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Market Trends and Financing Misconceptions

March 17, 2014

This week we were joined by Garth Johnson from Minnesota REO Experts as well as Brett Leschinsky from WJ Bradley. We started off the show by discussing the current market trends with Garth Johnson. Something that has been dropping significantly in the market is inventory. It has dropped so much that there is actually a shortage of inventory for buyers to chose from. We have a 3 to 3 ½ month supply of inventory for sale, which equals 11,975 houses for sale with 22 consecutive months of decreased inventory. When you get under that number, you can feel the lack of options being a buyer in that market. Buyers are still thinking that they need a great deal in order to buy but they need to make sure they are looking at all the other factors that are involved when buying, such as the lack of inventory.

Given all of this information, it pretty much goes without saying that it has become a sellers market again. Coming into a sellers market, buyers need to make sure they are aligning themselves with a real estate team that can help them. They need to find the agent, find the loan officer to get pre-approved, find the title company, find the inspector, find the attorney if needed, and make sure to find a team that is going to be on top of the market and be able to find exactly what they want.

Brett Leschinsky brought up a few misconceptions buyers have of the financing process. A lot of buyers think that you have to have 20% down in order to buy a home. In reality, you have VA with 0% down, FHA that’s always been 3.5%, and conventional with 5% down. Due to so many changes over the past years in the financing process, it has become critical that you find an experienced mortgage professional versus someone that is part-time and may not necessarily be able to keep up with the changes.

When it comes down to finally closing on a home and you are competing with multiple buyers to get that property you need to consider all the ways to stay ahead of those buyers. Many people may think they are ahead of the game by getting pre-qualified, which may only mean that a lender has simply looked over your documentation but you should really be pre-approved as well. If you are pre-approved, that means that you have actually sent documentation in and even went through an underwriting system that gave an approval.

Garth Johnson talks about what to look for in an approval. When you’ve been around for a while, you see certain approvals from lenders that you know will for sure go through and will close. There are certain types of properties that only qualify for certain types of financing depending on the condition and sale price. Buyers need to align themselves with the right team and loan officer because there are a lot of programs out there that you don’t need to have 20% down. Buyers need to know that in the marketplace they don’t always need a lot of money down. Good credit and a few other things to prove they’re financially stable, yes, but having the actual money down right away is not always necessary.

John from Tailor Falls: We were looking at a home path home and we put an offer in on it. We got a call later saying that it was a multiple bid situation and that we needed to put in our best offer. We have dealt with multiple bids before and didn’t have any interest in dealing with that. A few days later, the realtor called back saying that our bid was accepted and was the highest bid. Were they just trying to raise the price of it by telling people there were multiple bids when our original offer ended up being just fine?

Garth Johnson: With home path, the agent that represents you submits the offer online on your behalf, but when there is a second offer that comes in before your offer would be accepted by the bank, that triggers a multiple offer situation. The bank has a form sent out to the agents that requires the buyers to sign submitting your highest and best offer. It sounds like somewhere in between, there was a miscommunication, that if you weren’t interested any more in competing with other buyers in a multiple offer situation that your offer should have been withdrawn. If your agent would have communicated that to the listing broker, then they could have withdrawn your offer and then at that point there may have no longer been a multiple offer situation. All the offers that were submitted online, if one hasn’t been accepted yet and another comes in, then it does cause a multiple offer situation.

John from Minneapolis: I have an existing home that I want to make a rental. I’m not sure how much money I should invest before renting it out, it does need new windows, new siding, but I’m just wondering how much money I should put aside for a new purchase versus putting money into the existing home?

Andy Prasky: Look into ROI’s on rental investments. See what things that you can put into the house that will give you the best returns. It also will depend on the client, whether it’s someone that will come into the home and take their shoes off and take care of it versus someone that has motor oil on their shoes and just walk through the house with dirty shoes.