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Should You Pay A Record Retention Fee When Buying or Selling a Home?

Whirlpool 3159698458_ec3c3f3c23Most real estate agents work on a commission basis.  That means that whether you are buying a home or selling your house, the agent representing you is most often paid as a percentage of the purchase price.

An excellent agent is worth every penny they get paid.  And sometimes, worth much more than the commission earned on a particular transaction.  For example, right now I’m involved in what should have been a simple, slam-dunk transaction that has dragged on for 10 weeks and involved much more time effort and energy than any of the multiple transactions I’ve already closed in the same time period.

But I digress.

The point of this article is to make you aware of transaction-related fees that may appear on your closing statement and are often presented by a real estate agent as a “requirement.”  We’re talking about “transaction,” “processing,” or “records retention” fees that are disguised as required  in order to close your transaction.  I have heard that these fees can vary in amount anywhere from $100 – $1000.

These fees bother me for several reasons.  Foremost, is that those types of fees are simply the cost of doing business. The law requires that certain documents are included in a real estate transaction (transaction fee to make sure all documents are property executed).  Processing fees may be interchangeable with transaction fees but sometimes are charged by a third-party (for example in the dwindling popularity of short sales).  The law also requires that real estate brokers retain their records for a specific period of time (records retention fee, anyone?).

Keep in mind that each real estate brokerage sets their own business policies. The brokerage may indeed require these fees for their own transactions.  The good news is that there is no legal requirement to include these extra fees in your transaction.  In fact, paying those fees is a bit like watching extra money flushed down the drain.  So, what can you do about it?

If you are already in an active escrow transaction, and you love your agent, the best thing to do is have a discussion about the fees and negotiate those fees to satisfy yourself.

If you are just getting started with buying or selling a home, make sure that one of the questions you ask the agents you are interviewing is whether or not they charge any fees in addition to the commission.

It’s important to interview the agent you plan to work with in order to make sure you are a good match.  One of my favorite questions to ask is “do you discount your commission?”  Curious about the ramifications of the agent’s answer?  Call, text or email and I’ll be happy to discuss it with you.   If you would like a list of great questions to ask when interviewing, please let me know.  I’ll be happy to share that with you as well.

Is there ever a time that you might want to pay the a la carte fees?  I suppose if you decide to hire a discount broker and the addition of the fees doesn’t get the cost above what you would have been paying you could consider it.

One caveat to keep in mind is that “you get what you pay for.”  In the case of these extra fees, you are paying for what you are already getting.

Personally, I believe that if an agent is going to work on a contingency basis, as I do with the majority of my clients, than the commission should cover all the costs.  There are certain cases when I also will work on an a la carte basis, but then the client is fully informed of each of the fees he or she may encounter for my services.

This is one in a series of articles designed to help the consumer navigate the world of a real estate transaction.  Real estate is local, and working with someone who knows the area and the specific issues that may affect your transaction is important.

Sally Sig extra smallPlease share your thoughts or questions by commenting below, emailing me at Blog@93561Home.com or phone / text at 661.375.REAL (7325)

 

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What should Tehachapi homeowners avoid doing if you can’t afford to pay your mortgage?

Let’s talk about some do’s before we get the don’ts.

Feel like your Tehachapi house has you drowning in debt?  Think about selling it as a short sale.

So, what are some good things to do if you are a Tehachapi homeowner and can’t afford to pay your mortgage?

Find out what your options are!  You didn’t set out to be in this situation and your lender will understand that.

 

Many times folks that are no longer able to pay their mortgage and owe more on their house than it’s worth think their only choice is to let it go to foreclosure.  That’s just not true.  You have a number of choices available to you in what can seem like an overwhelming situation.

  • Talk to your lender to see if they will work with you to keep your house.
  • Negotiate a reduced mortgage payment.
  • Sell your house as a short sale
  • Arrange a Deed in Lieu of foreclosure
  • Talk to your accountant and attorney for advice that is specific to your situation.
  • Talk to a REALTOR® who can explain the options to you.
  • Allow the foreclosure to go forward

So what should you avoid under these trying circumstances?   Don’t make the mistake of feeling like you’re stuck.  Make a choice!  Talk to a real estate professional that is familiar with short sales and foreclosure issues.  I’d be happy to help.  Feel free to contact me at 661-375.-7325 to get your questions answered.


 

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Are short sales a good choice for you as a buyer?

Thinking about buying or selling a short sale? Call 661-375-7325 to get your questions answered today.Are short sales a good choice for you as a buyer?  Let’s answer that with another question.  Are you planning to move, or are you planning to look?

Short sales occur when a seller’s lender agrees to take less money to satisfy the mortgage debt then the seller owes on the mortgage.  That’s a pretty simple sentence that carries a huge amount of baggage with it!

Start with the word “occurs.”  In order to get to that point, there has to be a willing buyer in contract with a willing seller, and the seller’s lender has to have approved the terms of the transaction.  Once the seller’s lender has approved the sale, the sale is handled in a similar manner to a sale with a conventional seller.

So what’s it take to get to that point?  First, the seller has to list the property for sale.  Next a buyer makes an offer and negotiates a deal that the seller finds acceptable.  Now the fun begins for the seller and his agent.  To start the process, the seller gathers (at minimum) all these documents for his agent to submit to the seller’s lender:

  • two months worth of all bank statements
  • two months worth of pay stubs
  • two years worth of tax returns
  • a letter explaining why the seller deserves to have the short sale approved
  • a full financial statement
  • the lender’s application form
  • the listing contract and all addenda
  • the purchase contract and all addenda
  • the lender’s purchase addenda
Doesn’t sound too bad so far from the buyer’s perspective, right?  It’s not, although the documents submitted so far usually exceed 100 pages.  Unfortunately, it is still not unusual to have to resubmit all or part of the package several times before the lender agrees they have received everything.
So as a buyer, you are probably aware that you are in for a fairly long wait to find out whether or not the lender will agree to a short sale on the house you fell in love with.  Let’s take it one step farther and consider whether or not you want to be in a back up position on a short sale:

If your goal is to move, you should not consider any short sale that has an existing offer unless all other options have been exhausted.  Making a backup offer on a short sale may be appropriate for someone who is buying it as an investment, or has absolutely no concern about whether or not they will ever be able to move.

Properties that are accepting back up offers are doing so in case the existing buyer, already under contract, is unable or unwilling to complete the transaction.  There are a number of reasons why that may happen, but consider these as examples:

  • The buyer completes their investigation and finds a problem they cannot live with …. say a foundation problem.  It is unlikely that you would want a house that had a problem so severe someone else walked away from it after having already invested money in inspections.
  • Keep in mind that in most cases, there will be no deficiencies repaired in a short sale transaction.  Usually the seller does not have any money to do repairs and the seller’s lender is unwilling to spend money on repairs when they are already taking a loss on the loan.
  • The buyer is unable to complete the transaction because the property appraisal value came in too low.  Since you are also financing, it is likely that you would have the same issue.  By this time, you would have spent money on inspections and the appraisal.
  • Some other funding condition existed which the buyer was unable to meet.  This is about the only circumstance in which you are unlikely to have the same problem.
The seller and listing agent want backup offers in place because it’s good for them to be ready with another buyer when their deal falls apart.  The four properties above that are already in contract with a buyer are in the status called Active 3PA.  This means that the buyer and seller have signed the contracts, but they are waiting for the sellers’ lender to approve the short sale.  

To give you an idea of the time involved in the lender approval phase, I have two short sales listed right now that had buyer and seller contracts in place less than one week after they were listed.  We are still trying to get short sale approval from the lender — SIX MONTHS LATER — so that we can open escrow and (hopefully) complete the transaction.  If you were one of those buyers, and we made that offer today, in the best case you would be getting close to moving in seven and a half months.  Is that situation acceptable to you?

So, back to the beginning question, do you want to look at houses, or do you want to move?
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Why Might Short Sales Stabilize the Real Estate Market?

Find out why foreclosure may not be your best choiceI hear from lots of prospective buyers that want to get a list of Tehachapi foreclosed properties so they can look for the “best deal.”  The truth is a foreclosed property may not be the best deal whether you are the occupant of the foreclosed home, or the prospective purchaser.

As the occupant, if you are just waiting for the foreclosure to go through, you’re not really doing yourself, or your neighbors, any service at all.  I understand that the entire situation is distressing and stressful.  You probably already went through one or more attempts at a loan modification.  I’m sure you’ve had plenty of offers of “help” that didn’t seem very helpful.  Regardless of what your history has been, it’s pretty much never a good idea to stand by and let the lender foreclose.

As the seller, you can salvage the shreds of your credit rating by taking action.  In addition to stopping the free-fall on your credit rating, you’ll be able to hold your head up and move on with your life.  How do you do that?  Consider a short sale as an alternative to passively waiting for foreclosure.

Why is this good for your neighbors?  A foreclosed home typically sits vacant for extended periods of time while the lender is readying it for sale.  During that time, squatters may move in, but whether they do or not, the property continues to deteriorate while it sits there waiting.  This means that the value is going down while it sits too.  This spiral is contributing to the issues we face today with market values dropping because when these distressed properties finally do sell, they are the comps (comparable properties) that are being used to help value the properties for which buyers are getting loans.

Foreclosed properties typically will sell for a little bit less than non-foreclosures, but those savings come at a cost.  The costs can include both time and money.  A foreclosed property will, most often, need some work done in order to bring it up to the standard of a non-foreclosed property.  That means that it may not be the best deal when it comes to buying.

It also takes a special kind of person to look past the problems and see the beauty that can be revealed with some sweat equity.

It takes an even more special seller to take action and try to sell the house before the lender forecloses.  If you are that kind of seller, I’d be happy to talk to you about options.  Why not call today?

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