Loan Modifications – The Good and The Bad

Many homeowners have been able to take advantage of the loan modifications that some of the lenders are doing on mortgages that either are in trouble or may soon be.

We at Hometown Realty here in Hutchinson, MN have clients who have been able to work out modifications with their lenders to lower their monthly payments by hundreds of dollars and now are able to stay in their homes.

Some of the modifications have required the homeowner to come up with some cash at the time of the modification, some of the loans have been extended to 35 and 40 years, while others have simply lowered interest rates to allow for lower monthly payments.

That’s all the good, now for the bad. These loan modifications will affect the homeowner’s credit scores negatively. This isn’t always explained clearly to the homeowners who become surprised down the road when they learn that their credit scores have dropped considerably.

So, if you are considering doing a loan modification, be sure you know all the ramifications before you proceed.

Attitudes are Improving

I just came from the Hutchinson Home Landscape and Garden  show that is being held at the McLeod County Fairgrounds here in Hutchinson, MN. The show ends at 4:00 p.m. on Sunday, February 21, 2010.

It was encouraging to visit with all the people who came to the show this year. Almost everyone that I visited with seemed to be much more upbeat about our economy. This is completely different than it was a year ago at the same show.

In talking to many of the vendors who have booths there this year, almost all of them told me that they had done a lot more business this year than in the past.

All of these things are good signs that people are beginning to regain confidence in our economy.

At Hometown Realty our first two months of 2010 has shown good improvement over 2009 for the real estate market here in Hutchinson, MN.

All of this seems to tell me that things are getting better and let’s hope that this momentum will continue throughout 2010!

Cancelling the Listing

Late last week we got a call from one of our sellers who said they needed to cancel their listing. Now, we are usually concerned when sellers want to cancel, but this time we were all celebrating!

Why? The reason they wanted to cancel their listing for their home here in Hutchinson, MN was that they were rehired at Hutchinson Technology. Now they don’t have to move!

This was wonderful news for them and for our entire community. The fact that one of our major employers is once again hiring some of the people who had lost their jobs earlier is a good sign that the worst of times may be behind us.

So, this time when the seller called to cancel their listing, it was a good thing!

Experienced Agents Can Save You Money

This morning I got a frantic call from a new home buyer ( we closed yesterday.)  They said that the plumbing wasn’t working right in the house they had just bought.  I asked what they meant by not working right, and they explained the problems they were having.

The home that they purchased in Hutchinson, MN had been vacant for about 6 or 7 months.  I knew from past experience with problems like this that more than likely the problem was simply coming from the fact that things hadn’t been used for some time.  I suggested that they run a lot of water through everything and see if things didn’t straighten out.

I just talked to them and everything is working just fine now!  An inexperienced agent may have told them to call a plumber which would cost somebody a bunch of money.  Then there would be the adventure of figuring out who was going to pay for the plumber’s bill, the former seller or the new buyer.

So, experienced agents can save you money even after you own your new home!

Know All Your Options

Yesterday I talked with some people who had purchased their home from Hometown Realty a number of years ago here in Hutchinson, MN.  They have both retired and had received a call about refinancing their home and reducing the number of years left to pay on their mortgage to 15 years (currently they have 25 years left to pay).  This was very interesting to them.  The mortgage people who contacted them suggested that they could get their interest rate on their mortgage down from 5.75% (current) to 4.65% (proposed).  Their payment would increase a couple of hundred dollars per month.  I asked how much the closing costs would be to refinance and they thought about %4,000 – $5,000.  While visiting with them, I asked if they were comfortable with the higher payment that was being suggested and they said, “yes.”  So, I suggested to them that rather than increase the amount of money that they owe ( current principal amount plus new closing costs), that they simply pay the higher payment on their current mortgage.   By doing so they would reduce the amount of time left on their mortgage easily to 15 years.   They were so glad they called and talked to us about this.   So, the moral of the story is “Know All Your Options.”

The Pendulum has Swung

The mortgage business has gone from lending money to anyone that has a pulse to scrutinizing absolutely every little thing when a buyer’s application is submitted for approval.  This isn’t all bad, it’s just that the buyers have to be absolutely squeaky clean with no unanswered questions in order to get a mortgage today.  I’m told from some of the lenders that the underwriters (the final decision makers) have huge authority to approve or reject a loan today.  The lenders are frustrated in that the rules for RD and FHA loans are continually changing and what the lender tells a potential home buyer today may not be true next week.  All this will hopefully settle down (hopefully sooner rather than later) so that we and the lenders will know that when we give information to buyers, that information won’t change.

Good News to Report

The real estate market in Hutchinson, MN is continuing to come alive. Right now, there are less homes for sale than there were a year ago and the pending sales have shown an increase over a year ago. (Pending means that a purchase agreement has been written by a buyer and the seller has accepted the offer, but closing has not taken place.) This is good news because according to John Tucillo, one of the most respected real estate economists in the U.S. and the former Chief Economist for the National Assocation of Realtors, there are three things that must happen in order for the housing industry to recover. They are 1) a decline in the new listing acitivity, 2) a decline in the days on the market, 3) an increase in the sales price to list price ratio. We started seeing a reduction in the number of homes on the market last fall and throughout the winter months. In the last quarter of 2008, we saw the days on the market begin to decline. Now, we are hoping that with the increased pending activity, the third phase of this recovery will begin. I’m told that Hutchinson Technology has started calling back some of their employees and that also is a good sign for all of the Hutchinson, MN residents and businesses. I also noticed over the last few weeks that the parking lots at the retail stores continue to be full as well as the restaurants. That tells me that things are not as dire here as they may be in other parts of the country. So, don’t pay attention to all the doom and gloom. Let’s focus on the good things that are happening here in Hutchinson, MN.

The Race Is On

A few weeks ago I talked about the multiple offers that we were starting to see. Well, that’s intensifying with the “spring” market approaching. There are alot of buyers that have been making offers on homes in the last couple of weeks and many of them on the same houses. It’s very encouraging to see that so many buyers are realizing what a prime time it is for them to be purchasing a home or investment property. Recently I have read that the prediction by some economists is that we will have inflation beginning to creep into our housing market shortly. Some predict that inflation will regain all the value that was lost in the housing market over the last two years, in the next five years or so. Sellers have become much more realist about what price they can expect to get for their homes, and therefore the buyers may not see another “opportunity” to own homes as they have right now. The interest rates remain favorable and with the stimulus package incentives, anyone considering buying a new home will be glad they did in 2009. So, the race is on to take advantage of all that is taking place in the real estate market here in Hutchinson, MN.

Our Job Is To Find Solutions

Last fall I heard an economist speak to a group of real estate people and mortgage brokers. He spoke about what we could expect in 2009 in our industries. He told the mortgage people that there was good news and bad news for them. The good news was that the interest rates would drop and they would be flooded with homeowners who would want to refinance. The bad news for them was that many of those who wanted to refinance would not be able to because they were upside down on their mortgages (they owed more than the home is currently worth.) I remember thinking, “well, I’m sure we in the real estate industry here in Hutchinson, MN will also be faced with a similar problem.” The guy was right! Just last week I met with four homeowners who wanted to sell their homes, and I had to tell them that it was not possible for them to sell and pay off their mortgages in the market we are currently in. Fortunately, none of them had to sell. We discussed other options they had such as renting out their current home (which two have decided to do) or just waiting for a more favorable real estate market for them to sell their current home. This real estate market is not so different than it was in the early 1980′s. Back then we were faced with huge interest rates that most people could not afford and so we had to find other solutions like contract for deeds, seller second mortgages, assuming existing loans. Most real estate agents today weren’t around during those challenging times and don’t understand what we are talking about when we mention assumable loans. Finding solutions to help people accomplish what they want to do is what our jobs as real estate agents is all about. It’s also important that we be honest with home buyers and sellers about their expectations. This is a very exciting time in the real estate business as we are all part of a very challenging market.

Multiple Offers

Even though the real estate market in Hutchinson, MN is still quieter than we’d like, we are starting to see multiple offers come in on quite a few properties. That certainly is a good sign! There are buyers out there just waiting for the right “deal” to come along and when it does, the buyers are making offers. A person has to wonder though, are these buyers purchasing the homes that they want, or are they just buying “a good deal?” Regardless, this activity this early in the year is a really good sign for the real estate market in Hutchinson, MN!