Seller’s Closing Costs

Thinking about selling your Edmond, Oklahoma home this coming year?  Part of the successful transfer of Real Estate from the seller of a home to the buyer is avoiding surprises.  Surprises in Real Estate, especially on the day of closing generally translate to money coming out of someone’s pocket.  The best way to ensure you’re walking away from the closing table with what you expected to see on the bottom line of your settlement statement is to work with a quality Realtor who can help you accurately estimate the true costs of selling your home.  Here are some of the expenses involved for the seller to successfully get to the closing table:

  1. Loan payoff costs.  This is the fee involved in paying off, and closing your existing mortgage with your current lender and can include pre-payment penalty fees
  2. Real Estate commissions.  Generally the home seller pays commissions to both the listing Realtor (your Realtor) and the selling Realtor (buyer’s agent’s Realtor)
  3. Transfer taxes
  4. Title Insurance
  5. Notary
  6. Attorney fees if attorneys are used in the transaction

Buyer’s Closing Costs

The price of a new Edmond, Oklahoma home is more than just the sum of the size of your down payment and the mortgage you obtain for the purchase.  There are many other costs involved you should be aware of ahead of making an offer on a home.  Some can be paid with the mortgage proceeds at the closing table.  These generally are related to the paperwork end of the purchase, like loan application fees, etc.  Some costs relate more to the actual home, like inspections.  All of these costs affect your bottom line and need to be budgeted for so you’re not left scraping for extra funds at the last minute.  Here we go:

  1. Fees associated with obtaining the mortgage
  2. Home inspection costs
  3. Homeowner’s insurance
  4. Title insurance
  5. Title settlement fee
  6. Property taxes
  7. Transfer taxes (which may be shared with the sellers)

Closing costs generally range between 2 – 7% of the sales price of the home, and lenders are required to give you a good faith estimate shortly after you make application for the mortgage.

Budgeting for Unexpected Home Repairs

Not all home improvements are as exciting as taking a dreary Edmond, Oklahoma basement and finishing it to include a fifth bedroom, home theater, game room, and personal pottery studio.  Some improvements can be categorized more under unplanned repairs (and unplanned expenses) necessary to bring a home back to normal, everyday working condition.  We’re talking replacing a dead furnace, re-roofing cracked and warped shingles, or replacing a dishwasher.

How do you plan for the unexpected repair expense?  One way is the 1% rule, that is to say, plan on 1% of the value of your home in repair costs annually.  This way, whether you set aside some money every month, or every paycheck you’ll have the funds available when costly maintenance issues arise.

An alternate method for budgeting for the unexpected is using the $1 per square foot rule.  With this method you simply take the total number of square feet in your home and put a dollar sign in front of it to estimate how much your annual maintenance expenses may be.

It’s important to keep in mind most household appliances last 10 – 15 years before needing to be replaced.  So if you bought your home with all brand new appliances, and you’re nearing your 10 year anniversary, you may want to start budgeting for a new dishwasher, stove, water heater, fridge…

“Need to Know’s” Before Grandma Moves In

In years past it was a common occurrence for Grandma (or Grandpa) to move in with their adult children at some point during their retirement years.  Three generations (or more) in the same Edmond, Oklahoma home can have its benefits.  If your children are still younger you have a built-in babysitter so Mom and Dad can have a date night every once in a while.  Financially, the arrangement makes a lot of sense because it can be significantly less expensive than paying for Grandma to have her own place.

But for every positive that can come out of having your mother move in with you there is also a potential negative.  Making the decision for financial reasons is one thing.  But what if your decision is based on Grandma’s health?  Will she need a responsible adult in the home with her at all times?  Does she have a condition (like Alzheimer’s, for example) where her health will continue to deteriorate and eventually require a more dedicated caregiver?  Grandma’s health is just one consideration you should take into account before moving her in with you.  Here are some other considerations to ask yourself when evaluating the prospect of having Grandma move in:

  1. How has your relationship been with your mother historically?  Aside from the normal, inconsequential disagreements any two individuals can have how have you gotten along otherwise?  If your relationship has always been strained what will it be like when you’re back under the same roof?
  2. Who will be paying for what?  Avoid disagreements down the road by discussing and agreeing ahead of time who will be responsible for which expenses.
  3. What does your spouse think?  As important as it is to you to take care of your elderly parents, it’s just as important to take care of your spouse and children.  What does your spouse think about moving Grandma in?  Be clear on what Grandma’s role will be in the house in relation to the children.  Will she be “in charge” while Mom and Dad aren’t home?  Have a nice long talk with your spouse, and include the kids so know you’re taking their feelings into account too.
  4. Be realistic with time commitments.  Is your schedule going to allow you to be available as much as your mother may need you?  With all the other demands on your time can you realistically be the primary caregiver for someone who’s failing health requires more consistent attention?

Five Home Buyer Turnoffs

If you’re thinking about selling your Edmond, Oklahoma or Greater Oklahoma City home this spring, why not start getting your house ready for the market now?  You say your house is already ready?  Really?  What about that distinct German Shepherd scent that practically knocks you over when you step through the front door, or the boxes full of Beanie Babies toys you used to collect but which have now entirely taken over one of the bedrooms?  What about the lime green stove and refrigerator in the kitchen that are older than your thirty-something children?

Selling a home does take time, effort, and energy, and all other things being equal between two houses for sale (same number of bedrooms, same number of baths, age of home, etc.) the one that shows better will sell quicker, and for more money.  So what to-do’s should you spend your time on to ensure your home is in tip top showing condition?  Why not just ask the experts who spend their time working everyday with home buyers what most turns off their clients when viewing homes for sale?  Good idea.  Following is a list compiled by Bankrate.com of the most troublesome turnoffs for buyers compiled from Real Estate Buyer’s Agents, home interior decorators and designers, and Real Estate marketing specialists:

  1. Dirt.  This one may seem like common sense, but sometimes it’s the easiest overlooked.  Dirty carpets, tile, walls, and disagreeable smells like pet odors and cigarette smoke can turn people off, and turn them away from looking at the finer selling points of your home.
  2. Outdated kitchens.  So you know you’ll have to give any potential buyer an allowance to purchase new kitchen appliances, right?  Why not go ahead and install new stainless steel equipment now in case buyers are unable to look past your dated kitchen?
  3. Wallpaper.  Nowadays wallpaper is a no-no.
  4. Personal belongings and clutter.  How can potential buyers see the true benefits and features of your home if they’re distracted by your extensive HO train set taking up the entire basement, or the stacks of magazines and newspapers they’re busy navigating just to get from room to room.  Pick up, pack up, put away, and de-clutter.
  5. Nosy sellers.  Yes, you!  When you do list your home for sale, and your Realtor calls to set up the appointment to show your home to potential buyers, be sure to leave the house during the appointment.  Sellers who stick around too long interfere with visiting buyers trying to imagine making your house their home.  Go for a walk or go for a ride, whichever.  You just need to be sure to go.

How the New QM Mortgage Rules Affect Borrowers

A new set of rules went into effect at the beginning of the year from the Consumer Financial Protection Bureau aimed at ensuring consumers obtain sustainable loans and keep banks from making questionable loans to unqualified borrowers.  These new rules known as the QM regulations (short for Quality Mortgage Regulations) are in response to the recent housing and financial crisis.

As a potential Edmond, Oklahoma borrower applying for a mortgage loan your total monthly debt payments must be at 43% or lower of your monthly income.  Secondly, lenders are capped at 3% for lender fees on the loans they provide.  By sticking to these two standards a loan earns the QM designation, which means the loan can then be purchased or guaranteed by Freddie Mac or Fannie Mae.  Bottom line, QM loans backed by Freddie or Fannie bring legal protection for the lender against future lawsuits by borrowers or investors.

That’s not to say lenders do not have non-QM loans available.  With the new regulations the onus is still on the bank to complete their due diligence, ensuring borrowers have the ability to repay the loan, but the non-QM loans will not receive the same legal protection as the QM loans.

What does all this mean to you?  Much of the flexibility lenders had in the past is now gone.  Many banks have already gotten rid of quite a few of their mortgage products in the wake of the crisis like the no-documentation loans, interest only, and negatively amortizing loans.  These new regulations are more likely to affect traditional borrowers in any of a number of ways.  An example would be a borrower with a healthy savings account, but who has lower monthly income because they are retired.  Likewise self-employed people may be evaluated under a more powerful magnifying glass as to their ability to repay as banks strive to toe that 43% debt to income ratio.

From Buyer Beware to Seller Beware

You’ve heard the old sales axiom, “caveat emptor” or “buyer beware,” right?  But following on the heels of a down economy a disturbing trend has come about that should be a warning to all Edmond, Oklahoma home sellers.  Sellers beware: failure to properly (read legally) disclose defects in Real Estate up for sale will come back to bite you.

Here’s the impetus.  In good and bad economies alike homeowners across the country periodically end up in a financial situation where they need to move.  Could be unemployment, under-employment, or any combination of factors compounding the issue.  Then consider the mounting differed maintenance issues in a home where the owners’ cannot afford repairs, let alone the mortgage payment.  The thing is, when the economy takes a hit, as it specifically relates to the housing market, home values depreciate.  When values depreciate, and equity is lost, homeowners needing to move suddenly find themselves unable to afford to sell.  So the choice is eventually to forfeit a property via foreclosure, or to try to sell a home already in need of some serious help.

Perfect storm, right?  Now, homes can be sold in as-is condition, just as mortgage companies can deny a loan on a home they see as having serious defects.  The problem arises when home sellers neglect to disclose known defects in a property, defects that only come to light after the sale is complete and the new owners have moved in.  Many of these defects are addressed by law as well as in sales contracts, and suddenly the unscrupulous home seller is held accountable for more than just the price of rectifying the defect.

What are the most common non-disclosed defects resurfacing after the sale?  Termites, water damage, mold, and lead.  Even non-disclosure of previous known repair work, or the fact that a property lays within a flood plain or earthquake zone can come back on a seller.  The short solution to avoiding post sale repercussions?  Disclose everything.  The alternative?  Best not to find out for yourself.  The best advice is to talk to your Real Estate agent about creative, legal ways to facilitate the sale of problem properties.

Mortgage Market Update and Notes

In the weeks after several economic reports including recent weaker housing data have been released we’re seeing mortgage rates down slightly pretty much across the board.  The only rate to inch up from the week previous was the 1 Year Treasury-Indexed ARM which had a negligible increase of 0.01%.  Here are the week’s rates and notes for our Edmond, Oklahoma friends and family courtesy of Marketwired and Freddie Mac:

30-year fixed-rate mortgage (FRM) averaged 4.32 percent with an average 0.7 point for the week ending January 30, 2014, down from last week when it averaged 4.39 percent. A year ago at this time, the 30-year FRM averaged 3.53 percent.

15-year FRM this week averaged 3.40 percent with an average 0.6 point, down from last week when it averaged 3.44 percent. A year ago at this time, the 15-year FRM averaged 2.81 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.12 percent this week with an average 0.5 point, down from last week when it averaged 3.15 percent. A year ago, the 5-year ARM averaged 2.70 percent

1-year Treasury-indexed ARM averaged 2.55 percent this week with an average 0.4 point, up from last week when it averaged 2.54 percent. At this time last year, the 1-year ARM averaged 2.59 percent.