Lynn Frantzen’s Blog

Zero down financing could soon be a thing of the past. First time home buyers bought homes for many years before zero down was invented believe it or not, here are some ideas for rounding up some cash for closing. ·         GRANTS, we are seeing more grant type funding options coming available all the time.  Many funds are based on property location, most have income and sales price limits. To see what might work for you, give us a call.  ·         GIFT FUNDS, many programs allow the down payment and/or closing costs to come from a gift, normally from a relative, but other sources can work too. ·         SECURED LOAN, if you own a car that is underfinanced, or have a 401K or other liquid assets and are allowed to borrow against it, borrowing the down payment can work. ·         SELLER CONCESSIONS, asking the seller to pay closing costs is pretty normal these days.  

When you go out on showings dress warm. I swear that vacant homes are actually colder than standing outside. I want to Cabellas last week and bought my long underware - my husband laughed at me. Also as the evenings are dark so early remember to bring a flash light with. I carry 2-3 flash lights with me but everyone usually really wants their own.

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I know my clients are very frustrated with the waiting and waiting that sometimes happens with bank owned foreclosures. In Minnesota our purchase agreements state that time is of the essence - we start wondering who’s essence this is referring to. I don’t mean to sound so negative, there are some fantastic deals out there. These deals are generally worth waiting for, it just gets hard when my clients are going “crazy” waiting for a bank to respond to a good offer. Best advice I can give is to just hang in there and wait it out, the payoff can be great. Not every deal will end with a successful sale and closing. During this wait the bank’s can receive more than one offer. When this happens the listing agent will call each buyer’s agent involved and ask for the highest and best offer from the buyer. Highest is referring to the price. Best is referring to the terms the buyer can offer: amount of earnest money, type of financing, cash offer, closing date…. Sometimes the lower offer does beat the higher offer in terms and will get the sale. Wow! When did the market get this crazy and when will it end.

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Often when a client first meets with their lender they will find errors on their credit report. This is hard to understand because so much is calculated off what your credit score is now days. How are mistakes made on a credit report - this can happen several ways. Typical causes for these mistakes can be using different names such was William and Bill, Maiden name and married name. Sometimes it is as simple as a human error while inputting information. The scary answer is credit or identity theft. When you first start planning on a purchase as large as a home meet with your lender and have them review your credit report for possible errors. Fixing these errors can be a time consuming event and when you are ready to lock your interest rate that is not the time to start. Some lenders will offer a rapid re-score for a fee, this does not correct the actual credit report but it does give the lender an updated credit score they can work with.

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I am going crazy with the number of multiple offers my clients are facing in this crazy market. When a home is finally an REO or foreclosure bank owned property the price is generally set aggressively. If the property is clean at all they are selling quickly and with more than one offer. Banks do not play “nice” they are out to protect their bottom line. Usually they do not look at offers for the first 4 or so days a property is on the MLS and they wait to see how many offers will come in. As a buyer this is very upsetting and as a Realtor it is very frustrating. Having to call a client and tell them that in a market that the news claims nothing is selling and their offer was too late or not accepted due to a higher offer is a hard call to make. I wrote an offer last week on a property that our office has listed. By the end of the weekend there were 8 offers on the property with the sales price more than $20K above list price. If you are a buyer and are looking at REOs be ready to recognize a good deal with you see one.

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Here is some basic information on financing investment properties provided by Cindy Allen with Prime Mortgage.  Every lender is a little different - these are the rules with the two I just checked who usually are the ones who are pricing the best:  Fannie Mae limits the number of financed properties to four when the mortgage being delivered to Fannie Mae is secured by a second home or investment property. Maximum seller contributions is 2% not 3%. For conforming investment properties: 1 unit property - $417,0002 unit property - $533,8503 unit property - $645,3004 unit property - $801,950 For 1 - 2 unit property: 80% LTV/CLTV for SFR, PUD or 2 unit investment property80% LTV/CLTV on 40 year fixed rate mortgage for purchase, no cash-out refinance and cash-out refinance80% LTV/CLTV on 30 year cash-out refi70% LTV/CLTV on interest only cash-out refinance For 3-4 unit property: 75% LTV/CLTV for 3-4 unit property70% LTV/CLTV on 40 year cash-out refi Guidelines regarding conversion of primary residences to second homes and investment properties: - 6 months of reserves are required on both the new primary residence and the old one, unless the borrower has at least 30% documented equity in the old primary residence. - The borrower’s income must be sufficient to qualify for the combined payments on both properties. 

 - Rental income may not be used to offset the payment of a primary residence converted to an investment property unless the borrower has at least 30% documented equity in the property.  Acceptable documentation of equity includes  an appraisal, AVM, or BPO from an approved source.

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As it is getting darker much earlier and many homes are without electricity try to remember to bring a flash light. I always carry at least one with extra batteries. Winter brings a whole new list of necessary Real Estate Equipment - warm coat, boots for unshoveled walks, flash light. This sounds odd but with many of the available homes being REOs (bank owned) they will be cold and dark. Even in the day a boarded up home needs additional light. I was showing homes today in North Minneapolis that were boarded on the first floor, we assumed all the windows were broke but were wrong. They were boarded in order to save the windows - we are really living thru an odd time.

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chart provided by National Association of REALTORS®

A BPO is a Brokers Price Opinion, the bank depends on other agents to help determine the price and they really use these to decide if they should accept an offer or if the offer is too low. We can’t drop the price below the BPO value or we will not be able to have the mortgage company accept the offer.The nice thing is that Country Wide and some of the other mortgage companies will tell me the value the BPO comes in at. Usually they don’t order one until they have an offer or they are trying to do a work-out with you. 

The BPO value is determined by other “distressed” sales and active listings in the area over the past 90 days. Personally I complete about 6 BPOs a month for properties that are headed for foreclosure so I am very aware of how the value is determined.

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When you purchase a foreclosed property expect to see language in the final counter from the bank/owner of the home that addresses “should the closing be delayed”. The language will then spell out that if the closing is delayed due to a seller related issue that the buyer has no recourse. However if the closing is delayed due to the buyer or buyer’s financing the buyer shall pay the seller a specific dollar amount per day. This dollar amount does vary depending on the value of the home. The most common amount is $100 per day, including weekends. As a buyer be proactive in dealing with your lender and make sure they are not waiting for just one more thing that you could possibly help provide. A good example of this is if the lender needs a landlord statement of rent history, the buyer does not want to be charge for this delay and maybe able to prompt the landlord to sign the form in a timely manner.

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