Leverage Works

I've mentioned the term "leverage" in several of my previous posts when negotiating the terms of a purchase and sale agreement.

So, what's leverage and how do I get it? Put simply, leverage is the degree of control one party believes it has over the other.

Leverage comes from market conditions but can be affected by one party gaining personal and/or financial information about the other. People have a tendancy to talk...excessively when under stress. Negotiating the purchase or sale of a house is definitely stressful.

My advice: Think twice before volunteering any personal information!

Mortgage Broker Yield-Spread Premium Under Scrutiny

State investigators are taking a hard look at yield-spread premiums, the commissions that lenders pay mortgage brokers for bringing in a borrower.

If you weren't aware, mortgage brokers are "middlemen" who match buyers with a mortgage loan through a lending institution. Mortgage brokers do not have money to lend, lenders do!

The same nationwide task force of prosecutors who in January announced a $325 million settlement with Ameriquest Mortgage Co. for alleged deceptive loan practices is now investigating yield spread premiums. Tom Miller, Iowa's Attorney General, says the investigation is in its early stages, but the practice, which now involves an estimated 60 percent of home loans, is a growing issue. “It may constitute a deceptive practice. Consumers are paying more than the fair market price of their loan,” Miller says. Some in the industry concur that the practice deserves a hard look. "Most players in the industry would agree that it's time to reform the disclosure of the yield spread premium," says Howard B. Glaser, counsel to the National Alliance of Independent Mortgage Bankers.

While we're on the subject of lending, before applying for a mortgage loan you might ask the loan officer: "do you and your company charge overages for your loans?" An overage is the difference between the actual market interest rate versus the interest rate the loan officer charges. Over thirty years even a slightly higher interest rate will cost you thousands of dollars in extra interest. Some lenders play the overage game, some don't.

Just so you know.

Five Questions Sellers Might Be Asked...And Buyers Should Think About Asking

With changes that started in San Diego, CA late in 2004 and blossomed into other highly appreciated real estate markets, selling a home is becoming more difficult these days. As a seller, you may be asked some difficult questions that buyers in tighter markets may not have had the time or inclination to ask.

Here are five questions a seller should think about and be able to answer — just in case you're asked.

• Why are you selling this lovely home? The buyer wants to know just how desperate you are. ANSWER: we decided it's time to move.
• How much did you pay for this house? ANSWER: it's a matter of public record and your REALTOR should know.
• What defects does the home have and have there been any recent professional home inspections? ANSWER: you must be honest and this is why I recommend a pre-listing home inspection then either fix or disclose the findings (the buyer may have an inspection anyway so why waste valuable marketing time and get a suprise three weeks later).
• What problems have you had with this home? ANSWER: in most states, court decisions and statutes do not require home sellers to reveal past problems that have been corrected but if you believe it's in your best interest to disclose then do so but at least have the repair company's paperwork in your homebook.
• What is the quality of the public schools? ANSWER: your REALTOR should contact the school district and put this information in your homebook.

Hey you buyers out there, pay attention! This may help you gain some leverage for your offer.

Tips for Kitsap County Homebuyers

Elizabeth Razzi offers these six observations worth keeping in mind when you're shopping for a home:

• Don't reject a home because of outdated appliances. You can buy new ones for a few thousand dollars--a small investment compared to the total cost of the home.
• Check out the commute during different times of the day and days of the week. What's the traffic pattern to and from. Will different weather patterns make a difference.
• Your REALTOR should present your offer in person. The seller and their agent don't know you but your REALTOR should. Discuss specifically what you want him or her to say.
• Ensure the purchase and sale agreement addresses everything in the house that you want.
• Make sure your purchase and sale agreement contains the necessary contingencies and terms that protect you and provide leverage for your offer and to your benefit.
• Your closing date should occur earlier than your loan "lock" expiration date so you won't have to deal with a higher mortgage interest rate.

The "Lowdown" on Adjustable Rate Mortgages (ARMs)

Should I get a adjustable rate mortgage (ARM) or a fixed-rate conventional mortgage? Good question! Most ARMs have several "special" qualities you should investigate before you sign up.

• Annual cap (limit)
• Lifetime cap
• Adjustment period
• Prepayment penalty
• Frequency of payments
• Window to convert to fixed-rate mortgage

It's not unusual to have an annual cap of 2 percent per year. This is the maximum amount the interest rate can increase (or decrease) during the adjustment period. Lifetime cap is the maximum amount a loan rate can increase throughout the term of the loan. It's not unusual for the lifetime cap to be 6 percent. The adjustment period is the amount of time between rate adjustments. This could be 6 months to annually. Is there a prepayment penalty if you want to make an additional mortgage payment or pay more towards principal in a payment? Are you making monthly payments (12 per year) or do you make a payment every 4 weeks (13 per year)? Finally, can you convert your ARM to a conventional mortgage, when and what is the cost?

You need to compare the annual cost of each mortgage before deciding which makes the most sense. In our current market in Kitsap County with rising interest rates, an ARM may not be the best for you.

If you need help with the financial comparisons, email me or give me a call and I'll be glad to help you.

What's That You Say About Staging Homes in Kitsap County?

Home owners don't have to spend a fortune on decorating to impress potential buyers. Interior decorators say there are many easy and affordable ways to transform a home from dull to dashing.

If you're on a tight budget, here are four decorating ideas that may help boost the "wow" factor of your home, whether you're in the market to sell or not:

• Eliminate those white, white walls, the bolder the better. And don't forget to paint the ceiling. Using this color scheme throughout the remainder of the house makes the rooms look bigger.
• Place a new area rug over an existing carpet or floor. Remnant pieces from carpet or home work just fine. However, don't be offended if buyers or their REALTOR lift the carpet to ensure there is no concealed damage under the throw rug.
• Light up the room. Make sure it shines day and night with lamps, wall lights, hanging fixtures or a combination. Some buyers are impressed when a room contains a ceiling fan with a light.
• Don't underestimate the power of accessories. Votive candles, plants and even colorful switch plates for lights can add a flourish to a plain room.

One feature of my Smart Move marketing program includes a consulation with Nonnie Ranstrom who is an Accredited Staging Professional (ASP). Nonnie's a true "expert" in her field. You can visit Nonnie's website by clicking here.