Tag Archives: agent

What Is a HUD Foreclosure?

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Mike Licht

Realtor.com quoted me in What Is a HUD Foreclosure? A Home That’s Below Market Value. It reads,

“Foreclosure” is a scary word with a simple definition: It’s the process of a lender attempting to recoup the balance owed on a loan after the homeowner fails to pay the mortgage. Mortgage lenders can be banks, private institutions, or the Federal Housing Administration. The FHA is the world’s largest insurer of mortgages; FHA loans are managed by the Department of Housing and Urban Development. So any foreclosed house that was purchased with an FHA loan is called a HUD foreclosure. But what exactly is a HUD foreclosure?

What is HUD?

HUD is a federal agency with the mission to help low-income and first-time home buyers. Through mortgage assistance and subsidized housing, it helps make the dream of owning a home a reality for many Americans.

A major division of HUD is the FHA, which is the world’s largest insurer of mortgages.

“A HUD foreclosure is the foreclosure of a loan that was insured by the FHA,” says David Reiss, professor of law and research director at the Center for Urban Business Entrepreneurship
 at Brooklyn Law School
.

When a homeowner defaults on this government-backed loan, HUD pays off the mortgage and becomes the property’s de facto owner. To recoup financial losses, HUD then puts the house on the market.

The benefit of buying a HUD foreclosure

The upside for bargain home hunters is that HUD-owned properties are usually sold well below market value.

While anyone can buy a HUD home, “the agency has a special program for teachers, police officers, firefighters, and EMS personnel called the Good Neighbor Next Door program,” says Reiss.

This program allows people in those professions to purchase a HUD property at a whooping 50% discount if it’s in a “revitalization area” and the owner occupies it for three years. Revitalization areas are neighborhoods with very low income, low homeownership, or a high concentration of foreclosed homes.

How to buy a HUD foreclosure

HUD foreclosures are not sold in the typical manner, according to Reiss. Instead of open houses and offer letters, he explains, HUD foreclosures are sold through a bidding process that favors owner-occupants (people who actually want to live in the house) over investors by giving them priority in bidding.

Prospective owners working with a real estate agent authorized to sell HUD property submit bids but have no idea what the other bids are. If the property fails to sell to an owner-occupant, the HUD foreclosure is then open to investors.

How to find a HUD foreclosure

According to Reiss, HUD maintains the HUD Home Store, an online database that lists all its foreclosures. And unlike some foreclosed properties that may have liens (a notice attached to your property that means you owe a creditor money), HUD homes are for sale lien-free.

When Buyers Change Their Minds

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The Wall Street Journal quoted me in When Home Buyers Change Their Minds (behind paywall). It opens,

The offer was accepted. The mortgage was approved. What happens when the buyer gets cold feet and wants to back out of the deal?

Jason Michael faced this issue about 18 months ago when he listed his three-bedroom home in St. Louis. Mr. Michael, a 36-year-old public-relations executive, asked $130,000 for his home and accepted an offer for $127,000. The buyers posted a $1,000 deposit of “earnest money,” completed inspections, negotiated repairs and were approved for a mortgage.

Then they told Mr. Michael that they had found another house and didn’t want to move ahead with the purchase.

While the contract allowed Mr. Michael to pocket the deposit if the buyers defaulted, they refused to authorize their agent to release it. Only after Mr. Michael threatened to sue did they surrender the $1,000.

“My agent had said that people don’t back out of house purchases—that this won’t happen,” Mr. Michael says. “But now I approach it as if the buyer can back out until the very last minute.” He ultimately decided to rent out the house.

According to an online survey of 2,241 adults conducted for finance website Nerdwallet.com in January, home-buyer’s remorse isn’t uncommon. Nearly half (49%) of homeowners who responded said they would do something differently if they had to go through the process again. Broken down by age group, 61% of Generation Xers (the mid-1960s through the 1970s) and 57% of millennial homeowners (born in the early 1980s through about 2004) indicated they had regrets. Many wished they had bought a bigger home or saved more money before buying.

*     *      *

Here are a few things to consider if you might want to back out of your real-estate contract. Buyers and sellers should consult a qualified real-estate attorney for advice.

• Craft carefully. Rather than having a mortgage contingency allowing you to obtain a mortgage “at prevailing rates,” specify that the mortgage rate can be no more than 4%, for example. Or, consider making the contract contingent on the mortgage actually being funded by the lender. “This extends the contingency all the way to the closing,” says David Reiss, a Brooklyn Law School professor who specializes in real estate.

• Sharpen your negotiation skills. Even if you can’t back out legally, try to negotiate a reduction or return of the deposit with the seller. In a market where prices are rising and the homeowner can get a higher price for their home, there might be a chance to come to terms.

• Remember the broker. Even if the seller lets the buyer off the hook, he may still be liable to the broker for the commission. Contracts state that the commission is due when the broker finds a ready, willing and able buyer. Many brokers will work with the seller in this situation, Mr. Haber says, but it is an issue that needs to be addressed.

 

Choosing a Real Estate Agent

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US News & World Report quoted me in 6 Tips for Choosing a Real Estate Agent. It opens,

Selling a home has become easier over the years with online services to help the seller set a price and advertise, but most homeowners still hire a real estate agent.

While many agents have deep experience and know their markets intimately, newcomers abound – people looking to cash in when the market is hot and may not even work at the job full time. So experts advise homeowners to look carefully for an agent with the right combination of experience, knowledge, work ethic and personality.

What is a Realtor? Typically an agent is someone licensed by the state to sell real estate, while a broker is a manager of a team of agents. A Realtor is a member of the National Association of Realtors, the industry’s main trade group, which requires members abide by certain ethical standards. Experts suggest sellers use agents who have received more than minimum training required in their state.

“In California, the requirements for a real estate salesperson’s license are very low, basically, three classes and a test,” says Bryan Zuetel, a real estate attorney and broker in Orange County, California.

“Almost any agent can get a listing, enter the property into the (multiple listing service), create some flyers, hold open houses and fill in blanks on the contract forms,” Zuetel says. “However, most agents do not understand, but should understand, the complex contract terms, implications of an unhappy party in the transaction, legal requirements for the numerous disclosures, appropriate negotiations during the escrow period, conflict resolution via mediation or arbitration, and the remedies under the contract.”

Do your homework. Law professor David Reiss, academic program director at The Center for Urban Business Entrepreneurship at Brooklyn Law School, says it’s important to check out a prospective agent with previous sellers.

“Some real estate agents are great at pitching themselves but not great at marketing homes once they have the listing,” Reiss says. “Getting recommendations from friends and relatives will give you information that the agent herself or himself would not provide. Do they return phone calls promptly? Are they creative problem solvers? Do they educate themselves about the pros and cons of the home and (comparable properties in the area)?”

Understanding FSBO

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US News & World Report quoted me in 3 Things to Know About Selling a House on Your Own. It opens,

The internet is full of sites that help homeowners sell property on their own, promising thousands in savings by avoiding commissions, but the National Association of Realtors says commission savings on a for-sale-by-owner transaction, or FSBO, are more than offset by lower sales prices.

The truth lies somewhere in between, according to most objective analysts. So for most sellers, deciding whether to go FSBO is a tough call.

Ali Wenzke, a Chicago writer with a blog called the Art of Happy Moving, says do-it-yourself transactions have worked well for her.

“My husband and I have sold two houses FSBO and purchased one home without an agent,” she says. “Be objective. Work hard. Be flexible to do showings at any time.”

“Anyone can do it and the average home is shown five times or less,” says Sissy Lappin, co-founder of the FSBO website ListingDoor.com.“The notion that no buyers or sellers can understand or manage what happens in a transaction is simply absurd.”

One thing is sure: the average seller’s experience does not necessarily apply in any specific case. What matters is whether you can succeed with a FSBO, regardless of whether your neighbor has.

Adjust your expectations. Experts do agree that FSBO novices should be realistic. Even if you get top dollar and avoid the agent’s commission, the process can be a time-consuming headache. And even if you don’t have an agent of your own, you may have little choice but to pay one representing the buyer, cutting the savings in half.

“While listing on your own seems easy, you are in fact replacing a job which you usually employ a broker to do full time,” says New York-based real estate agent Dylan Hoffman, who is not a fan of FSBOs. “You will need to organize showings, tours, previews and open houses. Plus all the back-end work, like maintaining photos and descriptions on websites, checking for a clear title, etc. An owner would also take on the role of marketing, both digital and print.”

The internet has made the process much easier, with many sites now offering listings, advice and services like printing signs. For a fee, usually several hundred dollars, some services will get your home on the multiple listing service used by real estate agents and buyers, though Lappin says it’s good enough to list on a site like Zillow.com, which is free. The goal is to save the agent’s commission, typically about 6 percent of the sales price, or $18,000 for a $300,000 home.

“FSBO has grown up and sellers don’t have to settle for a red-and-white generic yard sign,” Lappin says.

She says the seller of a $400,000 home with $60,000 in equity would spend 40 percent of that equity if they paid a real estate agent 6 percent commission, or $24,000.

What kind of homes sell without an agent? The National Association of Realtors says about 10 percent of home sales are conducted without an agent, though some critics say the figure is higher. The association says the average FSBO sells for 13 percent less than the average agent-assisted sale. Again, critics like Lappin disagree, with many noting the association’s studies do not look at comparable homes and lump in mobile homes and other inexpensive properties, as well as intra-family deals that tend to have low sales prices. Association figures do show that FSBO is less common with high-priced homes.

FSBO advocates generally agree that doing it yourself is more difficult for the seller, and can take longer. Though you might catch a buyer’s eye right off the bat, the FSBO approach is relatively passive, as you won’t have an agent steering buyers your way. Obviously, the seller must be available to show the house, and that can require weekdays, not just Sunday afternoons.

“It takes a lot of people skills to sell your own home,” says law professor David Reiss, director of The Center for Urban Business Entrepreneurship at New York’s Brooklyn Law School. “Can you engage with potential buyers even as they are criticizing your house and the choices you made about it? Can you distinguish serious buyers from window shoppers? Can you negotiate without giving away the farm or playing too hard to get?”

Anti-discrimination laws limit what you can tell buyers about issues like the ethnicity of neighbors, or even the number of school-aged kids or seniors on the block. And you have to be willing to show to all comers.

Going it alone also means you won’t have an agent’s advice setting the home up to it up to look its best, though you could hire a professional stager.

Negotiating Real Estate Fees

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office-negotiationPolicyGenius quoted me in 5 Mortgage Loan Fees and Rates You Should Always Negotiate. It opens,

When it comes to making major purchases or financial decisions, we always hear that mantra, “Everything is negotiable.” You can haggle with the salesman when shopping for a new car, or with the hiring manager at a new job over your starting salary. It’s even possible to negotiate your tuition rates as a college student.

But a lot of the costs associated with buying a house can be difficult to negotiate down, according to mortgage advisor and author Casey Fleming.

“Appraisal, underwriter and processor are chosen by the lender, and the variation in fees is quite small,” he says. “Escrow and title services are typically chosen by the real estate agent of the seller in most areas, so the buyer has little say in what those fees will be.”

There’s also not much way around paying private mortgage insurance — you’ll need no less than a 20% down payment to avoid it.

But, you don’t need to let the non-negotiable items prevent you from bargaining for a better deal on other house-hunting costs. Here are a few fees and costs worth negotiating:

Real estate broker’s fees and commissions

From the outset, consider negotiating your real estate broker’s fees, according to Prof. David Reiss of the Brooklyn Law School, who teaches real estate finance and community development. “If 6% is standard in your community, you can look for brokers who will sell your home for 5% or less,” he says. “Be careful how low to go though, because you want your broker to be motivated enough to sell your property.”

Reiss notes that to gain the most advantage in negotiating their fees, your broker’s listing agreement should outline all the services they’ll provide you regarding advertisements, showing, and the plan in place to buy or sell the property in question.

Honesty Is Best

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Grant Wood; "Parson Weems' Fable"; 1939; oil on canvas; Amon Carter Museum, Fort Worth, Texas; 1970.43

Grant Wood; “Parson Weems’ Fable”; 1939; oil on canvas; Amon Carter Museum

Trulia quoted me in 6 Things Home Sellers Are Legally Required To Disclose. It opens,

When it comes to selling your home, heed your mother’s advice: Honesty is always the best policy.

Denise Supplee and her husband, Jerry, had been in their new home in Horsham, PA, for just three months when they started to notice something strange in their bathroom. “You could see mold starting to seep through the paint,” says Denise, a co-founder and director of operations of SparkRental.com. “We had a contractor come in and he told us we were lucky,” she says. “It seemed to be an issue kept to the bathroom and occurred most likely because there was no exhaust fan.” The problem: The seller had blatantly painted over existing mold without ever disclosing it to the Supplees. Although the seller made good and paid for the mold removal — a $1,500 cost — the Supplees could have taken them to court for not disclosing the problem before the sale.

It’s a question that plagues many residential sales: As a seller, what do you — and don’t you — need to tell the buyer about your home? “My rule of thumb is this: If you’re not sure if you should disclose something, you probably should,” says Sam Pawlitzki, a real estate agent with Beach Cities Real Estate in Los Angeles, CA. “Think of seller disclosures like a Carfax report.” Plus, the harm in not disclosing something can result in some serious legal and financial woes. Here’s a list of what you legally need to include in your sellers’ disclosure to keep yourself out of hot water.

1. Lead paint

One item is a must when it comes to being upfront with potential buyers: the use of lead-based paint in your home. “If the home was built before 1978, each party in a transaction needs to sign a lead paint disclosure,” says Pawlitzki. “This is a federal law and applies to every state. No matter if you think the lead paint has been removed or not, it still needs to be disclosed.” However, David Reiss, a professor at Brooklyn Law School in Brooklyn, NY, explains, “If you are not aware of a lead-based paint issue in the house, you are not required by the act to investigate whether there is any.”

Questions Your Broker Might Not Answer

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Realtor.com quoted me in 4 Questions Your Agent Might Not Answer—and Why. It reads, in part,

Want to know how old the roof is on a house, or whether it uses gas or electrical heat? Your trusty real estate agent can tell you pretty much anything you need to know about a home you’re hoping to buy (or at least find answers for you). Yet if you ask your agent certain questions, you might be puzzled to hear nothing but an awkward silence. Why?

It’s not that real estate agents don’t know the answer; they probably do. It’s just that they’re correctly staying on the right side of the Fair Housing Act, which prohibits housing discrimination based on race, religion, sex, or family/economic status.

So that silence is actually a good thing—it means that your agent is conscientiously steering clear of the tinderbox issues hidden within your innocent questions.

Here are the top ones that leave them feeling tongue-tied—plus where you can actually find the answers you seek.

Question No. 1: Is this a good place to raise a family?

This question is often “a lose/lose/lose for the Realtor®,” says David Reiss, a professor at Brooklyn Law School who specializes in real estate. If an agent admits a certain area is not all that family-friendly, “it could imply that families with kids aren’t welcome.” Or, on the flip side, “if the agent says that the neighborhood is a good place for kids, that could be interpreted as saying households without kids aren’t welcome, which is another form of discrimination.”

Housing professionals who try to either encourage or discourage home buyers based on the kid question can, and do, face consequences in court.

Bottom line: Rather than get burned, a cautious agent refrains from presuming where you and your brood will thrive. So if you want to know this info, you’ll have to do your own research  (more on how to do that below).

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Question No. 4: How are the schools here?

Because the racial divide can also run deep in U.S. schools, “a Realtor has to be careful not to let their answer be construed as a coded message about race,” Reiss says. Rather than risk a potentially offensive miscommunication, Realtors may very well introduce you to one of many websites that rank schools—such as Great Schools and School Digger.

Another option: If you have your heart set on your child attending a certain school, download realtor.com’s mobile app, which allows you to search for homes for sale by school district.