Real Estate For Atlanta Blog

Many counties in Georgia offer seniors a very large break on their property taxes. In most cases, the discount is related to an exemption of the school tax portion of the bill. However, it’s important to note that each county has different restrictions, qualifications and amount of discount offered. I recently called most of the local counties that I frequently service and inquired about the specifics of each counties plan. Overall, what I found shows that Cobb County offers the most generous discount and Fulton offers the least. If you are interested in this information for another county, please feel free to contact me and I’ll be happy to assist you. Also, please note that while I believe this information to be accurate, it is not warranted in any way:

For months, I have been telling people that the opportunity to buy is now and that waiting for the so called bottom is a mistake. Those who listened to me took advantage of the market and closed on their homes this month. They will enjoy a purchase price as low as low can be. In many cases, prices in line with what the same home cost 10 years ago. In addition, they are enjoying a 4.5% 30 year fixed interest rate. For those who have missed the boat, interest rates have already gone up by almost a full percentage point in the last week alone. The going rate now is closer to 5.25% - 5.5%. This .75 difference in rate may sound like a small amount; but take out any loan calculator and you’ll quickly see that it equates to about $200 / month extra payment on a $400,000 house. That means that what cost $2,000 a month last week will now cost the owner $2,200 for the same house. A 1% rise in rates is about equivalent to a 10% rise in price in terms of monthly costs. So, effectively the payment on that $400K house is now equivalent to the payment you’d have if you bought it for $440K last week. Additionally, home sales are up and the value priced properties are now getting multiple offers and bidding wars. It stands to reason that prices will begin to rise soon as well. Though it is probably too late to buy at the most opportune time, I believe things will only get less favorable for buyers from this point forward. The prices and interest rates we have now are still incredibly low and this could very well be the last chance to get in before the train pulls away. Don’t get left out and kick yourself for waiting too long and missing the opportunity to buy a home in this unprecedented buyer’s market.

If you’re out looking for a deal on a home and notice some new construction that is bank owned, you may tend to assume that since the home is new there will be less problems with it and it might be a better option than an older resale. While this could be true on some properties, make sure you consider the following:

1. Notice how many other homes in the subdivision are either empty lots or vacant homes. If the community is less than 75% sold, it could take a considerable amount of time for the other properties to be sold. The vacant lots can require some maintenance such as weed control that the bank owner is not likely to do. If there are a lot of partially complete vacant homes, these could become hazards and eye sores to the street as children begin to play in them, etc.
2. Check the health of the Homeowner Association. Many new construction homes are part of a Homeowner Association (HOA) that collects dues to maintain common areas and shared amenities such as pools and tennis courts. If there are only a few occupied homes, these few homes will need to pay high enough dues to cover the costs of maintaining these areas without having the benefit of more homes to share the costs with.
3. Since the foreclosures are as-is sales, make sure the home is complete. Often, these new construction “bargains” are sold as-is meaning that if the electrical wiring is only half installed or the kitchen cabinets aren’t in yet or the floors aren’t finished, what you see is what you get. Make sure to at least ask if a C/O (certificate of occupancy) has been obtained. That at least means that the county has inspected the home and determined that it has all of the basic needs to be moved into by a homeowner. Of course, cosmetic items are completely ignored by the county inspectors.
4. If you do buy a partially finished home and plan to finish it on your own, make sure your lender will be willing to make a loan on it. Most lenders will not lend you money to buy an unfinished property or they will consider it a construction loan; which will at the very least preclude you from getting those 4.5% interest rates that are around these days and might prevent you from being able to obtain financing.
5. Even the best built homes need some tweaking and fix ups after the 1^st year. That’s why most builders offer a 1 year walkthrough to address the issues that come up after closing such as nail pops, squeaky floors, etc. due to normal settling that occurs in the first year as well as things that went unnoticed during construction. Since you won’t have such a warranty on a foreclosure, you will be absorbing the risk on your own. Additionally, you will not have any recourse if there turns out to be a major issue. For example, if the home is built on a sink-hole and develops structural issues shortly after closing, you have nobody to go back to since the builder is not the one who sold you the house.

In summary, there are some fantastic deals out there and in many areas new construction prices have come down more than resales. These can be good deals; but when deciding to buy one of them, make sure you take these factors into consideration to evaluate whether it’s really a good deal or not.

With all of the short sales and foreclosures taking place in the recent year or so, it is no surprise that the companies that issue title insurance are feeling the pain. These distressed sales are much more likely to lead to title problems than any other and when things go wrong, it is often the title insurance company that gets stuck paying. For those that may not know, title insurance is insurance that protects against claims to the title for real property (land and houses). As part of the settlement process, a title search is done to identify any potential problems and the closing cannot take place unless there is reason to believe that there is clear title on the day of the closing. However, often things come up after that fact and that is what title insurance protects against. There are typically 2 policies; one policy to protect the lender’s interest in the property and another to protect the owner. The state of Georgia is one of only a few states that do not require a home buyer to purchase an owner’s title insurance policy; but it is almost always a good idea to do so anyway. Due to the increased risk to the insurance company, the insurance companies are being forced to raise their rates. Therefore, it is not uncommon for title insurance to cost 25 – 30% more than it did just a year ago. Lenders should be aware of this when issuing Good Faith Estimates and home buyers should expect to have these additional costs at closing.

As a small child, I remember overhearing my parents speak about money and with an over-simplistic, child-like perspective I chimed in and asked them; “If you need more money, why don’t you just go to the bank and get some”. It was then that my parents explained to me that the money they take out of the bank was actually money that they put in there too and finally I got it. From that moment on, I had a new perspective on the value of money. As adults, this sounds somewhat humorous because we all know that is how things work. However, it amazes me how few adults actually get the concept of money at a higher level. Since money is printed by the government, many view the government as an endless supplier of money. In reality, asking the government to print more money to pay for things is equally as absurd as me asking my parents to go to the bank to get more money when they had none in their account. Still, this is what is going on as we speak. In an effort to save the economy, the government is really not left with much choice other than to print more money to pay for things that will hopefully boost the economy. In the short term, it seems that the efforts to prop up the economy are starting to work. However, there are future consequences to actions that are being taken today that many have not thought out fully. As the government prints more money, it devalues the money; effectively making each dollar worth less (on some level, this is simple supply and demand). If each dollar is worth less, it will lead to inflation. Furthermore, if the government issues more treasury bonds to raise capital for some of the proposed spending projects, there will be more bonds; which, in effect makes it harder to find buyers for the bonds and it is likely that higher interest rates will need to be paid on the bonds to entice investors to buy them. If it plays out like that, then the Fed will have no choice but to raise interest rates significantly and quickly to keep the value of the dollar from heading towards worthless. Therefore, it seems that we find ourselves in a delicate race against time. We have no choice but to take actions today that will prop up our economy and put a band-aid on things for now; knowing that our actions will eventually lead to new and very different problems down the road. Our best hope is that the economy is able to revive itself to a point at which it can sustain the next blow before the inflationary problems hit us. If it does, then we’ll be able to pull through on a more permanent basis and enter into a more stabilized economic climate. However, if not, then we may have only seen the tip of the iceberg. So what does this mean to investors and home buyers? There will likely not just be a “bottom” to the market; but rather a small window of opportunity. The window of opportunity is the time period at which the positive effects of our actions of today begin to be felt while the negative longer term effects have not fully set in. During this time, one will have the extremely rare opportunity to have the best of both worlds: low interest rates, bottomed out prices, low or non-existent inflation, etc. before the pendulum begins to swing in the other direction ushering in an age of high interest rates and inflation. In my opinion, that time is NOW. If you have been on the fence about buying property, this really is the opportunity of a lifetime. Once interest rates begin to rise, you will quickly miss out on the window of opportunity. Many people don’t realize that a 1% rise in interest rates has an equivalent effect on home ownership costs as a 10% change in price. In other words; buying a home for $200,000 with a 4.5% interest rate will yield a virtually identical payment to getting the same home for $180,000 and paying a 5.5% rate on the loan. It is foolish not to take advantage of this incredible and short-lived opportunity while it is available.

Keller Williams Atlanta North will be hosting a massive multi-home open house weekend this Sunday, March 29, 2009 from 2-5pm.  Homes being held open are all over the metro area with the majority in Marietta and others in nearby Roswell, Atlanta, Kennesaw, and other cities.  If you are in the market for a home or simply enjoy looking please stop by.  In particular, I’d love to see you at mine which will be at 560 Bircham Way; Roswell.  For a complete list of properties being held open this Sunday, you can visit:  http://www.RealEstateForAtlanta.com/publicpages/openhouses.aspx

1. Get started early - don’t wait until you’ve found a home to begin investigating lenders.
2. Pick one day to call 2-3 lenders that you wish to comparison shop.  Ask each for what is called a Good Faith Estimate (GFE).  This is a standardized form that will show a complete breakdown of estimated fees and loan terms.
3. Don’t just look at the bottom line - many of the fees are 3rd party fees and government taxes that will be the same no matter which lender you use.  The fees that you want to consider most heavily are those in the first section of the GFE (lender fees).  You can pretty much ignore the rest.
4. Generally speaking, if you plan to be in the house for a shorter time or if you are cash poor and need all of your money to be applied to your down payment, then you are better off with a lower fee structure even if it means a slightly higher rate.  If you are not cash poor and plan to stay in the home for a long time and don’t anticipate refinancing, then it may be better to get the lowest rate even if you have to pay more upfront.
5. The lenders will want to pull your credit report.  Consumers are often afraid to have that done because they fear that it will negatively impact their score to have it pulled many times.  Firstly, although it is true that it can have a negative impact, the impact is so small that it is insignificant for most poeple and very rarely does that alone make the difference between qualifying or not.  It’s a good idea to have it pulled at least once early on to identify any issues that might take time to work out.  Also, there is a rule that multiple credit pulls done during a short window of time are not supposed to negatively impact your score at all.  This was put in place to allow home buyers to shop for loans.
6. Don’t forget about the customer service aspects.  Your lender will play a significant role in how smooth your transaction goes.  Your best option is to select a local lender that you can meet with face to face if necessary (Internet lending does add some difficulty) and who knows the local customs and laws for the state in which you are buying a home.
7. Don’t drive youself crazy - while there will be some differences and it is worth shopping around, you are likely to find that the costs are going to be very close no matter who you go with.
8. You should not generally have to pay an up front fee to lock your rate, etc.  Be leary of anyone that asks you to do so and find out specifically why.

As an agent in the trenches daily, I am often exposed to the most up to the minute data that can help me predict where I think the local housing market is headed in the near future. For example, when I see more hits on my web site, it is usually a good leading indicator that more buyers are out there with an interest in buying homes. The opposite is also true. What I’ve noticed lately has been rather surprising. 

Lately it seems like we were finally getting to a point where buyers were realizing that this is the opportunity to buy and perhaps the fence is not the correct place to be. Just as the traffic started to increase on my listings and web site, speculative announcements began to circulate in the media about potential upcoming legislation that is designed to stimulate the housing market. Buyers who were just about ready to write offers on properties began to put things on hold. Afterall, who wants to buy now when they are told that they might be able to get 4% interest rates or a $15,000 tax credit if they wait another month. The pre-announcement of this possible legislation has actually had the opposite effect on the market as it was designed to do.

I think that getting closure on what the stimulus bill(s) are going to be is more powerful than the bills themselves. Now that we seem to have gotten some closure on this, I am hopeful that this will begin to get things moving once again. The worst thing the government can do right now is announce possible legislation that might come to fruition as this will once again make everyone put everything on hold. I also believe that the currently approved legislation has too long of a timeline on it. What we need is legislation that will take buyers off the fence today - not by the end of the year.

Multiple Homes

Recently, Fannie Mae changed their guidelines so that investors could no longer have more than 4 investment homes no matter how good their credit and income is. 

This rule was created to help manage the risks for the banks. However, it seems they have finally come to the realization that perhaps cutting off your nose to spite your face is not good. By making this requirement, many investors who were well qualified and funded were prevented from buying additional homes even though they wanted to. This kept even more inventory and made it even harder to sell the foreclosed properties. Just a short time after this limit was put in place, it has now been lifted and investors can get up to 10 loans. However, the rest of the guidelines remain stricter than ever including:

720 minimum credit score

25% down payment for a 1-unit (30% for a 2-4 unit)

No mortgage delinquencies in the last 12 months 

6 months of reserves for each investment property

This will help a little and perhaps it’s a sign of the mortgage industry finally starting to realize that swinging the pendulum in the far opposite direction (guidelines that are too tight) is equally as bad as being too liberal (i.e. former easy lending practices). The right place to be is in the middle and the faster the banks realize that, the better off we’ll all be and the faster we’ll get through the “crisis”.

Home buyers often feel that they will somehow be better off without an agent representing them. Some of the common reasons for this are based on somewhat flawed logic. Be sure you don’t make these mistakes. 

1. The first mistake many buyers make is in thinking that they will automatically get a better price on a home if they negotiate without having an agent represent them. In order to see how this works, it helps to have an understanding of how real estate commissions usually work. In just about every case, there is a listing agreement between the seller of the home and an agent who is representing the seller. This contractual agreement obligates the seller to pay the SAME total amount of commissions out of their proceeds whether the buyer is represented or not. If the buyer is unrepresented then the listing agent gets to keep the entire amount. If the buyer is represented, then they are required to share their commission with another cooperating agent. So, as a buyer, if you submit an offer on a home without an agent, the listing agent does not have to automatically reduce their commission at all and has the right to simply keep it all. In reality, some agents will reduce their commission a bit in that scenario; but rarely by 50%. The truth is that YES you can sometimes get a slightly better price on a home if you don’t have an agent; but before you make the choice to do so, you need to realize what you are giving up and what your true savings is. It is almost NEVER a 3% savings as most buyers are led to believe and in many cases, it is actual ZERO.
2. For the little bit of potential savings mentioned in #1, you will be putting yourself at greater risk by not being represented. NEVER be fooled into taking comfort in the fact that the nice and friendly sales agent in the builder’s model home is going to help you get the best deal. That agent is representing the seller and ONLY the seller’s best interests. In fact, it’s would be a violation of their listing agreement to do anything other than that. If all goes well, this is not a problem; but a professional agent might be better suited via their experience to identify potential snafus and modify the terms of your agreement slightly to minimize your risk as a buyer. One example of this that is common today is the builder deposit. Many builders demand a builder deposit instead of earnest money. Most buyers do not know the difference. If the transaction closes successfuly, there is not much difference; but the way the money is handled from contract to close is grosely different. In the event of the builder going out of business (rather common these days) or another unforseen glitch, the buyer’s money is at much greater risk in that scenario. This is just one of many things that a good experienced agent will know to look out for on your behalf.
3. When finding the right price to offer, agents who know the local market and are in the trenches every day are better positioned to analyze the market and advise you on how low the seller might go.
4. All the time, I hear people ask me, “You make money on a percentage of the sale price; so isn’t it in your own best interest to make me pay more so that you get more commission”. What I say to that is that I pitty the agent who has such a dead end and short sighted view of their client relationships. With the relationship that I have with my broker, raising the selling price by $10,000 puts a whopping $192 bucks of taxable self employment income in my pocket. Now, I can only speak for myself that on a $500,000 sale, I’d much rather get $15,000 in gross commmission and have a happy client that feels that I represented them properly which will lead to referrrals and repeat business than to secretly voilate my fiduciary responsibilities to my client and try to make them overpay to sell the same home for $510,000 so that I can make $15,192 in gross commissions instead. No good business person would ever make that mistake or they’d be out of business pretty quickly.
5. If you are selling a home in the same area and buying, you can benefit even more by having an agent. If you present an agent with an opportunity to represent you on the sale of you old home and the purchase of a new one, you can often negotiate a better rate on the listing commission. Best of all, you’ll know you won’t be compromising on quality or service because the agent who has 2 transactions tied to the sale of your home and doesn’t get paid on either until both happen will be the most motivated listing agent you could possibly ask for. This is the real way to “beat the system” and get a deal.
6. Convenience is important. Having an agent represent you makes the home shopping process much easier. Every agent has the same incentive to sell any listed property as they do to sell their own listings. With an agent’s lockbox key, they can take you out and show you every property on the market at once - rather than requiring you to make individual appointments with the many different listing agents to get into each home.
7. A good agent is well networked with other agents in the area and often knows of new properties BEFORE they come on the market. This includes having inside information about potential future foreclosures, etc.
8. Agents usually have a tried and true list of vendors including loan officers, inspectors, handymen that they can put you in touch with and facilitate a smoother transaction.

These are just some of the benefits of having an agent as a buyer and once you factor in all of these; plus take a realistic look at your potential savings, hopefully you will be making a much more educated decision about this.