1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.

2. Develop your home wish list. Then, prioritize the features on your list.

3. Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.

4. Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment?  Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.

5. Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
6. Determine your mortgage qualifications. How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.

7. Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.

8. Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.

9. Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.

10. Contact a REALTOR®. Find an experienced REALTOR® who can help guide you through the process.

When I represent sellers in a transaction, they often ask me what they need to leave with the house.  Unless negotiated otherwise, all fixtures attached to the house must remain, as according to contract.  Most Realtors have a story about the dining room chandelier “accidentally” disappearing or the $1000 custom copper kitchen faucet that is replaced with a shiny new stainless steel faucet from Home Depot just before close of escrow.  Obvious no-nos.

Beyond this, I always hope that the sellers and buyers can briefly meet at the property shortly before close of escrow.  I have attended many of these meetings with my clients and it is very advantageous for the buyers to hear all of the seller’s tips regarding the care of the home and the property.  Sellers like these meetings also because if they have a prize rose bush, for example, that needs special care, this is an opportunity to give the special instructions to the buyers.  Then I recommend that the sellers never return to the property just in case that rose bush is replaced with a built-on barbecue….

I always give my buyers the necessary utility and media numbers they need to get everything up and running right away.  But in addition to this it’s nice if the sellers can leave the following for the buyers of their property:

• Owner’s manuals and warranties for appliances left in the house.
• Garage door opener.
• All sets of house and mailbox keys.
• Code to the security alarm and phone number of the monitoring service if not discontinued.
• Any personal property that the seller and buyer agree on such as paint, spare tiles, etc. that the buyer may need in the future.

My friend and co-hort, Harriet, is going to be joining me on Twitter.com.  As quoted from the Twitter website: ”In countries all around the world, people follow the sources most relevant to them and access information via Twitter as it happens—from breaking world news to updates from friends. See what people are doing right now.”

Twittering is as fun (or maybe more fun) than blogging.  You can give an update on “What are you doing?” in 140 characters or less, as often as you like.  You can form virtual friendships and, for me at least, learn the latest real estate news as perceived by fellow Realtors.

I’ve just recently become a member of the Twitterati and I’m not yet as addicted to Twitter as a lot of the people I’m following are.  But I’m looking forward to tweeting back and forth with my friend Harriet!

To follow me on Twitter, look for me under my Twitter id, which is the creatively conceived:  GretchenMerrick.

Even with all of the buzz in the media regarding short sales and foreclosures, I still have people asking me basic questions regarding the difference between a short sale, pre-foreclosure, foreclosure and REO.  So if you are completely educated on this topic, you might want to go onto my next post because this post will be just going over the basics on these topics.

The first step that a financially distressed homeowner should take is to call their bank and ask to speak to the loss mitigation department.  They should ask for someone who can help them with a forbearance agreement or a loan modification agreement.  Remember, the lender doesn’t want to foreclose but would prefer to work on options that would allow the homeowner to stay in their home.

Should these agreements not be obtainable, the homeowner should explore selling their home as a short sale.  A short sale happens when the unfortunate situation arrises where the owner must sell but their mortgage amount is greater than the amount that they can net on the sale of their home in the current market.

Why do banks accept short sales?  Simplistically, they do because the mortgage is in arrears, the property may be in poor condition, the homeowner has suffered a hardship (must be proved), the area or neighborhood has depreciated, or the bank simply has too many REOs (bank-owned) properties on their books.

Why do short sales get such a bad rap in the real estate market?  Because of the time that it takes for the seller’s bank to agree to the contract price.  This can take 30 to 90 days (I’ve seen longer.)  Most buyers lose patience and look for another home to purchase.

What do banks require from the short seller?  The package must contain, in addition to several other items, the most recent mortgage statement, hardship letter (for job loss - pink slip, for divorce - divorce filing, for excessive debt - consumer credit counseling, for illness - a letter from their doctor, for death - a copy of the death certificate, for a job transfer - the relocation order), completed financial statement, three months bank statement, three months pay stubs or P&L statements, two years past tax returns and current asset statements.  If this is incomplete, the process will be delayed that much further.

If the short sale is unsuccessful, foreclosure is the next step.  A foreclosure is the legal process of selling property to satisfy a defaulting borrower’s debt.  The preforeclosure process has several steps:  Notice of Default given to homeowner, Notice of Trustee Sale setting the auction date, the Trustee Sale auction, and the Trustee’s Deed which transfer the property title to the highest bidder or to the beneficiary (the bank).

The timeline for a foreclosure begins with the Notice of Default (NOD) recorded.  On Day 14, the NOD is mailed to the borrower (homeowner).  At this point in the preforeclosure timeline, some buyers may offer to buy the mortgage from the owner.  Some owners are not accomodating and may not allow any inspections of the home.  Also the burden is on the buyer to check whether any liens are on the property.  On Day 91 the Notice of Trustee’s Sale is recorded and mailed.  Day 115 is the deadline to cure default and Day 122 is the Trustee’s Sale.

There is no right to withdraw an offer made at the Trustee’s Sale.  The buyer is responsible for any liens on the property.  The minimum bid at the Trustee’s Sale covers the loan balance, accrued interest and the fees and costs associated with the foreclosure.  These days, most often there are no bids on many of the properties due to the high minimum bids. At that point the bank becomes the owner and the house becomes a Real-Estate Owned property.

Short sales and foreclosures effect a distressed homeowner’s credit rating differently.  Although there are not definite amounts that the scores will be lowered and these numbers may be optomistic, a general rule of thumb is that short sales will lead to a loss of 80 to 100 FICO points and that it will take approximately 18 months for the short seller to be able to buy real estate again at a decent interest rate.  A foreclosure will lower the credit rating by about 250 to 280 points and it will take approximately 36 months after going through foreclosure to be able to purchase a home with a mortgage that has a reasonable interest rate. 

The reasons for using a real estate agent are both many and very significant.  They include, but are not limited to the following:

1.  The seller of the home will have a qualified Realtor looking out for their best interests.  They do not pay their Realtor to look out for you.  That is my job.

2.  Real estate is all that I do.  I am constantly monitoring the market and actively looking on your behalf daily.  Through my networking, I often have information on new listings before they hit the market.   

                       

3.  As a Realtor, I have access to information that the public often finds difficult to obtain.  I can research any home on the market before my client writes an offer to ensure that my client isn’t paying too much.

4.  Negotiating isn’t much fun for the average home buyer.  This is one of my strengths and I love to do it.  I negotiate on property all the time when an average home buyer will only negotiate on a few homes throughout their entire lives.  I save my clients money.

5.  Besides price, there are other terms in the contract that also require negotiation.  I am completely familiar with the real estate contracts in use and know the ins and outs of negotiating the various terms.

6.  Contracts can sometimes seem overwhelming and confusing.  I work with these contracts on a daily basis.  I will assist you with understanding the components of the contract and ensure that you are protected.

7.  There are many other details relating to the purchase of a home to deal with.  I align myself with other professional service providers to make the purchase easy.  I have great alliances with mortgage brokers, title and escrow officers, and home inspectors.  You don’t have to worry about much of anything…I do it for you.

8.  My services don’t cost you anything.  I work on your behalf for free!

For years, I’ve noticed that the real estate market seems to slow during the final weeks of May and first few weeks of June.  I was always surprised that graduation could make a noticeable difference in the attendance to open houses and number of buyers out looking at listings.  But I got to learn first hand this year how graduation can TAKE OVER YOUR LIFE!

Our daughter just graduated from high school and between the huge party we co-hosted, out-of-town relatives visiting and the myriad of parties to go to in honor of the graduates — now I understand.  We are so proud of Emma and wouldn’t have missed a minute of the congratulatory celebrations, even if it did mean removing myself from the real estate scene for a week or two.   She will be off to University of California at the end of September and so shouldn’t we be savoring every last minute with her?

So if you currently have your home on the market at this time, please be patient.  We weeping mothers and relieved fathers, and all of our various and sundry relatives and friends will be back actively participating in the housing market once the graduation festivities quiet down for another year.

(Title quote from Charlotte Perkins Gilman) 

I currently have three offers out on short sale properties.  Banks are taking forever to respond to these offers.  One offer was submitted on March 1, 2008, one on March 30, 2008, and one was just submitted on May 5, 2008.  I don’t have a response on any of them.  Thank goodness my clients are aware that they will have to be extremely patient while waiting for a response from the seller’s bank (or banks if there is more than one loan on the property.)  But, in the meantime, new properties are coming on the market, and the sellers and the banks may lose what offers they currently have on the table as buyers are always looking….

Anecdotally, the banks don’t seem to realize the value of the Realtors who list the short sales or those who represent buyers who make offers on the short sales.  Banks want to severely cut our commissions.  From what I understand regarding short sales versus foreclosures/REOs, banks would be much better off financially if they would work with the Realtors in a timely manner, pay our full commissions and get these short sales closed.  The banks’ losses will be much greater if these short sales work through the foreclosure process and end up as REOs.  And with the way the system is working currently, it is very probable that the majority of short sales will become REOs.  Ironically, once the REOs are listed on the MLS, the seller, i.e. the bank, usually offers 3% commission to the buyer’s agent.

Welcome to my brand new blog site.  I’m so happy that you came to visit!  Some of you who are checking in may already know me, but for those of you who don’t I’ll give you a little bio.

I was born in southern Indiana, and no, I didn’t grow up on a corn farm.  I was a city girl in Evansville (pop. 125,000).  At age 18, I left for Vanderbilt University in Nashville, TN to study Civil Engineering.  I had to graduate with that major because my dad told me he didn’t think I could!  (He was a master at reverse psychology!)  After graduation I decided to head west when I was offered a job in Redwood City, CA at a small engineering research firm where I worked for about three years.

I met my husband-to-be, Dan, traveled for four months in Southeast Asia and Nepal, and then let Dan talk me into getting my masters in Civil Engineering at SJSU with him so that he could copy my homework.

Well, to summarize a long story, we married, I worked in civil engineering for three years, we had two beautiful children who we both adore, and then I began my career in real estate. 

But I will say that I’m passionate about selling real estate!  When I made the switch from engineering to real estate, I was a little sheepish about admitting that I was joining the ranks of the not very esteemed Realtors.  But my estimation of Realtors has risen immensely and some of the people that I admire a great deal are, you guessed it, Realtors!  And not only do I love working with people and fitting them into the home of their dreams, but I feel that I’m raising the bar on the quality of the service that all buyers and sellers deserve!

Gretchen Merrick Phone:408-892-9015 gmerrick@interorealestate.com Featured Listings 16830 Edwin Jones Court Morgan Hill, CA 4 BR | 3 BA $749,000 More Details 16868 De Witt Ave Morgan Hill, CA 6 BR | 4.50 BA $849,999 More Details

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