With all this discussion about recession and the adjustable mortgage rate crisis, you may be thinking that its a good time to stay on the sidelines and as far away from the Real Estate Market as you possibly can. You're not alone in those concerns.  A recent article on Realtor.com states that foreclosure filings are up 5% over February of 2007, and a whopping 57% over March of 2007.

 

According to the National Association of Realtors (NAR), although the first half of the year is predicted to only improve slightly, the last half should see us starting to turn things around, and next year even better.

 

For me personally, things have definitely started to pick up. I have several solid listings in inventory, and also have several transactions in pending status. Its not as busy as 2005 & 2006, but its definitely an improvement over the first few weeks of the year.

 

I suppose the bottom line is that the market is a living, breathing animal, subject to the wants and needs of consumers. And while its true there are fewer qualified buyers out there, there are still plenty of people who want and can afford to buy. And we'll continue to provide them with the best client care possible.

You may recently have been hearing a lot about a home sale transaction called a "short sale." Although this is not a new term, the adjustable rate mortgage crisis has given it renewed popularity. Simply defined, a short sale occurs when a bank or lender agrees to discount the outstanding balance on a mortgage. The homeowner then sells the home for less than the amount owed, and gives all of the proceeds from the sale to the lender. The lender may then forgive the remaining balance of the loan.

 

This can be very beneficial to the homeowner who is in danger of foreclosure. Although they still have to sell their home, they avoid having a foreclosure on their credit report. It can also be a better situation for the lender, as they don't lose as much money as they would have if they'd had to foreclose.

 

Although there are positives for both parties, it isn't a given that the lender will agree to the short sale. There can be a lot of "red tape" involved. Most lenders have specific criteria to determine who's eligible for this type of transaction.

 

Wikipedia has a great article that explains short sales a bit more in depth. Another article, from the Tucson Sun, also gives a bit more information and perspective.

 

What it boils down to is that each homeowner has his/her own set of circumstances that can influence both the availability and outcome of a short sale. Talk this over with your lender and an experienced real estate agent to ensure that you know what you're getting yourself into, and that its the right fit for you.

Hello Again -

 

Well, its turning into a pretty busy year here for The Craig McKenzie Team. Although the year started off a bit slow, we seem to have created some strong, forward momentum, and are really seeing some positive changes in this market.

 

Our last two blog entries focused on the definitions of some more common real estate terms. There's one final installment, and then we'll wrap up this series. As always, if you have any questions about these definitions, don't hesitate to let us know.

 

Note rate: The interest rate stated in the legal document (note) used as evidence of the borrower's debt to the lender. The document also describes how the loan will be repaid.

 

Origination fee: Fee charged by the lender to process a loan application and underwrite the loan. It is usually 1 to 3 percent of the loan amount.

 

Points: The amount equal to 1 percent of the principal amount of the loan. For example, if the loan is $50,000, a point would be $500. Points are charged by the lender to increase the yield on a loan to make it comparable with other types of investments.

 

Rate lock-in: A guarantee that the interest rate will remain the same for a specified period of time. Whether the loan's interest rate index rises or falls during that period, the borrower pays the rate which was current at the time of the lock-in agreement.

 

Replacement cost: The cost of replacing property without deduction for depreciation.

 

Second mortgage:  A mortgage placed on a property which has a second claim (or secondary rights of foreclosure) to a first mortgage on the property.

 

Secondary market: Investors who purchase loans from lending institutions, providing those institutions a secondary source of funds other than deposits from which the institutions can offer more loans.

 

Title insurance: A policy which insures current ownership of the property regardless of previous claims against the property and insures the lender's claims on the property resulting from the loan.

 

Underwriting: A series of criteria used by the lender to determine whether a loan application should be approved or denied.

 

Wraparound mortgage: Seller keeps original mortgage. Buyer makes payments to seller, who forwards a portion to the lender holding the original mortgage.

 

 These are the last of the definitions, unless there are terms not listed here that you would like us to define. If so, just send your request to us at mckenzie@whidbey.net. We'll respond to you as quickly as possible, and then add that to your list of definitions for future installments.

 

We hope that so far this year is proving to be successful for you, both personally and financially. Please check back again soon for more additions to The Craig McKenzie Team Blog.

 

Thanks!

 

Craig and Debbie

Hello again!

 

Welcome back to our team's blog. We hope that you've had a safe and happy holiday season so far. We also wish that the coming new year is the best one yet!

 

In our last blog, we started a list of definitions of common real estate terms. These terms may be common to us, the title and escrow companies, and the lenders because we use them everyday. However, they may not be so familiar to someone who is buying a home for the first time, or maybe making their first property investment. If you need clarification of any of these definitions, please let me know...I'm happy to explain further.

 

Discount: A reduction in the interest rate offered by the lender, usually for an additional fee referred to as discount points. A form of loan fee, sometimes called a buy-down.

 

Earnest-money agreement: Also known as the sales contract, it is a written agreement between the purchaser and seller setting forth all terms and conditions of the sale. This "good faith" agreement is accompanied by a sum of money (earnest money) given to bind the sale.

 

Escrow: Process which is performed by a third party which makes certain the interest of the buyer and seller and lender are satisfied.

 

Equity: The interest or value which an owner has in real estate, over and above the mortgage or debt against it.

 

Mortgage insurance: Lenders require this when the borrower makes a low down payment, usually a amount less than 20 percent of the purchase price.

Sometimes it's easy, after 16+ years in Real Estate, to forget that first time buyers (and even experienced buyers) can be confused, bewildered, or overwhelmed by the terminology that is used everyday. So I thought it would be useful to share the definitions of some of the more commonly used terms. Now, this can turn into quite a lengthy list, so I plan to cover just a few terms in each post. Please feel free to email me with questions about terms I haven't listed, or if you need further clarification on any of the terms I have listed.

 

Adjustable-rate mortgage (ARM): This particular type of mortgage has received a lot of press in recent months. It's a mortgage in which the interest rate increases or decreases over the life of the loan based on market conditions, resulting in possible changes of your monthly payment. Some of these loans have rate "caps" that limit the amount your interest rate may change. An ARM, which has many variations, generally has a lower initial rate than a fixed-rate loan because the borrower assumes the risk of the rising or falling market. This is part of the reason it has received so much attention as of late; many homeowners have been unable to afford their new payments, have defaulted on their loans, and have ultimately gone on to foreclosure. If you are considering an ARM, be sure to have a thourough understanding of it's details before making your final committment.

 

Amortization: The gradual repayment of debt by means of systematic installments of principal and interest (monthly payments) over a set period (term of the loan). At the end of the period, there is a zero balance.

 

Closing costs: All costs, other than the loan origination fee, paid by the seller or the buyer when the loan is finalized. Examples include lawyers' fees, title search fees, title-insurance premiums, deed recording and transfer tax.

 

Conventional (fixed-rate) mortgage: A mortgage in which the interest rate and payments remain constant over the life of the loan.

 

Deed of trust or Mortgage: Establishes the lender's legal status in the property.

 

Depreciation: Decrease in the value of property over a period of time due to use, wear, tear or obsolescence.

 

Disclosure statement: There are actually different types of disclosures required by law. In a residential mortgage transaction, the lender or credit arranger is required by the Federal Government's Truth in Lending Act (also known as TILA) to provide the buyer with a good faith estimate of the loan's finance charges within 3 days of receiving the written application. These charges include the total finance charge (the sum of all fees and charges the borrower pays in connection with the loan) and the annual percentage rate (the expression of the total cost of the loan as an annual percentage of the loan amount). These figures enable a borrower to "shop around" by comparing loans with different prospective lenders.

 

Another type of disclosure is the Property Disclosure Statement, which is required by law in the State of Washington. This is a statement that discloses to prospective buyers the seller's knowledge regarding the property's condition and other material information. It's imperative that the seller complete the form to the best of their knowledge, as inaccuracies can be costly.

 

That's probably enough information for one day. As I mentioned earlier, I'll continue this list of definitions in future entries. In the mean time, I'm happy to answer your questions, or, if you have a specific term you'd like defined, let me know, and I'll be sure to get that definition to you right away.

 

Have a great week!

 

 Craig and Debbie