landlord may not terminate tenancy without cause. There are only four exemptions to this law: 1. The property owner/landlord intends to demolish the unit or convert it to a use other than residential. 2. The property will undergo major repairs or renovations that will make the dwelling unfit/unsafe for occupancy. 3. The landlord or landlord’s immediate family intends to occupy the property as a primary residence. 4. The landlord is selling the property, has an accepted offer from a buyer who intends to occupy the property as their primary residence. In all of these cases, a 90-day notice must be served and in the case of exemption 4, the landlord must provide evidence of the offer to purchase within 120 days of acceptance of the offer to purchase.

It’s important, when looking to purchase or sell a property that is tenant occupied, to be clear on the laws protecting tenant rights. I highly suggest working with a broker who has significant experience working with tenant occupied properties, as well as one who is well versed in landlord/tenant law. Do the research when choosing a broker; it will save tremendous headaches in the long run.

Also, see my column in The Source.

Landlord/Tenant Law: Part 1

In today’s market, it’s not uncommon for single-family homes to be tenant occupied, specifically in Central Oregon. As a real estate professional, I reconcile some of this as a result of the Great Recession. As we are all aware, in 2008, we experienced a massive change in the real estate markets across the U.S. While I understand that details and statistics are not exciting, some statistics are required for perspective.

In July 2008, according to the Mortgage Bankers Association, the average number of home loans held by at least one full-time employee were being defaulted on at an average rate of 261 loans a week. Anecdotally, what resulted was a massive amount of inventory that was either scooped up inexpensively for a long-term investment (rental) or single-family home owners who had no other choice but to try to rent it out, and at the very least, save their credit and work with the tax depreciation options.

It’s now 2019 and we’re beginning to see many of those rentals/investments hit the open market. The reason: many of those real estate holdings have now hit the 10-year mark where the earnings/losses can no longer be depreciated out per U.S. tax code, and as such are considered “non-performing assets” in an investment portfolio. Long story short, it doesn’t make sense for the investment portfolio any longer. So, now we’re seeing an influx of tenant-occupied properties for sale.

In the last two months, more than 50% of the transactions I’ve closed have involved tenant-occupied properties—hence, why I feel it’s important to discuss landlord/tenant law with your real estate professional.

When purchasing or selling a tenant-occupied property, it’s crucial to be aware of state landlord/tenant laws. There seem to be quite a lot of confusion on what property owners’ rights are versus tenants’ rights.

Can a tenant refuse a property being marketed for sale?

The answer to this question is no. While a tenant is considered to have legal possession to the property during the rental period, a tenant cannot dispute or refuse a property owner’s right to list the property for sale. Nor can a tenant legally hinder the sale or transfer of a property.

24 Hour Notice:

The State of Oregon requires that written 24-hour notice be given to the tenant in order to enter or be on the premises. This applies to real estate showings, as well. The tenant has the right to deny access and the property owner must comply, should a tenant ask to reschedule entering the premises. If the tenant agrees to allow showings, inspections and appraisals on a shorter-notice time frame, it’s highly suggested to have such an agreement in writing and signed and documented by all parties involved. Should a tenant consistently refuse access, there are protections in place that allow a property owner/landlord recourse to ensure access. I highly suggest consulting with a legal professional regarding these rights.

Leases/Rental Agreements:

In the State of Oregon, a tenant’s lease or month-to-month rental agreement transfers with the sale of the property. For example, say a tenant is on a 1-year lease and is 6 months into the contractual lease period. The lease remains in effect for the duration of the contract, regardless of the buyer’s intent to occupy the property. Essentially, the tenant remains in possession of the property and the lease terms cannot change. In the State of Oregon, tenant/landlord law has a provision where a tenant can buy out their lease early. The same does not apply for a property owner/landlord. The lease buyout clause is not reciprocal, and a landlord cannot buy a tenant out of the lease and require the tenant to relinquish possession of the property.

Stay tuned for my part 2 of this series the week after next that will continue to explore and explain tenant/landlord law.

 

Also see this article in The Source.

Frequently Asked Questions In Real Estate

Whether buying or selling a home, questions surrounding the process abound. As is a common statement in the vast majority of my columns, the purchase or sale of a property is one the largest investments one will make in their lifetime. As such, there are bound to be a lot of questions. The sales process is exciting, scary and can be strange at times—and I can guarantee never a dull or vanilla process. My colleagues and I field questions daily, and I want to stress: There are no questions not worth asking!

As the old adage goes, “The only dumb question, is the question that is not asked.”

Are we in another housing bubble? This is a question my colleagues and I get daily. While none of us have a crystal ball, no doubt we wish we do, because who doesn’t wish they were able to predict that their investment was foolproof? No one can answer the question of the future. That said, I can tell you what’s different from the myriad of factors that led to the real estate crash of late 2008 and subsequent years.

As a result of the real estate crash we’ve come to know as the “Great Recession,” lending guidelines have changed dramatically. Gone are the days of stated income loans. No longer are the days where a buyer doesn’t have to unequivocally prove with written documentation that they are able to afford the monthly mortgage based on their debt-to-income ratio. Lending guidelines are far stricter than they were some 11 years ago, and these new guidelines, while not fail-safe, do help protect and insulate the real estate market from a rash of encumbered inventory flooding the market, thereby limiting the chances of another “bubble.” Long story short, so long as the current guidelines stay intact, we will not see another “bubble.” Prices will fluctuate, of course, but to assume that there will be another “2008-2010” market is almost akin to betting that the University of Oregon’s football team will not go to a bowl game in the next five years.

Personal Property vs. Fixtures: This is a common question and can also be confusing. A fixture, defined by Merriam-Webster, is property other than real property consisting of things temporary or removable. The most common examples of this in real estate are refrigerators and washer/dryers. These examples are considered to be by Oregon law, personal property. They are not affixed to walls or countertops and are removable/temporary. One of the easiest ways to look at personal property versus a fixture is: can it be unplugged and removed without removing anything that attaches it to the structure?

If you’re not sure, ask, and ask again. Your real estate professional is able to answer these questions for you. The last thing anyone wants is to assume on what is included, only to find out that the refrigerator is not a permanent fixture on moving day with a cooler full of perishables.

In future issues, I’ll be answering FAQs I receive from clients and would love to hear your questions. Please feel free to contact me with questions you would like for me to address in this column series. Please email me at christinhunter@windermere.com with things you’d like to know about real estate and I’ll be happy to address them in future columns.

 

Also see my column in The Source!

Curb Appeal

It is that time of year. Blue skies abound, flowers and trees are blooming, birds are singing. Along with the flora and fauna coming to life after the dormant winter, so is the real estate market. Buyers are out in full force, searching for their dream homes. Meanwhile, sellers are eagerly awaiting offers.

As has become a common theme in my columns, I will say it again: You only have one chance at a first impression. Curb appeal is crucial in making that first impression. It is in those few seconds that a buyer draws their opinion on the visual desirability, upkeep and attention to detail of a property. The exterior appeal is the beginning of the story to be told about a home. So again, it bolsters the reasoning that first impressions are everything when selling a home.

Here are some easy ways to enhance curb appeal prior to listing a home for sale:

Exterior paint and trim:

Peeling and faded paint can be a huge turn-off, immediately sending the message of deferred maintenance to a buyer. A fresh coat of paint or a touch up of the exterior trim can make a world of difference. Think about choosing neutral colors that blend well with the landscape and style of the home.

Landscaping:

Most people don’t find weed jungles, dirt piles and dead lawns appealing. A good clean up—trimming trees and shrubs, fertilizing and keeping the lawn maintained, adding pops of color with annual flowers and a fresh dressing of mulch or gravel will go a long way.

Create, inviting entry:

Whether it be pavers, concrete or wood that leads to the front door, years of exposure can make things seem dirty or dingy. It’s amazing what grime can be removed with a good pressure-wash of pavers and concrete. Where wood is concerned, a fresh coat of stain will liven up the wood and enhance the cleanliness appearance. A few potted plants or hanging baskets can add a welcoming, joyful pop of color and life.

Front door:

This runs in line with creating an inviting entry. If a front door is looking dingy and faded, a new coat of stain or paint will liven it right up. Consider using a color that’s appealing to the masses and on par with the latest style trends. Stay away from off putting color choices that do not blend well with the overall look and feel of the exterior and neighborhood.

Exterior Lighting and house numbers:

Changing the house numbers and exterior lighting fixtures are quick methods of modernizing the look of a home, bringing it more in line with the latest trends.

Remove unnecessary clutter:

First thing first: Hide the trash cans! A lot of vehicles or “toys” in the driveway can be a turn-off and detract from the overall look of the property. When possible, find a place for those extra vehicles, boats and RVs.

When selling a home, first impressions can make or break the buyer’s interest in exploring the property further. Well-kept and pretty sells—and sells faster!

 

Also see this in The Source

For Sale By Owner

Selling a property can be a stressful and demanding process. So many things have to come together to find the right buyer for your home. Some sellers opt to sell their home on their own without the assistance of a real estate professional and opt the For Sale By Owner route. The most common reason to FSBO is to save a couple percent in potential commission, and a lot of people don’t think that selling property is that hard, right? Wrong.

There are so many factors that going into selling and successfully closing a real estate transaction. Perhaps that is why we’ve seen a consistent decreasing trend in sellers participating in FSBO.

There are several factors to consider when looking at selling a home by owner. The first thing that comes to mind when selling a home is the cost. When selling a home by owner, it may seem as if there is a savings in doing so. In reality a lot of money is spent upfront with no guarantee of a return. Listing agents charge nothing upfront for things including professional photography, videography, marketing material, marketing advertisements, and, in some cases, pre-listing home inspections and staging. These things are considered part of their fee/commission. These costs can add up very quickly and can be thousands of dollars.

Another thing to consider is liability. Real estate professionals are required by law to stay up to date with all state laws. This includes the latest disclosure laws, both financial and property-wise. When selling a home by owner, any mistake large or small that is made in the contract or disclosures can cost a seller greatly. Real estate brokers have Errors and Omissions insurance—a protection to both the seller and broker in the event a mistake is made.

In the age of the internet, the tools real estate professionals have in their arsenal for property exposure are unsurpassed. The first of those tools is the Multiple Listing service. FSBOs can’t list their home on this service unless they’re a licensed Broker and belong to the local Realtor’s association. There are hundreds of partner sites that pull the data from the MLS and provide much more internet exposure than FSBO properties receive.

According to the National Association of Realtors, the average sales price of a FSBO is 10 to 30 percent less than those who use a real estate professional. This is due in part to incorrect pricing and ineffective negotiation skills. Granted, there are a few exceptions, and you may hear of the occasional FSBO sale that did yield a market value sale; but by and large the statistics prove that working with a real estate professional will yield far more than the money a seller will save by trying to sell the property on their own.

Time is another factor. Most do not realize the amount of time that a real estate sale can take, from the marketing, showing of the property, negotiations and coordinating all of the moving parts once escrow is opened. Real estate professionals are skilled at handling these things. They make their living selling property and are experts in the field.

Think of it like this: When sick, it makes sense to go to a medical professional for treatment, as they are experts in the human body, correct? So why would one without the expertise opt to search WebMD and sift through a world of information they aren’t experts in and attempt to treat themselves? It doesn’t make practical sense to take the risk of making a mistake with the human body. The same goes for the largest purchase/sale most make in their lifetimes: wouldn’t one want to work with a professional rather than assume the risk of doing it themselves?

 

Also see this in The Source.