New Homes in Loudoun County, Virginia, Buyer REBATE

LAWS ABOUT THE USE OF CELL PHONES, TEXTING and BROKER LIABILITY.

BE RISK AVERSE.  Folks who know me know that I am very risk averse.  That said, we can't live in a cocoon and we can't eliminate all risk to ourselves or our businesses.  We can, however, take affirmative steps to limit liability. 

This post inspired by June Lewis who wrote a thoughtful article today on this timely subject. 

THE MATTER OF "DISTRACTED RESTRICTIONS" WHEN DRIVING.  This subject came to my attention several years ago.  Granted, it was prior to the introduction of texting.  However, I believe that the risk to real estate brokers when an agent is texting is the same as an agent using a cell phone while on real estate business.

• Cooley Godward, a Virginia-based law firm, was slapped with a $30 million wrongful death suit where an employee of theirs was conducting business on her cell phone when she struck and killed a fifteen-year-old boy with her car.

A good article about this matter can be found at Employers Guide to Cell Phone.

When I read about the Gooley Goodward case in Virginia, I contacted my attorney and, after consultation, we decided that, in order to limit broker liability, which would be similar to the law firm liability in the Cooley case, Homefinders.com would implement a BROKER POLICY to the effect that Independent Contractors who were agents of the brokerage would acknowledge receipt of a NOTICE that it was broker policy that agents would not use cell phones while driving.

Agents signed the acknowledgment letter and it was kept in their employee file. 

I could not control agents' use of their cell phone while driving.  However, implementation of the broker policy served several purposes. 

• It made agents more aware of the dangers of talking on the cell phone while driving.
• It gave some protection to my real estate brokerage and myself as the broker.

WE ARE ALL AN "ACCIDENT ABOUT TO HAPPEN".  To this day, I do not talk on my cell while driving.  Calls go to my 800# and I check messages regularly.  If I make an outgoing call on my cell while in my vehicle, I first pull over to a safe place.  That said, I understand well the pressure for agents to be connected while on the road.  Agents on my network are usually anxious to answer a call from me because they know it's important.  I'm usually calling with a buyer referral.  However, I still would not encourage them to answer a call while driving.  With a "HANDS FREE" device, voice activated agents may have a margin of safety.  However, law enforcement folks claim that simple talking is distracting.  I don't have an answer for that, or anything else for that matter.  I would just like to raise the awareness of the subject for my ActiveRain friends.  When an agent doesn't answer, I assume that they are driving and wait a reasonable time before calling another agent to make the referral. 

"Hey, let's be careful out there."  Sergeant Phil Esterhaus, Hill Street Blues.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

I have an incline (O.K. hill)  behind my home that is perfect for sledding. 

Some folks got all bundled up and headed for my house with their sleds.  No one can drive the driveway to my house, but my neighbor had cleared his and there is parking there. 

UP THE HILL

DOWN THE HILL

The exposure isn't too good because there's still snow coming down. 

Snow accumulation is now about 2.5+ feet but the snowfall has subsided quite a bit.  Unfortunately, the wind has picked up and is predicted with up to 40 m.p.h gusts.  My fingers are crossed.

Courtesy, Lenn Harley, Broker, Homefinders.com 800-711-7988.

OFTEN AMAZED AT THE INGENUITY OF THE HUMAN SPECIES, this morning I amazed myself. 

I was disappointed this a.m. to find that I HAD NO TELEVISION RECEPTION.  It started to go out about 7:00 p.m. last evening.   Not a problem.  However, this morning I wanted to see what the area was like with such a massive snow storm and a snow accumulation of about 2 feet plus and still coming down. 

Now I can be as rugged as anyone when it comes to rough weather and living conditions.  I have tent camped in Yellowstone for weeks at a time in June when it gets down to 25 F. overnight with ice on the picnic table, all to catch a few Cutthroat Trout.  I once hiked a total of 14 miles, 9 miles in and 5 miles out to catch a 6 inch trout in Lake Shoshone.  I'm as tough as anyone.  However, when I'm at home I want my TELEVISION TO WORK. 

NO TELEVISION! . . .   NOW THAT IS A TRUE CATASTROPHE!  

We have a lot of snow, about 2 feet and still snowing in Lovettsville, Virginia. 

The fence in this scene is about 3 feet tall.  It appears that the snow is right up to the top level.

                                               This is my deck.  That's a lot of snow at 7:00 a.m.

I was glad to find my electricity still working this a.m.  I fully expected it to be out and, in fact, still expect to lose electricity as soon as that branch on the tree across the road, laden with snow , to break off and fall on the line with expected results.  It wouldn't be the first time, but, so far so good.  When I realized that the television was out this a.m., I figured it would be that way until the snow stopped and the dish could get a signal.  However, a light went on in my brain!  Something told me this morning that perhaps all that snow on the dish could be part of the problem.  At least it was worth a try. 

Fortunately, the DirectTV dish is right outside one of the windows in my sunroom.  So, after opening the window, taking the screen out, I could access the dish easily.  Now what to do??  The dish is covered with packed snow, a good 6-8 inch layer all over it.  I needed a tool to remove the snow.  I wasn't really thinking high tech.  I just wanted to get the snow off the dish without doing damage to the dish or the parts that made it work.  I also didn't want to cause it to move.  Why?  I don't really know but it made sense at the time.  When coming into contact with a TV Satellite dish, first do no harm.

EUREKA, I FOUND IT!

SUCCESS!  About the second I brushed the snow off the dish, I could hear the TV in the Family Room. 

So far, this is a mighty storm.  However, with my electricity still on and the TV and computer working,

I CAN ROUGH IT!

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988. 

Well, I just gained a higher respect for the weather professionals.  They predicted that snow would begin in MD and VA at about 10:00 a.m.

The snow began at 10:00 a.m. 

That's almost scary.  It's like they "turned the switch".

Fortunately, in Loudoun County, VA, VDOT does a good job of clearing the highways and local roads where my house is located.  Lovettsville is lovely in the snow.  It's equally lovely in the spring, summer and fall.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

A LOUDOUN COUNTY REAL ESTATE AGENT FOR LOUDOUN COUNTY HOME BUYERS.

To search homes for sale in Loudoun County, visit the Homefinders.com "Search Listings" site.  Enjoy your search and contact us to visit new or resale homes for sale in Loudoun County, Virginia.  Ask about the Homefinders.com New Home Buyers' REBATE.  1% cash back to you when you work with Lenn to find and buy a new home in Loudoun County.  We know Loudoun County homes.  We can help.

Lenn Harley, Broker, New Homes Specialist, Homefinders.com, 800-711-7988. 

THE FINANCING CONTINGENCY OF A CONTRACT CAN BE PLAYED LIKE A STRADIVARIUS!

The FINANCING CONTINGENCY can make or break a Contract of Sale.  Read it carefully.

You may just have to eat that mortgage rate!? Make it a tasty one. by Alan May is loaded with great information for agents.  Alan writes about the fnancing contingency with a focus and good tip about owner financing.

THE FINANCING CONTINGENCY DOES NOT ALWAYS PROTECT THE BUYER.  I have found by reviewing hundreds of contract prepared by agents that the financing contingency is one of the most neglected and least understood paragraphs in the Contract of Sale.  

Many agents believe that the financing contingency gives the buyer an easy way out of a Contract of Sale simply because the buyer fails to get loan approval.  That's not always accurate.  The financing contingency cannot be exercised if:

• The buyer has misrepresented their financial ability to obtain a mortgage.
• The buyer has misrepresented their funds to close.
• Through actions of the buyer, financing a new vehicle, etc., the credit picture has change and the buyer is no longer qualified.
• The buyer has not cooperated with the loan process.

In all of the above causes of loan denial, the seller has a claim on the Earnest Money Deposit. 

WHAT INTEREST RATE TO PUT IN THE FINANCING CONTINGENCY?  Suppose the buyer has a pre-approval letter than states that the buyer is qualified for a $300,000 loan at 5%.  Would you enter 5% in the financing paragraph? 

YES, if you're the buyer's agent.  Further, you'd cross your fingers and hope the seller accepts the financing contingency with an interest rate of 5%.  Sadly, if the buyer's qualification is marginal and interest rates increase while the loan is in processing and the rate was not locked, they are not likely to get through underwriting.  I pays for buyer's agents to understand the buyer's financial profile and avoid writing on homes in price ranges up to the limit of the buyer's highest qualifying range.  If rates are falling, the risk in minimal.  However, if rates are rising or volatile, the contract is at risk.

However, if you're a listing agent, you'd advise your seller to counter the 5% to a higher rate, perhaps 5.5% or 6%.  Advising a seller to accept a contract with 5% would mean that, if rates went up,the buyer may not be able to close.  If the buyer is only qualified for $300,000 @ 5% and rates go up, the buyer wouldn't be qualified and could exercise the financing contingency. 

THE FINANCING CONTINGENCY CAN ALSO PROTECT THE SELLER.  It only makes sense that, if a seller receives and offer with a price of $300,000 accompanied by a pre-approval letter that has a 5% rate, the listing agent might recommend that the seller counter the interest rate in the contract to 5.5% or 6% or even 6.5% if settlement is more than 45-60 days future.  This is a safe practice for Short Sales.  A careful analysis of the buyer's financial statement is recommended if they are customary in your market.  At the very least, a discussion with the buyer's loan officer to determine if the buyer can qualify at a higher rate protects the seller.

WRITING OR ACCEPTING A CONTRACT for a buyer that is marginally qualified puts the buyer and seller at risk.  When agents understand the intricacies of the financing contingency, neither the buyer, seller nor agents will be faced with a loan denial. 

As mortgage financing becomes more difficult, it's important for Buyer's Agents and Listing Agents to pay close attention to the financing contingency and make sure that the buyer is well qualified.

"The offer is good but the buyer's lender's letter is written to today's interest rate.  If interest rates go up, the buyer could exercise the financing contingency.  I recommend that we counter the interest rate in the contract to 1% higher." 

WHEN DID "REFERRAL" BECOME A DIRTY WORD??

This post inspired by Justin Gramm describing how he feels about the referral fees.

Mr. Gramm doesn't accept referral fees because:  "I just don't feel right asking to be compensated simply for taking an hour to do some research and refer my friend/client to a competent agent in another state."

Unlike Mr. Graham, many agents DO accept referral fees because:

1.  Our experience through the day-to-day practice of real estate brokerage gives us the knowledge to identify agents qualified to serve the buyer's or seller's needs.

2.  We are often well connected to industry professionals through networks like ActiveRain to identify qualified practitioners that match the buyers specific needs.

3.  Agents are more responsive to another agent about their experience and specialties when seeking help for buyers with specialized needs.

4.  When requested by a buyer or seller for an agent referral, the consumer relies on our experience and knowledge to meet an agent that will help them with their specific needs.

5.  Experience and knowledge in real estate brokerage are acquired through practice, training and continuing education.  That knowledge and experience is cumulative and compounds over time to give us the insights to identify good referral agents. 

Even if it takes only an hour to identify a good referral agent, that hour reflects our training, practice and experience.  

Making a quality agent referral has value, surely value equal to or more than some of the other tasks we perform for buyers and sellers. 

Experienced agents and brokers understand that,

WE ARE PAID FOR WHAT WE KNOW, NOT WHAT WE DO. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988. 

"John.  Congratulations on finding your home in New York so quickly.  How did you find your agent?"

"Thanks Sue, the agent who sold our home in Virginia referred us to him.  Yes, he did a wonderful job."

MARYLAND AND NORTHERN VIRGINIA NEW HOME SALES - ARE BUYERS HELPED BY WORKING WITH A BUYER'S AGENT???

"HIRE A BUYER'S AGENT" would seem to make sense.

For new construction, I would say, "Hire a Buyer's Agent with experience selling new homes."

The differences between new and resale properties are significant from the basic Contract of Sale to the contingencies, to financing, to walk-through and settlement. Experience counts when working with new home buyers too. The contract, inspections, closing, etc. for new construction are not at all similar to managing a resale contract.

Was the agent the "procuring cause"?   Builder's practice in MD and Northern Virginia is to pay the broker/agent fee to the agent who accompanies the buyer when they first visit the site. The agent must do nothing but accompany the buyer, get the registration made, sign the "Broker Fee" agreement in the Contract of Sale and sit back and wait for the commission check.

In reality, few real estate agents are even interested in selling to-be-built new homes. They would prefer to sell a resale and close in 30-60 days rather than the 5-10 months needed for new construction. I don't say that as criticism. Simply that few agents actually specialize in new home sales and the income stream is a factor. Which is, of course, why so many agents will show resales, ignore new construction and then are shocked, shocked when the buyer goes into a new home model without their agent and buys a home. That builder owes nothing to the buyer's agent/broker.

Short Sales also introduce a protracted closing and more than a few agents do not represent buyers in Short Sale transaction for the very reason of the delayed closing.

This is a lot more complicated than just considering working with an agent when buying a new home. Working with an agent with new home sales experience is the key.

                                         SOLD BY LENN ROUND HILL, VIRGINIA

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988. Specializing in New Home Sale in Maryland and Northern Virginia.

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A LOUDOUN COUNTY REAL ESTATE AGENT FOR LOUDOUN COUNTY HOME BUYERS.

To search homes for sale in Loudoun County, visit the Homefinders.com "Search Listings"site.  Enjoy your search and contact us to visit new or resale homes for sale in Loudoun County, Virginia.  Ask about the Homefinders.com New Home Buyers' REBATE.  1% cash back to you when you work with Lenn to find and buy a new home in Loudoun County.  We know Loudoun County homes.  We can help.

Lenn Harley, Broker, New Homes Specialist, Homefinders.com, 800-711-7988. 

LIMITS ON MORTGAGE INTEREST DEDUCTION was once a "sacred cow" of tax law.  No more.

The American home owner is square in the sights of the budget released today. 

On October 25, 2008, a bolt of lightening struck me and I realized that there is no income protection safe from the government's zeal to play chess with the American tax payer's assets.

An article published by the Wall Street Journal, back in Oct. 2008, discussed the government's need for cash to fund programs that were being discussed by members of Congress.

These days, the Wall Street Journal discussed the Obama budget's plan to limit ALL deductions for tax payers earning $250,000 or more. 

"But as in last year's budget, Mr. Obama proposed Monday to go further by limiting the value of those benefits, which include deductions for mortgage interest and some charitable contributions. The highest-income earners under current law can lower their taxes by up to 39.6% of those deductions; under Monday's proposal, that would be reduced to 28%". . . . .More.

However, unless I'm missing something, the mortgage interest deduction is the primary interest deduction for home owners.  Credit card interest, auto loan interest deductions have been gone for years.  What's left?? 

• Today, $250,000. 
• Tomorrow, $100,000. 
• 2 years from now?  Who knows?

GOING. . . . GOING . . . . GONE!!!

"SORRY, MR. AND MRS. TAX PAYER, THERE IS NO LONGER A DEDUCTION FOR THE INTEREST YOU'RE PAYING FOR YOUR HOME MORTGAGE."

ONE THING EXPERIENCE TEACHES US IS THAT, JUST BECAUSE A PERSON IN AUTHORITY SAYS SOMETHING, DOESN'T MAKE IT TRUE.

EXAMPLE:  HUD Secretary Donovan, in announcing the details of the changes to FHA financing, states:

"The new policies are designed to strengthen the FHA's capital reserves so we can continue to fulfill our mission of serving underserved communities."

The changes include:

1. Increase the up-front mortgage insurance premium (MIP) to 2.25%;
2. Update credit score and down payment requirements for new borrowers;
3. Reduce seller concessions to three percent, from six percent; and
4. Implement a series of significant measures aimed at increasing lender enforcement. 

1.    Assuming HUD/FHA employs actuaries, the actuaries had to know that, due to increased MIP payouts, the FHA insurance fund was approaching a dangerous level and the MIP needed to be increased.  Why did the request for an increase in MIP wait until the fund was in default???   If the MIP had been brought up to where it was before being reduced to 2.25% or 2.75%, the fund could have been replenished over the past year or two without going into default.

IN 1990, THE UPFRONT MIP WAS, I believe 3.8%.

"o    If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP."

By shifting the upfront MIP (which can be financed) to annual MIP, which adds to each monthly mortgage payment, more home buyers will be disqualified. 

Mr. Donovan states further that:  "In addition, we were determined that these changes should support, not disrupt, the nation's housing market recovery."

2.   It defies logic that proposals to increase the cash needed by home buyers can do anything but disrupt the nation's housing market recovery by reducing the pool of qualified home buyers with money to close.  Higher closing cost will = fewer buyers.   

3.  It doesn't take a Rhodes Scholar to understand that reducing seller concessions from up to 6% to up to $3%, will reduce the buying pool.  For every $100,000 in purchase price, the buyer's cash needs for closing may, depending on the area, increase by 1%.  Further, HUD/FHA is, I believe, infringing on the home seller's right to use their assets as they please.  How the seller uses their equity is, IMO, none of the government's business.  If a buyer requests more than a seller is willing to pay, the real estate industry has a simple process, accept, counter or reject.  The appraisal process is the logical check on inflated value to fund closing cost assistance. 

4.  Lender enforcement.  I am interested in lender comments about proposals for lender enforcement.

Mr. Donovan writes:  "by continuing to provide affordable, responsible mortgage products, FHA will support the housing market's recovery.  Importantly, FHA will remain the largest source of home purchase financing for underserved communities."

The new higher cash requirements will simply drive prospective home buyers out of the market.  Or, make them further reliant on community/county/state programs funded by HUD/FHA designed to provide tax money to further grow government or funnel tax money to politically connected groups.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

"Honey, can't we at least look at homes for sale, our apartment is just to small and expensive".

"Why Dear??  Our lender said the new FHA rules mean we need several $Thousand more to buy".

SHORT SALE MISCONCEPTIONS COULD BE MISSED OPPORTUNITIES FOR AGENTS.

IS KISMET AT WORK IN THE MYSTERIOUS WORLD OF SHORT SALES??

SHORT SALES HERE, SHORT SALES THERE, SHORT SALES EVERYWHERE.  The significant number of short Sale listings and sales these days have led to the misconception on the part of many agents licensed within the past 5 years or so that Short Sales.

Kathy Schowe writes today about a Gentleman who made $1,000,000 in the past years but now wants to sell his home as a Short Sale.

The ubiquity of Short Sales caused by the mortgage mess is unique to the real estate industry.  However, SHORT SALES are not new and agents with some years in the business have likely been through a few of them in the past. 

WHAT'S THE DIFFERENCE NOW??? 

• Value of the property - $300,000.
• Owner owes - $450,000.
• Estimated loss - $150,000. 

That's a $150,000 loss that the owner's mortgagee(s) is expected to take.  Further, the mortgagor, the owner who purchased the property, lived in it for some time fully expects to complete a Short Sale transaction and be left with no liability for the deficiency beyond a reduction in credit score.  A reduction in loss of credit score that will be less than that they would experience with a foreclosure. 

The difference in Short Sales now and in years that predated 2004 or so is that the mortgage company or investor is now expected to take the loss. 

SHORT SALES OCCUR ANY TIME A PROPERTY TRANSFERS AND THE SALES PRICE IS LESS THAN THE OWNER/SELLER OWES ON THE PROPERTY.  Over the years, as a Buyer's Agent, I have represented a number of home buyers who purchased homes whereby the seller owed more than that for which they could sell their home.  In order to complete the sale, the OWNER/SELLER came to the settlement table with money to pay the mortgage company the difference in what the home was selling for and that which they owned.  I've had closings whereby the sellers came to the settlement table with $10,000, $25,000 and one time over $70,000.  It was still a Short Sale. 

Short Sales whereby the banks take the loss are a very recent phenomenon.

The thought of a mortgage company taking a loss on the sale of a property was unlikely and foreclosure was the naxt logical step if the owner/seller didn't have the resources to cover the loss. 

SO, WHY ARE THINGS DIFFERENT NOW???  LENN'S EPIPHANY! 

• On the average, short sales sell for more than the same property after a foreclosure. 
• Short Sales result in better public relations for the bank than a foreclosure.
• Short Sales avoid the lengthily FORBEARANCE offered to owners with government backed loans.

HUD (and VA) FORBEARANCE.  Compare the relative short typical Short Sale transaction of 3-10 months with that of an FHA loan and the HUD forbearance of 1 to 2 years.  With a short sale, the owner often continues to make mortgage payments, albeit perhaps not as timely as before, but the band is offsetting their loss.  With a HUD forbearance, the home owner may not make a payment for 1-2 years before accepting a modification of their loan or the property going to foreclosure.

BANKS THAT FORCE FORECLOSURE OF EVERY PROPERTY IN DEFAULT contribute to the serious decline IN market value of communities.  Market adjustments are often good for an inflated market, but severe declines eventually cost the banks, the home owners and the taxing income of local municipalities.

OPPORTUNITIES FOR LISTING AGENTS.  Before you dismiss that owner as a Short Sale because the bank doesn't accept their HARDEHIP, it is sometimes possible that a seller will pay the difference themselves.  It will surely benefit an owner with the resources to pay the deficiency themselves rather than have a credit report showing a deed in lieu of or foreclosure or even a short sale with the deficiency taken by the bank.  A good credit report is, after all, money in the bank. 

KISMET.  One thing we've learned about financial institutions that take severe losses in the market place is that profits are enjoyed by the financial houses and their investors.  Losses are suffered by the tax payers.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.