Good Faith Estimate (GFE) versus Initial Fees Worksheet

As of the first of the year HUD issued new rules regarding Good Faith Estimates (also know as GFE’s).  These newly adopted rules called for stricter guidelines for the preparation of GFE’s by lenders, mortgage bankers and mortgage brokers.  Obviously the look of the GFE and layout has changed; however, the real change in the rules is how accurate the preparer must be in estimating closing costs and loan origination fees.  In the past there were not many guidelines regarding the accuracy of these items.  Although, I feel that there are many great mortgage brokers and lenders working in our market; I must also admit that I had many instances where the final HUD at he closing table had significant differences from the original GFE, and trust me, it was never in the favor of the buyer.  Although, there is no way to prove it; it would appear that preparers of GFE would under estimate closing costs, prepaid items and origination fees in order to get the buyer / borrower to commit to them, only to later at the closing table, at the 11th hour change-up the numbers.  “Well, now what here we are a the closing table, with a ton of deposit money in escrow at risk if we don’t close.”  Naturally, this would anger any buyer and anger any agent or broker representing the buyer.

I for one am glad that the new rules are in place. The rules basically state that there is only a small margin of acceptable variance from the GFE to the final HUD for the previously mentioned fees.  Also, if these fees do vary by more than the acceptable margin then the lender must absorb the difference.  I feel that this will help in more honest and responsible lending.

Lenders are naturally concerned about this rule as they see it as potential losses.  Therefore, many lenders have responded by creating “initial fees worksheet”. This worksheet will give an estimate of fees and prepaid items, etc. However, this particular worksheet will be provided prior to application, that is prior to the borrower having their credit pulled, or even providing the property address.  The main thing for a buyer / borrower to remember is that this is not a GFE and should not be taken as such. The “initial  fees worksheet” offers no guarantees whatsoever.

Please browse our site where you may perform a property search or estimate your mortgage payment.

South Florida Brokers & Associates, Inc.

Reports of Short Sale Fraud

It is no big secret that in  the recent post real estate boom market there have been great deals for investors and end-use buyers in the foreclosure and short sale arena.  Many buyers know exactly what a foreclosure is but many are not familiar with short sales. Well, a “short sale” is a sale in which a lender agrees to allow a property to be sold in a sale which will produce proceeds insufficient to clear the actual loan amount / balance, in laymen terms the lender will take a loss on the loan.  This type of sale although considered cumbersome by most real estate practitioners are an essential part of a recovering market.  Therefore, as real estate brokers and agents we should do our best to help buyers find the best deal on the market; and if the best deal is a short sale we should certainly educate the buyer on short sales and work the deal and on the other side if we have the short sale listing we should educate the seller and work closely with the lender involved on the short sale to ensure a successful transaction.  However; buyer, seller and real estate practitioners BEWARE!!!!

I read a recent CNBC report which was a bit disturbing. This report depicted fraud when it came to these short sales.  Although, as a brokerage we have not experienced or witnessed this type of activity, the report did place me on guard and as a broker I have passed on the information to the associates working with us.

The allegations go something like this: There is a short sale listing which goes under contract. There are two mortgages on the property. The primary lender or first lien position accepts the contract and negotiates with the secondary or second lien holder a reduced amount, usually a small fraction of what they are actaully owed.  The buyer and seller all sign.  This is all perfectly legal and good until the secondary lender does one extra step. That extra step is that the secondary lender contacts either one of the real estate agents (seller or buyer agent) or the seller or buyer directly and states that they want additional funds paid outside of closing (POC) or wants fund paid which will not be depicted on the closing statement (HUD).  This is a violation of RESPA (Real Estate Settlement Procedures Act), which clearly states that all monetary transactions must be depicted on the HUD.  However, secondary lenders are allegedly ignoring this fact and asking for funds outside of closing disregarding the law; and going to the extent as to threaten to block or kill the short sale and allow the property to go into foreclosure.  The irony of all of this is that although it may harm the seller and buyer and the real estate licensee it still doesn’t help the secondary lender as the fact is that if the property goes to foreclosure the second loan will subordinate to the first lien position anyway.

In conclusion, our advice to sellers buyers and all of our counterparts is to not participate in this type of activity.  No commission or deal is worth a license being revoked or to be accused of aiding in fraudulent activity.

Find Great DEALS in South Florida.

South Florida Brokers & Associates, Inc.

2009 was a great year for Condo Sales in Downtown Miami

According to a recent article in the Miami Herald 2009 was a pretty good year for condo sales in the Downtown Miami area. The article expresses that buyers snatched up good deals at a rate of 7 condos per day.  In my opinion this is extremely impressive in light of the downturn in the real estate market in recent years. The article goes on to describe a possible reason for the buying frenzy, that is developer slashing of prices by roughly 33% from an average of 300 per square foot to 200 per square foot.  We ourselves can say that we have seen many sales closing in our office in this 200 per square foot for condos off the ocean (areas such as Downtown, Brickell and even Aventura).

However, I don’t believe this means we are out of the woods yet.  I also read another report where realty track is depicting the foreclosure filing shooting up by 21%.  This may keep the inventory at high levels, meaning good news for buyers who will be able to shop in a market that will still have great deals due to high inventory, but hopefully in a recovering real estate market.

Take a look at the great priced unit available in Downtown Miami and Brickell areas.

South Florida Brokers & Associates, Inc.

Pending Homes Sales Index is down

Today I got several report from reliable sources (NAR, FAR and Realtor.org) that the pending home sales index was significantly down from October 2009 to November 2009.

Pending home sales are Down

As most of us know the pending home sales index is an excellent indicator often used to forecast future real estate activity in a market or even nationally.  The idea is that the higher this index the lower the inventory will be in the next 30 to 60 days and we all know that the lower the inventory the more likely prices are to increase.  Well the same can be said for the reverse; that is to say the lower this index the less homes can be expected to close and if sellers continue to place properties on the market then inventory should increase and prices drop.  With that said the November 2009 pending home sale index dropped by 16% from October 2009; however, this may be very misleading.  The reality is that there was one big factor that was more than likely artificially increasing the index in November 2009.  That factor was the tax credit expiration.

I believe that buyers were rushing to the market in order to make their purchase in time and benefit from the economic relief program consisting of the tax credit.  However, the extension of the tax credit may have simply alleviated the pressure of  the rush and therefore deflated the pending home sales index.

When we look at additional data we find that the pending home sales index actaully went up significantly form November 2008 to November 2009, this is more like comparing apples to apples.  In this case the index rose 15%, according to data gathered and received from realty times.com. This is a clear indication that the marker was certainly headed in a better direction in 2009 over 2008 and I believe that 2010 will be better than 2009.

In addition, prices have been creeping up in most major metropolitan areas.

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Smart investors are making their move into real estate…..NOW!!

Well, it looks like reports are coming in from all over reputable resources (from the National Association of Realtors to local boards to private reports such as Realty Times) that the real estate market has a positive outlook for 2010.  These report apply to mainly residential real estate; however, there is one particular sector that I have noticed pick ing up speed in our brokerage and decided to do a bit of research on it.  That sector is the real estate investor.  I am speaking here about your average investor, the “average joe” not you huge developer.  I mean lets face it the formula is pretty simple and it goes something like this:

HIGH INVENTORY + AFFORDABLE PRICING + LOW INTEREST RATES = OPPORTUNITY

Now it would be easy to simply leave it at that but I prefer to look at the hard data, from reputable sources. 

According to move.com just over 12% of buyers are looking at purchasing an investment property.  Furthermore they state that 25% of homebuyers are targeting foreclosures, and of that number 42% regard their purcahse as an investment.  These numbers are pretty impressive compared to the past two and even three years.

In addition, in 2010 we are much clearer on exactly what the government is willing to do or not do in order to prevent additional decay in the financial system.  The extension of the tax credit has most certainly helped and also the inclusion of non-first time home buyers to be eligible for the tax credit has increaed the pool of potential buyers.  In short there are more buyers out their that will soon match the inventory levels.

In addition, we are seeing reports daily that consumer confidence is on the rise.

Now, I most certainly do not believe that we are headed for another real estate BOOM similar to the one in the mid 2000’s (and I for one would hope that that would not be the case), but I do believe that we are headed for a much more stable market, a much more equal playing field for buyers and sellers.

So buyers if you are on the fence, now is the time to dive deep into your research.  Look at trends, watch the market!

For your complete property search with no obligation log on to www.arealtyteam.com

South Florida Brokers & Associates, Inc.

New Fannie Mae Loan Guidelines

OK, so you found your dream home and you have 20% of the purchase price to put down, plus you dont need any seller contribution for closing as you also have that money set aside. Your dream home is listed under market value and will easily appraise, it isnt a short sale and it isnt a foreclosure; just an old fashioned GOOD DEAL. This should be a breeze, you simply apply for a loan and wait for your approval and then go to the closing table.  Oh, wait a minute may not be exactly that simple. 

The new Fannie mae loan guidelines may affect you.  Effective today (December 15, 2009) you credit score will play a much bigger roll that in the past.  Effective immediately the new required credit score needs to be at a minimum of 620; this is a drastic increase in credit requirement from the previous 580 score requirement. In addition to the stricter credit requirement Fannie Mae is also concerned with you current obligations. In other words, a maximum of 45% of your income can go toward current debt or obligations.  These obligations would include debts such as car payments, credit cards payments, and other loans.  Add to this that fact that if you are purchasing a condo there will be a condo questionaire which will depict condo maintenance dues delinquecy rates and forclosure rates in the building; this will also be taken into consideration when the lender is evaluating the risk involved with your loan.

It is expected that most banks will adopt the new higher standards imposed by Fannie Mae; considering that Fannie Mae buys loans from lenders inturn providing needed financing to these institutions.

If you are in the market to buy a home some good steps to take are: lowering currect debt, do not open additional accounts, and do not make any other major purchases (ie, a vehicle).

Also, it is a great idea to keep an eye on your credit score.  One good website to use is annualcreditreport.com , there is a small fee associated witht the complete report, but if you are in the market for a purchase it is well worth it.

For a complete property search log on to arealtyteam.com

Foreclosure Filings Fall 8% (But what does this really mean?)

The Florida Association of Realtors recently reported in an industry e-mailed news letter that the number of homeowers falling into foreclosure dropped for a fourth consecutive month in November.  The update goes on to point out that millions of Americans are still being considered for Barack Obama’s foreclosure prevention program. 

This actaully leads me to believe that the drop in foreclosure filings may not be an indicator that we are actually seeing a turn around. My question would is how many of these “millions” being considered will fall short ofthe requirements to enter into the administrations program? Could we be looking at forclosures coming out inh the future, could be be penting up the foreclosure that well later be unleashed on the market.

I have many buyers which are n the market to invest and this questions comes up often. Basically, it goes like this “… do you think that the worst is behind us or do you think it will get worse…?”

Well, I guess the answer is a bit of both.  Keep in mind that the market is local; therefore, looking at state or national data only gives you a broad view. You really need to focus locally. If we look closely at the stats, we find that yes foreclosures are going down for four consecutive months (this is good right), well not really not when you compare it to a year ago same month.  I believe if you do this you will find that they are between 15% and 20% higher this year than a year ago. The anser is to go local.

Your real estate professional will be able to pull the most recent comparables, they will be able to search public records for additional foreclosures, they should also be able to check with the homeowner’s association and with a condo board for the status of the property you may be considering.  You are going to want to gauge the possibility of more units going into foreclosure. 

The bottom line is if you are in the market to buy, this is indeed a great time to buy; with low interest rates, properties prices well below market and an abundance of inventory to sift through. But be sure to associate yourself with a local, knowledgable real estate professional that will dig up the real scoop on your property of interest. For properties in South Floirda start your search HERE.

Finding Good Reliable Real Estate News and Information

As the broker of South Florida Brokers & Assocaites and Miami Rent Seekers ; I am constantly searching the internet for reliable real estate news, information and updates.  Although, I believe that our National, State and Local Boards offer excellent services in this realm, by providing weekly and monthly updartes via email and simply by logging on to the perspective websites sometimes we ned the extra that gives more consummer oriented information.  I recently discoverd  realtytimes.com. This site offers a wealth of information.  This information is very much up to date. Anyone is abl to access this site and view information such from Real Estate Forecasts and  Current Market Conditions to Buyer and Seller advice and even an agent locator.

The real estate professional is certainly not left out of this site. In fact thair are several tools I noticed that are available to real estate and mortgage practitioners. Many are geared towards adverisment.

To be honest the best feature of the site that I noticed was simpy the podcst at the very top of the home page.  If you play it, it will give you a quick and concise view of the national real estate market and break it down on regions for you.  Although, I do not believe this site replaces local infomtation (we all know real estate is very local), I do believe it is an excellent source for quick information as an overview.

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