Realtor Tips and Resources
Tips For Listing Agents
[slide name=”Use a Professional Mortgage Company “]If your buyer is shopping all over the internet, there is a good chance you will have problems downstream. In a perfect world try to steer them to someone local that they can meet with that you know has the experience and track record to get the job done right.
In today’s environment, your best choice is a mortgage banker. They are shopping for the best rate among various investors but still control the transaction from start to finish in house. They underwrite, draw the closing package for the attorney and fund the loan directly. So do banks, but they take dramatically longer.
Brokers will provide competitive rates but they have several more regulatory challenges than in the past which slows down the process. Worse than that, they are not in control of the loan process, the lender they brokered[/slide]
[slide name=”Structure a Contract For Success “] Coordinate with the Loan Officer and your client before crafting your first offer. By spending a few minutes up front you can avoid a lot of stress as the deal proceeds towards closing and insure you are all on the same page.[/slide]
[slide name=”Ensure a Good Appraiser Participates “]Try to educate your buyer about the advantages of using a local mortgage banker that has it’s own pool of local appraisers.
Banks and brokers utilize appraisal management companies that hire appraisers that often aren’t knowledgeable of the neighborhood nuances. In addition, these appraisers are paid 20-40% less than the full fee which makes it difficult to spend the same amount of quality time on each appraisal that is typically required.
Mortgage Bankers typically will pay the appraiser the full fee.[/slide]
[slide name=”Avoid Customer Self-Sabotage “]Last Year Fannie Mae imposed a requirement on lenders to pull credit a 2ndtime within 10 days of closing. Most lenders like to pull it even closer to closing 3-5 days. They are looking to see if the buyer has obtained any new credit after the loan was originated. In addition, more and more scrutiny is being imposed on bank statements.
In particular, Fannie Mae is looking at deposits and forcing lenders to document any “large deposits”. Large deposits now are not large at all — most lenders look to document anything over $500-$1,000 which can be a real headache trying to paper trail.
The most important thing you can do is reinforce the importance of not applying for any new credit or running up any credit cards before they close. As for bank accounts, encourage them not to move any money around in their accounts until one week before closing.
We are very careful to educate the buyer upfront including a disclosure form with a big Stop Sign but we may be the exception.[/slide]
[slide name=”Keep the Lender in the Change Loop “]If you are getting ready to amend the contract or submit an amendment to address concerns, please be sure that you coordinate with the lender prior to preparing this.
For the most part, lenders do not allow the seller to provide an allowance for repair issues. The catch 22 is that if you mention items you want fixed, the lender will require them to be fixed prior to closing. There may be ways of working around this but best to not put anything in writing until you have run it by the loan officer first.
Either way, the lender needs to have a copy of any amendment ASAP because the underwriter will have to review any changes.[/slide]
[slide name=”Working with an Unfamiliar Lender “]From time to time you may end up working with a client that has already chosen a lender you do not know. If this is the case, try using these suggestions to make sure things are on track:
[list_item]Introduction. Find out from your client the name of the loan officer and give them a call immediately to introduce yourself. If you have not written a purchase contract yet, ask them to provide a good faith estimate so you know what the total closing costs and prepaids are. That way you can coordinate with your client on how you want to negotiate the contract. You also can find out at this time the terms of the loan so the agreement properly reflects the loan they have selected. As we mentioned in our tip on writing contracts, now is the perfect time to coordinate the timing of the due diligence period as it relates to where they stand in the loan process. Let them know that you are more than willing to help if the client is procrastinating in providing pertinent loan application items.[/list_item]
[list_item]Loan Commitment. If you have already reached binding agreement, contact the loan officer and make sure they have a copy of the agreement and understand the timing of the due diligence period. Can they provide a 100% loan commitment within the allotted time frame? Have they ordered the appraisal and title? Offer to help if your client is dragging their feet in providing pertinent information. Ask them if they would be kind enough to provide a copy of the good faith estimate. Next week, we will provide two more handy tips to help you guide the loan to a successful conclusion.[/list_item]
[slide name=”Successful Closing Preparation “]About a week away from closing, I would call the loan originator or processor/loan coordinator and find out if the loan is in “clear to close” status. If not, when do they expect it will be? When do they expect that the package will be delivered to the closing attorney?
Tell them you would like a settlement statement at least 48 hours ahead of time and preferably longer if possible. And get the name of the person at the attorney’s office that will be preparing the HUD Statement.
You want to be able to go over the numbers ahead so the client knows how much the check needs to be etc. Be persistent at this stage, your goal is a happy closing with only signing going on — no lingering issues to resolve. [/slide]
[slide name=”Approval Letter “]When you first receive an offer, insist on an approval letter and the name and phone number of the loan officer (LO). Check out the approval letter. Is it an approval or a pre-qualification? Have they checked credit, income and assets?
We issue what we call a Certified HomeBuyer approval that means we have pre-underwritten the file upfront and have a 100% commitment. But we are not aware of any other lenders providing this service and it is not always possible to get the client to agree to do this upfront.
So how can you be sure that the buyer is solid? The short answer is that you can’t be sure with no formal underwriting approval. But you can get a good feel at least by picking up the phone and calling the LO. Ask them what stage the loan application is in and how there credit is.
Do yourself a favor and try to get as much insight as possible so your not tying up your clients house unnecessarily.[/slide]
[slide name=”Appraisal “]Make sure and provide the loan officer with your name and best contact phone # for the appraiser. Work to try and get this appointment set as soon as possible.
We have seen more appraisal issues than ever and the earlier in the process you can deal with this the better. Make sure and have recent comps that you have uncovered in setting the listing price available for the appraiser as well as any listings and/or pending sales that you are aware of. Comps must now be within 6 months and in the subject’s subdivision except in special circumstances.
If you have pertinent information let the appraiser know. It is rare that lenders accept the first appraisal they see at face value. They almost always force the appraiser to provide additional comps and/or additional information.[/slide]
[slide name=”Repair Addendum”]If the potential purchaser decides to try and negotiate some money for repairs, be aware that lenders typically will no longer allow checks to be cut to 3rd party vendors for repairs to be completed after closing.
If the seller is not contributing the full amount necessary to cover closing costs and escrow setup, then the seller contribution towards closing costs be increased to cover some or all of it. Just be careful how the addendum is worded, you don’t want to set off any red flags to an underwriter by mistake.
Be sure to encourage the selling agent to coordinate all of this with the lender to avoid having to rework the addendum later. You can always agree to lower the sales price as an alternative.[/slide]
[slide name=”Deferred Maintenance “]If the house you are listing has items of deferred maintenance, you need to address this with your seller. Going into the listing, I am sure that you advised them to take care of these items. If they have elected not to, we will give you some additional ammunition.
Obviously, the first reason to do it is that the house will show better and sell for more. But we have an even more compelling reason. Depending on the severity, there is a high probability that the loan will not be approved. Lenders do not want to inherit another bank’s “lemon” nor a property owner’s neglect.
At a minimum, you will want to have them fix anything obvious that an appraiser would notice and be required to comment on.
One of the more common items that raises red flags are water damage related items. For example interior ceilings that are water stained, exterior siding that is damaged etc. The appraiser has an obligation to disclose these type items which will always raise a red flag with a lender.[/slide]
[slide name=”Closing”]Assuming you were not the one to select the closing attorney, make sure and get the name and phone number for the closing coordinator at the law firm. You want to be able to call and confirm the delivery of the closing package and insure that a HUD Settlement Statement is put together with adequate time to review it.[/slide]
[slide name=”14 Essential Appraisal Tips “]
One of the top three complaints from Realtors across the country is bad and low appraisals. We’ve put together some tips to help the Appraiser and avoid problems:
[list_item]Remove Lockbox and personally meet appraiser.[/list_item]
[list_item]Make sure utilities are on for appraiser.[/list_item]
[list_item]Have Recent MLS comparable sales within 4-6 months and explain differences – divorce, foreclosure, distress condition, needed new roof — provide second source of information for confirmation purposes.[/list_item]
[list_item]Pending sales if just closed be prepared to provide a closing attorney contact or realtor contact.[/list_item]
[list_item]Comp Construction – CBS or Wood Frame[/list_item]
[list_item]FSBO sales – provide source[/list_item]
[list_item]Seller improvements – new kitchen, bathrooms, new roof, new air conditioner, wood floors, upgrade tile floors, non-standard hurricane windows or shutters[/list_item]
[list_item]Views – subject as opposed to comparables[/list_item]
[list_item]Special School Districts[/list_item]
[list_item]Describe in detail differences between neighboring communities.[/list_item]
[list_item]Differences in Neighborhoods within Projects – know the subdivision.[/list_item]
[list_item]Seller Concession on Comps[/list_item]
[list_item]FHA – Resolve repair issue before appraisal – call us to discuss[/list_item]
As Mortgage Bankers, we compiled a list of only local Appraisers. They have experience in our market place. However, you know the subject property and comparables better than anyone. When we receive the Appraisal we’ll review it for accuracy and send you a copy. Any questions … give us a call.
[slide name=”6 Can’t Miss Short Sale Tips”]
If you find yourself making an offer on a short sale, asking the right questions will provide you with the best chance of success. There are many horror stories out there, so be proactive:
[list_item]Has the short sales been approved previously? Did another deal fall through, if so why?[/list_item]
[list_item]Has the seller been approved from a income and liability standpoint by the lender?[/list_item]
[list_item]Is there more than one mortgage involved? If so, have both reviewed the seller’s application?[/list_item]
[list_item]Is the short sale being reviewed for acceptance for the HAFA program? If so, the lender has certain timeframes they must adhere to in terms of responding to the offer etc.[/list_item]
[list_item]Does the listing agent have contact people at the lender? Can they provide names and numbers? Has a negotiator been assigned to this case?[/list_item]
[list_item]How knowledgeable is the listing agent in dealing with short sales? If they are not familiar, then you will most likely want to be very proactive. Our experience with this is the agents that stay on top of it, will generally succeed. If you take a hands off approach, there is a good chance it will drag on and on.[/list_item]
[slide name=”How to Really WOW your clients “]Imagine this. Your client calls and announces they want to make an offer on that $500,000 house they saw over the weekend. Next, you find out they are out of town. In a perfect world, you would meet them in person at your office to prepare the contract. That way, you could walk them through all of the pertinent decisions that have to be made to insure you are all on the same page.
[list_item]Purchase Contract. In our introduction email to you last week, I promised to introduce you to some technology that would help you in your business. This is the first of a series of “ideas” we came up with to help you. Remember I referenced the purchase and sale agreement? Listen along and I will give you an overview of what we are thinking. Hi Tom & Sandy. Since we can’t get together to go over this offer we are making in person, I thought it might help if I provided you this audio clip for better clarity. Starting on page one here, I will walk you through some of the decisions we will need to make. The first item involves the earnest money deposit. This is a deposit you will put down subject to you due diligence period that we will go over shortly. In other words, you will have period of time to get your inspection done and financing in order before you are truly committed. If you decide to back out before the due diligence period is up, you will be able to get this deposit refunded. I would recommend you put down XXX based on the offer price. The next blank we have to contend with is this one that provides for you to request that the seller pay some or all of your closing costs and escrow set up for taxes and insurance. Scott mentioned that he sent you an audio clip and that you agreed that $5,000 would be a good number. This is a start of a example of how you could use this to walk your client through the highlights of the agreement if you can’t get together in person[/list_item]
[list_item]Home Loan Scenario. Before you go to make an offer that involves financing, it is always a good idea to check with the loan officer to make sure you’re on the same page. Depending on your clients situation they may need or want to structure the contract to have the seller pay some or all of the closing costs and escrow setup for taxes and insurance. We always send our clients out an audio clip like this, walking them through this itemization so they are fully educated on the total closing costs and escrow setup costs. That way we are all in synch as to how much to request the seller pay towards this total cost. You can see here on page one, we have a itemization of all the closing costs and scrolling to page 2 breaks down the escrow set up costs and the details of the transaction including cash to close and monthly payment. We have attached a sample so you can see how we walk each client through the numbers in detail.[/list_item]
[list_item]HUD. When you get to the final settlement statement from the lender, wouldn’t it be nice to use an audio clip to walk your client through it. Here at Family Mortgage, we do this for each client and copy the agents in. We have attached a sample audio clip so you can listen in. If you’re not working with Family Mortgage, use this to really WOW your clients.[/list_item]
[list_item]Other Applications. Ok now that we have introduced you to the power of audio clips for your business, what are some other applications you could use them for in your business? How about, listing agreements, buyer agency agreements, appraisals, home inspections etc….This tool can allow you to highlight things in documents that are hard to describe if you can’t be in person. Let us know if you need help getting started…we would be happy to spend some time together getting you setup and started on the right track. It really is a breeze.[/list_item]
[slide name=”Make Sure Your Buyers are Certified Home Buyers “]
Be Sure Your Clients are “Rock Solid” Up-front. The residential mortgage industry is in the midst of change unlike any we have seen in recent memory. Lending standards are tightening up rapidly, making it harder and harder to get approved. Borrowers are paying rate premiums for anything but perfect credit. But there are steps you can take to be prepared to get the best possible interest rate and insure you have the rock solid approval. Family Mortgage offers a designation called ‘Certified Homebuyer.’ This allows us to gather all of the necessary application paperwork and income/asset documentation up front and issue a “rock solid” approval before we can even issue the approval letter. If there are any issues, we know immediately. You can rest assured your deal isn’t going to get tripped up later and it is one less thing to worry about during the due diligence period. In your next tip we will explain in greater detail the distinct differences between being “pre-approved” and “Certified”.
What is a Certified Homebuyer? It is the strongest approval available in the marketplace. The difference between this and a pre-approval is that the borrower’s income, assets and debts are verified by an underwriter upfront. A typical approval means that the lender has taken an application, has pulled credit and may have even taken the step of uploading the electronic file to Fannie Mae or FHA for approval. The problem is that the computer assumes that what was put on the application and uploaded electronically is supportable with proper documentation. If it is not, the loan will be turned down. We validate the following to offer a “rock solid” approval before you ever go shopping for a home:
[list_item]A satisfactory credit report has been obtained and approved.[/list_item]
[list_item]Sufficient income to qualify has been documented – if they are self employed we get 2 years of tax returns. If there is bonus income we need to verify its receipt for 2 years and that it is not declining.[/list_item]
[list_item]All funds needed for closing have been verified – are there any large deposits that we will have trouble explaining…are there gift funds involved?[/list_item]
[list_item]If you have an existing home, does it need to be leased or sold – do they have adequate reserves to cover both homes under the new guidelines?[/list_item]
[list_item]No other known credit issues exist to prevent closing.[/list_item]
To test the strength of an approval, ask the lender if they can close in 15 days or less. If not then you should be concerned about the validity of the approval itself. If the borrower has gone through the Certification process, then the heavy lifting is done. What is left is the appraisal and some detail work like securing insurance, title work etc.
Structuring a Contract For Success
[slide name=”Who should Sign “]If you are representing the buyer, be sure to confirm with the loan officer who will be on the loan. The contract has to be signed only by the borrower or borrowers that will be on the loan.
For example, if a husband and wife are buying the house and the loan will be in the husband’s name only with the wife on title, the contract would have to be in the husband’s name only. This avoids having to amend the contract later.[/slide]
[slide name=” Due Diligence and/or Financing Contingency Periods “]This is definitely an area you will want to coordinate with your clients Loan Officer. Some agents just use a due diligence period but we recommend a financing contingency be used as another level of protection. The time frames that you select will be driven by several different factors such as:
[list_item]Are you dealing with a bank, broker or Mortgage Banker? A mortgage banker such as Family Mortgage will underwrite a file in house and typically will have an approval in 2 days or less. If your client is financing through a bank or mortgage broker, expect longer turn around times. But the key is to find out a realistic time up front so you are not in a position to beg for an extension.[/list_item]
[list_item]Is there more than one loan involved? We have a relationship with a credit union that will finance up to 90% of the value of a home with a 2nd mortgage. This comes in handy when your client is buying a larger home and can’t qualify for a jumbo mortgage because they don’t have enough of a down payment. We can do a $417,000 first mortgage and the balance to 90% on a 2nd mortgage through the credit union. The only catch is that we need 2-3 weeks for the credit union to give us an approval. As long as everyone coordinates upfront we are in good shape….we just need a longer financing contingency period.[/list_item]
[list_item]If your client has been Certified (pre-underwritten) upfront, we will be able to instruct you to proceed with a more aggressive financing contingency timeframe which will strengthen your offer.[/list_item]
[slide name=”Appraisal Contingency “]This once again should be checked with the Loan Officer. If you are working with a mortgage banker such as us, we are able to order the appraisal immediately and have pool of local appraisers that we trust that will turnaround the appraisal in 3-4 days assuming that an appointment can be set quickly.
If you are dealing with a bank or mortgage broker, there may be a 3 day waiting period just to order the appraisal (depends on their interpretation of the RESPA changes that were enacted last year) and they typically take 5-8 days from the time the appraisal is ordered. So all told, you may be looking at as long as 15 days in some circumstances.[/slide]
[slide name=”Seller Contributions “]The loan officer should have provided an itemized breakdown of the closing costs and the prepaids (escrows for taxes and insurance and prepaid interest).
If you are dealing with a first time homebuyer, most often they will prefer to have the seller to contribute as much of the closing costs and prepaids as possible. Sometimes, the only way the deal will work is if the seller pays for everything.
If money is no object, then some prefer to negotiate the lowest price possible and handle the costs themselves. But the point is that it is important to coordinate this with both your client and the loan officer.
Oftentimes your buyer may not even know what has to happen.[/slide]
[slide name=”Special Stipulations “]Be careful about including anything in the contract that the buyer will get and not have to pay for it that is out of the ordinary.
For example, lets say the buyer agrees to leave a big screen TV. Most underwriters now will want a value attached to it and will require the purchase price of the house be reduced by that amount. Also be sensitive about bringing up problem areas with the house that might force an underwriter to have to dig deeper.[/slide]
[slide name=”Pre-Approval Letters “]You will always want to submit an offer with a pre-approval letter. We recognize that agents have different styles and prefer the letter read a certain way. Just let us know what you would like it to say and we are happy to accommodate your request.
If you receive a letter from another lender that does read the way you like, give them a call and see if you can get them to re-word it.[/slide]