Archive for January, 2008

Will Your Emotions Set The Price?

Every homeowner is always interested in getting the highest possible price for his or her home. This is certainly an understandable goal. The key to receiving the best selling price begins with the most appropriate asking price. Quite often, emotions play a major role in affecting the asking price. Here are some examples of emotions in action:

BASING PRICE ON EGO:
“I am going to get more for my house than he did!” This is an example of letting ego take control in pricing decisions. If we don’t like the home of a neighbor that was recently sold or don’t approve of the way he or she kept the home, we may allow these feelings to influence us when comparing the value of both homes.

BASING PRICE ON OUR PERSONAL TASTES:
As homeowners, we are entitled to decorate and furnish our homes in any manner suitable to our tastes. When we put our homes on the market, however, we must realize that potential buyers may look at our decorating ideas as a detriment and not an advantage. In fact, the buyers may offer us less than we want because they will have to incur the cost of removing the existing decor in order to replace it with decorating ideas they prefer. This reality is often difficult to accept because we feel that we should receive a premium price for the money and ideas we have invested in decorating.

BASING PRICE ON FUTURE CASH NEEDS:
Many of us price our homes by adding up the money we will need to satisfy future financial needs. This is most often the case when we are selling a home to buy another. Because we need a certain sum of money in order to buy the next home, we just automatically decide that the current home will have to provide the necessary amount. Although this goal is desirable, it may not be possible considering actual market conditions.

ADVICE:
Emotions are often at their peak when dealing with issues of family and home. Because of the importance of setting the right asking price, however, get the help of an emotionally detached and market-wise Realtor®.

According to the Pacific Business News, there were 1,270 home foreclosure filings in Hawaii in 2007, a nearly 89 percent increase over 2006 but still one of the lowest in the nation. Hawaii ranked 43rd for its foreclosure rate and is still relatively untouched by the softening housing market that has hit many areas of the country.

By comparison, California had 481,392 foreclosure filings in 2007, a 238 percent increase from 2006 — and a 682 percent gain over 2005. California had more filings and more properties in foreclosre — 249,513 — than any other state.

The report found that more than 1 percent of all U.S. households were in some state of foreclosure during the year.

19 Questions And Answers For First Time Buyers

Knowledge is said to open doors. This is literally true when it comes to buying a home. To become a first-time homebuyer, you need to know where and how to begin the homebuying process. The following questions and answers have been carefully selected to give you a foundation of basic knowledge.

GETTING STARTED
1. HOW DO I KNOW IF I’M READY TO BUY A HOME?
You can find out by asking yourself some questions:
- Do I have a steady source of income (usually a job)?
- Have I been employed on a regular basis for the last 2-3 years?
- Is my current income reliable?
- Do I have a good record of paying my bills?
- Do I have few outstanding long-term debts, like car payments?
- Do I have money saved for a down payment?
- Do I have the ability to pay a mortgage every month, plus additional costs?
If you can answer “yes” to these questions, you are probably ready to buy your own home.

2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?
Start by thinking about your situation:
- Are you ready to buy a home?
- How much can you afford in a monthly mortgage payment (see Question 4 for help)?
- How much space do you need?
- What areas of town do you like?
- After you answer these questions, make a “To Do” list and start doing casual research.
Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper.

3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?
The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.
Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.

4. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT CAN AFFORD?
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA ,monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

5. HOW DO I SELECT THE RIGHT REAL ESTATE AGENT?
Start by asking family and friends if they can recommend an agent. Compile a list of several agents and talk to each before choosing one. Look for an agent who listens well and understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources and contacts to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide all the knowledge and services you need. Better yet, just call me at 808-737-7694 and I will help you achieve your Hawaii real estate goals.

6. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH?
Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities – things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a ‘wish list.” Minimum requirements are things that a house must have for you to consider it, while a “wish list” covers things that you’d like to have but aren’t essential.

FINDING YOUR HOME
7. WHAT SHOULD I LOOK FOR WHEN DECIDING ON A COMMUNITY?

Select a community that will allow you to best live your daily life. Many people choose communities based on schools or proximity to work. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.

8. IS AN OLDER HOME A BETTER VALUE THAN A NEW ONE?
There isn’t a definitive answer to this question. You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambiance, and have lower property tax rates. People who buy older homes, however, shouldn’t mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new homes often don’t want to worry initially about upkeep and repairs.

YOU’VE FOUND IT
9. WHAT DOES A HOME INSPECTOR DO, AND HOW DOES AN INSPECTION FIGURE IN THE PURCHASE OF A HOME?

An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs, that are needed. The Inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.

10. HOW DO I DETERMINE THE INITIAL OFFER?
Unless you have a buyer’s agent, remember that the agent works for the seller. Make a point of asking him or her to keep your discussions and information confidential. Listen to your real estate agent’s advice, but follow your own instincts on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the home’s condition, how long it’s been on the market, financing terms, and the seller’s situation. By the time you’re ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price.

11. WHAT IS EARNEST MONEY? HOW MUCH SHOULD I SET ASIDE?
Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price. If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.

GENERAL FINANCING QUESTIONS:THE BASICS
12. WHAT IS A MORTGAGE?

Generally speaking, a mortgage is a loan obtained to purchase real estate. The “mortgage” itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.

13. WHAT STEPS NEED TO BE TAKEN TO SECURE A LOAN?
The first step in securing a loan is to complete a loan application. To do so, you’ll need the following information.
- Pay stubs for the past 2-3 months
- W-2 forms for the past 2 years
- Information on long-term debts
- Recent bank statements
- Tax returns for the past 2 years
- Proof of any other income
- Address and description of the property you wish to buy
- Purchase contract
During the application process, the lender will order a report on your credit history and a professional appraisal of the property you want to purchase. The application process typically takes between 1-6 weeks.

14. HOW DO I CHOOSE THE RIGHT LENDER FOR ME?
Choose your lender carefully. Look for financial stability and a reputation for customer satisfaction. Be sure to choose a company that gives helpful advice and that makes you feel comfortable. A lender that has the authority to approve and process your loan locally is preferable, since it will be easier for you to monitor the status of your application and ask questions. Plus, it’s beneficial when the lender knows home values and conditions in the local area. Do research and ask family, friends, and your real estate agent for recommendations.

15. HOW ARE PRE-QUALIFYING AND PRE-APPROVAL DIFFERENT?
Pre-qualification is an informal way to see how much you maybe able to borrow. You can be ‘pre-qualified’ over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.
Pre-approval is a lender’s actual commitment to lend to you. It involves assembling the financial records mentioned in Question 13 (Without the property description and purchase contract) and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

CLOSING
16. WHAT HAPPENS AFTER I’VE APPLIED FOR MY LOAN?

It usually takes a lender between 1-6 weeks to complete the evaluation of your application. Its not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you’ll be able to move into your new home.

17. WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH?
This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller’s responsibility to fix them.

18. WHAT MAKES UP CLOSING COST?
There may be closing cost that are unique to a certain property type or locality, but closing cost are usually made up of the following:
- Attorney’s or escrow fees (Yours and your lender’s if applicable)
- Property taxes (to cover tax period to date)
- Interest (paid from date of closing to 30 days before first monthly payment)
- Loan Origination fee (covers lenders administrative cost)
- Recording fees
- Survey fee
- First premium of mortgage Insurance (if applicable)
- Title Insurance (yours and lender’s)
- Loan discount points
- First payment to escrow account for future real estate taxes and insurance
- Paid receipt for homeowner’s insurance policy
- Any documentation preparation fees

19. WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY?
The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc. Once you’re sure you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses . You’ll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed. You’ll pay the lender’s agent all closing costs and, in turn ,he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state offices over the next three days, and you will become a homeowner upon recordation (usually three business days after signing).

How Much Should I Offer?

When you find the house you want, it is time to act. How do you know how much to offer the seller? Although everyone likes to get a bargain, every transaction is unique and there are certain factors to consider in each potential purchase. Here are some things to consider:

RECENT COMPARABLE SALES:
What price has this type of property sold for in the recent past? Can you see a trend in the local area that would justify an offer in a certain amount? Remember that the seller will be going to the same sales data in order to evaluate your offer. If your offering amount can be backed up by solid market data, you will have a better chance of having your offer accepted.

DEMAND FOR THIS HOUSE:
Some properties have no one else interested at the time you make your offer. This situation is to your advantage because the seller doesn’t know when or if another offer will come along. If the house you want is in great demand, however, you could be involved in a bidding war regardless of what the market value may be. Your best strategy may be to offer more than the seller is asking. This will often get the house when competing against someone else who thinks a full-price offer is sufficient to win the house from you. Offering a high earnest-money deposit also helps strengthen your position and cost you little, so long as you remain in the transaction through completion. Another good strategy is to obtain a pre-approval from a mortgage lender prior to making the offer, so the seller is assured in advance that you will be able to qualify for the loan amount you will need to complete the purchase.

ADVICE:
The purchase of real estate is a major financial decision for all of us. Use the services of a Realtor® when you are buying real estate. Realtors know the present market and the past sales history of similar homes. They can give you the facts. Call me if you would like my assistance with an offer or would like to know some of my favorite strategies for securing a Great price for a new purchase of a home…….God has blessed me with excellent negotiating skills that I can put to work for you…….Just let me know if I can be of service……Aloha, Jon.

Why Buy Instead of Rent…….four simple reasons.

When you’re thinking about buying your first home, it’s essential for you to be confident in your decision to buy instead of rent. However, you may not know about the many great reasons to buy a home! Here are just a few of them:

Smart investment
When you invest in a home, it offers the possibility for appreciation in value. The equity becomes yours when you’re still paying off your mortgage. You even get to live in it while your investment matures.

Tax advantages
Since both mortgage interest and property taxes are tax deductible, homeownership can save you significant amounts of money every year.

Planned housing costs
You decide how much you spend on your home, including repairs and improvements. Unlike renters, homeowners with a fixed-rate loan can lock in their monthly housing costs.

Improvements to your taste
You can choose which improvements to make your own property, such as a deck, kitchen remodel, or new paint, instead of needing permission from your landlord.

If you have more questions about making the decision to buy a home, please feel free to call or email, as I would be glad to assist.

Always a Compromise

I hope you are not still looking for the perfect home. It is not unusual for people to completely design their new home from scratch, only to be disappointed with the end result. In the final analysis, a home purchase is always a compromise.

You like the house, but not the lot. You like the location, but not the house. You like the floor plan, but not the decor. It’s always something. Knowing that your next home purchase will be a compromise, the issue comes down to deciding what you must have and what you can give up.

Here are some suggested items you should NOT give up:

Location: Remember, a home purchase must satisfy your needs and tastes but also be a worthwhile investment. A good location can always make up for shortcomings in the property itself.

Bedrooms: The first question asked by potential home buyers is, “How many bedrooms does it have?” The number of bedrooms must accommodate your needs and appeal to a significant percentage of buyers who will consider buying your home in the future.

Bathrooms: The second most frequently asked question is, “How many bathrooms?” Don’t include the bathrooms that may be located in the basement, if any. They do not carry the value that bathrooms have that are located elsewhere in the house. A bath off the master bedroom is usually a much sought-after feature by most home buyers.

ADVICE: When you begin the search for your next home, decide in advance which features you will and will not compromise.

Here is a nice chart put together by the Honolulu Advertiser…….Highlighting December 2007 Oahu Home Sales:

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Here is another nice chart put together by the Honolulu Advertiser…….Highlighting December 2006 to December 2007 Info:

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What is a “Short Sale”?

A “short sale” is a term that is commonly used when a property is sold for an amount which is insufficient to pay the existing liens, encumbrances and costs associated with the sale of the property. The seller is often said to be “upside down” in the property.

The Scenario:
The current market value for the property is $400,000.00. Closing costs are estimated to be $40,000.00 and the current balance on the loan secured by the property is $390,000.00. The sale proceeds will be insufficient to meet the seller’s obligations at closing by $30,000.00.

Possible Solutions:
Seller can deposit the additional $30,000.00 required into escrow at closing or the seller can contact the existing lender to determine if the lender is willing to reduce the amount required to release their lien from the property.

Contacting the Lender:
Seller should contact the existing lender to determine the documentation required to start the “short sale” approval process and the amount of time necessary for the lender to provide a preliminary determination, once the seller has provided the required documents.

The Purchase Agreement:
The lender may not provide final approval for the short sale until the seller has entered into a purchase agreement with a prospective buyer and seller’s acceptance of this agreement should be contingent upon the successful negotiations with seller’s existing lender to reduce the amount required to release the lien of record.

The Escrow:
If the short sale is approved, the lender will provide the escrow holder, upon request, with a written statement reflecting the amounts required to release the lien of record and any final conditions which must be met before the lender will authorize the escrow to close.

Possible Lender Conditions:
The lender may require the seller to sign an unsecured note for any additional amounts required to pay the loan in full with payments to be made by seller after the close of escrow. The lender may require the seller to assign to lender, any refund due on any existing hazard insurance policy being cancelled or any remaining balance in seller’s impound account.

Tax Consequences:
The seller should contact a tax attorney or certified public accountant to determine the tax consequences of participating in a short sale.

Advice:
Short sales often present challenges which go far beyond the possible tax consequences. It is strongly recommended that all parties seek the additional legal advice from a qualified real estate attorney before participating in such a transaction.

Essentially, there are four major areas of content in your credit report:

Identifying information.
This includes your name, phone number, address, Social Security number and date of birth. It may also include a list of your current and previous employers and previous addresses.

Credit history.
Your credit history is a summary of your credit transactions. This is the core of a credit report. It includes your payment history, including any late payments, to banks, credit card companies, retailers and other lenders. Other lenders include mortgage and auto-finance companies. These items remain on your credit report for seven years.

Public records.
If you owe a creditor or tax agency a debt and do not pay it, expect to have a public lien against you. For example, a person who owes property taxes but does not pay them is likely to have a lien filed against them by their local property tax board. Public records include any filings of personal bankruptcy or court judgments against you. These items remain on your credit report for seven years, except bankruptcies, which remain on your credit report for 10 years.

Inquiries.
There are two types of inquiries: hard and soft. A hard inquiry remains on your credit report while a soft inquiry does not. Frequently applying for credit will run up the number of hard inquiries on your credit report. Some prospective lenders may interpret that as a sign of your desperation for credit.

A credit report also shows any current credit that you have, including amounts owed, amounts available (such as on a credit card or other form of revolving credit) and payment amounts on installment loans.

Lenders seize on this area of the credit report since it lends immediate insight into how much credit you may need, how well you pay back your debts and how much your monthly payments are likely to be if they approve your loan request.

The following items are not on your credit report:

Deposit information.
Deposits are assets and not a form of debt, after all. A credit report focuses on your liabilities.

Credit score.
Credit scores are generated based in part on the contents of a credit report. However, they do not constitute a part of the credit report. The credit bureaus will sell your credit score for a low price, however.

Race, gender, ethnicity or national origin.
The Equal Credit Opportunity Act prohibits the use of this kind of information to avoid any discrimination in lending practices.

Business debts.
If a debt is personally guaranteed, a business debt may show up on your personal credit report. Otherwise, it won’t.

You should review your credit report at all three major credit bureaus. Check for errors or omissions in any and all three major reports. Discrepancies may exist between them. If you find an error or note an omission, contact the credit bureau directly.

Under the Fair Credit Reporting Act, amended a few years ago to beef up consumer privacy rules, you are legally entitled to obtain your credit report from a credit reporting agency. This includes receiving a list of everyone that has requested your report.

It is a good idea to order and review your own credit reports and credit scores on a regular basis. If you have not ordered any credit reports within the last 12 months, you will be able to get free copies from all three credit reporting agencies. Request your report from www.annualcreditreport.com, or by calling (877) 322-8228. The free credit reports do not include credit scores, but you can purchase those for approximately $5 each when you request your free annual credit reports through the Web site or by contacting one of the nationwide credit reporting agencies:

Equifax – (800) 685-1111

Experian – (888) 397-3742

TransUnion – (877) 322-8228

Keep in mind you also are entitled to receive a free copy of your credit report without a credit score if you were denied credit or employment based on the information in your credit within the past 60 days, if you are currently unemployed and seeking work within the next 60 days, if you receive public assistance, or if you are a victim of identity theft or credit fraud. If none of these circumstances apply to you, credit bureaus also offer a variety of bundled services related to your credit report. For example, all three credit bureaus presently offer a combination of your credit score and credit report for $14.95 – $15.50.