New Appraisal Regulations: here’s what you need to know.

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This industry is constantly in flux.  Regulation changes from the Government or Lenders are never far away.  Keeping on top of these changes can be a daunting task, making it tricky to determine what will pertain to you and your clients.

Appraisals: As of 2014 (old to some, new to others) there is a new policy in place that allows borrowers a fair chance to review their appraisal before closing.  Unfortunately, this can also cause quite a headache.  Here’s how it works and what to plan for.

How it works: The borrower (homeowner or homebuyer) is required to have 3 business days to review their appraisal before closing on the loan.  To account for mailing time, Lenders require 6 business days (3 for mailing and 3 for review).  You cannot close on your loan until this takes place.

Complications: Each of the Lenders we work with have determined this to be based on the final appraisal, so if the appraiser needs to correct a typo or a new construction needs a completion certificate, the wait time will START when the Bank receives this appraisal.  For Home Purchases, this can cause a delay in closing.

Shorten the wait time:  Borrowers can sign a form waiving their rights to the 3 day review period. This will cut the wait time in half as lenders still require the 3 day time to mail.

Bottom line: In most cases, this will not be an issue as long as your Lender has been given enough time to complete the loan and the order for the appraisal is placed immediately.

That being said, there will be times when this will be an issue, most often with new construction and the need for a completion certificate. Knowing this is a potential hurdle beforehand and communicating that to everyone involved in the transaction is a great way to help ease stress for all parties involved and allow everyone to plan for the worst while expecting the best.

-Matt

http://www.mattroyer.com

 

Image courtesy of ddpavumba/FreeDigitalPhotos.net

 

Our Paperwork is wrong: Should we just sign it to close on time?

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Succinctly Put: NO!  Now, let me tell you a story:

“Wally” and I are working to refinance a home he bought on Contract for Deed. He and his wife divorced in 2002 and over five years later, he purchased his current home on Contract for Deed (CD).  When he signed the CD, it listed him and his wife as a married couple.  He asked about it and was told to simply sign it to avoid from having his closing delayed.

If he didn’t sign, he would be stuck trying to find a place to live for 3-4 days as well as juggle scheduling the movers to name a few of the biggest stresses.  So, he goes ahead and signs the form as-is and moves in that afternoon.

Flash forward to present and he is finally at a point to officially move this CD into a mortgage in his own name and own the home outright.  Here’s the rub: A Contract for Deed is a legally filed and binding document. This means that his ex-wife, is now signed into title as his now current wife, giving her full ownership rights to the new home.  HIS EX-WIFE NOW OWNS HALF OF HIS HOUSE!

In an amiable situation like this one, this can be resolved by having her sign a Quit Claim Deed that relinquishes her ownership rights.  Fortunately for Wally, She was willing to sign a QCD.  If she hadn’t, Wally would have a potential legal battle on his hands and I’m sure the topic of ‘Fraud’ would be brought up as well for knowingly signing a document he knew was not accurate.

Simply put, making moving arrangements or postponing them can be a huge hassle, but if there is something incorrect on your final mortgage documents, you need to take a step back and consider the long term issues that can end up being much more damaging.

-Matt

 

Image courtesy of phanlop88 / FreeDigitalPhotos.net

Communication: Have it your way!

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I can’t remember which food chain used the “Have it your way” tagline.  However I do think it’s a quick and simple reminder for myself to work with clients the way they prefer to communicate.

An old friend of mine has purchased two homes over the past decade.  The second one coming this past year for him, his wife and new daughter as they made the shift from Fargo, ND to the St. Paul area.  There’s nothing special or significant about those details.  The part that is significant is that in both cases, we never once spoke.

With “Bart’s” job, he spends a lot of time in front of the computer and when he’s done with work for the day, we’re both knee deep in parenting. Something we both place a very high priority on. With the nature of his job and our evening schedules, it made sense for both of us to communicate by email.  I do spend a lot of time sending emails to almost all of my clients, but that usually coincides with personal visits or phone calls for a good portion of the process.  The emails tend to be a supplemental communication system.

With Bart, not 1 phone call…not one word spoken. We went from start to finish and finally spoke face to face at the closing.  It was great to see him again and spend the closing looking through the pictures of his budding family while he signed the final paperwork.

Oh, right.  My point.  I guess we can stop the rambling and move to that. Some clients live by email, some live by phone, some live by text and in any given scenario, using only one of these is never ideal.  The goal is to cater to your client in the best way possible and communicate with them on their terms.  When you find the right mix, it’s unforgettable for both you and your client.

With his permission, here’s a quote from our final email before the closing:  “Thank you so much on getting me the deal you did. Isn’t trust a wonderful thing? We had just about the whole thing done before even having a phone conversation.”

-Matt

Image courtesy of sippakorn/ FreeDigitalPhotos.net

How do you handle your mistakes?

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Image courtesy of Grant Cochrane/ FreeDigitalPhotos.net

Savor your mistakes, let them shape you.

I’ve been thinking about my Dad the past couple days, most likely because my parents just watched our kids for a weekend. As my thoughts drifted from how fortunate I’ve been to grow up in a loving family it also made me realize that it isn’t the happiest of times that I’m going to remember as the years pass.  Sure, I’ll remember those too but I’m more drawn toward the ‘tough’ love times and how they shaped who I am.  The times where my normally gentle and lighthearted father was overwhelmed with frustration and anger.  It’s those moments that resonated years later and took a foothold in my mind, leading me to shape how I wanted to act as an adult.

In the big scheme of things, how I conduct myself both personally and professionally and my views on life were directly affected by the mistakes of my youth and how I moved on from them.

As I continue in my profession for the 14th year I have realized something as well.  The professional mistakes, just like those teenage acts of lunacy are the moments that irk me.  I cringe when I think about something I’ve done that is stupid, overlooked or simply lacked forethought.

It may sound crazy, but I am thankful for these moments and love that they make me feel regretful. This emotion has been a great driver to help perfect my profession.  In anything we spend time on, it should be worthwhile.  In order to be worthwhile personally, I want to do everything in my power to improve day after day and with each interaction.  If things always go smooth, there would be no catalyst to change or grow.  I love taking a break like anyone else and simply enjoy doing nothing.  Some of my favorite moments are exactly that!

My love of doing nothing helps me keep a running thought in my head. “If I choose to put energy into this, I want to give it 100%”  When I work towards 100%, that includes improving.  Thank goodness I’ve made enough mistakes to understand, there is always something more to work on.

I’ll never be perfect, but I can certainly try.

Bad Appraisal? Here are a few options.

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A few months back I was referred a client “Jim” and his wife.  They had recently had their loan declined with a larger bank because of a low appraisal value.  This left them frustrated for a few reasons. First, they were sure their home was worth more than the value they were given and second, they felt frustrated that they had just spent $400 to have this appraisal and had no way to fight the value.

What does one do in this situation? It can feel like you’ve been ripped off and now are no better off than when you stated the process. Well, there are two choices and neither come with guarantees. In the off chance, this happens to a client of mine here’s what we do:

1. Appeal the appraisal.  Most lenders have some sore of appeal or review process in place, allowing you, the borrower and/or a Realtor to show why they feel the value is inappropriate.  The best way to do this is to find comparable homes that have sold more recently or closer to the home than the homes used in the appraisal. This most likely won’t get you the higher value you are looking for but will offer some peace of mind with an explanation for what was used to determine the value and why.

2. Take your chances with a new Lender.  Now this one, I rarely, if ever advise. The odds are not in your favor to have an appraisal come in higher.  The quality control process now leaves a lot to be desired, but overall values tend to be fairly consistent.

When Jim and I talked about his situation, we realized two things very quickly.  First, the other Lender did not offer an option to appeal the value and two, the loan officer that he was working with lacked the ability to think critically about this situation.  In fact, with the appraised value Jim had gotten, he could complete his refinance by moving into an FHA refinance program instead of the conventional program he was told to pursue.  Most loan officers are aware of the higher loan to value (or percentage of homes value that can be lended) with this program.  Jim just had bad luck with a poorly educated professional.

Here’s how Jim was able to obtain his refinance. After going over the risks of paying for another appraisal, we decided together that the risk was low for the benefits of the refinance.  The appraisal came back around the same value as the first mortgage, but that was all we needed to combine his first and second mortgages into one new mortgage at a lower interest rate as well as save Jim and his wife over $350 per month.  This gives Jim a lot of room each month to enjoy his new boat and do some Walleye fishing in Detroit Lakes.

Sometimes, the value of the appraisal isn’t the problem, sometimes it’s simply finding the right solution for the facts at hand.

Have a great week!

 

Image courtesy of cooldesign / FreeDigitalPhotos.net

Contract for Deed? Sometimes it’s the most sensible option.

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Image courtesy of phasinphoto, / FreeDigitalPhotos.net

There are many ways to sell a house and for most of them, I highly recommend a licensed Realtor. Every once in a while,  a client of mine will bring up a situation that’s unique.  I enjoy these one off situations because it’s a exercise in creativity as well as a chance to offer direction and education. “Cody and John” were very recently married when I first met them.  They were also expecting their first baby soon and needed to move out of the tiny home that John owned.  Here was the problem: John bought his home at the peak of the market.  Three years later, he owed more than the home was worth and wanted to avoid a Short sale with the bank to protect his credit. Fortunately, Cody had a friend looking to buy a house but couldn’t get approved for a traditional mortgage with her credit history anyway.  This left both sides with an obvious solution: Having Cody’s friend buy the house from John on Contract for Deed. This was when John called me to see how to go about this. I am not an expert on Contract for Deed’s.  My expertise is in Mortgage’s themselves. Fortunately, I have worked with many different professions and situations over the past fourteen years and sent them to a former client of mine who specializes in real estate law.  Scott could walk Cody and John through every portion of the Contract for Deed, ensure they had every legal protection in place that they would need and complete the transaction for them.  This is when I got to do my job and walk them through buying a new home for their budding family. Cody, John and their little daughter are happily set in their new home.  I still get to check in with each of them for pictures of their growing daughter and share parenting stories. It sounds like #2 won’t be too far off either… Have a great week!   -Matt

Buying a home: The first and most important question to ask.

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Like many clients I work with ‘Barbara’ wanted more than anything to be a homeowner.  She had taken the time to save up a down payment and like many home shoppers, had started window shopping online in her spare time.

When I first spoke with her, she had a pre-approval from a large bank stating what price home she could buy.  The question posed to me was what interest rate she could get and what the closing costs would be for the type of home she was shopping for.  Important information that I was happy to provide.

I had one question for her: How much are you comfortable paying each month for a mortgage? I ask every home buyer this question before providing a pre-approval for a few reasons.

1. Your Budget is important!  Home ownership comes with many expenses that renters aren’t accustomed to.  Water bills, trash bills, higher energy bills.  Recognizing these costs before buying will keep your budget in line and avoid any potential of being ‘house poor.’

2. Online Calculators don’t give you the full information. Many leave out Mortgage Insurance (required in most cases if you have less than a 20% down payment) as well as not estimating property taxes or homeowners insurance.  This can lead to searching for a home that is really out of your comfort range.

3. Once we know this number, we can tailor the home search and mortgage process to meet your individual needs.  This process is fluid and based in communication between you and your mortgage professional.

Barbara spent the greater part of year finding the house that fit her budget and her needs, we traded emails back and forth any time she had a question or wanted to know the exact payment of a property near the top of her budget and once we closed on her new home, the smile on her face was worth $3 Million Dollars. Our hard work and cooperation paid off by getting her a home that not only gave her everything she wanted but would keep her from worrying about making a payment each month!

I live to hear “I love my house!”

 

-Matt

Short sale? When can I buy another house?

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Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Over the last several years, especially in the wake of what I like to term as the foreclosure crisis, many homeowners found themselves in a situation where selling their house for less than they owed on the mortgage was the only option.

This is commonly referred to as a short sale and this will show on your credit report. When Julie (name changed) was referred to me from her Realtor, she had been told so many different waiting periods before she could buy that she didn’t know what to believe anymore.  I’ll agree with her, it can be confusing.

The time frame varies between programs, anywhere from no waiting period to 7 years!  Julie was told that she would need to wait 3 years. In her case this was wrong and she moved into her new home less than one year after her short sale.

Here’s why:  FHA, Conventional and VA programs all have different requirements.  Julie was able to take advantage of the FHA program that allows immediate purchase of a new home as long as the mortgage on the prior home that was sold has a payment history that was on time for the prior 12 months.

Here are the programs and their timelines as of today:

Conventional:

  1. 7 years with a down payment <10%
  2. 4 years with 10% down.
  3. 2 years with 20% down.

FHA:

  1. 3 years if the prior mortgage had any late payments.
  2. No wait if the prior mortgage was paid on time and the borrower can show specific hardship reasons for the short sale.

VA:

  1. 2 years in most cases.
  2. No wait if the prior mortgage was paid on time and the borrower can show specific hardship reasons for the short sale.

As always, talk to a professional to ensure that you meet all the guidelines in addition to this general synopsis. That’s what we are here for, to help you understand and walk through each part of this process!

-Matt

Small town ideals: Where I’m from and who I am.

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I wanted to take a break from some of the client stories I’ve been sharing the past few weeks and share my distant background as I feel it directly shaped how I see the world.

I grew up in Winnebago, MN. The census states a population of 1400 people, I’d guess it’s more accurately under 1000 within the city limits. It’s a tiny town smack dab in the middle of southern Minnesota.  My grandparents still live there and my uncle runs the family business, a plumbing and heating shop over 55 years in the making.

All this to say that I grew up watching and learning how my family ran a business in such a small footprint successfully for so long and it’s taken the last 25 years to process and articulate what became an instinctive part of my personality.

To survive in a small town, it isn’t the flashy marketing that brings business in the door, it’s the individual relationships that you foster each day.  It’s the reciprocity of kindness and help, education and teamwork.  The proverb “It takes a village to raise a child” is the mentality of this town.  A town this small only survives on the premise of each person aspiring to be a part of the whole and pitching where they can to boost everyone up.  You don’t drive 15 miles to Wal-Mart to buy a birthday card when Nancy sells them at the grocery store. You support your friends and family and your town IS your family.

This is the same way I have built my business of 14 years.  By helping my clients succeed, I succeed in kind.  I always use the phrase, my clients are my family. I would do anything to help each and everyone of them whether it’s helping them set up a retirement account with a financial planner or referring other clients to their business.  I also offer advice and ask advice about parenting with my two young kids.

Family communication with a home purchase? Yes, I do that too!

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Image courtesy of jscreationz / FreeDigitalPhotos.net

This past August I was helping a young couple purchase their first home.  It was as simple and straight forward as could be.  Julie’s parents were kind enough to help out with the down payment by giving a gift to the young couple.

The Bank had everything they needed well in advance of closing from Jim and Julie and we had a signed gift letter from Julie’s parents.  There was only one item left for us to issue a final approval and be ready to close.

If you have purchased a home in the past 2-4 years, you may be aware of how much additional documentation is needed from the mortgage applicant these days compared to 5-10 years ago.  Obviously, a first time home buyer would not be aware of how extensive this can be until they enter into the process.  With gift funds, the money needs to be traced from start to finish, meaning we need to show the account the money came from and the account that received the money to coincide with the provided gift letter.  This is where we hit a brief impass.

Julie’s father refused to provide the account statement showing the money leaving the account.  I asked Julie if it would be alright for me to talk to him and explained to him the process and why these provisions had been put in place, he began to understand even though he didn’t agree with it (who does?).  The next big quirk was that he did not want Julie to see his financial account information as he felt it was an invasion of privacy as well.

I came up with a solution to our speed bump after a little thought.  For the same reason, he would not fax the information to me or send it digitally via email because he didn’t trust technological security. What we decide to do was a little cumbersome for Julie but it solved the issue.  We had her father seal the account in an envelope and have Julie hand deliver it so we could bypass the post office, the computer and the fax machine yet still get the information we needed in my hands.

Now, I’ll never be sure what his reasons were and I’m content with the fact that it’s none of my business. What I am content with is that despite an issue that literally could have cost his daughter the ability to buy this house, we found a solution that would calm his concerns and still let me get the required information to the Lender.

Julie and Jim are expecting Twins this spring…I couldn’t imagine them trying to fit the new additions into their apartment.