The Power of the Preapproval

The Power of a Preapproval

Quick question: how often do you make a grocery list of items you need, pack everything (or everyone) in the car to run to the store and never check to see how much you have to spend on groceries? Never check your bank account if using a debit card, never check your wallet for cash, never even so much as look in the car for loose change….my guess, probably not very often. So why do the same for the largest purchase of your life?

 How people buy homes has evolved over the years, and especially since the housing bubble burst. Gone are the days of declared income where banks take your word for how much you make and how much debt you have. These days, it all has to be documented and lenders have very defined terms of what you have to meet in order for them to lend to you. While I am not a lender, underwriter, or originator, I do know they look at a number of factors including your credit score, your debt, your income, your job history, how much you have for a down payment, and a few other variables. These days, jumping online to browse through homes to schedule viewings with your preferred Realtor is NOT the first step in the home buying process. The first step to buying a home is to find out how much you can afford and how much you will be loaned; both accomplished by simply obtaining a PreApproval (NOT a Prequalification).

Here are a few reasons why, if you plan to use financing, to get a preapproval as the FIRST step in your buying process:

1)      You will know without a doubt (provided you don’t squander you money and rack up huge credit card debt between preapproval and closing) how much you can afford and how much you will be loaned.

2)      It makes budgeting for a home payment quick and easy once you have a loan amount and interest rate. Just add in taxes and approximate insurance and there you have it.

3)      Experienced real estate professionals will not work with you if you do not have a preapproval. Sounds harsh but so is wasting your time and theirs because you “know for sure” you can get a loan but turns out, your credit score is 35 points off the minimum requirement to get financing.

4)      You have a much more realistic idea of what you can get for your money if you know a ceiling or cap of your loan amount. If you are looking at homes in the $150,000 range but can only get financing for $110,000, there is a pretty drastic difference in the type of home in those two price ranges for the Pensacola market.

5)      It opens the door for more opportunities if you are only considering buying to get a preapproval. If you don’t have 3.5% to put down on an FHA loan, but turns out you are looking in an area that falls within the USDA Rural housing area, you could get 100% financing.

6)      Nearly all, (and all the transactions I have been involved with) REQUIRE a preapproval to be submitted with an offer package. If you are looking at a great home and so are 3 other people, having that preapproval speeds up the offer process that much more so you don’t potentially lose the house by wasting time getting everything together.

7)      If, after trying to get your preapproval, you are unable to buy today for whatever reason, you have a person in the business to guide you on the path to restoring your financial situation to a point that they will lend to you. It’s like credit counseling without the charge! Yes, they do make money eventually if you get your loan through them

The preapproval process has become exceptionally streamlined and quick over the years. I have my list of preferred lenders who can take your information over the phone and have a preapproval issued within the hour.  Knowing where you stand helps determine where you start, which ultimately leads to where you want to go.

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Monthly Market Update

As a graduate from the University of West Florida with a degree in Finance, it comes as no surprise that I am a numbers person. The old adage that “numbers don’t lie” is so true when it comes to evaluating everything from your own personal check book to investment properties to market statistics and so on. From this point on, I am going to be updating you with the key statistics that I follow to stay on top of the local market.

Note that I use the phrase local market. Real estate is a highly localized industry. When you hear in the news that, for instance, Boston or Miami are such down trodden markets and that everyone is drowning underwater in their homes, that is solely for Boston and Miami markets. That is not how Pensacola real estate, or even Escambia County real estate, is acting. Despite what is being reported, as a Real Estate professional who follows statistics monthly, weekly, and even daily, I can attest that the market is improving. Have we officially hit bottom and are on the endless trend upward; not sure since I don’t have a crystal ball. However, I do have the statistics to show that the LOCAL real estate market is doing just fine.

First and foremost, I follow the total number of sales per month that occur for each month as reported in the Pensacola Association of Realtors. From the following table, you can see that for June, PAR recorded 472 listing sales. This is up from 442 in May. As you can see from the graph, from January to June, YTD sales have been quite steady with a small trend upward.

 

Next, I like to follow average monthly residential sales price. This is the average of all the homes sold within a given month. So, an easy way to figure this is to take the total sales volume for any given month and divide it by the number of sales from the graph above. As you can see in the graph, aside from the crazy spikes in the “Bubble” the average monthly sales price is trending on an average appreciation line of 5% annually.  This goes to show that not all homeowners are completely underwater in their homes.

 

The next graph I find most intriguing to follow. Ask anyone about real estate in the local market and you will get one of two answers. It is either “bad market” or it is a “buyer’s market.” As the first two graphs illustrate, it may not be a GREAT market, yet, but it definitely is not a bad market. This next graph shows that it has not been a “buyer’s market” for some time now. Note how the number of residential listings is actually DECREASING for all of 2011. You can see in the graph that we usually experience a “hump” where there is a flood of residential listings around spring time. For 2011, that flood of listings never occurred and as such, your typical supply and demand scenario kicks in; Less supply drives demand up which in turns starts moving prices higher, as shown in the last graph. This is by far the most shocking statistic to people since it is being reported, and I guess understood, that it is has been a buyer’s market for some time and that is will be a buyer’s market for some time. The numbers don’t lie though, and for the past 6 months it has been a neutral market.

 

       As you can see, from the numbers that is, that the LOCAL real estate market is holding up very well. Despite was is being reported across the nation and despite what the stigma may be about real estate today, the local real estate industry is improving.

     I hope you find this information valuable in your search for the right property. I hope to add a few more statistics as my research broadens to help you, as a buyer or seller, make the most informed decision possible.

As always, I am here to provide REAL solutions to all of your REAL estate needs.

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How Real Estate Agents EARN their money representing buyers

How about a little bit of trivia? On average, in a traditional transaction, how many people are involved in and during the sales process? Answer……at the bottom of this post.

Continuing from my explanation last week on the series of “How Do Real Estate Agents Get Paid?!” I will be explaining all the details and services of what I do to earn my commission while representing a buyer in a “traditional” real estate transaction. Traditional, for purposes of this topic, will be a seller of a residential property represented by a listing agent who is selling to a buyer, represented by a separate agent, who is using a mortgage to purchase the property.

How about we just dive right in?

First and foremost, the way a traditional transaction works regarding compensation to the real estate agent is quite simple. The seller, as negotiated between him or her and the listing agent, determines a commission to be paid at the sale of the house. Additionally, in the listing agreement, each party agrees to a commission split to be paid to any cooperating broker, or a selling agent. From this, the seller of a property pays both the listing agent and the selling agent. So, you as the buyer, how much exactly do you have to pay to utilize the services of a real estate agent?

NOTHING (keeping in mind the “traditional” aspect to the transaction in this discussion).

Now, for you as the buyer, you get what you pay for, right? I mean, if you don’t have to pay anything, then you are on your own and the selling agent who has been driving you around all this time is only there to write the offer and that’s where their work stops, right? Not a chance.

Once you decide to utilize the services of a real estate agent, and specifically MY services, you get an entire TEAM on your side. Yes, a team of professionals dedicated to making sure you get the house you want. My team consists of:

1)      Mortgage brokers and loan originators to get you preapproved.

2)      Inspectors to make sure the house you are eyeing is in good condition.

3)      Insurance agents to insure the biggest purchase of your life.

4)      Title companies to make sure you have a clean and clear title to the property.

5)      Closing agents to prepare and help you understand the pile of documents you are signing.

6)      WDO (wood destroying organisms) inspectors to make sure you there aren’t any critters feasting on your prospective property.

7)      Surveyors to ensure you know exactly what you are purchasing.

8)      Contractors to help repair any damage or necessary items before closing.

9)      Home warranty companies to give you more peace of mind after the purchase.

10)   And of course, yours truly, ME! (there are others on my team which get involved depending on the circumstances).

After discussing the steps of getting preapproved, going over the inventory in the local market, showing you what you can get for your money, and finding a house that you want to turn into a home, I transition into a new role. My next job is to act as a project coordinator/manager to ensure that each aspect of the transaction is met, resolved, or negotiated prior to closing. Additionally, during the offer and contract stage, I work for you to increase your buying power. What is “buying power?” you ask. Your buying power is how much house you can get for YOUR money. By increasing your buying power, I am increasing the amount of homes you can view and are eligible to buy considering your budget, loan preapproval, and needs. So instead of looking at 6 homes you think you could possibly afford, I will take you to 12 homes which I will show you HOW you can afford with the same budget, needs, and circumstances. Pretty neat, isn’t it?

So to recap, you, as the buyer, get all of the services and people listed above when you decide to jump into the home buying arena. You get to take advantage of services which demonstrate years of experience, knowledge, professionalism, integrity, and enthusiasm for absolutely no cost to you! No gimmicks, no slight of hand tricks, this is the real deal!

Thinking of purchasing a home in the near future? I would love to sit down and show you exactly how to increase your buying power and give you a demonstration of how my team works in the process of finding you a perfect home.

Now on to the answer….the average number of people involved in a traditional transaction? 43!

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Please come back often to find great information on current Pensacola market conditions and real estate news.

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