A Closer Look At PMI

PMI stands for private mortgage insurance. No one really cares about it until it's time to get a mortgage. If you aren't putting down at least 20% expect to see a PMI charge as part of your payment each month. It's basically like paying an extra 1% of interest on your loan per year.

Why would anyone do that?!

The banks require it. In the olden days, buyers HAD to have a decent down payment so that the banks felt comfortable loaning the money. In order to increase their business the banks figured out a way to offset this risk to an insurance company that insures them against default. Of course, the buyer has to pay for this.

Note that I said, "insures them [banks] against default". This will benefit the banks, -not you, the borrower. If you default, the PMI company may cover the bank's losses, but they can then come after you for the money unless the bank has forgiven the loan.

I was meeting with a seller the other day who thought the whole thing was crazy. He said, "The banks think we can't afford $1100 a month, so instead they charge PMI, increasing the total payment to $1200 a month! That doesn't make any sense!"

He's right, but having PMI was the only way that the bank would have made this loan. It was figured into the payment from the beginning and without it, he might still be renting.

The good thing is that Federal law requires PMI to drop off after you have at least 22% equity in the home. You can also be proactive and get them to remove it as soon as you reach 20% equity in the home. Contact your lender to find out how they handle it. If you've made improvements or had substantial appreciation you may be able to have the home appraised to show the increase in equity and get the PMI removed.

Please note that I am not a mortgage guy so check with your lender to better understand your exact situation and how PMI affects you.

-Peter

www.NashvilleCityHomes.com

Making An Offer With an FHA Loan

With the changes in the mortgage industry many home buyers are turning to FHA Loans because they still offer the opportunity to purchase a home with little or no down payment. There has been a noticeable increase in buyers using FHA even among my own clients.

The problem is that there are a lot of misunderstandings about how this works, some of which I addressed in my article, "Myth-Busting FHA Loans...". Today I wanted to talk about how to structure an offer when you're using FHA.

Two main questions-
1. Should we ask for the Seller to pay for some or all of your closing costs?
2. Do we need to ask the Seller for down payment assistance?
Both of these items are built into the offer, often on raising the sales price so that the bottom line is still agreeable to the Seller.

Closing costs are extremely common to ask for. The costs vary, but most programs will only let the Sellers pay 3% of the purchase price toward your closing costs and prepaids. This will save you (as the buyer) some out-of-pocket cash and basically let you roll these fees into your loan. We want to make sure to include this in the offer.

The misunderstandings come when we're talking about down payment assistance. Currently, the Seller can contribute to a 'charity' such as Ameridream which, in turn, will contribute toward the down payment. There are rumors that new legislation in congress will change this, but for now, it's still happening. (Read how it works here.) It's best to talk to your lender about this because often then banks will have specific wording that they want put in the contract to make this happen. So, in addition to asking for closing costs, we would ask for 3-5% of the purchase price to be paid toward the down payment.

Help the Seller Understand
Often, the biggest hurdle to overcome with an FHA-financed offer is helping the Seller understand it. They often think that the Buyer is trying to be sneaky and take advantage of them. The key is to tabulate all of the numbers and focus on their net proceeds- how much they will make from the sale. It can also be helpful to compare these numbers to how a conventional loan would be handled so they see the differences.

The goal in every negotiation is agreement- a win/win situation. For the most part, Sellers seem open to these type of offers, but it takes a little more time to educate them and build trust. As it becomes more common, I'm sure it will get easier for us all.

-Peter

www.NashvilleCityHomes.com

Nashville Zoo is Worth Checking Out!

Saturday was a hot one, so what did we decide to do? Spend the time outdoors- at the zoo!

This was my first time at Nashville's Zoo, even though we have a family membership and my wife has taken our kids there a handful of times. I must admit I was impressed. Of course, it doesn't even compare to places like San Diego's Zoo, but for Nashville, it was quite nice. Much more than you can see in one day and keep your sanity.

We came late in the afternoon with the intention of just 'getting the kids out of the house'. It was hot, but there are lots of shady paths were we could find some relief. My son Noah, who is now 4, is a zoo veteran and was our tour guide for the day. He quickly led us to see some exotic birds and monkeys before running ahead to show us the meerkats.

After much pleading from the kids we ended up at the playground, which is a mammoth structure full of hiding places, tunnels and rope ladders. It was awesome, except I had trouble keeping track of everybody. Of course, if I waited long enough, Noah would always find his way down the enormous corkscrew curly slide to find me sunburning at the bottom.

The trip would not be complete without a ride on the carousel, which was thankfully free this evening to zoo members.

Chasing a four-year-old around the zoo wore us out so we'll have to see the elephants and giraffes on another day. If you haven't been to the zoo, it's worth the time to check it out. If you live in Nashville with kids, it's even worth the family membership to get them 'out of the house' once in a while.

-Peter

www.NashvilleCityHomes.com

Germantown Plans and Condos Everywhere!

I've been touring many of Germantown's cool new developments with a client moving here from Seattle. It's been great to compare the different units and get an intimate feel for how the area is poised for continued momentum. Let me highlight some of my favorites:

Werthan Lofts- Wow! There is nothing else like it in Nashville. A true factory that is being converted into fantastic loft space with tall ceilings and nice views. Even more, they are creating a new community space complete with pool, dog run, bocce ball court and a coming-soon cafe+nightspot in the 'boiler room'. The vibe here is awesome, especially on cool evenings when folks gather outdoors.

Morgan Park Place- Like Werthan, this project is yet to be finished, however, the available units are quite stunning. Lots of upscale finishes and over-the-top efforts in 'green-building'. They've actually received top awards for their energy efficiency techniques that might save you quite a bit when it comes to your monthly utilities.

Row 8.9- This development has been complete for a few years now, but occasionally units come up for sale. It's a "Chicago-style brownstone" development, which means the units are aligned in a row with steps down the street. The units on Rosa L. Parks Blvd have unbeatable views of the capitol and downtown skyline while being literally across the street from the Farmer's Market and Bicentennial Park. All of these for a very reasonable price- lower than most of the other similar units around town.

There are many others to check out if you're interested, and it seems that there is no stopping these developers who are forging ahead in Germantown. The whole neighborhood is full of new condos and historic-looking infill homes built to reinforce the roots of the neighborhood while adding the modern amenities that people demand these days.

Guiding much of the development is a Detailed Neighborhood Design Plan that the Metro Planning Commission put together in 2002. It's quite interesting, especially if you live in the area or are considering it.

-Peter

www.NashvilleCityHomes.com

Gra-Mar Neighborhood in Inglewood is Lookin’ Good!

I’ve recently become a fan of a somewhat unknown pocket of Inglewood called Gra-Mar. It’s an area full of ranch style homes from the 1960’s, many of which were built on very large lots. Part of the area is dubbed Gra-Mar Acres for this reason.

The neighborhood is just south of Briley Parkway between Ellington Parkway and the railroad tracks closer to Gallatin Road. It extends south to Broadmoor or so.

So what makes this neighborhood look so good these days?

Price- Homes in the area average around $93 a square foot these days, less if the home needs upgrades from it’s 60’s interior. At this price a 2000 square foot family-sized home with 3 bedrooms and 2 baths will cost you around $186,000. A smaller 2 bedroom home will be priced in the lower $100’s. Compared to the rest of Inglewood or East Nashville, this is quite affordable, especially considering the following points…

Lot Size- This is one of my favorite parts- space! Room to spread out a little, and still be 10 minutes from downtown. Many of these homes are on lots of at least half an acre. It’s more to mow, but you don’t have to go to the park to see grass and mature trees.

Quality- Most homes in this area were built in the 1960’s and many were more custom with lots of tile and unique brick exteriors. They are built to last, and most are in great condition with little maintenance.

Neighbors- Homes in Gra-Mar don’t come up for sale that often. That’s because many of the residents have been here for years. They bought the homes to raise a family and they didn’t leave. Driving through, you can tell that people care about their homes and you’ll even get a friendly greeting from people you might meet.

Convenience- As mentioned above, Gra-Mar is conveniently located right off of Ellington Parkway about 10-15 minutes from downtown or Rivergate. You can quickly get to Opry Mills or even the airport by taking the new and improved Briley Parkway.

Upside- At this point, Gra-Mar is an undiscovered area that people are starting to notice as more homes get renovated or come up for sale. It’s super close to the new Inglewood Home Depot as well as the new Wal-Mart Supercenter & more that are being built across from Skyline Medical Center.

If you're looking for a solid home with lots of grass, check out Gra-Mar and some of the surrounding areas. You may need to give it some updates, but it's definitely in a neighborhood that's worth the investment.

-Peter
www.NashvilleCityHomes.com

“Easy to Show”- Music to my ears!

When I’m hunting down properties to show to buyers I love to see the words “Easy to Show” in the listing. Another good phrase is “Vacant-Show anytime”.

On the other hand, making showings difficult is a good way to keep your house from selling. How about these:

-Make Offers Contingent Upon View Interior
-Do Not Disturb Tenants
-Day Sleeper- No showings before 4 pm
-Agent Must Be Present For All Showings

I know that sometimes the circumstances can sometimes make showings terribly inconvenient, however, please know that putting any kind of restrictions on showings when your home is for sale will reduce the number of buyers that see your home. Even something simple like requiring 2 hours notice.

I also know you can’t always show your home at the drop of a hat, but again and again I’m out showing homes in a neighborhood and the buyers notice one for sale across the street and want to see it too! I hate to tell them that we’ll have to wait and do it another day.

The goal is to make it easy to show, at least as easy as possible.

On a side note, I believe this is even true for investment properties. These are often difficult to show if there are tenants involved. That's understood, but at least try to upload some interior pictures to see it it's worth the hassle to show. Even just a couple pictures of the inside help buyers get an idea of the home and decide to take a look. Without any interior pictures, people assume the worst and skip it. They assume that it looks terrible; otherwise there would be pictures, right?

So, the home-selling lesson for today is…
1. Make it “Easy to Show”
2. Have lots of fantastic pictures

Thinking about it? Give me a call.
-Peter

www.NashvilleCityHomes.com

Good Bones Make a Great Fixer Upper

I enjoy working with clients who have the passion to take a neglected home and renovate it. Make no mistake, this is a BIG job. It will consume your life if you aren't careful, which is why it's so important to look for good bones.

"Good bones" is a way that people describe the fundamental parts of a home that are difficult and expensive to change. Things like floor plan, room sizes, electrical/plumbing systems, ceiling heights, etc. You can paint and add granite counters to any home, but if it’s missing some of the fundamentals, you may have trouble selling it later.

I was exploring some of East Nashville’s fixer-uppers this morning with a wonderful client of mine. We looked at some that needed hardly any work and others that needed complete renovation. Since I try to attend every home inspection personally and I've renovated a home myself, I’ve learned quite a bit about the systems in a home and where the common problems are. Sometimes I probably point out too many things to my clients, but I want to help them understand what their getting into.

Here are some bones to look out for:

Floor Plan- Watch out for funkiness. Does the layout make sense? Is one of the bedrooms a walk-through? Are there closets? Where will the fridge and dining room table go? Where is the washer and dryer? A home with a great floor plan will be easier to sell down the road.

Structure of the Home- How is the foundation? Are the floors level? Is there water damage? What’s causing it and is it easy to repair? Is the roof in good shape? Is there a basement or crawlspace? Any water problems down there? (BTW- water issues are the #1 killer of a home, reminding us all to clean out our gutters!)

Systems- Are the systems outdated? What about the HVAC? Are there old ducts wrapped in Asbestos tape? Is the wiring grounded? Fuses or circuit breakers? Any knob & tube wiring? Galvanized or copper plumbing? How’s the water pressure?

Location- This should probably be at the top of the list, since it cannot be changed. More than anything else, location will greatly affect the value of the property. Don’t think you can overcome it by dressing up a home in the wrong neighborhood!

Lastly, when you’re considering a fixer-upper, you have to know the numbers going in. What are other homes in the neighborhood selling for? How much money and time will it take to renovate it? How quickly are home selling? What are the trends in the area?

It’s a lot to think about, but when you’ve made a thoughtful choice, renovating a home can be an enjoyable and profitable experience. Otherwise, you may lose your shirt…

-Peter

www.NashvilleCityHomes.com

3 Ways FSBO's are Missing Out

I was talking to someone this afternoon who is trying to sell their home by themselves without an agent. She said that her main reason for doing this was that they couldn't afford any extra fees for Realtors. They owed too much on the home and were already behind on their payments.

This is a sad story that is happening too often right now. However, I'd say that situations like this are the most important times to work with a Realtor. Especially when the market is slow and buyers are few. Let's examine why I think this seller is missing out...

1. Who knows that her home is for sale??
This is a biggie. She has a sign in her yard. Even if she's on a for-sale-by-owner website, the most qualified buyers- those using a Realtor and needing to buy quickly- are searching the MLS and missing her home. I only knew about it because my client drove by.

Contrast this to how I market homes. Not only are my listings in the MLS with professional pictures and a virtual tour, but it's broadcast to numerous other home home searching websites and promoted by me through everything I do. People searching for homes online (which is where people look nowadays) will find my listings and they will look great.

2. Agents will not show your home. This is true mainly because they don't know it's for sale! In this case, the sellers were not offering any commissions even to the buying agent. In effect, they are actually discouraging me from showing their home. We may eventually take a look, but it will be at the bottom of the stack.

3. What risk is the seller taking by being unrepresented?? As a Realtor, I believe that much of my value comes as I help negotiate the contract and then keep things from falling apart to the closing. Even so-called easy deals can have things pop up that can cost lots of money or ruin the entire agreement. My experience will help you avoid these issues and be prepared for each step of the process. Even if a FSBO doesn't hire me, I try to encourage them to hire somebody. It's just not worth the risk.

I appreciate a seller wanting to make more money on their own. It just seems that selling your home is a time when it's best to work with a professional. If you try it, please be careful and willing to be very patient. If you'd like some help, give me a call. :)

-Peter

www.NashvilleCityHomes.com