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Mortgage Opportunities from Record Rate Cut

December 16th, 2008

Late yesterday (Tuesday) afternoon, the Federal Reserve slashed its target for the overnight federal funds rate to a range of 0 to 0.25 percent. That may sound like meaningless gobbledygook, but it’s not. It’s an all-time record low. Read the rest of this entry »

First the good news, then the bad news.

December 11th, 2008

We’re all happy to learn from Freddie Mac that this week’s rates for 30-year FRMs (fixed rate mortgages) are at their lowest since March 2004. They’re now averaging 5.47 percent, down from last week’s 5.53 percent. This time last year, they were at 6.11 percent.

But there are two pieces of bad news. Read the rest of this entry »

Lease Options: Help for Buyers and Sellers

June 25th, 2008

Lease options may become all the rage this year. While the potential pitfalls of this alternative method of selling a home kept it from ever becoming popular, its time may have come. Why? Let’s look at market conditions right now. We have the following:

· Mortgage lenders requiring larger down payments.

· Soft real estate markets in much of the country.

· Almost 9% of homeowners behind on their mortgage payments or in default.

· Risk-based pricing in conventional mortgage lending, meaning those with lower credit scores, smaller down payments, or buying certain types of property (like condos or manufactured housing) pay a premium for loans.

· The unavailability of loan products such as stated income financing.

All of these factors make it harder for buyers to purchase homes no matter how badly they want to take advantage of today’s lower prices. And that keeps sellers, real estate agents, and lenders out in the cold as well — a no-win situation for all. Here are the most common reasons lease options weren’t done too often in the past, and why you might want to consider one now if trying to sell your home:

· Real estate agents didn’t like lease options because the full commission isn’t paid until the transaction closes, and that can take several years. Well, these days any commission beats no commission — you’ll probably find an agent willing to work with you to close on a lease option sale. And unless you are very comfortable with real estate investing and contracts you will want some help — an agent or real estate attorney can help you close the deal.

· If property values continue to decrease, the tenants will probably decline to exercise the option. Or you may not complete the transaction if the rental agreement isn’t honored or if the tenants’ credit or other problems derail the purchase. Angry tenants who lose their deposits may damage the property. However, at least for now you get a tenant willing to pay more than the market rate and you may sell your home in the end as well. Again, a good real estate agent can help you vet your purchasers and increase your chance of a successful transaction.

· In the past, with easy financing terms available, buyers saw no reason to wait before buying a home — making the lease option unnecessary. Today, would-be homeowners may well have to improve their credit scores, pay off debt, save a down payment, or find a way to prove their income before they can get a home loan. A lease option allows them to lock in today’s lower prices while they do this, ensuring they won’t be priced out of the market if real estate markets get stronger. Being willing to accept a lease option increases your pool of potential buyers.

· In the past, housing prices rose so quickly in some parts of the country that sellers were unwilling to agree to a transaction that seemingly gave all the advantages to the buyer — locking in a lower price, taking so much time before closing, and ultimately having the right to walk away should markets soften. Today, many desperate sellers would be more than willing to accept a lease option if it gets their property sold — it beats being forced into foreclosure.

So if you have a home you need to sell and aren’t having any luck, offer a lease option to bring in buyers. And by enlisting the help of reputable and experienced real estate professionals to handle the contact, escrow, and property management, you can be a lot more confident in completing the sale of your property.