What is the maximum Seller Concession for a Buyer's Loan?

Well, that depends, and it's always best to consult with the Buyer's lender before your offer includes promises your lender can't keep. When you are negotiating for a buyer, keep the following in mind.

Type of Loan	LTC/CLTV	Maximum Seller Concession Allowed
Conventional Primary and 2nd Homes	Over 90%	3%
Conventional Primary and 2nd Homes	75-89.99%	6%
Conventional Primary and 2nd Homes	Under 75%	9%
Conventional Non-Owner Occupied	N/A	2%
FHA	N/A	6%
VA	N/A	4% Maximum for prepaid closing costs, funding fee & debt payoff

This information provided by Eileen Burke with Cobalt Mortgage in Seattle, a preferred lender.

Eileen also counsels that Seller concessions can not be paid in cash to the buyer, so if you are leaving money on the table, apply it to future home owner's insurance, property taxes, or *HOA dues.

We are in a very unusual market. For listings where the Sellers properly prepare the home and agree to list at a price the market recognizes as current, we are seeing very short market times and multiple offers. The other half of the market consists of homes that were priced too high originally and/or the Sellers are unwilling to lower them. It's this homes that the seller is often willing to assist the buyer in making the loan more attractive and sometimes just possible.

Representing a Buyer involves getting the best deal possible and this is one avenue to explore.

Representing a Seller and suggesting a Seller contribution in a counter offer may just be the ingredient that makes for a happy transaction.

Previously published on Active Rain

At some point in the process of buying a home you are going to be asked how you want to "hold title".

Here are four common ways to hold title to real property in Washington State:

1)      Single Individual - A person who is not married or a registered domestic partner.

2)      Separate Property - A person who is married or a registered domestic partnership who holds title without a spouse or registered domestic partner.  A quit Claim Deed will often be required by the title company from the spouse of partner not going on title.

3)      Tenancy In Common - Two or more people have interests (not as community property or joint tenants) in the property.  The individual interests do not need to be equal, but the sum total of the interests must equal 100%.  The interests of each tenant-in-common pases to his or her heir(s) upon death.

4)      Joint Tenancy - Two or more people have equal interests in the property and the deed by which they take title must specify that the property is "held as joint tenants, with rights of survivorship".  Unlike tenancy-in-common, when a co-owner dies, his or her ownership interest automatically passes to the other co-owner(s).

Choosing how you want to hold title is an important detail to figure out prior to closing.  Be sure to have a conversation with your agent, Title Company and/or an attorney if you have any questions or concerns.

Clutch, a book by Paul Sullivan is all about the ability to do under pressure what you can do under normal circumstances. The concept applies constantly in sports events as athletes who have practiced for years suddenly need to excel in real time under "other" circumstances. Those in the military discover who can and who can't perform in combat sometimes with dire consequences. 

How does "being a clutch player" pertain to real estate? What traits do clutch players have and how do you recognize them as you decide which Realtor to use when buying or selling a Seattle home or small business?

The five traits are focus, discipline, adaptability, being present, and the awareness of the push and pull of fear and desire. Without all five character traits, will your selected agent stumble through the preparation, searching, marketing, negotiating, inspecting, and closing steps involved in the typical transaction in the very different market we now face?

The well-developed ability to focus, to concentrate like a laser, on the client's needs is the first and most important of the five traits.  Solid discipline keeps the Realtor on track. Adaptability allows your agent to recognize trends and keep you advised to slight as well as major changes in the market. Being present involves meeting the market where it is today. Past successes are nothing but ego strokes for the agent. Today's market is substantially different from anything seen over the past 30 years. And lastly, is your agent keyed into your desires, and is he aware of the consequences of failure? Are you?

Overconfidence and pride are enemies of a clutch player. If anyone tells you that making a move and successfully completing a transaction in the current market is going to be easy, they are missing or ignoring many important factors that they cannot control. Loans and appraisals are very uncertain elements these days. Buyers remorse is frequent. Sellers okay at one price may be coming up short at the offered price.

Choose a Realtor® wisely. Choose a Lake and Company agent to help you find success in real estate.

Not one real estate agent in the country has ever admitted publicly to being a poor negotiator. We all claim to be experts. And most of those claims are based on agent experience developed between 2002 and 2007. Everything sold, no matter what. Boasts like, "I averaged 12% over listing price for my sellers," abound. Buyer agents claim that, "I got it for my buyers over 8 other offers," were pretty much the norm. But I don't think that this had anything to do with negotiating skills. A pleasant, professional appearance, a pre-inspection and a strong offer usually carried the day.

Let's take a rational look at negotiations to understand the process see if real estate agents are even in the game these days. There are two ways to negotiate. You can negotiate from a position or you can negotiate from merit. If, as buyer, you want to negotiate from a position you are essentially saying that you won't go over $xxx,xxx for that house. Your reasoning might be comps or condition. But you take a stand and see if the seller rolls over. If your agent has to deliver that message, or a message that contains the clause "only if," then you are in a fixed position and decrease your chances of making a deal. The message is, the buyer doesn't really care about the house; only care about getting a deal. The same rationale applies to sellers. On the other hand, if the offer has merit, if it explains your needs, your financial abilities, and if it assesses the situation rationally, then it's worth trying to find a way to understand the merit of the other party and determine if the needs of each can be attained.

Once you've established how you and the other members of the negotiation are looking at the situation, you will need to determine the style of each person who has something to say. The five basic negotiation styles consist of defeatism, accommodation, compromise, withdrawal and collaboration. Non of these styles is necessarily wrong, and it is important for an expert negotiator to recognize how these various styles are being used an any conversation.
Someone who uses the defeatism style is often perceived of as aggressive and as a bully. It is often used successfully when that negotiator discovers a weakness in the other party and tries to use it to their advantage. If such a person has a habit of using the technique, at some point they may make an error in evaluating the weakness of others and destroy the negotiation progress.
 If, at the beginning of a negotiation, one party adopts an accommodating posture, the others may see that as a weakness. This type of person, a person who doesn't want to make waves, would be wise to have a skilled negotiator on his side to help him keep his original objective in mind.

Some negotiators are compromisers. It often works well for each party to to give up something in exchange for something else. In some cases this can get confusing and again, one or both parties may loose sight of their original objectives.

For offers that are too low to start with, or counter offers that don't seek resolution other than in price, and usually the original price, some parties to a negotiation will just withdraw. Nothing stops a discussion faster than one party refusing to speak to the others. The final style of negotiating is for the parties to collaborate. It stakes a skilled negotiator to sincerely ask and discover what the opposing party really wants, and yet be confident enough to disclose the prime objectives and goals on his side. The result, when successful, will have one negotiator finding ways to teach the other to collaborate so that both parties reach their objectives.

My next post will deal with the emotional side of negotiations. When choosing a broker to work with, it is important for you to determine how he interacts with you. It may be a good indication of how he will represent your interests in the purchase or sale of a property.

Newspapers and television keep talking about the housing recovery. Hello? The housing industry has recovered. If you've ever had a serious disease, major surgery, or been significantly injured in an accident, you long for recovery. You endure physical therapy, medication, and rehabilitation processes to, one day, get back to being your old self. But then one day you are old, and you've always been yourself, but you know that where you are now is not the recovery you hoped for. The housing market went through a period of drug induced euphoria between 2002 and 2007. Place the credit or blame where ever you want. I call it financing on crack. Investors wanted to make big money fast. Wall Street was doing anything to get bundles of loans they could then sell to investors. Lenders were going to 70% ratios (the norm always was, and is again 30%) on stated income (not anymore) just to make loans because Wall Street was buying. And the American public just had to buy a bigger and better home because next week it would be worth 50% or 80% or 100% more and we would have money to spend, spend, spend. Granted: Not everyone thought his way. But in retrospect, it should be obvious to all that the values reached in the real estate industry were not sustainable. They were not true values. In Seattle we have drifted back to the prices of 2005, and we linger at this point. That seems like a good thing to me. Prices on well kept homes are inching up. Prices on fixers are still trickling down. Why down? Because there is little upside for most DIYers in this market. The "it's fast money, honey" days are over for now. Look at any graph and you will see that we are in a stable market. For example the second and third graphs on the SeattleBubble Website show the decline percentage from the peak in many areas of the country has stopped. In Seattle, the price of homes sold over the past 36 months has changed only 3%, while in the 20 months before that it fell 23%. Lenders are being extra cautious to only make loans to people who can

• Pay them back
• Avoid default in the event of unexpected expenses
• Demonstrate financial stability

This is the market. The recovery is here and we are living it. Throw away that crack pipe, you're not addicted any more. Buying a home is not for everyone. Only do so if you want to, and if you are able to. You don't need to wait for verification from all of your friends. You don't need to wait for the newspaper to tell you that it is okay. You only need to see value, and move forward.

Also published on Seattle Real Estate with Glenn and Marjie

Okay, Admitted. A little more Times bashing for today. The Wednesday Seattle Times has two articles in the business section. The feature is headlined "U.s. Home Prices fall, more declines seen." This article is datelined Washington (and they mean D.C.). It's from information released a week or so ago put out by Case-Shiller, a company that claims to follow same house resales over long periods of time.

Two things about Case-Shiller's information.
1. It is always two months old based on closed sales which are also two months behind the current market. So, figure 4 months stale.
2. In following the sale of the same house over time they don't, as far as I know take into account remodeling/deterioration. Back between 2002 and 2007 home improvement stores were booming because people were pouring money into their homes and re-tapping them for equity. Houses were getting improvements so the values should have gone up. Essentially they were not the same homes that sold two or three years earlier, even though they had the same address. And from 2007-present, most people stopped putting money into their homes and many of them have deteriorated, resulting in a home of less value. Same address, but now a fixer/shortsale/REO. Selling for less: No DUH!


Also published at www.glennaroberts.com

I got an email from a buyer a while back. I had met him at an open house I was holding. It wasn't my listing and he acted like he knew more about the listing than I did. Maybe so. There is a lot of information out there. I asked if he wanted to look at some comparable properties. He said maybe.

I got an email from him a few days later. "How would you negotiate for me?" he asked. I could tell from talking to him at the open that he had read about the bubble and then the shadow inventory, and he was sure prices were going down more. He told me about how much less than asking other homes were selling for. So I pretty much guess that more than anything, he wanted the deal of the century.

I wrote back: There are two ways to negotiate. you can negotiate from a position or you can negotiate from merit. If you want to negotiate from a position you are essentially saying that you won't go over $xxx,xxx for that house. Your reasoning might be comps or condition. But you take a stand and see if the seller rolls over. That would tell me that you don't really care about the house, you only care about getting a deal. On the other hand, if the house has merit, if it meets your needs, if you can afford it, if there isn't any other property that meets your needs as well, for the same price, then it's worth trying to find a way to make the purchase work so that the seller's needs are met as well.

He wrote back: No, I want to know how you will make the seller sell at a lower price.

I knew the seller had received an offer at a lower price and it didn't work out. It might now and I would help the buyer with it, but it had to make sense.

I wrote back: It sounds to me like you are trying to defeat the seller. That is one style of negotiating. It will work if the seller and his agent are both accommodaters. They may just roll over, and give you the house for what ever you want. But they didn't to the last person. If both the seller and you were compromisers, we might reach agreement, but you would have to give up some of your desired features. I really don't know what they are other than a lower price than the home is currently listed for. On the other hand, with an offer too low, as you suggested you might make, the seller might just withdraw. We would go no where with this if the other party will no longer speak to us. I suggest we try to collaborate with the listing agent and the seller. We'll need to negotiate more after the inspection and possibly after the appraisal. Some how we can tweak their needs with ours, once I know what yours are. I need to know why you want this house so I can build a case for you. Or maybe, there is a better house somewhere else that will work as well.

Apparently this buyer, a buyer who wouldn't sign a buyer's agency agreement, a buyer who didn't seem to have needs other than to get a house for way less than the listing price, a buyer who is perhaps, not a buyer at all, didn't like my idea that we try to work with a plan that would accomplish the goal of closing a sale. He seemed to want a negotiator who would help him make it fail. I didn't hear from him again, nor did I pursue him as a client. I don't think he really wanted to be a homeowner. I think he only wanted a deal.

The savvy buyer in Seattle wants all of the information they can get. They want to know the history of the property and of the neighborhood. The savvy buyer reads blogs and reads the newspaper. Just a few years ago buyers wanted to have it all in a house and they wanted it now. Banks accommodated them and many bad decisions were made. You know that story.

Unfortunately, what we see on TV and in the news media today is all about the extremes. We hear and experience around us the effects of the millions of foreclosures and short sales. We read how the incomes of the top execs in the country have risen while the unemployment rate nationwide remains around 10%. Most of the media is thriving on the bad and the ugly.

Will things get better or will they get worse? Consumer Reports came out with an interesting article in their November issue. People do expect that inflation is one way that home value increases and over time that increase is slow and steady. Yes there are stunning surges and sometimes declines that match. The magazine has determined that there has been a 4% average per year increase in home values from 1987 to the present. They've contrasted that with the Case-Shiller Home Price Index for the same period. Years 2003-2006 certainly show an abnormally high increase in the price index. And 2007-2010 show a just as dramatic correction.

We've all heard the spiels of the television real estate evangelists touting get rich quick methods for real estate investing. Some "investors" still subscribe to those practices. Now, these same preachers are letting off steam on how to make millions in the short sale and foreclosure market. Why? Because there is always someone out there who wants to believe that they can have it all...now, and is willing to pay for the dream.

This Consumer Reports Chart pretty much tells you where we've been and where we are headed. Will greed make us make the same mistake again? The average buyer will only get in the market after all of their friends have made that move.

From the article:

The optimists say the market will eventually catch up to the historical trendline with larger-than-average price appreciation. Record low mortgage rates will make homes even more affordable for those with the means to borrow. Put the two factors together, and buying a home might be an incredible bargain as long as you're not looking to make any quick profits from it.

The savvy Seattle buyer pays more attention to slow growth and debt reduction. The savvy buyer knows that the scrupulously cared for property will fetch a good price when the time to sell comes. The savvy Seattle buyer knows you cannot participate in the gains unless you are in the market.

The old adage to buy when everyone is selling, and sell when everyone is buying continues to hold true in Seattle and likely in your city, too. Prices and interest rates are low. Don't get left out in the cold.

A popular website for homebuyers researching neighborhoods is Walkscore.com.  Lake & Company Real Estate now offers Walkscore information for every listing in the Northwest MLS.  From Lakere.com simply choose the home you are interested in from the search map.  At the detailed listing page look for the tab "what's nearby".

 

Website rates your neighborhood's walkability and your commute costs.  The Seattle Times, 8/16/2010

According to Walkscore, 57 percent of Seattle residents live in a neighborhood with a score of 70 or above.  Most neighborhoods have a score of at least 50, with 14 percent of residents living in car-dependent neighborhoods.

Seattle's most walkable neighborhood is Pioneer Square, with a score of 99, followed by downtown, 97; First Hill, 96, Belltown, 95; and Roosevelt, 96.  At the bottom of the list is Blue Ridge, with a score of just 32. 

Walkscore also scores the walkability of a neighborhood to its proximity to such amenities as grocery stores, schools, restaurants, parks and even bookstores. 

The website also has a calculator to show home much of a resident's average monthly income goes to housing and transportation costs.  According to Walkscore, households in traditional suburbs spend up to 32 percent of their incomes on transportation costs, while households in walkable areas with good access to public transportation spends as little as 12 percent.

The Seattle Times reprinted an article by David Streitfeld of the New York Times today. Your home a path to wealth? Experts say no quotes exectives from various companies as if they have a clue as to what's coming down over the next 20-50 years.  Even the cheif financial officer of Zillow says,  "There is no iron law that real estate must appreciate." 

When was the promise that home ownership would create wealth, except on late night TV? Most of us know that there are a great many tangible and intangble benefits to home ownership, that span one's lifetime. The home isn't and never was intended to be the monthly ATM machine to meet expenses. Nor was it the path for everyone to create wealth.

Perhaps only executives of major corporations know that the true way to weath is gigantic bonuses funded by investors through IRAs and other investment plans. Maybe there is a flaw in the Wall Street model for the little guy to get ahead.

Of course you could put you money in a CD or bank account, now paying a whoping 1%, more or less. The beauty of compound interest has pretty much gone down the tubes.

Renting is the only option besides buying, unless Mom and Dad will allow you a little comp time in the basement. Have you ever noticed that rents do go up? With a fixed rate mortgage your house payments will stay the same. Have you ever noticed that sometimes the landlord is non-responsive to your requests for small repairs? Could you do a better job of that yourself?

Home ownership is not for everyone. For one thing you are either going need a lot of cash, or good credit. And then you have to be a responsible person, willing to take care of your home. Sometimes you will have to cancel the trip to Cabo, because, just maybe you didn't plan ahead for the new roof. Oh, well, the sun shines here once in a while, too.

When you are ready to own, give us a call. I'd be happy to help you find that special home, or one that you can make just right.