Big Changes for Home Buyers Coming October 3rd!

Thanks to now-retired U.S. Senators Chris Dodd and Barney Frank, aggravating changes will take effect on October 3rd, 2015 which will make home buying more difficult for those who are obtaining a home loan to make their purchase. Ten things consumers should know:

1. A new closing statement form called the Closing Disclosure or CD will be used for most loan applications taken for new mortgages, effective on October 3, 2015. This replaces the HUD-1 that is in place today. And now, the lender, not the closing agent, may be preparing and delivering the CD.

2. The CD must be delivered to the buyer/consumer at least three business days prior to the scheduled closing date.

3. Closing agent must get information to the lender approximately 10 to 14 days prior to the closing date for completion of CD to meet the delivery requirement. The closing agent must know about ALL buyer paid charges 10 to 14 days prior to the closing date.

4. The closing agent will need the real estate company’s state license number and the individual real estate license number for the new CD.

5. The CD sent to the buyer/consumer won’t include the “seller’s side” of the transaction. The closing agent (not the lender) is responsible for completing and delivering the seller’s side of the CD. The closing agent may decide to prepare a separate CD for the seller.

6. Although responsible for its accuracy, the agent/broker may or may not receive an advance copy of the CD before it’s delivered to the buyer/consumer. The lender will likely send the CD to the closing agent when it’s sent to the buyer/consumer. The settlement agent will not automatically be permitted to send a copy to real estate agents. The agent/broker may have to obtain a copy from the buyer or seller.

7. Changes to the CD after delivery to the buyer/consumer MAY trigger a new three-day waiting period if changes cause the Annual Percentage Rate to be inaccurate, the buyer changes loan product or a prepayment penalty is added. Changes and adjustments affecting the value of the property (as determined by the lender) may trigger additional disclosure and review periods under the Equal Credit Opportunity Act (ECOA) controlling the delivery of the appraisals. Buyers should consider two pre-closing inspections (walk-throughs) in addition to a home inspection.

8. The CD refers to Owner’s Title Insurance as “optional” in some circumstances. Lenders will require a mortgagee policy, but the addition of a simultaneous owner’s policy to protect the buyer’s equity may be optional. Without owner’s insurance, only the lender’s interests are insured. Buyers should obtain appropriate professional advice before before declining this coverage.

9. The new TRID rules may affect the actual contract terms between buyers and sellers. As an example, a closing date to occur within 30 days may no longer be a realistic expectation if a mortgage is involved. The consensus is that an additional 15 days should be added to any otherwise realistic projected closing date.

10. And remember … If a closing date is breached, a seller in a strong seller’s market may very well decide to put a property back on the market rather than sign an extension to further protract the closing. Buyers must understand the urgency in responding to lender requests for information and documentation. Buyers must have past three year’s tax returns, current pay stubs, brokerage and bank account information available at the onset.

Including personal property in the sale of your home

It is not totally uncommon in Destin, South Walton and along 30A for the buyer of a home to express an interest in a piece of furniture, some lawn equipment or perhaps even artwork when negotiating an offer to purchase. Some properties, especially those on a vacation rental program, are commonly offered fully furnished and rental ready. However, one word of caution… Personal property negotiations have destroyed or have come very close to destroying many a real estate transaction!

The real estate sales transaction can be quite complex. You have title issues,  home inspection items, PC&R compliance and acceptance, open permits to be resolved, lender contingencies, appraisal concerns and closing date coordinations, all of which must be orchestrated and resolved to the satisfaction of all parties.

So at long last, after 30 – 45 days, all the stars appear to be in perfect alignment and the closing is scheduled. All players are set, ready for the final act in the play. But wait. The sales contract also specified that the two white chairs remain. Or perhaps the lawn mower was supposed to be included.

Seller: “We did not think you meant the RIDING mower”.

Seller: “We thought you meant the two white chairs on the back porch, not the two white chairs in the living room that Aunt Edna gave us as wedding gift”.

Any time that personal items are to be included in the sale of a home, specifics are crucial. Back it up with photographs to be attached to the offer. Leave no possibility of misunderstanding.

All real estate transactions can and should run smoothly and efficiently. But overlooked details at the onset have the potential to cancel your performance.

So, what IS with the condo market?

Condo sales are down this year, no question. One of the biggest factors is the Dodd-Frank Financial Reform Act which, of the 13,789 pages involved, probably can lay claim to about 100 pages of sane legislation.  Dodd-Frank is a law that was designed to criminalize dumb behavior. It makes the mortgage loan processes so unnecessarily burdensome  that lenders are unable and unwilling to make many sound, safe and conservative loans, lest they run afoul of Dodd-Frank. Both Dodd and Frank have of course personally retired.

Many condos along the Gulf Coast (and elsewhere) are classified and non-warrantable. This means that they cannot be sold to Fannie Mae or Freddie Mac, the largest mortgage purchasers in the nation. Loans on non-warrantable condos are therefore much more limited. With today’s super-cheap long-term interest rates, most purchasers wishing to finance their purchases rather than  pay cash will not likely be able to obtain a 30 year fixed rate mortgage. A more likely option is a 5 year balloon.

More financing options means more sales and more appreciation. Dodd-Frank has not been kind to the real estate and mortgage industries. Just another case of typical knee-jerk government reaction and interference.

 

 

 

I own my home that is in a flood zone. Are flood insurance issues going to make it difficult to sell now?

At least in terms of the astronomical rate increases that you have been reading about lately, probably not.

The U.S. Senate just passed the Homeowner Flood Insurance Affordability Act which had already been passed by the House this month. Once signed by the President, this Act will negate the majority of the devastating changes that were enacted by the House and Senate last year. More on this at: http://rem.ax/1fXPi7o

For information on this or other real estate topics, please visit www.DestinFloridaRealEstate.com or email us at smith@realtor.com

Are flood insurance premiums still supposed to go up?

Flood insurance (NFIP) premiums have already gone up astronomically in the case of pre-FIRM homes, the result of the Biggert Waters Act. In this area, pre-FIRM generally refers to homes that were built before 1974.  Our elected politicians in D.C. are going through the motions but making little progress in the re-writing of this very bad legislation.
Our salvation may lie in the fact that FEMA failed to follow the rules and did not conduct the required cost studies before enacting. Therefore, a now pending lawsuit in federal court may provide our best option for relief.

As always, please visit us at www.Ed-Terri.com or for questions, email us at smith@realtor.com

 

Before Closing a Loan

Do's and Don'ts before closing_Blossman

Are flood insurance premiums still supposed to go up?

Flood insurance (NFIP) premiums have already gone up astronomically in the case of pre-FIRM homes, the result of the Biggert Waters Act. In this area, pre-FIRM generally refers to homes that were built before 1974.  Our elected politicians in D.C. are going through the motions but making little progress in the re-writing of this very bad legislation.

Our salvation may lie in the fact that FEMA failed to follow the rules and did not conduct the required cost studies before enacting. Therefore, a now pending lawsuit in federal court may provide our best option for relief.

More on this at: http://rem.ax/1fnwewZ

As always, please visit us at www.Ed-Terri.com or for questions, email us at smith@realtor.com

Ed & Terri Smith, Broker Owners
RE/MAX Coastal Properties
850-837-5500 x1

 

Did I miss the opportunity to buy with really cheap interest rates? Are rates going to come back down?

The scaling back of QE is expected to increase mortgage interest rates by 50 basis points over the course of the year. Some believe that the recent increase in rates pre-absorbed that anticipated impact.

However, to put it all in perspective, 2001 marked only the second time in Freddie Mac’s history (1971) that rates averaged below 7%. 2010 marked the first year that rates averaged below 5%. So by comparison, at 4.5%, today’s rates are still very cheap and it is a great time to buy!

As always, please visit us at www.Ed-Terri.com or for questions, email us at smith@realtor.com

 

What happens to a rental property that I own after my bankruptcy?

After your bankruptcy/debt is discharged, you are still the owner of record. Liability associated with the property typically resumes at that point.  After discharge, the bank may choose to file a foreclosure action or they may prefer to entertain a short sale proposal from you.

Some lenders will choose to actually pay you at closing for cooperating with a short sale after bankruptcy. In one such instance, our client received a check for $20,000. You should of course consult with your attorney before pursuing any post-bankruptcy real property action.

As always, please visit us at www.Ed-Terri.com or for questions, email us at smith@realtor.com

Ed & Terri Smith, Broker Owners
RE/MAX Coastal Properties
850-837-5500 x1

Is the government shutdown impacting home sales?

In an indirect sense, yes it is. Specifically, one of the biggest impacts on the real estate market is the psychological effect that it has on buyers. As to VA, FHA, Fannie Mae and Freddie Mac, all is well. They are processing loan packages as normal.

An interesting development … Most all lenders had been requiring a form 4506 from the IRS when processing a home loan. This is a request for your tax return transcript. IRS is not processing such requests during the shutdown, so fortunately, almost all lenders responded by waiving the requirement!

For more info, please visit us at www.DestinFloridaRealEstate.com or for questions, email us at smith@realtor.com

Ed & Terri Smith, Broker Owners
RE/MAX Coastal Properties
850-837-5500 x1