Tag Archives: Broker

Mortgage Broker v. Loan Officer

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MagnifyMoney.com quoted me in Mortgage Broker vs. Loan Officer: The Best Way to Shop for a Mortgage (must scroll down). It opens,

When you need to take out a loan to buy a home, you generally have two options. You can work with a lender’s loan officer or hire a mortgage broker. Loan officers and mortgage brokers are not the same thing, although the terms are often used interchangeably.

Loan officers work for a bank or a lender and will only be able to show you mortgage options from that financial institution. In contrast, mortgage brokers are individuals or firms that are licensed by a state to act as middlemen between you and multiple banks or mortgage lenders. Because brokers aren’t beholden to a particular lender, they can shop around and try to find you a loan with terms that best fit your circumstances.

Why should you consider working with a mortgage broker?

One of the biggest benefits to working with a mortgage broker is that they take over the job of shopping for a loan. You might be able to do this on your own, and in some cases, you could find a better loan than the broker, but it can be a time-consuming and complicated process.

A broker can help collect and organize the documents you need to apply for a mortgage, such as your proof of employment and income, tax returns, a list of your assets and debts, and credit reports and scores. The broker can then use the information to look for loans, compare rates and terms, and apply for mortgages on your behalf.

Casey Fleming, a mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage,” says one of the big benefits is that brokers are generally “on your side,” while a loan officer represents the lender’s interest. Brokers are also incentivized to find you a loan that meets your needs and see the deal through closing because they don’t get paid until you close on the home.

Additionally, brokers might have access to lenders that don’t work directly with consumers, meaning you wouldn’t be able to get a loan from the lender even if you tried. And in some cases, brokers can leverage their relationship with a lender to get it to waive fees you’d otherwise have to pay.

Are there risks involved with using a mortgage broker?

While working with a broker could be a good idea, there are potential drawbacks to consider. “Not all brokers are created equal,” says Fleming. “Many have only a few sources for loans, and may not be able to find the best pricing.” There are also some mortgage lenders that don’t work with brokers and will only offer loans directly to consumers (through one of the lender’s loan officers).

Using a mortgage broker can also be expensive. Although you may find the services are worth paying for, consider the costs of using a broker:

Mortgage broker fees

Mortgage brokers are often paid in one of two ways. You may be able to choose how you’d like to pay the broker, or opt for both payment methods.

Some mortgage brokers will charge you a commission based on the loan you take out, often about 1% of the loan. For example, that’s a $3,000 fee on a $300,000 mortgage loan. You’ll pay this fee as part of your closing costs when you close on the home.

Other brokers may offer you a fee-free mortgage. However, what likely happens in this case is that the mortgage broker arranges a loan with a higher interest rate, leaving room for the lender to give the broker a cut. This route could cost you more over the lifetime of the loan but might be the better option if you want to minimize costs now.

Where to find a good mortgage broker

“Word of mouth is very useful when it comes to finding a good [mortgage broker],” according to Professor David Reiss, a real estate law professor at the Brooklyn Law School in Brooklyn, N.Y. You could ask friends or family members who’ve recently bought a home if they used a mortgage broker, as well as your real estate agent if he or she can recommend a broker.

However, don’t settle for the first recommendation you receive. The Federal Trade Commission recommends interviewing several brokers and trying to find one who’ll be a good fit for your home search.

Ask about their experience with buyers like you in the area, the fees they charge, and how many lenders they work with. “You want to know whether the mortgage broker can find competitive mortgage products, is well organized so that loans close in a timely manner, and whether it keeps away from bait-and-switch tactics that can be so difficult to deal with when buying a home,” says Reiss.

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.”

Leverage in a Tight Market

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TheStreet.com quoted me in Home Shoppers Seeking Leverage in a Tight Market. It opens,

Homebuyers have faced tight supply issues this year, and obtaining leverage in this market has been challenging.

The lower inventories pushed sales in July down by 3%, according to the National Association of Realtors, a Chicago-based trade organization. The decline has resulted in sales falling back to levels in March and April with an annualized pace of 5.39 million, bringing the sales pace down by 2% from July 2015. The level of inventory of homes for sale has declined by 6%.
As the faster summer buying pace has moved into the fall phase when there are fewer buyers, consumers have a greater advantage as homes are on the market longer. For both May and June, the listings stayed on Realtor.com a median of 65 days. By July, that figure rose to 68 days and August brings even more options and should end at 72 days. The reduction of inventory has occurred for 47 consecutive months, helping sellers, but restricting options for buyers.

For homebuyers who want to nab their dream house in the neighborhood they have been eyeing, they still have leverage, but here are some tips to improve the process.

Home Buying Tips

Before consumers start shopping, they should work on improving their finances and avoid making any large purchases such as a car. After finding out your FICO score, the goal is to find ways for it to rise above 700, which means you will qualify with more lenders and obtain a lower interest rate, saving you thousands of dollars, said Jonathan Smoke, chief economist for realtor.com, a Santa Clara, Calif.-based real estate company.

Determine how much you can carve out of your savings for a down payment, but still maintain six months of emergency funds, especially if you are buying an older home which may have unexpected repairs.

The average down payment in 2016 is 11% across the U.S., but it depends vastly on the market and loan you are seeking.

“If you are struggling to come up with a down payment necessary for your market or type of mortgage, research down payment assistance programs,” he said. “Get all of your financial records organized, including recent bank and financial statements, the last two years of income tax filings and pay statements.”

There are many opportunities available since mortgage rates remain near historic lows and are unlikely to see substantial moves soon.

“The buying opportunity is still substantial and now the annual cycle means you will face less competition on homes that are on the market,” Smoke said.

Sellers want to see serious buyers, so getting pre-approved from a lender is important.

“A pre-approval letter as part of an offer will communicate to the seller that you have the ability to close,” he said.

Sellers still have an advantage and even though there are fewer potential buyers with fall right around the corner, the existing inventory remains low, so getting a house under contract can still be problematic, Smoke said.

“Don’t expect sellers to feel desperate,” he said. “Sellers may still act like it is the spring. Listen to the advice of your realtor on the composition of the initial offer so that you are more likely to keep the conversation going rather than face complete rejection.”

While you continue to search for another home, maintain your savings and increase the amount of your down payment and keep paying down your credit cards and student loans. Consumers who will be receiving a bonus in December should include these funds it into their down payment. If the interest rates for your credit card rates are fairly low, consider bulking up your down payment since mortgage rates are very low, said Colby Sambrotto, president of USRealty.com, a New York-based online real estate broker. said. These measures will help increase your odds as you house hunt.

“Ask your lender to recalculate your loan preapproval to reflect your updated debt-to-income ratio and the greater amount you can put down,” he said. “That can reframe your search parameters.”

Down payment assistance is available through employer and community group programs. Some companies will offer loans if you remain employed there for a certain number of years, said Sambrotto. A good source for more information about various programs is Down Payment Resource.

“The loans are usually geared to encourage employees to buy around a certain area, usually within walking distance of the employer,” he said.

Location is Key

Transportation can emerge as a “hidden cost” if your commute includes costly tolls or you want quicker access to cultural and sporting events, schools for children, shopping districts and professional education opportunities.

“Narrow your search to neighborhoods that offer economical options for commuting and routine errands,” Sambrotto said. “Look for neighborhood groups on Facebook and ask to join the conversation so you can quiz current residents about the true cost of living in that area.”

While homeowners might prefer a standard standalone house, a two-family duplex might be a better option, said David Reiss, a law professor at Brooklyn Law School in New York. These homes have a clear advantage because they generate investment income along with various financing, tax and capital gains advantages which the traditional single-family house does not have.

“Think through your preferences and then take a fresh look at the market,” he said. “You might have that idealized picket-fenced house in mind, but a duplex will expand the number of houses you can look at. They also bring along all sorts of additional maintenance responsibilities with them, so they are not right for everyone.”

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).

*     *     *

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.

Dual Agency Explained

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Trulia quoted me in What Is Dual Agency? (And Why You Should Beware). It opens,

Home sellers and homebuyers are two sides of a complementary transaction. Should they each have their own agent, or is one agent enough? The answer: It depends.

You’ve probably heard the phrase “You can’t have your cake and eat it too.” But if you’ve ever puzzled over it’s meaning, here’s a hint: If you eat your cake now, you won’t have any left over to look forward to eating later. In other words, sometimes a person is forced to make a choice between two good options. In the real estate world, dual agency breaks the cake rule: If your real estate agent also represents the sellers of the home you want to buy, you don’t necessarily need to ditch them. In many cases, you can keep your agent and get the house too — if you want to, that is.

Whether you’re buying a home in Providence, RI, or Tampa, FL, it’s typical for one agent to represent the seller and another agent to represent the buyer. With dual agency, one agent works for both the buyer and seller — and keeps the full commission. Dual agency also occurs when agents from the same brokerage represent each party. But like enjoying a huge slice of cake and in return getting a bellyache, there are definitely pros and cons to agreeing to dual agency.

Pro: Streamlined communication

Because one real estate agent or brokerage represents the buyer and the seller, the agent doesn’t need to wait every time communication needs to happen between the parties. Streamlined communication often creates a smoother transaction. “You are in charge of both sides, including paperwork, scheduling, and deadlines,” says Mindy Jensen, a Colorado agent and community manager of BiggerPockets.com. “We’ve all been involved in a sale with an agent who didn’t respond in a timely manner, missed deadlines, and in general did not perform their duties as they should have. For us control freaks, dual agency can seem like a great thing.”

Con: No advice

Because a dual agent is working in a potential conflict-of-interest situation — one client (the seller) wants to get as high a price as possible, while the other client (the buyer) wants to pay as little as possible — the agent can’t take sides or give advice. Bruce Ailion, an Atlanta, GA, real estate agent and attorney, compares dual agency to having one attorney representing both husband and wife in a divorce. “The parties’ interests are adverse and are best represented by independent professionals,” he says.

The agent in a dual agency situation becomes, instead of a coach, more of a referee. “The agent cannot disclose confidential information to either party and has to act in a neutral position during the transaction,” says Emily Matles, a New York, NY, agent with Douglas Elliman. Matthew Berger, another New York, NY, agent with Douglas Elliman, says: “When the listing agent steps into the role of dual agent, they cannot give advice to the seller nor the buyer.” On the other hand, when you have an independent agent, “You are more likely to get the benefits of being a principal getting fiduciary benefits,” Ailion says.

Pro: There must be full disclosure

Whether you’re a seller or a buyer, there’s nothing to fear about dual agency: If you don’t consent to the practice, it won’t happen. “The dual-agent broker must ensure that both parties know of the arrangement and consent to it,” says David Reiss, professor of law at Brooklyn Law School. His advice: “Home sellers should review the terms of the listing agreement before they sign it to see if dual agency is being contemplated.”

Why Houses Don’t Sell

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I was quoted on Trulia in 8 Reasons Your House Isn’t Selling. It opens,

It’s a seller’s market in many cities across the U.S. If your home is in one of those cities, say Charleston, SC, or Colorado Springs, CO, and isn’t getting offers, something could be wrong. The good news? Knowing there’s a problem is the first step toward resolving it. However, there could be many reasons your house isn’t selling. We’ve asked real estate professionals and agents from all over the country what those top reasons might be — and they’ve provided some sound advice on how to remedy each situation.

1. You’re overconfident

Being in a seller’s market might mean that your home will get snapped up for premium price, no matter its condition. But that isn’t always the best strategy to count on. “Sometimes homeowners and agents get overconfident in a seller’s market and get lazy about ‘Home Selling 101,’” says Sep Niakan, broker and owner of HB Roswell Realty in Miami, FL.

Solution: Be realistic from day one. Although you may love your house, brace yourself for it to potentially sit on the market for quite some time. And no matter the market, it’s still important to “position your home to sell well,” says Niakan. “What does that mean? Staging, staging, and more staging.

2. The house is priced too high

Classic supply and demand conditions come into play in a seller’s market: There’s high demand, yet low supply. Therefore, you can usually expect to get more money for your home. But that doesn’t mean the sky’s the limit when it comes to your listing price. “In a seller’s market, a seller may feel comfortable pushing the asking price a bit higher, and this can be a huge mistake,” says Chase Michels of Brush Hill Realtors in Downers Grove, IL. “Determining the best asking price for a home is one of the most important aspects of selling a home. If your home is listed at a price that is above market value, you will miss out on prospective buyers.”

Solution: Make sure that you and your agent are certain of the value of your home in your market and price it right. “Get an analysis of the local market with a professional agent, solid comparables, and specific market trend data,” says Jill Olivarez, a Miramar Beach, FL, real estate agent.

3. The home needs some TLC

It can be a bitter pill to swallow to pay for home improvements that you may not enjoy for long. But if you want to sell for full asking price, you might need to get your house in a condition that warrants it — and not base this number only on price per square foot. “Retail buyers understandably still want the most house for their money,” says Barbara Grassey, author of How to Sell Your House Fast in a Slow Market and founder of the West Florida Real Estate Investors Association.

Solution: “The seller should have amenities comparable to other properties for sale in that price range and should really upgrade certain amenities,” says Grassey. Some upgrade examples, she says, include a pull-down gooseneck faucet, an upgraded ceiling fan, a double-bar towel rack, or upgraded door handles. They sound simple, but a few small changes can make a big impact.

4. There’s a problem with the title

“Title” in this case doesn’t mean the cute name you might have given your place (“The Laurels,” “The Conners’ Corner Cottage,” etc.). Rather, it’s the document that shows ownership. “One reason a house won’t sell is because there is a problem with the title to the house that spooks buyers,” says David Reiss, law professor at Brooklyn Law School in Brooklyn, NY. Here are some examples he gives of title problems:

  • Conveyance without a recorded deed (can sometimes happen in transfers between family members).
  • A paid-off mortgage that is still showing up as a valid lien on the house.
  • A mechanic’s lien that was filed for work done on the house by a subcontractor.

Solution: “Some [title] problems just require a little time to resolve,” says Reiss. Contact the title company to find out what you need to do to prepare for selling — then do it.