Lower Buyer Closing Costs with Seller Financing

A recent survey by MortgageIT.com revealed that the average new homeowner paid closing costs in the neighborhood of $3500-$5500. If you could find an alternative means to finance your home and lower these costs, would you jump at it?

Mortgage Closing Costs by State - 2011

Despite today’s low interest rate environment, lower closing costs can provide strong incentive to use creative seller financing alternatives — benefiting both the buyer and the seller.

Closing costs can be difficult to tie down.  As a general rule, cost variables depend on the property location, local custom, type of transaction and/or financing, the parties’ negotiated agreement, time of year, housing market, and even one’s choice of realtor, title company, lender, and escrow agent.

Buyer Closing Costs

For buyers, the deal is the most attractive, which is one reason why owner financing with higher interest rates can prove desirable even in today’s housing market.

Normally an owner financed real estate purchase contract is more of a convenience to the buyer because the property doesn’t have to go through the appraisal process or be subject to the fees of a traditional lender.

Fees buyers may typically avoid with seller-financed contracts include:

• Credit report — up to $50
• Appraisal — $200-475
• Inspection — $150 – $500
• Mortgage Broker Origination Fee — $300 up to 2% of amount of loan
• Lender’s Fee — varies greatly, from $125 – $600
• Overhead Fees — $50 to several hundred dollars
• Loan Origination Fee (“Points”) — typically between 0.5%-2% of loan
• Lender’s Title Fee —$300 and up

To protect yourself as a home buyer, it’s still advisable for the to take some of the same safeguards as a bank, such as paying for an appraisal to ensure the purchase price reflects the value of the property.

It’s optional, but in the buyers best interest to always have an inspection made to check for structural damage whether you are buying with a traditional mortgage or owner financing.

Seller Closing Costs

For the seller, financing the purchase doesn’t provide the same savings in closing costs as for the buyer, but the deal can serve to attract more prospective home buyers than normal in this current housing market.

In most cases, owner-financed contracts give sellers the ability to charge higher interest rates, and this extra yield on mortgage payments may help compensate for any closing costs incurred at the time of the sale.

Fees sellers may typically incur with seller-financed contracts include:

• Excise tax on $100,000 (@1.78%) — $1,780
• Document recording fees — $20 and up
• Escrow or attorney fee — $300 – $600; higher in larger metropolitan areas
• Open collection escrow account — $64 – $100 set up fee
• Ongoing escrow collection fees — $2-8 per month

Often sellers are willing to carry financing for the contract, but don’t want to get into the business of collecting payments.  That’s why it’s common for sellers to open a collection escrow account to which payments are mailed.  This in turn provides interest and payment reports to both parties, as well as transferring the deed and paperwork to the buyer for recording.

A collection escrow account also sets up a procedural process in case you need to show proof that the buyer has been in default.

Perks for Both Parties

While the seller bears the brunt of closing costs, he does gain quite a few advantages. An Owner-financed real estate contract offers three attractive features:

1. Creative financing makes the deal happen.
2. Provides seller a higher rate of return for his cash than other safe investments.
3. Allows the seller to sell the property for asking price.

The seller-financed transaction is even better for the buyer. He may have to put down a significantly higher downpayment and pay somewhat higher interest rates, but saving money on closing costs can provide a powerful incentive for home buyers who may not normally qualify for a mortgage with a traditional lender.

If you are considering selling your home with owner financing, let us show you how to think outside of the box and get your home sold for more money and faster than most other homes.  Fill out the contact form below to arrange a free consultation.

THIS WINSTON-SALEM HOME IS READY TO MOVE IN & CONVENIENT TO SHOPPING

This beautiful home in Winston-Salem has been recently updated and ready to move in.  New features include KITCHEN CABINETS, FLOOR COVERINGS (TILE, LAMINATE, CARPET, VINYL), PAINT, LIGHT FIXTURES, HVAC, and BONUS ROOM in the basement.  It has THREE BEDROOMS, TWO AND A HALF BATHS, LIVING ROOM, DINING ROOM, and BONUS ROOM.  The living room has a FIREPLACE and LAMINATE FLOORING.  The KITCHEN has NEW CABINETS and TILE FLOOR.  The MASTER BEDROOM has a CATHEDRAL CEILING and FRESH PAINT and NEW CARPET.  It’s only 1.5 minutes from Wal-Mart, Lowes Hardware (off South Peters Creek) and many restaurants and less than 10 minutes to Downtown Winston-Salem, NC.  This home also has a single car garage in the basement, a nice size back yard (partially fenced), and comes with a ONE YEAR WARRANTY for peace of mind.  Call or text Tony at 336.287.4423 for more info.

The Winston-Salem real estate market continues to improve as existing home sales were up in November, 2011. This was the fifth consecutive month that sales were up over the same month last year. 346 homes sold during November which was up 9% from a year ago. Home sales were also slightly up from October.

The increase in sales is obviously a good sign for the local housing market, however the average sales price is slightly lower. The average sales price for the month was $151,000 versus $164,000 for November, 2010.

Pricing has seemed to stabilize over the last several months, but the number of foreclosure properties continues to hold prices down. There are currently almost 500 bank owned properties in Forsyth County (NC). With lower prices and near record low interest rates, buyers are taking advantage of the current market.

With average home sales for December, the Winston-Salem area housing market will have it’s best sales year since 2008. There were 4522 houses sold in 2009 and 4560 homes sold in 2010. Through November, there have been 4266 houses sold. It looks like there will be over 4600 units sold in 2011. With these numbers, it appears the real estate market is slowly making a comeback. This should give sellers and real estate agents something to look forward to in 2012.

If you’re thinking about selling your home in the Winston-Salem, Clemmons or Lewisville area, be sure to check out our Digital Marketing Strategy that gets your home SOLD!

The Winston-Salem Regional Board of Realtors recently reported that October 2011 home sales were up 11% compared with the same month last year.  That’s six consecutive months of growth over the same period for 2010.  I believe that is a great sign for our local real estate market.

WSRAR Board chief executive, Glenn Cobb, was quoted saying “Pending home sales indicate that 2011 will be the best total units sold in our market since 2008.  There were 4,522 units sold in 2009 and 4,560 units sold in 2010. Below-average sales in November and December would still cause total sales for the year to be over 4,600.”

He also said the data suggests that existing-home sales hit bottom in the Forsyth County area in 2009, with a small improvement in 2010 and additional growth in 2011.

The average sales price dropped slightly by 5.3 percent to $151,534 in October compared with $160,000 in October 2010. The average sales price in September was $158,700.

If you are wondering what your home might sell for in today’s market, be sure to click the “What’s My Home Worth” image on the right sidebar, and I will provide you with our “cyber market analysis”.

The National Association of Realtors® released their latest housing market statistics for October, 2011 yesterday.  Lawrence Yun, NAR chief economist, said the market has been fairly steady but at a lower than desired level.  He reported that existing-home sales improved in October while the number of homes on the market continued to decline.

Total existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 1.4 percent to a seasonally adjusted annual rate of 4.97 million in October from a downwardly revised 4.90 million in September, and are 13.5 percent above the 4.38 million unit level in October 2010.

All-cash sales accounted for 29 percent of purchases in October, little changed from 30 percent in September and 29 percent in October 2010; investors make up the bulk of cash transactions.

Investors purchased 18 percent of homes in October, compared with 19 percent in September and 19 percent in October 2010. First-time buyers accounted for 34 percent of transactions in October, up from 32 percent in September; they were 32 percent in October 2010.

Single-family home sales increased 1.6 percent to a seasonally adjusted annual rate of 4.38 million in October from 4.31 million in September, and are 13.8 percent higher than the 3.85 million-unit pace one year ago. The median existing single-family home price was $161,600 in October, which is 5.8 percent below October 2010.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 590,000 in October but are 10.5 percent above the 534,000-unit level in October 2010. The median existing condo price⁵ was $160,300 in October, down 1.5 percent from a year ago.

In the South, existing-home sales increased 2.1 percent to an annual level of 1.94 million in October and are 14.1 percent above a year ago. The median price in the South was $145,700, down 1.6 percent from October 2010.

Read the entire report at the link below.

October 2011 Housing Market Statistics by the National Association of Realtors®

Guidelines to Refinance Your Under Water Mortgage in Winston-Salem Using HARP 2.0

Here are the links to the HARP 2.0 Mortgage Refinancing guidelines released recently.

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/sel1112.pdf
http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1122.pdf

In short, here are the changes these guidelines describe:

- Starting December 1, 2011 authorized lenders may begin the loan application process for Winston-Salem Triad area borrowers who have Fannie/Freddie mortgages with a current loan to value greater than 125% (you have an under water mortgage; owe more than your home is worth, etc.).  HOWEVER those HARP 2.0 loans cannot be approved until March 2012 at the soonest because the Fannie/Freddie approval software will not be updated until then. So the soonest a HARP 2.0 loan with an LTV of more than 125% could actually close is probably April of 2012. (Better late than never I guess)

- For Freddie Mac loans, if the first mortgage is less than 80% of the value the home the first and second mortgage combined cannot be more than 105% of the current value of the home. (There will probably be price breaks for these loans though).

- There is apparently no change to the eligibility dates so people who got their current Fannie/Freddie loan after May of 2009 appear to not be eligible for HARP 2.0 still.

- There is no mention of changes to the mortgage insurance rules. The official guidelines of HARP 1.0 allowed for MI to transfer already but we do not know of any authorized lenders or MI companies that allowed that. We will have to wait and see if there is more incentive for lenders and MI companies to allow it with the new program.

The other questions yet to be answered over the coming months are:

1. How many authorized lenders will participate in the HARP 2.0 program? There are no requirements for lenders to participate.
2. What will the pricing be for these high LTV HARP 2.0 loan? (Probably significantly worse than loans with lower LTV’s)

These guidelines shed some light on the new program, however there are a lot of questions still to be answered for Winston-Salem Triad area homeowners who have underwater mortgages.

Major Changes To The HARP Government Refinance Program Announced

The new HARP government upside down/underwater mortgage refinance program will help some home owners in the Winston-Salem, Clemmons, Lewisville, Kernersville, Advance, and Piedmont Triad areas who want to keep their home and lower their interest rate and mortgage payment.

What is HARP?  Well, it’s an instrument, but in this post we’re talking about the Home Affordable Refinance Program.  You may have heard it called DU REFI Plus or Access Relief loan….or HARP 2.0 or the Obama refinance.   No matter what you call it, it’s meant to help home owners who have NOT fallen behind on their mortgage payments, and their home is worth less than what they owe on their mortgage.

The purpose of the revised or new HARP program is to help people who’s home values have dropped like a ton of bricks take advantage of today’s lower interest rates.    The problem with the old HARP refinance program was it had a loan-to-value cap of 125%, many lenders limited it to 105%, and other lenders wouldn’t participate in the program at all.

The anticipated changes to the Home Affordable Refinance Program (HARP) were announced recently. The updates include several but not all of the changes most borrowers have been hoping for.  Among the changes are the following:

Well, Thanksgiving is less than a week away.  Can you believe that?!?   I love pumpkin pie at Thanksgiving, or any other time for that matter, but sometimes you just want something a little different.  If you haven’t tried Paula Deen’s Pumpkin Gooey Butter Cake, you must!!!  It’s incredible!!!  (or at least it is when my wife, Kim makes it ) Now, since it’s Paula’s recipe, you know it’s going to have about a pound of butter in it, but no worries.  It’s Thanksgiving!  It’s time to eat all you want to eat and don’t think about the consequences.  But you can only afford to do that once a year, so BEHAVE!  I promise, this one will make your family say “Wow!  That was awesome!”  Enjoy and I hope you all have a HAPPY THANKSGIVING!

Recipe Courtesy of Paula Deen

Based on 169 Reviews

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Modest Volume, Price Gains Projected in Housing Market Next Year By National Association of Realtors Chief Economist

The housing recovery will continue on its slow but steady pace over the next couple of years, NAR Chief Economist Lawrence Yun said recently at the REALTORS® Conference & Expo Economic Issues & Residential Real Estate Business Trends forum.

November 2011 | By Robert Freedman, NAR

 

NAR Chief Economist Lawrence Yun predicted home sales would increase by 4 percent next year and home prices would inch up 2 percent during the Economic Issues & Residential Real Estate Business Trends forum Friday morning. In 2013, he projected sales to pick up another 6 percent and prices to rise another 3 percent.

Home-sales growth has been flat this year, even though it couldn’t be a better time for consumers to buy, because prices are still down—essentially under replacement value—and interest rate are at historical lows. Even employment and wages have been heading up, although both at a modest pace.

Yun characterized today’s market as “strange” because of this disconnect between the good buying conditions and the low sales growth.

Rock-bottom consumer confidence is a big part of the weak market but the hurdles to borrowers imposed by lenders through stringent underwriting requirements are a major issue, too. Lenders are requiring applicants to have credit scores of about 760 for Fannie Mae and Freddie Mac loans, and just under 700 for FHA loans, shrinking potential home sales by about 20 percent.

The stiff requirements come at a time when banks are seeing strong profits and run counter to the Federal Reserve’s efforts to use rock-bottom interest rates to attract borrowers and get the economy moving.

Behind the tough underwriting is a concern among banks about borrowers’ ability to repay loans, but Yun says that risk is low. Rather than continuing to head down, home prices have been stable for the last two years and are poised to head up, which will reduce lending risks, lower foreclosures, boost sales, and further strengthen the market.

To show that home prices have been stable, he cited both NAR and Case-Shiller data, which show prices have been hovering around a $140,000 national median since 2009.

Yun said it was crucial that the federal government not stymie what little momentum the housing market is seeing by moving forward with a proposal to require 20 percent down payments from home buyers or making other destabilizing housing policy shifts (contact your local congressman and senator to tell them “no” on this proposal! – Tony).  It’s also crucial for interest rates to stay low, although if lenders return their underwriting to the sound standards they used before the housing boom, he said, the market could handle higher interest rates.

Richard Peach, senior vice president at the Federal Reserve Board of New York and the other speaker at the session, offered a unique suggestion to improve the housing sector, one that was particularly suitable for Veteran’s Day: help military personnel who served overseas purchase foreclosed homes.

“My idea is to allocate certificates to 2.5 million service members who served in Afghanistan and Iraq that could be used as a downpayment on a foreclosed home in the Fannie or Freddie portfolio,” Peach said (that would be a fantastic program for deserving military service men and women! – Tony)

Reprinted from REALTOR®Magazine November 2011 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2011. All rights reserved.

Moravian Heights Home for Sale in Clemmons, NC

You will enjoy the convenience of Highway 421 and  wonderful Clemmons living at 1526 Oak Creek Court in Moravian Heights.

This home was built in 1988, is about sixteen hundred square feet, is on point two seven of an acre, has three bedrooms, and two and a half bathrooms.  It also has a CATHEDRAL CEILING IN THE LIVING ROOM, a FIREPLACE, LAMINATE WOOD FLOORS, a DINING ROOM, an OFFICE, and a STUDENT STUDY NOOK.

The excellent school zone includes Southwest elementary, Meadowlark Middle, and West Forsyth High School.

The list price is $129,900.  View the virtual tour at www.1526OakCreekCourt.info.  Call or text Tony Green with Exit Realty at 336-287-4423 to find out more about this beautiful home today.  You can search all homes for sale in the Clemmons area at SearchWinstonSalemHomes.com