mortgage

Why a home sale falls through

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Home sales are complicated. There’s a lot more to it than putting a buyer and seller together. Things can go wrong. Deals do not always close. And here are the top reasons why some home purchases fall through:

Inspection surprises. Each transaction involves an inspection by a licensed home inspector. Some are very good. Some, not so much. Among the “not so much” group you’ll find inspectors who identify numerous very small issues which, while not material, scare the heck out of the buyers, causing them to back out of the purchase.

Buyer financing. Even if the buyer is “pre-approved” by a lender, it does not guarantee financing. Sometimes when the lender looks more deeply into the buyer’s financial condition, they find issues that cause them to reject the mortgage application.

Low appraisal. During periods when homes are appreciating in value, appraisals are typically not a problem. In soft markets, though, it is not uncommon for a home appraisal to come in lower than the agreed-upon purchase price. In this case, lenders either choose to not make the loan or demand a higher down payment. The buyer can back out or seek a lower price from the seller.

Buyer remorse. Occasionally a buyer simply gets cold feet, and, unfortunately, he usually gets his earnest money back. Bad news for the homeowner and for the Realtor.

An experienced Realtor can help to minimize these risks, though failed transactions can happen to any seller and any Realtor. I even see this occasionally in The Glen (in Glenview, Illinois) where I live and work. The Glen is an upscale residential community with luxury homes…single family homes, condos, townhomes, two-flats, and duplexes. The price points are substantial, so we typically see qualified buyers who are serious about their home search. But, as I say, it can happen.

If you may be interested in The Glen or greater Glenview, please call or email me.

Margaret Ludemann, @properties Realtor, margaretludemann@gmail.com 847-401-1802

Glenview, one of the safest cities in the U.S.

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Safety. You’ll find few other factors more important to home buyers. And here’s some great news for homeowners in The Glen, a residential and retail development in Glenview, Illinois. Glenview is ranked the 37th safest city in the United States!

OK, let’s put that in perspective. According to U.S. Census Bureau statistics, there are 19,354 incorporated communities in the country. So, Glenview is in the top 0.0019% of American cities in safety. Rare air, indeed.

So, where did this ranking come from? As you know, lists of ‘top this’ and ‘top that’ appear regularly, often from sources with, shall we say, ulterior motives and questionable credibility. But that’s not the case here. Neighborhood Scout is a national neighborhood search engine and provider of location-based analytics for real estate investors, mortgage professionals, and home buyers.

The rankings are determined by factoring in data from over 18,000 law enforcement agencies, and ratings are assigned for various types of crime, such as murder, robbery, assault, burglary, and theft. Looking at the list of the Top 100 safe cities, we find that the safest places to live are in areas where residents can afford to relocate for quality of life. These tend to be bedroom communities near major cities, with low unemployment, high educational attainment, and great schools such as those found in Glenview. (In a future blog, I’m going to analyze Glenbrook South High School’s recent high ranking.)

So, if you are a resident of The Glen, rest easy…you’re in a great place. If you are considering buying a home in the Chicago area, take a look at The Glen. I am an award-winning Realtor and a long-time Glen homeowner, so give me a call.

Margaret Ludemann, Realtor, @properties

847-401-1802   margaret.ludemann@CBexchange.com

Impact of new jobs report on Glen home buyers & sellers

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The Labor Department reported last Friday that the economy created 271,000 new jobs in October which is much better than anticipated; and the unemployment rate dropped to 5%. That’s great news, of course.   In simple terms, people without jobs can’t purchase homes, so more jobs = a larger pool of prospective buyers.

Even entry level jobs can positively impact the market for higher priced homes in places like The Glen and greater Glenview where I focus my real estate practice. Why? Because the sale of an existing entry level home turns the home seller into a buyer of another home, presumably one with a higher price point.

There is a downside to today’s report, though my sense is that it will modest, at least in the short term. With the very positive news on job growth, the Fed is more likely to increase interest rates at its next meeting in December. If so, it will be the first increase since 2006. While the federal funds rate is not directly tied to mortgage interest rates, it increases the borrowing costs of lenders who will pass along their additional costs to their home buyer clients in the form of higher mortgage rates. I’m not an economist and I don’t play one on TV, but I suspect that the Fed’s December increase (if it occurs) and any further increases next year will be modest because the Fed does not want to throw a wrench into a still recovering economy.

So here’s the take away:  A healthier employment climate will increase housing demand, but expect modest increases in mortgage interest rates in 2016.

Margaret Ludemann

Realtor, @properties, Glenview Illinois

847-401-1802   margaretludemann@gmail.com

What you should know about home appraisals

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A neighbor of mine here in The Glen is considering selling his home, and knowing this will require an appraisal of his home, he asked me how they work. So I thought I would write to you about it in today’s blog.

Home appraisals are performed by independent, certified professionals (not realtors) to establish the current fair market value of a home, information that lenders use to determine if and how much they will lend. They will examine the most recent selling prices of comparable homes to yours (known as “comps”). They will consider other factors such as your home’s condition (which they will personally inspect) and whether the residential real estate market in The Glen is appreciating or depreciating. In a housing market where prices are steadily rising (which is the case in The Glen currently) appraisals are typically not a problem unless the seller and buyer have agreed on a price that is much higher than similar homes have sold for recently. In markets where prices are falling appraisals many times come in below agreed-upon sales prices.

When a home is appraised at less than the agreed upon sale price lenders either reject the buyer’s application for a mortgage or require that they put more money down. Some buyers may not have the ability to come up with additional down payment money or they may not wish to do so. In this case buyers might choose to simply walk away from the deal or they may ask you to renegotiate the purchase price downward so that they can qualify for the mortgage loan. At this point it is your choice whether to renegotiate or walk away.

Even if a home purchase transaction is for cash (not requiring a loan) some buyers still require an appraisal as a condition of the sale. This is to protect them from purchasing a home above fair market value.

So that’s how it works. If you have any questions please call or email me. I am a long time homeowner in The Glen and an award winning Realtor affiliated with @properties.

Margaret Ludemann   847-401-1802   margaretludemann@gmail.com

Mortgage interest rates: good news for home buyers and sellers

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A few weeks ago a potential buyer of a home in The Glen (in Glenview Illinois) told me that he was holding off buying a home until mortgage interest rates improve. I believed that was unwise, so I researched historical 30 year, fixed rate mortgage interest rates using Freddie Mac data. I grouped them into 5 year periods and calculated the averages. What did I learn…that recent mortgage interest rates are roughly half what they were 25 years ago!

The average rate in August (the most recent data available) was 4.12% for a 30 year fixed rate mortgage. This is a smidgeon higher than early months of 2013. Rates, however, have inched downward in each of the last 4 months; and that August rate of 4.12% is actually lower than the same month last year. So it is clear that home financing today is extremely low. While rates may bump along with modest increases and decreases in the short term, there is no evidence that they will become appreciably lower in the foreseeable future. In fact, it is likely that rates will eventually increase to more normal levels.

Interest rates matter…a lot…because they affect a buyer’s monthly payment and the total cost of financing over the period of ownership of a home. Every 1% rise in interest rates reduces buying power by approximately 11%. Obviously today’s low interest rates are beneficial to home buyers, but they are also good for home sellers. If buyers can purchase more house because of low interest rates, there are more qualified buyers for sellers’ homes.

If you are interesting in buying a home in The Glen or greater Glenview, please email me at Margaret.ludemann@cbexchange.com or call me at 847-401-1802.

Margaret Ludemann, Glen homeowner and @properties Realtor