Real Estate stories from Central Valley area Merced and Atwater

With You're The Focus service it’s all about setting expectations for clients looking to sell or buy homes. Too often mistakes are made by not understanding all the variables that go into selling or purchasing a home. This blog entry will review some common problems that could impact your purchase or sale. Knowing these things in advance so you can be prepared will be helpful.

The first example is with lending options. The most popular program continues to be FHA loans due to lower down payment amounts and generally lower interest rates. Many clients I meet with expect to have 3.5% for their down payment not realizing that closing costs could run closer to an additional 6% (that’s 9.5% total needed to purchase a home). The closing costs include such items as home insurance, property taxes, escrow fees, homeowner’s title policy, loan origination fees, process and underwriting fees and sometimes Mello Roos, HOA or other handling (often on short sale) fees. We will ask the seller for a contribution toward these costs but often an additional 2% to 3% is needed from the buyer.

Inspection results: Depending on the type of lending inspection results can cost a buyer or a seller the current sale of their home. Many properties state that they are being purchased “as-is” but an inspection report showing problems that the buyer can’t afford to repair or that the lender requires to be repaired could cost you the home. One example is a pest report indicating section 1 items (termites, rotting wood, etc) to be repaired prior to funding the loan. On a foreclosed (REO) home sometimes the bank will repair these items and other times they may not. Another example is a home report with plumbing or electrical issue that may not be called out by the lender but certainly will add cost for the buyer. If a buyer asks for repairs and the seller isn’t in a position to pay for the repairs (short sales most common cases) then the buyer may end up walking away from the property. If you are a buyer make sure you have $300 or so for these inspections.

A recent issue my client faced was the cost of flood insurance. We found a house they loved at a great price. When we asked for an insurance quote on the property it came back as a high risk flood zone. Their cost went from an expected $600 to $1800 annual. This $100 per month increase in their monthly mortgage payment was enough to cancel the purchase and find them a home within their budget. Once an offer is approved on the home purchase obtaining an insurance quote within the inspection time frame is a must.

Review the property profile on any home you purchase. See if there are Mello Roos or other taxes that might add to your monthly payment. These taxes could add $50, $100 or even $200 per month to your payment.

When using a calculator to estimate your monthly mortgage payment remember that this doesn’t contain property taxes, insurance, PMI or other associated costs. Work with your agent and lender to make sure you understand what’s involved in determining your costs (closing and monthly payment).

From the seller's standpoint brokerage fees and closing costs such as providing items the buyer asks for including repairs, closing cost contributions, escrow fees, up to date taxes, etc will impact your net profit. In the case of a short sale these costs don't go away unless you have approval from the lender to cover these costs. The good news on the short sale is that there are no brokerage fees as these are paid for by the lender. We have short sale and foreclosure alternative information for those sellers looking for help in this area.

After reading this entry I hope that you will be encouraged to save extra money above and beyond what lenders indicate just in case costs increase. I also help that the agent you select will help prepare you by setting your expectations as much as possible for the variety of things that can and do happen during the real estate process. These were just a few examples and crazy things from title problems to seller or buyer issues that are beyond anyone’s control do occur. I would be honored to work for you earning your trust and your business.