Be Cautious of Pre-Approval Letters

Recently one of our clients in Hutchinson, MN had an experience with one of the “big” mortgage companies that I want to share with you.

They decided to sell the home they currently live in and buy a larger home. They went to the mortgage company and made loan application based on them selling their current home (which they were selling on a contract for deed.) They were also putting 30% down on the purchase of the new home.

The pre-approval letter they got from the mortgage company said that one of the conditions was that the contract for deed be executed. They and their buyer signed the contract for deed and it was recorded at the courthouse.

One week before they were scheduled to close on their new home, the mortgage company’s underwriting department denied their mortgage application for the new house stating that they “wanted one year’s history of payments made on time with the contract for deed.” The original pre-approval said nothing about payment history on the contract for deed, just that it needed to be executed!

Fortunately for this client, they had other resources so they were still able to purchase their new home, but needless to say, they were not happy with the mortgage company.

So, even though you have a pre-approval in writing with certain stipulations, be cautious because they could change their mind.

The Early Spring Market

As we anticipated, the Spring Real Estate market seems to have arrived early this year here in Hutchinson, MN. Despite the extra cold weather, buyers and sellers are anxious to get moving.

We expected this based on the fact that both the First-Time Homebuyers’ Tax Credit and the other Homebuyers’ Tax Credit require that buyers have a signed and binding purchase agreement in place by April 30, 2010 and close by July 1, 2010.

Sellers don’t want to miss out on any of the market time between now and the end of April, so they are calling to get their homes put up for sale as soon as they can.

With the interest rates still staying low, buyers and sellers are smart to get a jump start on the housing market.

The Parking Lots Are Full

Judging from the number of cars in all the parking lots and along Main Street in downtown Hutchinson, MN it appears that the economy here is perking up.  Since Black Friday, I have observed that the stores have many shoppers in them no matter what time of day it is.  And, if you haven’t been to the Hutchinson Mall, you need to see all the new stores!  It’s great to live in an area where the economy appears to be improving each month.  

The real estate market continues to be very busy for what is seasonally a slower time for homes to sell and people to put their homes on the market.  We’ve also got people moving into Hutchinson because of job transfers and new positions with local companies.  This is wonderful news because a number of  our manufacturing companies have had significant layoffs and now are hiring people back.  Let’s all be grateful that we live in such a wonderful place!

A Glut of Rentals?

All you have to do is drive around Hutchinson, MN to see that there are many rental units available right now.  The last time I remember this many vacant units was back in 1999 when Hutchinson Technology had a significant layoff of employees.  I suspect that is the same reason we are now seeing so many for rent signs and incentives being offered by landlords.  The good news is that the tenants will be the ones who enjoy the benefits of this glut of rental units.  As you drive around you will also notice many SOLD signs up on homes that have been for sale.  The real estate market continues to be healthy here in Hutchinson, MN.  This is good for both buyers and sellers who are taking advantage of very low interest rates and a good inventory to chose from.

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!

Choose Not To Participate

Recently I had the opportunity to spend a few days with my sisters laying on the beach and shopping. All of us have careers that are being affected by the economy in one way or another. We decided at the beginning of our trip that we would not read any newspapers, listen to any television, or listen to the radio during our time together. What we observed was the the beaches were full of people, the restaurants had waiting lines, the shopping mall parking lots were full! Hmmm. Where was all the doom and gloom that we had been hearing about before our trip? By choosing not to participate in the “bad news” all day long, day in and day out, we found that we were able to have a delightful few days. When we returned to our jobs, we were refreshed and didn’t feel so bogged down. I have decided that although I need to be informed with what is happening in Hutchinson, MN and the rest of the world, I’m not going to participate in all the “bad news” all day long. Maybe if all of us did the same, the media would have to knock it off! Ok, maybe that won’t happen, but I know how I will spend my time.

Myths About Financing

Every day someone asks me if anyone can get financing to buy homes any more. I usually answer them by telling them that they need to quit listening to all the doom and gloom in the media. Then I answer them, that yes, buyers can still get financing.

Although the number of mortgage companies that will finance 100% of value has diminished, there are still some programs in Hutchinson with 100% financing available to qualified buyers. We are in a Rural Development Area which means that buyers who have qualifying incomes and a FICO score over 620 can still obtain mortgages up to 100%.

Also we are seeing more activity in FHA loans because they only require a 3% down payment and they also require a lower minimum FICO score.

Between the State of Minnesota and our local Hutchinson Housing Redevelopment Authority, there are numerous assistance funds available. Some of these programs are for down payment assistance (up to $15,000) and others are for monthly payment assistance. All of the assistance programs are conditional on the buyer’s qualifications.

So, favorable financing options are still available.