Written by Peter G. Miller

Whether you’re a buyer or a seller you want to succeed in the realty marketplace. That’s natural and reasonable, but what are the steps you need to triumph?

Negotiations are a complex matter and all transactions are unique. Both sides — buyer and seller — want to feel that the outcome favors them, or at least represents a fair balance of interests. In the usual case there is a bit of bluff, some give-and-take, and neither party gets everything they want.

So how do you develop a strong bargaining position, one which will help you get the most from a transaction? Experience shows there are five basic keys which will determine who wins at the negotiating table.

1. What Does The Market Say?

At various times we’re in a “buyer’s” market, a “seller’s” market, or a market where supply and demand are roughly equal. If possible, you want to be in the market at a time when it favors your position as a buyer or seller.

Because all properties are unique — it is possible to buck general trends and have more leverage than the marketplace would seem to allow. For instance, if you have a property in a desirable neighborhood with few sales, you may be able to get a better deal than elsewhere. Or, if you’re a buyer who can quickly close, that might be an important negotiating chip when dealing with an owner who just got a new job 500 miles away.

2. Who Has Leverage?

If you’re on the front page of the local paper because your business went bust — and the buyer knows it — you have less clout in the bargaining process. Alternatively, if you’re among six buyers clamoring for that one special property, forget about dictating an agreement — the owner can sit back and pick the offer which represents the highest price and best terms.

3. What Are The Details?

A lot of attention in real estate is paid to transaction prices. This surely makes sense, but the key to a good deal may be more complex.

Consider two identical properties that each sell on the same day for $275,000. The houses are the same, the sale prices are the same, but are the deals the same? Maybe not. For instance, one owner may have agreed to paint the property, replace the roof, purchase a new kitchen refrigerator, and pay the first $5,000 of the buyer’s closing costs. The second owner made no concessions.

In this example, the first house was actually sold at discount — the $275,000 purchase price less the value of the roof repairs, closing credit, and other items. If you’re a buyer, this is the deal you want. If you’re a seller, you would prefer to be the second owner and give up nothing.

4. What About Financing?

Real estate transactions involve a trade — houses for money. We know the house is there, but what about financing? There are several factors that impact the money issue:

Has the buyer been pre-qualified or pre-approved by a lender? Meeting with a lender before looking at homes does not usually guarantee that financing is absolutely, unquestionably available — a loan application can be declined because of appraisal problems, title issues, survey findings, and other reasons.

However, buyers who are “pre-qualified” or “pre-approved” (these terms do not have a standard meaning around the country) at least have some idea of their ability to finance a home and know that they are likely to qualify for certain loan programs.

The result is that pre-qualified buyers represent less risk to owners than a purchaser who has never met with a lender. If the seller accepts an offer from a buyer with unknown financial strength, it’s possible that the transaction could fail because the buyer can’t get a loan. Meanwhile, the owner may have lost the opportunity to sell to a qualified buyer.

The lower the interest rate, the larger the pool of potential buyers. More buyers equal more potential demand, good news for sellers.

Alternatively, high rates or even rising rates may drive buyers from the marketplace — and that’s not good for anyone.

It used to be that down payments were a major financing hurdle — but not anymore. For those with good credit, loans with 5 percent down or less are now widely available. In fact, 100 percent financing, mortgages with nothing down, are now being made by conventional lenders. Reduced down payment requirements are good for both buyers and sellers.

5. Who Has Expertise?

Imagine you’re in a fight. The other guy has black belts in 12 martial arts — and you don’t. Who’s going to win?

Brokers have long represented sellers, and now buyer brokerage is entirely common. In a transaction where one side has representation and the other does not, who has the advantage at the bargaining table?

– Copyright © 2010 Realty Times. All Rights Reserved.

Written by Phoebe Chongchua

The Mortgage Bankers Association reported recently that mortgage applications decreased according to their weekly survey (ending 6/18/10). However, some banks are hiring mortgage lenders—a sign that banks are optimistic that requests for housing loans will increase.

J.P. Morgan Chase is planning to hire 1,200 loan officers, according to CNNMoney.com. Christine Holevas, a spokesperson for the bank said, “We may not be inundated with applications tomorrow, but we are confident the need will be there.” Despite any slight downturns, expected increases in the mortgage business are estimated to go from $725 billion in 2010 to $916 billion by 2013, according to the Mortgage Bankers Association.

If you’re looking to get a home loan here are a few things you should consider. If you’re self-employed the rules have changed considerably and not just for mortgages but also personal loans too. Some lending institutions are now requiring self-employed borrowers to provide documentation from assets to income and the documented income is then checked with IRS records. “It used to be nobody checked your IRS records,” says one source in the mortgage industry who agreed to be interviewed about the inside changes but could not be named.

Another big change has to do with what borrowers may have done in the past. “When Fannie Mae and Freddie Mac discover loans where the borrowers misrepresented their income, the agencies are requiring the lenders to repurchase the loan from Fannie Mae and Freddie Mac. In turn the lenders then have the option to go after the borrowers in the form of foreclosure—even if the loan is not delinquent,” says the source. There’s no statute of limitation for fraud. The source says, normally, if the loan is current, they won’t pursue the borrower. One major lending institution hired a company to go through all its stated-income loans looking to see if there was fraud. “At first they started with all the delinquent loans and then they moved into performing loans. Then they started requiring lenders to buy back all these loans which put lenders out of business. That closed down some shops,” the industry expert told me.

The problem that many self-employed borrowers have today is that they need to be able to show that their business is legitimate in order to get the loan. The typical documentation includes, but is not limited to, a Web site, CPA letter, 411 listing, and business license. And if you’re not self-employed, the rules for loans are tight as well—bigger down payments and better documentation are a must. While some lenders will allow as little as 5 percent down, most are looking for more than that. Everything you submit to a lender is now being double-checked.

Doing your part to make sure that your finances are in order prior to applying for a loan ensures a smoother process. Here are just a few helpful tips:

1. Make no major purchases such as a car prior to applying for a loan

2. Have complete documentation of your income

3. Check and clean up your credit before attempting to borrow

4. Reduce the number of outstanding credit options: close unused credit cards

5. Remain current on all your loans

For more information on protecting yourself when applying for a loan, read our article: Don’t Get Caught In Mortgage Fraud.

– Copyright © 2010 Realty Times. All Rights Reserved.

Written by Phoebe Chongchua

Mortgage fraud is among the top concerns of those investing in real estate. If you get caught in a mortgage fraud scheme it can create a financially painful and emotionally distressing situation. While there are many reputable and trustworthy mortgage providers, the lengthy documents filled with legal jargon make conditions ripe for misunderstandings. So before you sign, attorneys Jonathan Kurniadi and Jeff Hogue who specialize in real estate lawsuits have this advice to protect you from mortgage fraud or mishaps due to misunderstandings.

1. Read every page of every document.

It sounds like such a trite statement but really this is where many borrowers make their biggest mistake. “Most borrowers feel pressured to quickly sign loan documents, trusting that the content of the loan documents is correct. Also, trusting that the real estate loan professional has completed the loan paperwork in such a manner that the borrowers have agreed to. But there’s no reason to feel pressured for one of the biggest purchases of the borrower’s life,” says this Domestic Battery Kansas Lawyer.

He suggests taking your time to completely review each page, even taking notes on portions of the document that you have questions or concerns. Also, check things that might seem obvious. One borrower signed loan documents only to find that the street address was incorrectly printed on every single page of the loan documents — getting them changed became a tedious process and required the resigning of all the loan documents.

Kurniadi says borrowers should not feel they have to sign the loan documents. He says always be prepared to walk away if it doesn’t feel comfortable. He also says non-profit HUD approved community housing counselor agencies can help review the loan application and documents. “That’s probably the quickest, cheapest, and most efficient source to have loan documents reviewed,” says Kurniadi.

2. Sign documents only after seeing that the original and the copy contain the same contents. Be sure to get your copy.

“Some borrowers do not realize that they are entitled to a copy of their loan documents. And most borrowers forget that receiving a copy is useless if they don’t make sure the contents of the original and the copy are the same before they sign the loan paperwork,” explains Kurniadi.

He says borrowers must be certain they are comparing the documents before they sign because what can happen is “The borrowers will trust that the contents of the documents are the same as the originals (that they signed),” says Kurniadi. However, if the copy of documents the borrowers receive is not the same, Kurniadi says the original documents are what obligate the borrowers not the copies.

3. Make sure there is no false or even slightly fibbed information on your loan paperwork.

It’s just not worth it to falsify information in order to push your loan through.

“Any real estate or loan professional who advises you to provide any false information on loan paperwork is putting you at risk,” cautions Kurniadi. Jeff Hogue from Hogue and Belong adds, “There is no valid reason to provide false information on the loan paperwork, and most borrowers do not realize that signing a loan application is confirming its contents are true and correct under penalty of perjury.”

And Hogue says, “If your loan broker tells you that ‘everybody does it’ or that ‘it is legal and customary’ to fib on how much you make, ask him to put that in writing for you.” You can bet that won’t be happen!

4. Check the license background of your broker.

Taking the time to review the background of your real estate agent and broker can prove to be invaluable. Make sure you do this before you ever provide any personal information or sign loan documents. Finding out if there is any pending litigation or complaints will help you decide if they are the best people to do business with.

5. Ask how much your mortgage broker is earning on your loan transactions.

Hogue says that, “Often times, this is not disclosed. It is important information because sometimes the percentage of the loan broker’s compensation will correspond to what interest rate you will pay on your loan.”

As the adage goes, better safe than sorry — read your paperwork, tedious as it may be, ask questions, and give yourself time to understand it all. You’ll be glad you did.

– Copyright © 2010 Realty Times. All Rights Reserved.

Written by Broderick Perkins

In March, ING Direct bank commissioned Harris Interactive to conduct an online survey of 1,042 parents of children age 17 years and younger.

The survey discovered more than half, 56 percent, of those surveyed thought bouncing a check or paying a fee for having non-sufficient funds in their bank account would reduce their credit scores.

Wrong.

Credit reports typically don’t include information about checking and debit accounts, nor non-sufficient fund issues unless they somehow impact an attached credit account.

Also one in five (21 percent) thought checking their credit scores would hurt credit scores. Nearly as many (18 percent) thought accessing their credit report, would hurt their credit scores.

Wrong and wrong.

Obtaining your credit report and credit score has no bearing on your credit standing.

In fact, you should check your credit reports regularly. Every year, federal regulations allow you three free credit reports (ONLY through AnnualCreditReport.com), one each from the three credit reporting agencies, Equifax, Experian and TransUnion.

If you visit some other sound-alike, come-on web site, instead of AnnualCreditReport.com, expect to pay for credit services you may not need in exchange for that so-called “free” report.

From AnnualCreditReport.com, get the three free reports all at once if you haven’t seen them for years. Otherwise get one from a different company every four months to regularly monitor your credit report for errors, identity theft, black marks you may need to work on and other issues.

For your credit score it will cost you a nominal fee (it’s worth it) paid to each of the three credit reporting agencies.

A credit score — virtually always examined by lenders when you apply for a mortgage, credit card, car loan, other credit, even homeowners insurance and other financial accounts — is a numerical rendition of your creditworthiness.

Scores range from about 300 to about 850. The higher the number the more likely you are to get credit and the more likely you are to get cheap credit. Your score should be at 760 or above to land the best interest rate, according to FICO, a leading credit scoring system provider.

Debunking the myths

To help debunk credit score myths, misunderstandings, misdirection and to stop financial behaviors that could be passed onto future generations, ING Direct and Experian developed five tips to help parents separate fact from fiction.

Practice what you preach. Simple financial behaviors such as paying your bills on time will keep your credit in good standing and will allow you to obtain better interest rates on big asset purchases like a house or car. Lead by example.

Start early. When you kids start to ask you to buy things for them, it’s time for the “money talk.” Later, introduce more complex credit topics with stern statements like “credit is not free money.” Talk about interest rates, paying on time, paying off balances and saving money.

Make credit a family affair. Let children in on household financial discussions that reveal the true cost of necessities. Sit them at the table during budget and bill paying sessions. Explain the fallout from making poor financial decisions.

Set family financial goals. Teach children how money doesn’t grow on trees. Show them how to save for things they desire rather than accessing credit to spend money they do not have. It’s a way to encourage your children to set financial goals and work towards achieving them. Children savor things more when they put in the time and effort to purchase items with their hard earned cash.

Explain the difference. Talk to children about the differences between needs versus wants, especially at times when they want you to give into impulse buying. During grocery store visits, show kids the difference in prices between name brands and generic brands as a way to expand on this lesson.

– Copyright © 2010 Realty Times. All Rights Reserved.

Selected Rates as of July 1, 2010:

• 30 yr fixed: 4.58%
• 15 yr. fixed: 4.04%
• 1 yr. adj: 3.80%

– Copyright © 2010 Realty Times. All Rights Reserved.