Aug
1
What type of home sale is a “lease purchase?”
Posted by chattanoogarealestate under First Time Home Buyer, For Buyers, For Sellers, General Information, Mortgage
The term “lease purchase” is sometimes used loosely when referring to the purchase of a home. A true lease purchase would include a period of time that a buyer would lease the property prior to actually purchasing the home. In a lease purchase agreement the buyer is actually proposing an “option” to purchase. The buyer and seller would agree to a lease agreement with terms for the period the buyer is actually renting the home. And there would be a purchase agreement to define the terms of the sale of the home after the lease period. A lease purchase agreement will include a lease agreement and a purchase agreement that would be contingent upon the both of them happening. It is not a lease purchase if a buyer prospect simply wants to lease or rent the home for a period of time without the intention of a purchase. This would merely be considered as a lease agreement.
As a home seller, a lease purchase agreement could be a viable option to selling their home. If the seller is able to purchase another home without the sale of their existing home or has already moved out of the home for sale, it could be a great way to ensure a sale at future date. It would lock in the terms of a purchase and create an income stream to the seller during the lease period. In some cases, it helps to place an occupant in an otherwise vacant house to care for the home and reduce insurance rates which are typically much higher than an occupied property.
There are many reason why a buyer may consider or need to propose a lease purchase agreement. Sometimes there are circumstances that need time to pass to make a mortgage loan be approved for the buyer. This could include more time on the job, more down payment money saved, debt to be paid off, a credit blemish to be remedied and many other valid reasons. As a home seller, you want to make sure that the buyer’s reason is something that is achievable and not a lofty expectation that it will happen. Circumstances other than a delayed mortgage approval could be a reason for a buyer to propose a lease purchase agreement and would need to be considered on a case by case basis by the home seller.
In most least purchase agreements, there is a substantial security deposit paid by the buyer. The amount is usually high enough to make sure the buyer actually follows through with the purchase and to cover the seller’s damages if they did not. Typically, this security deposit is non-refundable if the buyer did not complete the sale according to the terms of the purchase agreement. Otherwise, the deposit would apply to the purchase price and be credited back to the buyer at the closing.
During the term of the lease of the lease purchase agreement, the parties become landlord and tenant. The seller is the landlord and the buyer is the tenant. The lease agreement will define the terms including monthly rental amount, length of lease term, fee for late payments, permission for any pets, insurance coverage, repairs and other terms typical of a lease. Both parties need to keep the landlord / tenant relationship until there is actually a purchase. For many home sellers, this could be their first and only experience as landlord. The buyer needs to realize that they don’t actually own the home during the lease period. Until the buyer pays for the property in full, any improvements to the property such as new flooring or kitchen cabinets will be the property of the seller.
In today’s market, lease purchase agreements are being offered by sellers and presented by buyers in increasing numbers. They offer an alternative to a traditional home sale closing in 30 – 60 days. A buyer can occupy the home prior to their ability to complete the sale. A seller can achieve a sale with a delayed closing. In all circumstances, both parties need to understand the terms of the agreement and the reason for considering the lease purchase alternative. The lease purchase agreement could very well create a “win-win” which is the desirable outcome in any home sale.
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Aug
1
What type of home sale is a “lease purchase?”
Posted by chattanoogarealestate under First Time Home Buyer, For Buyers, For Sellers, General Information, Mortgage
The term “lease purchase” is sometimes used loosely when referring to the purchase of a home. A true lease purchase would include a period of time that a buyer would lease the property prior to actually purchasing the home. In a lease purchase agreement the buyer is actually proposing an “option” to purchase. The buyer and seller would agree to a lease agreement with terms for the period the buyer is actually renting the home. And there would be a purchase agreement to define the terms of the sale of the home after the lease period. A lease purchase agreement will include a lease agreement and a purchase agreement that would be contingent upon the both of them happening. It is not a lease purchase if a buyer prospect simply wants to lease or rent the home for a period of time without the intention of a purchase. This would merely be considered as a lease agreement.
As a home seller, a lease purchase agreement could be a viable option to selling their home. If the seller is able to purchase another home without the sale of their existing home or has already moved out of the home for sale, it could be a great way to ensure a sale at future date. It would lock in the terms of a purchase and create an income stream to the seller during the lease period. In some cases, it helps to place an occupant in an otherwise vacant house to care for the home and reduce insurance rates which are typically much higher than an occupied property.
There are many reason why a buyer may consider or need to propose a lease purchase agreement. Sometimes there are circumstances that need time to pass to make a mortgage loan be approved for the buyer. This could include more time on the job, more down payment money saved, debt to be paid off, a credit blemish to be remedied and many other valid reasons. As a home seller, you want to make sure that the buyer’s reason is something that is achievable and not a lofty expectation that it will happen. Circumstances other than a delayed mortgage approval could be a reason for a buyer to propose a lease purchase agreement and would need to be considered on a case by case basis by the home seller.
In most least purchase agreements, there is a substantial security deposit paid by the buyer. The amount is usually high enough to make sure the buyer actually follows through with the purchase and to cover the seller’s damages if they did not. Typically, this security deposit is non-refundable if the buyer did not complete the sale according to the terms of the purchase agreement. Otherwise, the deposit would apply to the purchase price and be credited back to the buyer at the closing.
During the term of the lease of the lease purchase agreement, the parties become landlord and tenant. The seller is the landlord and the buyer is the tenant. The lease agreement will define the terms including monthly rental amount, length of lease term, fee for late payments, permission for any pets, insurance coverage, repairs and other terms typical of a lease. Both parties need to keep the landlord / tenant relationship until there is actually a purchase. For many home sellers, this could be their first and only experience as landlord. The buyer needs to realize that they don’t actually own the home during the lease period. Until the buyer pays for the property in full, any improvements to the property such as new flooring or kitchen cabinets will be the property of the seller.
In today’s market, lease purchase agreements are being offered by sellers and presented by buyers in increasing numbers. They offer an alternative to a traditional home sale closing in 30 – 60 days. A buyer can occupy the home prior to their ability to complete the sale. A seller can achieve a sale with a delayed closing. In all circumstances, both parties need to understand the terms of the agreement and the reason for considering the lease purchase alternative. The lease purchase agreement could very well create a “win-win” which is the desirable outcome in any home sale.
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Jul
20
Greater Chattanooga MLS Home Sales for June 2011
Posted by chattanoogarealestate under Chattanooga, For Buyers, For Realty Professionals, For Sellers, Market Statistics, Regional News
The local real estate market continued to show signs of a recovery – defying national trends – in both number of homes sold and median price according to statistics released today by the Multiple Listing Service (MLS) of the Greater Chattanooga Association of REALTORS ®. In June of this year, Southeast Tennessee and the Northwest Georgia area saw the sale of 534 residential units, a 10.1% increase compared to the previous month™s sales, while decreasing by 18.3% from the same period of 2010.
For the month of June, the local median home price was $128,000. That represents a decrease of 1.5% from the same period one year earlier and an increase of 2.5% from the median price reported in May. Median prices are one of the most watched statistics in the housing market today, because of the loss of value and accompanying loss of equity that homeowners nationwide have suffered in the down market.
The Average Days-On-Market have remained consistent with marketplace conditions, decreasing by 3 days from May to 134, and the current local inventory stands at 11.0 months™ supply.
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Jun
29
Tips on making a Short Sale offer
Posted by chattanoogarealestate under For Buyers, General Information, Short Sale
[This article was originally posted at Nooga.com]
Short sales are the hottest thing going in the distressed property market.
A short sale is a sale of real estate in which the sales proceeds fall short of the mortgage balance owed on the property™s loan.
Mortgage lenders consider short sales when a borrower has a hardship that prevents them from paying the balanced owed on their mortgage. And in most cases, the value of the property is currently less than the mortgage balance owed and expenses of a sale. The mortgage lender decides that selling the property at a loss is better than proceeding with collection efforts, including foreclosure.
Short sales are a type of debt settlement, and they can adversely affect a person™s credit report, though the negative impact is typically less for the property owner than a foreclosure or deed- in- lieu of foreclosure.
The first thing to expect when making a short sale offer is a longer waiting period to get an offer accepted. Do not make a short sale offer if you cannot wait.
The seller™s lender does not care that you are over-qualified to buy the property, paying cash and can close in 10 days or less. The short sale offer is just like every other short sale offer the mortgage lender is working and the amount of offers can be an incredibly high number of properties.
Depending on a number of factors, you could receive a response through the seller™s realtor within a couple of weeks or a couple of months. In some situations, it can even take longer than two months to get a reply from the mortgage lender.
Once the response is received, then it™s a race to get to the closing before the short sale offer approval expires. If you are a buyer in a situation where you simply cannot wait the time required or cannot deal with uncertainty very well, a short sale offer may not be right for you.
Short sales are not bank owed properties. A short sale is owned by the property owner and a foreclosure is owned by the mortgage lender.
In a short sale, the owner does not sign the purchase agreement. The mortgage lender is a third party beneficiary of the sale as any proceeds of the sale will be given to them.
The seller of the contract must sign the purchase agreement. If the seller does not sign, any other buyer interested in the home can make an offer and complicate your transaction. The buyer must make sure the seller has signed the purchase agreement. The agreement will be contingent upon the short sale approval of the third party mortgage lender. In most cases, there will be a short sale addendum to the purchase agreement.
A buyer should do their inspections of the property up front. In most cases, short sale homes are sold œas is. Most short sale homes require some maintenance to return the home to market condition and this can vary depending on the property.
Most often these issues are cosmetic in nature (carpet, painting, appliances, landscaping, etc.) or deferred maintenance issues the seller has not performed. But, some can require extensive repairs. The last thing a buyer wants to have happen is to wait what feels like an eternity and then discover the home has a major repair issue.
Therefore, inspect the home at the time of the contract and submit any repair estimates to the seller™s realtor so they can include it with the seller™s hardship package. Your offer should take the repair issues into consideration and the seller™s realtor can make the lender™s negotiator aware. While the lender will not generally make any repairs, they may provide concessions in lieu of repairs.
A short sale buyer must keep themselves œmortgage worthy during the waiting and offer process. This means not taking on any new lines of credit, installment purchases of furniture, financing a car or co-signing a loan.
You must maintain your credit history as it was when you were approved for the mortgage loan to purchase the short sale property. If something happens that you think may affect your credit history, income changes or payment ability, contact your mortgage lender and discuss the changes.
Hopefully, you will be still approved and able to get the mortgage loan. If not, let all parties know immediately to terminate your short sale purchase.
A buyer usually gets a great deal in a property when making a short sale offer that is accepted by the seller™s mortgage lender. Yet, they must be able and willing to wait the necessary time to get approval and take the extra steps to make the process a buying success.
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Jun
21
Greater Chattanooga MLS Home Sales for May 2011
Posted by chattanoogarealestate under Chattanooga, For Buyers, For Sellers, Listings, Market Statistics
The local real estate market outpaced the nation, as a whole, and the southeast U.S. in particular in median sale price, according to statistics released by the Multiple Listing Service (MLS) of the Greater Chattanooga Association of REALTORS ®. Unit sales advanced into positive territory, in a sign of local improvement. In May of this year, Southeast Tennessee and the Northwest Georgia area saw the sale of 485 residential units, a .2% increase compared to the previous month™s sales, though a decrease of 23.5% from figures released for the same period of 2010.
For the month of May, the local median home price was $124,900. That represents a decrease of only 4.3% from the same period one year earlier and an increase of 4.5% from the median price reported for April 2011. In a national environment of plunging home values throughout the country, these numbers represent a strong performance and preservation of homeowner™s equity in the Greater Chattanooga market.
Local analysts have also applauded the relative stability of the Average Days on Market, which stood at 137 during May “ an insignificant change at all from the April statistics.
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Mar
6
3 Reasons the Term Strategic Default Is Misleading
Posted by chattanoogarealestate under For Sellers, Foreclosure Properties, General Information, Mortgage, Short Sale
In a recent study, the Chicago Booth/Kellogg School Financial Trust Index found that a full 36% of Americans would consider œstrategic default”another term for walking away from your mortgage”if they were underwater (owed more on their home than what it was worth).
Now that more than one in four American homeowners is œunderwater, I feel that it™s important for the community to know the truth about strategic default.
The truth is the foreclosure process carries with it credit issues, current and future employment challenges, issues with security clearance and possible debt collections.
That™s why it is vital to explain the 3 reasons why the term œstrategic default is misleading:
1. There™s nothing strategic about defaulting on purpose, especially when you have options like short sales, mortgage modifications, and refinance (just to name a few) that may keep you from foreclosure.
2. The waiting periods to apply for a new mortgage loan are at least five years less in a short sale vs. a foreclosure.
3. A foreclosure will show up on your credit report every time you apply for a home loan, car loan, new job, etc., and will affect your financial situation for many years to come.
If you are underwater and can no longer afford your mortgage payments, you need to create a genuine strategy to avoid foreclosure, helping to provide stability for you and our community.
If you have any questions about what steps you or someone you care about should take next, contact me today!
Check out my website designed to help consider foreclosure alternatives: www.ShortSaleChattanooga.com
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Jan
22
Buyer’s Remorse – How do I prevent making a bad decision when making an offer?
Posted by chattanoogarealestate under Ask a REALTOR, First Time Home Buyer, For Buyers, General Information, Home Buyer Tips
How can I help prevent making a bad decision when making an offer on a home to purchase?
Buyer’s remorse is an occurrence that happens all too frequently when a home buyer overlooks something when shopping for a home and realizes after the fact what a big difference it can make to their decision. Considering the size of the financial investment that most buyers make when purchasing a home, it is incredibly important to make sure that you overlook nothing and ensure that your dream home truly is a dream before you sign the purchase agreement.
A home buyer needs to completely understand the difference between want and need when it comes to features of your new home. While you may want something in a home that does not necessarily mean you can have it within the budget set for your home purchase. It is important to carefully shop around to prioritize what you want in a home and determine what you actually need.
Focus on the neighborhoods you would prefer to live in. Consider the characteristics you would like to have in the ideal neighborhood. Take it a step further and spend some time driving around in the neighborhood, both during the day and at night, to get an idea of what that neighborhood is really like. Shop the stores, visit the schools and notice what the traffic flow is like during the busiest times of the day.
Determine how much you can comfortably and realistically afford to spend on a home purchase. You must have a realistic idea of what you can afford before you start to search for a home. In other words, you will not be out looking at mansions if you can only afford a small townhome. And it is not always a matter of what you can afford. It may be a matter of what you want to pay for your monthly mortgage payment. You may be qualified for $1,400 per month for a payment and you do not feel comfortable with a payment of more than $1,000. You should also allow for other expenses such as maintenance and upkeep. Once you have calculated all of those costs be certain that you will still have enough income left over each month to be comfortable.
When you have found the right home, consult with your Realtor and do your homework prior to making your purchase offer. Consider how much other homes in that neighborhood have sold for recently and then prepare an offer that will allow both you and the seller to gain something you want. Be prepared to negotiate. Almost everything is negotiable when buying a home today, but remember that negotiation is about give and take, so you may need to compromise.
Once your offer is accepted, understand that this is a critical time during which you will need to remain focused. Go ahead and start packing, make arrangements with the movers and schedule utility accounts at the new home while also scheduling shut-off of utilities at your existing residence for the day of your move. Stay in contact with your Realtor and mortgage lender for any last minute changes or issues so they can be handled promptly before they turn into big problems.
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Jan
20
Chattanooga Area MLS Home Sales for December 2010
Posted by chattanoogarealestate under For Buyers, For Realty Professionals, For Sellers, General Information, Market Statistics
Chattanooga Area MLS Home Sales for December 2010
The local real estate market showed a welcome uptick during December, 2010, in both number of homes sold and median price, according to data released by the Multiple Listing Service (MLS) of the Greater Chattanooga Association of REALTORS ®. In December of the year just ended, Southeast Tennessee and the Northwest Georgia area saw the sale of 440 residential units, a 18.6% increase compared to the previous month™s sales, but still lagging, by 8.5% the sales of the same period of 2009.
For the month of December, the local median home price was $137,500. That represents an increase of 10% from November, and a 6.6% increase from the same period of a year ago. Affordability in Chattanooga remains favorable. REALTORS ® generally prefer the use of median price over the œaverage or the œmean simply because it is a more reliable indicator of where the market is moving. Some people often mistakenly equate the percentage increase in median price as an increase in the value of real estate, which it is not.
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Jan
1
Is it a good time to buy a second or vacation home and what should I consider?
Posted by chattanoogarealestate under Ask a REALTOR, For Buyers, General Information, Home Buyer Tips
The current real estate market is making conditions for buying a second or vacation home very favorable. Many resort and vacation destination markets have an oversupply of home inventory at their lowest value in years. This includes areas in Tennessee, as well. A second home purchase is an investment. The long term appreciation of value of the property can make a second home a good investment decision. Buying now at a deflated price of a property could lead to sizeable increase in value in years to come.
Although the right second or vacation home is different for everyone, certain factors need to be considered are basically the same. Before purchasing a second or vacation home it is a good idea to research the location, types of destination, amenities and property value growth potential. In addition, it is important to know what to avoid and the type of property that is just right for you.
There are many things to research before you purchase a home, but the most obvious one is the location. You cannot do much research unless you know where to buy. Some who are new to the vacation market might consider a second home within a short distance to their primary residence with the intention of renting it out when they are not using the property. That way it is near for any maintenance needed. If you choose to buy somewhere farther away, though, hiring a competent property management firm with a housekeeper and maintenance personnel is a must.
If you already own a second home and planning to buy another one, you might want to buy in the same market as your current vacation home since you are already familiar with the area. However, this does not allow diversification or a variety in your family’s vacation. So some families choose a ski resort or beach property to have an option of getaways.
Once you have settled on an area for your second or third or fourth home, you have to research why buyers prefer that area. Research the prices in the location you have chosen to make sure it will not break your bank. It is also important that you consider your family’s interest on the particular area. Do not buy a house located in an area that you least like. If you buy a house that you love you will really enjoy spending your time to relax there.
The type of location depends on the location. You have to choose whether you want a destination that is remote or popular and the type of renters that would possibly be renting it when you are not occupying it.
There are also different home amenities that home buyers need to take in consideration. If your home is in an area where most homes include a hot tub, for example, then that is something you need to take into account. Having a game room included as an amenity is a good idea especially if you plan to rent your second home to families. Any amenity added as a feature to your second home should consider the type of climate of the area. For many buyers, the view is already considered an amenity. A home with a view can cost more, but can also increase the value of the property in the long term.
Lastly, before you purchase a second or vacation home consider the property value growth of your target property. Your Realtor can help you with this regard. Do not hesitate to ask and inquire any pertinent question regarding the prospect property. Also, keep in mind there are federal income tax deductions available for most second homes. They are similar to your first home deductions including mortgage interest expenses.
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Dec
7
Can I buy a house again after a selling my home as a short sale?
Posted by chattanoogarealestate under Ask a REALTOR, For Buyers, For Sellers, General Information, Home Buyer Tips, Home Seller Tips, Short Sale
Millions of Americans have lost their home to a foreclosure or short sale. Fannie Mae and Freddie Mac, who control the majority of home mortgages in the United States, realize restricting buyers from purchasing homes in the future is not a good economic decision.
Until recently, Fannie Mae and Freddie Mac had a five-year waiting period before a previously foreclosed borrower could finance a mortgage on a new home. The time frame for a FHA Loan is three years and two years for a VA Loan.
Fannie Mae and Freddie Mac have changed their policy and reduced the waiting period to two years for those homeowners who previously experienced a short sale or deed-in-lieu of foreclosure. The new loan must be a loan-to-value of 80%. This means the borrower will be required to have 20% as a down payment on a new home. After four years the maximum loan- to-value jumps to 90%, so only 10% down payment will be needed by the borrower.
Fannie Mae did supply a loophole to their guidelines in an effort to help those genuinely affected by the recession and the housing down-turn. It is possible for a borrower to put down 10% after a two-year period under mitigating circumstances. Some of these circumstances might include a job loss or health condition that appeared to be the primary cause of the initial mortgage default.
In all instances, the borrower must have re-established their credit and meet minimum credit score requirements. From the time of the foreclosure or short sale, it is extremely important to pay your bills on time and pay down your debts to re-establish good credit. Currently your credit score must be at least in the 680 range. The foreclosure or short sale will continue to be a derogatory mark on your credit for several years. Maintaining a positive credit history from the time of the setback is critical.
Borrowers that do not qualify for this program are those with mortgages on second homes and investment properties. Anyone who obtained a home equity line of credit (HELOC), or took out a second mortgage and pulled the cash out, will not qualify for the shorter wait period.
Keep in mind if you are paying cash for a home, your mortgage history and credit scores are not important. A cash transaction will allow the buyer to purchase a home at any time in the future.
These new guidelines are in their early stages, so it will be interesting to see how banks and lenders react to borrowers who defaulted and lost their homes to a foreclosure or short sale. These new regulations always look encouraging “on paper”. We will have to wait and see whether this is a step in the right direction for the housing economy.
Also, these new guidelines is just another reason why homeowners facing a potential default on their mortgage or foreclosures should consider pursuing a short sale as opposed to letting the home go into foreclosure.
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