Mortgage Interest Rates are a Gift - Accept It!

The Wall Street Journal announced on July 16 that the mortgage rate for a 15-year loan clocked in at 4.06%. Rates for a 30-year loan were quoted as 4.57%.

I don't have to tell anyone how incredible these rates are. Anyone who is still hesitating on making a home purchase, please consider that these rates will make any home purchase far more affordable than it is likely to be anytime in the future.

I personally remember mortgage rates being at 18% way back when. Time were tough back then for buyers AND sellers. Now? The buyers are in a terrific position with home prices being low, coupled with historically low mortgage rates. Sellers are perhaps not so happy with the price they are getting, but at least they stand a good chance of finding a buyer who can truly afford to purchase their home, given the selling prices and the mortgage rates. Buyers and sellers, rejoice!

Appraisers - Why You Need to Be Concerned

Time was when appraisers magically appeared at a home that was under contract to sell, wrote up a report that usually had the appraised value match the contract amount, and the deal closed. Everybody went home happy.

But not so much any more. And with good reason.

With the mortgage melt-down last year, scrutiny was focused on every step of the selling process. The appraisal system was deemed inaccurate at best, and perhaps knowingly inept or frequently "fudged" at worst. So how does this appraisal thing happen anyway, and what does it mean to the seller and the buyer?

To keep it brief, when a buyer applies for a mortgage, the lender orders an appraisal to be done. The lender needs to know the true market value of the property, so that the lender is comfortable giving the buyer a loan on that property. It used to be that the lender could call on any appraisal company he chose to do the appraisal, giving the lender a healthy amount of control over the appraisal process. At least the lender had knowledge of the appraiser's work, work ethic, areas of real estate market experience, etc. But with the mortgage industry debacle came new rulings on how appraisers were to be selected for a property under contract. Suddenly the lenders had no ability to select the appraiser. Appraisers were being doled out to do jobs from a central control processor. And the lender was strictly forbidden in having any conversation with the appraiser assigned to a file, and forbidden in doing anything that looked like an attempt to influence the appraiser's report. The results were immediately disastrous. Legitimately disastrous. Appraisers who had no familiarity with a community or neighborhood or condo building were writing reports that mocked the meaning of the word "accurate." Transactions were falling apart because of it.

The real estate and mortgage community put up the cry - Fix This! And the pendulum has swung back the other direction somewhat. But we still hold our breath when an appraiser's report is delivered, hoping that the results look accurate, given the community, neighborhood and specific condo buildings.

When the appraisal report supports the purchase contract price, the transaction can do forward. If the appraisal states that the purchase price is more than the market value, the lender cannot issue the loan as requested. Depending on the property, the lender might demand more cash from the buyer, or suggest a renegotiated purchase price, lower than the first agreed upon price, to meet the appraisal report. Or the lender might deny the loan altogether.

This is why the buyer and seller must be making their best effort to agree to a selling price that is not over the market price. It will only mean a brick wall to overcome if a mortgage is part of the deal.

The Death of Newspaper House Ads? You Betcha!

("Let's see, how many of these house ads match our price range, and bathroom requirements, and are in our kid's school district, have lots of inside pictures of the house, and can be ready without a magnifying glass?") ANSWER: NONE

A common point of discussion at my office sales meetings over the past couple years is the usefulness of local newspaper ads for our property listings and open house announcements.

The debate is this: some agents feel that the local newspaper ads are absolutely necessary to maintain a presence in the local real estate market and the consumers' minds. The managing broker (our boss) and the real estate company (Baird & Warner) are making decisions that are shifting our advertising resources AWAY from print newspapers and INTO the internet.

The reality is indisputable; most buyers start their home search on the internet. Most buyers have already done much research into a home search ONLINE before they set foot in an open house, let alone contact a real estate agent. And the demise of the traditional newspaper is either on the horizon for some papers, or already here for others. And for those that are still functioning, their size and volume of advertising is dramatically down. Our local weekly paper, published by the Pioneer Press, has shrunk to a mere shadow of its former self. Indeed, the Pioneer Press organization has recently SHUT DOWN several of its northwestern community editions! The Chicago Tribune, the historic daily paper, is also unrecognizable to me any more. The world has shifted to online news and advertising. Period.

So, why is this important in the grand scheme of things? Because most sellers of homes still want to see their property in a print ad in a newspaper; they think it makes a difference in finding a buyer. The print ads are very costly, and in fact provide very little results to the seller or his listing agent/broker. Put that same property into the MLS with a full service brokerage, and that property will find its way into dozens of websites that are searched daily by home seekers. If that home seeker sees an online ad for a home that provides the listing agent's contact information, the home seller has just had the best possible exposure - an interested buyer speaking directly with the listing agent.

It's time to let go of the notion that newspaper ads sell homes and tape-playing Walkman's are the best way to take your favorite music with you.