Category Archives: Mortgage & Real Estate

Here are 6 ways for you to win a loan-backed bid in a sea of cash buyers

It was love at first sight.

Scott and his wife had found the perfect home. It was within their $250K budget, in a great neighborhood close to a good school, and only a short drive away from work. They decided to make an offer immediately after the first viewing, and, because they were pre-qualified for a loan, directed their agent to prepare their bid.

A few hours later they got the call they’d been waiting for – only it was bad news.

“The seller has accepted a cash offer, I’m sorry,” their agent said.

And just like that, the couple went from love at first sight to heartbreak.

As a Realtor for ERA iRealty in Plano, Texas, I see this loan-versus-cash-bid scenario play out every day. And it’s not just Plano. It’s happening across Texas, where the real estate market is hot and inventory only stands for 35 days, but you can still snatch beautiful homes in up and coming communities for as low as $200,000. For many prospective homeowners in Texas, the bidding war is no joke – properties sell within hours and it’s not uncommon to have 15-20 bids on one home.

Over the last five years, cash buyers – most of whom are out-of-state investors looking to convert homes into rental properties – have begun to disrupt the loan-dominated financing model and give families looking to buy homes a real run for their money. Most of the race is happening with homes that offer the most for the least – good home, good neighborhood, good price – usually $250,000 or less. In that price range, on average, for every 10 homes sold, four are sold to cash bidders and six are sold to loan bidders – almost an equal split.

In Collin County, one of the state’s most in-demand markets thanks to an influx of new residents chasing jobs at Toyota, JPMorgan Chase, Liberty Mutual, FedEx or one of the other firms fueling the economy, this bidding war is both familiar and disheartening.

But money doesn’t always talk louder in the form of a bill.

Here are six ways I’ve helped homeowners win a loan-backed bid against a cash offer:

1. Work closely with your lender:

I mean very closely – to the point of having their cell phone number memorized. Your lender is a vital piece of this puzzle – make sure you know exactly what you need to have to make a complete bid.

2. Get fully approved for a loan:

Being pre-qualified is not enough in a competitive market, where waiting several days – or even hours, in some cases – to get fully approved for a loan can cost you the home of your dreams. So before you bid, get your loan approved contingent on appraisal of the home value. Taking this one extra step will put you on the same footing as cash bidders in the eyes of the seller’s agent, who will see your approval ‘as good as cash.’

3. Have your lender call the seller’s agent to give them peace of mind about your bid:

A phone call immediately after bid submission from your lender can go a long way in reassuring the seller that your loan-backed bid really is as good as cash, especially if it is coming from a trusted, certified third party.

4. Write a personalized letter to the seller expressing your interest in the home:

When you have a seller who is attached to their property and interested in seeing it go to the right buyer, a personalized letter could be the strategic advantage that gets you a winning bid. In many cases, cash offers are made by investors looking to either flip the home or convert it to a rental property. If you are a couple looking to raise a family in that home, stating that intention in the letter could appeal to the seller’s emotional side and close the deal in your favor.

5. Submit a complete, clean contract:

The less work you make for the seller’s agent, the better, so please, send a contract with legible writing, complete responses and all the necessary information. If you can resist, don’t ask for closing costs or home warranties, and don’t leave anything unanswered – if an agent is confused or delayed by your contract, they’ll simply move on to the next in the pile.

6. Give a higher offer than the listing price – and cash bid.

If you can afford it, offering between $5,000 to $20,000 on top of the asking price may be the most surefire way to close the deal against a cash bidder. In the end, money talks – no matter what form it’s coming in.

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Fannie Mae keeps economic growth projections unchanged despite political tensions

As tension mounts in Washington, Fannie Mae kept its annual growth predictions unchanged for 2017.

The company explained even a potential government shutdown won’t be enough to derail the projected growth.

And a government shutdown isn’t the only political tension lingering. Fannie Mae also mentioned the looming geopolitical tensions which pose risks to the economy.

Fannie Mae held its economic forecast steady at 2% for the year, according to the August 2017 Economic and Housing Outlook report from Fannie Mae Economic and Strategic Research Group.

“We are keeping our full-year economic growth outlook at 2% as risks to our forecast are roughly balanced,” Fannie Mae Chief Economist Doug Duncan said. “On the upside, consumer spending growth might not moderate as much as we have accounted for in our forecast.”

“A build-up in inventory also should be positive for growth this quarter and nonresidential investment in structures will likely continue to improve as oil prices stabilize,” Duncan said. “In addition, the decline in the dollar and a pickup in global growth should support manufacturing and exports, although the outlook for the trade sector is clouded by uncertainty surrounding trade policy.”

The economy increased by 1.9% in the first half of this year, however Fannie Mae predicts the growth will increase to 2.1% during the second half. Fannie Mae attributes the expected pickup in growth to consumer spending and business investment. After subtracting sizably from growth last quarter, residential investment also will likely be a modest contributor during the second half of the year.

However, there are still setbacks the economy could experience through the second half of the year.

“Headwinds include tax policy uncertainty that could delay business investment, the risk of a partial government shutdown this fall if Congress fails to pass spending appropriations, a technical default if the debt ceiling isn’t raised, and an increase in global political unease,” Duncan said. “However, we believe these headwinds and tailwinds essentially net out overall, and we stand by our view that economic growth will remain on track for 2% in 2017.”

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Beverly Hills developer ordered to pay $7.5 million for bilking investors in home flipping scheme

Jay Belson, a Beverly Hills broker and developer who specializes in luxury real estate, will pay more than $7.5 million in a settlement with the Securities and Exchange Commission, which accused Belson of defrauding investors in a series of house flips in Southern California.

The SEC complaint alleged that Belson and five companies he controlled, Smarte Real Estate Investments; Jack Rockman; John Blackstone; Residence at St. Ives; and Bellagio Place Residence; made false promises to a number of investors, including telling the investors that they would earn a minimum rate of return and be able to share in the profits from successful house flips.

According to the SEC, Belson also allegedly told his investors that he and his companies would only make money from the profits on successful flips or through “specifically identified development and management fees.”

Via these “false promises,” Belson raised approximately $18 million from at least 23 investors, the SEC said.

The SEC complaint states that instead of only taking money in those specific circumstances, Belson allegedly stole more than $1.8 million in investor funds.

According to the SEC, Belson pocketed some of the money and used some of the money to cover certain operating costs, including office rent, utilities and salaries.

Belson’s alleged malfeasance was discovered by one of his largest investors after Belson failed to pay the appropriate returns back to the investor.

According to the SEC complaint, the investor in question demanded and received access to the companies’ bank and accounting records. The investor then analyzed some of the bank records and discovered that Belson had allegedly been misappropriating funds.

The investor then confronted Belson about the alleged theft, accusing Belson of “taking other people’s money to support your life in hopes that we made a profit to make people whole, while putting everything in jeopardy.”

According to the SEC, Belson then admitted to the theft, stating (via the complaint) “You’re 100% right [….] i’m [sic] not sure how I got my attitude so twisted up on this.”

As part of the settlement, Belson neither admitted to nor denied the SEC allegations, but chose to settle nonetheless.

Under the terms of the settlement, Belson and the companies he controlled agreed to the entry of final judgments “permanently enjoining them from violating the charged provisions of the federal securities laws, ordering Belson and the entity defendants to pay, jointly and severally, $1.9 million in disgorgement and interest, ordering each of the entity defendants to pay approximately $905,000 in penalties, and ordering Belson to pay a penalty of approximately $1.1 million,” the SEC said.

The settlement is pending court approval.

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