My short answer is that “It’s crazy upfront, quiet in the middle, and then gets busy again before closing.”

Basically (in a typical Arizona home sale):

• Escrow is opened. The buyer’s earnest deposit check is deposited with the title company.
• The title company will mail or email a packet to the buyers and seller, that could be completed and returned ASAP.
• The seller provides a seller disclosure and an insurance claims history, within 5 days of contract acceptance.
• If the buyer is getter a loan, the lender will prepare a Loan Status Update (LSU) for the buyer’s signature, which also must be delivered to the seller within 5 days of contract acceptance.
• Home inspections are to be completed within the first 10 days, unless the time period has been changed in the contract. The buyer requests repairs (if any), and the seller responds.
• The buyer’s lender orders an appraisal and processes the loan.
• About a week before closing, buyer and seller’s order the utility transfer.
• Several days before closing, the buyer and seller sign documents, most often at the title company. In Arizona, buyers and sellers do not necessarily ever meet. Signings are done individually.
• Buyer and bank funds are wired into the title company.
• On the day of closing, the transaction occurs electronically. The title company notifies the real estate agents, who then notify the buyer and seller.
• Keys are delivered!

We currently have quite a few bank-owned properties listed for sale.  This past week, the seller announced that they besides accepting pre-qualification letters from Wells Fargo and Wachovia, they will also accept Neighborhood Assistance Corporation of America (NACA).

This was the first I’ve heard of the Neighborhood Assistance Corporation before, so did a little homework for you.

From the their web site:

NACA is committed to working with people who do not have access to affordable credit. NACA’s participants, or “Members,” are primarily people who have low-to-moderate income, people who will live in communities that need increased rates of homeownership and revitalization, or people who have difficulty obtaining reasonable and affordable credit.

And…

• NACA provides everyone with one mortgage product, which is the best one available anywhere with No downpayment, No closing costs, No fees, at a below market fixed rate and you do not need perfect credit.
• NACA provides free, personalized, and comprehensive counseling to all Members to address your particular credit and financial issues and help determine a mortgage payment you can afford. NACA’s counseling and underwriting criteria are “character-based” and not based on credit scores and ratios.

The program appears to have extensive education and counselling components to assist a home buyer in learning about the home buying process, costs, and budgeting.  It is a program that is sorely needed at this time, and amazingly the interest rate being quoted on their web site today is 5%.

If you are a first-time home buyer, interested in purchasing a home this year, check out the NACA program.  It may be just what you need to make an educated and affordable home purchase in today’s market.

The Phoenix office is located at:

5212 N. Central Avenue
Phoenix, AZ 85012
Phone: (602) 248-4408

Click on chart to see larger view

Click for a better view

 

You can also see that it’s taking significantly longer to sell a home.  From a median of 95 days at his time last year to almost 160 days in today’s market.  Condos have fared better, increasing from 90 days to 115, but it’s still an increase in selling time.

 

Clich chart for larger view

Digging a little deeper, I found this surprise though.  As you can see in the Median New Listings Chart below, the number of new listings has really dropped off since November. Typically, I would have expected to see an increase right after the first of the year. Instead, we are continueing to see a steady drop off.  I’m not sure this trend will hold, but it’s definitely worth keeping an eye on, as it will have an impact on the market.

Click chart for clearer view

In looking through the Altos Research charts for Scottsdale real estate today, you can see we have headed into another downturn in the market over the last several weeks.  The Altos Market Action Index shows slowing in all Scottsdale markets, across all zip codes. 

My suspicion is that many people are focused on the holidays.  At the same time, I’m seeing that many buyers are still very focused on searching through the new listings, keeping track of pricing changes, and asking me to refine their home searches.  While there are not a tremendous number of new homes going on the market during the last couple of weeks of the year, sellers are focused on preparing their homes for listing in January.  Our warm winters and huge events (golf, horses, and cars) attract visitors in droves and these sellers want to be ready.

I believe that after the first of the year, real estate will become a bigger focus for first time buyers and winter visitors / part-time residents.  Why?

1. Home prices continue to drop.  Sellers (those that are motivated) are listing their homes at more realistic prices.  Foreclosures and short sales are driving home prices down, and have an impact on normal, non-bank involved home sale prices. 
2. Interest rates are excellent.  Rates dropped to 4.5% briefly for one morning this week and are now back up to the 5% range.  Most lenders are writing about the refinancing boom, but these good rates also help home buyers, too. 
3. First time home buyer tax credits will expire.  The government has created a tax credit program, that’s really interest-free loan.  The program expires in July 2009, so will provide an additional incentive for first time home buyers who believe it’s a good time to purchase a home.

So, while it looks a little slow now, all that could change fairly quickly during January.  Time will tell.

Image via Wikipedia

The First Time Home Buyer Tax Credit has been around for a couple of months, but I’ve not really written about it:

Paul Wakefield, with Security Mortgage, emailed me his weekly update this morning, with the details and an example, so I decided it was time to share:

A reminder about the HR 3221 First Time Home Buyer Tax Credit.

This is a $7,500 TAX CREDIT, not a deduction. First-time home buyers or someone who has not owned a home for the past three years are eligible.

They must purchase a home between April 9th, 2008 and before July 1st of 2009. So, if the property is purchased prior to December 31st of this year, the buyer could potentially receive their credit in the next couple of months, provided they file their 2008 taxes right away.

The main features are:

• Income Limits: $75,000 for a single tax payer/ $150,000 for a married couple.
• Repayment: A home buyer claiming a $7,500 credit would repay the credit $500 per year. The home owner does not have to begin making repayments on the credit until 2 years after the credit is claimed. If the home owner sells the home, then the remaining credit amount would be due from the profit of the home sale. So, it really a 0% interest loan.
• Tax credit is refundable. For example: If a qualified home buyer expected, notwithstanding the tax credit, a federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit, the taxpayer would owe the IRS $1,000 on April 15th, 2009. Suppose now, that the taxpayer qualified for the $7,500 credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 – the $1,000 owed).

Keep in mind that the FHA does require a 3% down payment. After the first of the year, the minimum down payment increases half a percent to 3.5% of the purchase price. The down payment can be a gift from family, if the buyer does not have the funds.

As a side note, the FHA Maximum Mortgage Limits in Maricopa County will be lowered to $271,050, from the current maximum of $346,250, as of the first of the year.

I have a client who just closed on her first home last month, and one of the incentives for purchasing now, rather than waiting, was this tax credit. She was able to make her down payment, and know that she would be getting a tax credit back in several months, that would replenish the funds she used for her down payment. 

Here are two more resources for buyers interested in using the First Time Home Buyer Tax Credit to buy a home:

First-time homebuyer tax credit chart
Frequently asked questions about the first-time homebuyer tax credit

photo credit: wadem

As human beings, we have two sides to our brain.  Simplistically, I call them the thinking and feeling sides.  One side we use to crunch numbers, and the other we use to enjoy an aesthetically pleasing (or not) piece of art. 

When I work with home buyers, I remind them to use both sides of their brain when purchasing a home. 

To purchase a home, there’s a lot of number crunching that goes on.  Especially in this market, where a home buyer wants to be sure they are paying a price that will hold up in our changing economy and real estate prices are impacted both directly and indirectly by many factors.  Sometimes, it’s easy to get caught up in the decision making process on which home is the best buy, considering location, price, financing terms, and much, much more.

On the other hand, home buyers actually have to live in the property they purchase, so it’s really important  that they like (or love) the home they are purchasing.  After all, it’s where they are going to be waking up most mornings!

Several years ago, I was working with a younger first-time home buyer.  Her mother had flown out to assist her in her selection.  We all worked well together and narrowed the possibilities down to two condos in the same complex. 

At decision times like this, it can be very overwhelming for a buyer.  They are often often asking (many) others for opinions and recommendations.  The noise is their head can get very loud, making it tough to know what is right for them. 

The buyer and I met again to write a contract, and she was still torn as to which condo to purchase.  In this particular case, I asked her one simple question, “Which house did you imagine waking up in this morning?”  She smiled, and gave me her immediate response.  It was not the one her advisers had been giving her, but it was the one that was right for her.

In the past two weeks, I’ve written a number of contracts for buyers.  In two cases, there was one particular room in the home, that each buyer walked into, and connected with. You could see it in each of these buyers’ eyes.  And, it wasn’t anything that we could necessarily search for in the MLS system.  It wasn’t the fact that it had a great view, or an open kitchen.  It was that each of these buyers could see themselves in the home of their choice.  Plain and simple, they were looking for a space to live in, to accomplish their goals, to feel fulfilled.

So, when you are searching for a home on-line, know that this is just the starting point.  Unless you are an investor, who is looking totally at cash flow and the bottom line, you will want to find a house that works for you, both financially and aesthetically.  Even if the home is a fixer-upper, but has great bones, seeing yourself living there is a critical part of the process when selecting your next home.

Dream a little, work the numbers, and then decide.

While financing for buyers with large down payments still seems to be sliding through the mortgage machine, first-time home buyers and other with less that 20% down are having to be even more diligent in their financing search.  Now that the second mortgage options seem to have virtually dried up, mortgage insurance is back into the picture.

In Tyler Osby’s “Make Your Lender Pay Your Mortgage Insurance!” post yesterday, he clearly shares what it is and why you want to learn about it.  His quote, “I used to tell customers that having mortgage insurance was like lighting your money on fire.”, cracks me up and at the same time aligns with my own perspective.

Since this lender pay option is was new concept to me, I did a little searching about the web to see what I could find. 

• Wells Fargo has a pro’s and con’s page that gives you a quick look-feel.
• In 2005, Jack Gutentag wrote “Lender-paid mortgage insurance a good deal for borrowers”.  Jack refers readers to a mortgage insurance calculator for buyers to compare the actual interest rates of buyer paid vs. lender paid mortgage insurance.  (I ran a couple examples of home buying scenarios, and in my case, the interest rate for the lender-paid option was slightly lower.  Couple that with the reduced monthly mortgage payment, and it seems like a winner to me.  Your results may vary.)
• Shailesh Ghimire, our local Arizona Mortgage Guru, wrote about the lender paid insurance option earlier this summer. 

It’s funny how information is presented to us, and we miss it.  Timing is everything. 

This week, I have a client who could really benefit from lender-paid mortgage insurance.  His lease is up very, very soon and is buying his first house.  As with most first-time buyers, money is tight, not much down payment, and yes, there are closing costs, too.   Looks like this little gem of timely info is going to save him some money and help him get into his first home.