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Terry Lipe
REALTOR®, CRS, ABR, CLHMS, SFR, CNHS, RCC
(509) 999-7916
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Buying A Home

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July
2

How to Bridge the Appraisal Gap in Today's Real Estate Market

If you're searching for drama, don't limit yourself to Netflix. Instead, tune in to the real estate market, where the competition among buyers has never been fiercer. And with homes selling for record highs, the appraisal process is receiving more attention than ever. That's because, in a rapidly appreciating market, a property is more likely to appraise below the sales price—which can lead to major repercussions for both buyers and sellers.

It's never been more important to understand the appraisal process and the risks involved. It's also crucial to work with a skilled real estate agent who can guide you to a successful closing without overpaying (if you're a buyer) or overcompensating (if you're a seller). Find out how appraisals work—and in some cases, don't work—in today's unique real estate environment.

APPRAISAL REQUIREMENTS

An appraisal is an objective assessment of a property's market value performed by an independent authorized appraiser. Mortgage lenders require an appraisal to lower their risk of loss in the event a buyer defaults on their loan.

In most cases, a licensed appraiser will analyze the property's condition and review the value of comparable properties that have recently sold. Appraisal requirements can vary by lender and loan type, and in today's market, in-person appraisal waivers have become much more common. If you're applying for a mortgage, be sure to ask your lender about their specific terms.

APPRAISALS IN A RAPIDLY SHIFTING MARKET

An appraisal contingency is a standard inclusion in a home offer. It enables the buyer to make the closing of the transaction dependent on a satisfactory appraisal wherein the value of the property is at or near the purchase price. This helps to reassure the buyer (and their lender) that they are paying fair market value for the home and allows them to cancel the contract if the appraisal is lower than expected.

Low appraisals are not common, but they are more likely to happen in a rapidly appreciating market, like the one we're experiencing now. That's because appraisers must use comparable sales (commonly referred to as comps) to determine a property's value. This could include homes that went under contract weeks or even months ago. With home prices rising so quickly, today's comps may be lagging behind the market's current reality. Thus, the appraiser could be basing their assessment on stale data, resulting in a low valuation.

HOW ARE BUYERS AND SELLERS IMPACTED BY A LOW APPRAISAL?

When a property appraises for less than the contract price, you end up with an appraisal gap. In a more balanced market, that could be cause for a renegotiation. In today's market, however, sellers often hold the upper hand.

That's why some buyers are using the potential for an appraisal gap as a way to strengthen their bids. They're proposing to take on some or all of the risk of a low appraisal by adding gap coverage or a contingency waiver to their offer.

Appraisal Gap Coverage

Buyers with some extra cash on hand may opt to add an appraisal gap coverage clause to their offer. It provides an added level of reassurance to the sellers that, in the event of a low appraisal, the buyer is willing and able to cover the gap up to a certain amount.

For example, let's say a home is listed for $200,000 and the buyers offer $220,000 with $10,000 in appraisal gap coverage. Now, let's say the property appraises for $205,000. The new purchase price would be $215,000. The buyers would be responsible for paying $10,000 of that in cash directly to the seller because, in most cases, mortgage companies won't include appraisal gap coverage in a home loan.

Waiving The Appraisal Contingency

Some buyers with a higher risk tolerance—and the financial means—may be willing to waive the appraisal contingency altogether. However, this strategy isn't for everyone and must be considered on a case-by-case basis.

It's important to remember that waiving an appraisal contingency can leave a buyer vulnerable if the appraisal comes back much lower than the contract price. Without an appraisal contingency, a buyer will be obligated to cover the difference or be forced to walk away from the transaction and relinquish their earnest money deposit to the sellers.

It's vital that both buyers and sellers understand the benefits and risks involved with these and other competitive tactics that are becoming more commonplace in today's market. We can help you chart the best course of action given your individual circumstances.

DON'T WAIVE YOUR RIGHT TO THE BEST REPRESENTATION

You need a master negotiator on your side who has the skills, instincts, and experience to get the deal done...no matter what surprises may pop up along the way. If you're a buyer, we can help you compete in this unprecedented market—without getting steamrolled. And if you're a seller, we know how to get top dollar for your home while minimizing hassle and stress. Contact us today to schedule a complimentary consultation.

September
28

5 Things You Need to do After Buying a Home

Buying a Home Spokane

After buying a home, you may feel as if you've completed a marathon and are due for a little downtime to settle in and rest. But don't sit too long; there's still plenty to do.

We recommend prioritizing the many must-dos that will ensure your safety and comfort in your new Spokane home. Here are five things to get started on.

  1. Secure your home.
    Your family's safety is paramount, so take steps right away to change locks and garage codes. You have no way of knowing how many people have keys or codes, so before you move in, make the change. Ask the seller for any instruction manuals for electronic security systems, including cameras, alarms, and locks. If your home comes with an alarm system, you will need to find a new provider or reconnect service. 

  2. Do a walk-through.
    The best time for a walk-through is when it's empty. So take a look around, and make sure all requested/agreed-upon repairs were made; that all appliances and other agreed-upon items included in the sale are present; and that everything works, including plumbing, outlets, switches, fixtures, appliances, and the HVAC system. If you find issues that should have been covered in your contract, contact your real estate agent. If the issues aren't covered, plan for repairs or replacements. 

    Did you get a home warranty? These are commonly purchased by the seller to cover costs for appliances or major systems. Review the details so you'll know what to do if you have to file a claim. If you didn't get one with the sale of your home, you can still buy one after the closing.

  3. Find out where essential valves, fuse boxes, and the like are located.
    It's surprising how many homeowners don't know how to turn off the water at the street, how to turn off the power to the various parts of the home in an emergency, or how to shut off the water to an overflowing toilet at the base. Before you move in, how about doing a walk-through where you specifically identify valves, breaker boxes, and other features, so you'll know where they are in an emergency? Say your dishwasher has an electronic fire in its door (yes, this can happen), you probably can't just switch off the appliance but must go to the breaker box and turn off the power. Make sure all the breakers are clearly labeled as to what part of the home they operate. 

  4. Connect utilities before moving in.
    You will probably need to call all your utilities -- gas, electric, and water -- to start a new service and to apprise them that you're the new owner of your home and have no connection to whoever had service at the home prior. You will likely also want to contract for your phone and internet service, as well as TV (cable or satellite) and a security company. 

  5. Change your address.
    Contact the post office and fill out a change-of-address form so that all your mail will be sent to your new address. It's wise to also make a list of essential persons, companies, and government services that you deal with, so you can let them know your new address.

Whether you're shopping for Spokane homes for sale or moving into your new home, we can answer your questions. Get in touch today. 

September
21

Lowest Mortgage Rates In History: What It Means for Homeowners & Buyers

In July, the average 30-year fixed-rate mortgage fell below 3% for the first time in history.1 And while many have rushed to take advantage of this unprecedented opportunity, others question the hype. Are today's rates truly a bargain?

While average mortgage rates have drifted between 4% and 5% in recent years, they haven't always been so low. Freddie Mac began tracking 30-year mortgage rates in 1971. At that time, the national average was 7.31%.2 As the rate of inflation started to rise in the mid-1970s, mortgage rates surged. It's hard to imagine now, but the average U.S. mortgage rate reached a high of 18.63% in 1981.3

Fortunately for home buyers, inflation normalized by October 1982, which sent mortgage rates on a downward trajectory that would bring them as low as 3.31% in 2012.3 Since 2012, 30-year fixed rates have risen modestly, with the daily average climbing as high as 4.94% in 2018.4

So what's causing today's rates to sink to unprecedented lows? Economic uncertainty.

Mortgage rates generally follow bond yields, because the majority of U.S. mortgages are packaged together and sold as bonds. As the coronavirus pandemic continues to dampen the economy and inject volatility into the stock market, a growing number of investors are shifting their money into low-risk bonds. Increased demand has driven bond yields—and mortgage rates—down.5

However, according to National Association of Realtors Chief Economist Lawrence Yun, "the number one driver of low mortgage rates is the accommodating Federal Reserve stance to keep interest rates low and to buy up mortgage-backed securities." According to Yun, "we will see mortgage rates stay near this level for the next 18 months because of the significance of the Fed's stance."6

How do low mortgage rates benefit current homeowners?

Low mortgage rates increase buyer demand, which is good news for sellers. But what if you don't have any plans to sell your home? Can current homeowners benefit from falling mortgage rates? Yes, they can!

A growing number of homeowners are capitalizing on today's rock-bottom rates by refinancing their existing mortgages. In fact, refinance applications have surged over the past few months—and for a good reason.7 Reduced interest rates can save homeowners a bundle on both monthly payments and total payments over the lifetime of a mortgage.

The chart below illustrates the potential savings when you decrease your mortgage rate by just one percentage point. When it comes to refinancing, the bigger the spread, the greater the savings.

Estimated Monthly Payment On a 30-Year Fixed-Rate Mortgage

Be sure to factor in any prepayment penalties on your current mortgage and closing costs for your new mortgage. For a refinance, expect to pay between 2% to 5% of your loan amount.8 You can divide your closing costs by your monthly savings to find out how long it will take to recoup your investment, or use an online refinance calculator. For a more precise calculation of your potential savings, we'd be happy to connect you with a mortgage professional in our network who can help you decide if refinancing is a good option for you.


How do low mortgage rates benefit home buyers?

We've already shown how low rates can save you money on your mortgage payments. But they can also give a boost to your budget by increasing your purchasing power. For example, imagine you have a budget of $1,500 to put toward your monthly mortgage payment. If you take out a 30-year mortgage at 5.0%, you can afford a loan of $279,000.

Now let's assume the mortgage rate falls to 4.0%. At that rate, you can afford to borrow $314,000 while still keeping the same $1,500 monthly payment. That's a budget increase of $35,000!

If the rate falls even further to 3.0%, you can afford to borrow $355,000 and still pay the same $1,500 each month. That's $76,000 over your original budget! All because the interest rate fell by two percentage points. If you've been priced out of the market before, today's low rates may put you in a better position to afford your dream home.

On the other hand, rising mortgages rates will erode your purchasing power. Wait to buy, and you may have to settle for a smaller home in a less-desirable neighborhood. So if you're planning to move, don't miss out on the phenomenal discount you can get with today's historically-low rates.


How low could mortgage rates go?

No one can say with certainty how low mortgage rates will fall or when they will rise again. A lot will depend on the trajectory of the pandemic and subsequent economic impact.

Forecasters at Freddie Mac and the Mortgage Bankers Association predict 30-year mortgage rates will average 3.2% and 3.5% respectively in 2021.9,10 However, economists at Fannie Mae expect them to dip even lower to an average of 2.8% next year.11

Still, many experts agree that those who wait to take advantage of these unprecedented rates could miss out on the deal of a lifetime. It's hard to imagine that rates may drop even lower. Positive news about a vaccine or a faster-than-expected economic recovery could send rates back up to pre-pandemic levels.


How can I secure the best available mortgage rate?

While the average 30-year mortgage rate is hovering around 3%, you can do a quick search online and find advertised rates that are even lower. But these ultra-low mortgages are typically reserved for only prime borrowers. So what steps can you take to secure the lowest possible rate?

1. Consider a 15-Year Mortgage Term

Lock in a low rate by opting for a 15-year mortgage. If you can afford the higher monthly payment, a shorter mortgage term can save you a bundle in interest, and you'll pay off your home in half the time.12

2. Give Your Credit Score a Boost

The economic downturn has made lenders more cautious. These days, you'll probably need a credit score of at least 740 to secure their lowest rates.13 While there's no fast fix for bad credit, you can take steps to help your score before you apply for a loan:14

● Dispute inaccuracies on your credit report.
● Pay your bills on time, and catch up on any missed payments.
● Hold off on applying for new credit.
● Pay off debt, and keep balances low on your credit cards.
● Don't close unused credit cards (unless they're charging you an annual fee).

3. Make a Large Down Payment

The more equity you have in a home, the less likely you are to default on your mortgage. That's why lenders offer better rates to borrowers who make a sizable down payment. Plus, if you put down at least 20%, you can avoid paying for private mortgage insurance.

4. Pay for Points

Discount points are fees paid to the mortgage company in exchange for a lower interest rate. At a cost of 1% of the loan amount, they aren't cheap. But the investment can pay off over the long-term in interest savings.

5. Shop Around

Rates, terms, and fees can vary widely amongst mortgage providers, so do your homework. Contact several lenders to find out which one is willing to offer you the best overall deal. But be sure to complete the process within 45 days—or else the credit inquiries by multiple mortgage companies could have a negative impact on your credit score.16


Ready to take advantage of the lowest mortgage rates in history?

Mortgage rates have never been this low. Don't miss out on your chance to lock in a great rate on a new home or refinance your existing mortgage. Either way, we can help.

We'd be happy to connect you with the most trusted mortgage professionals in our network. And if you're ready to start shopping for a new home, we'd love to assist you with your search—all at no cost to you! Contact us today to schedule a free consultation.

This article is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

 

April
20

Fast Facts for Mortgage Payment Relief Assistance

Spokane Landscaping Trends

 

This is a guest post by Tony Jones, Sales Manager & Senior Mortgage Specialist with Directors Mortgage.  You can contact him at (509) 220-0259, or tony.jones@directorsmortgage.net. Please note, this information is accurate as of this article's posting time. The situation is very dynamic and is subject to change.

 

I hope you and your family are doing well during these times. Please be assured that Directors Mortgage has adapted to the the changes, and that my team and I are still here to help you.

Recently, several clients have asked about the news they are hearing - mortgage assistance may allow them to "skip" monthly payments if they are in a tough financial spot due to COVID-19. If you are wondering the same, in short, relief may be available. I strongly recommend you to consider all of your options, and you'll want to protect your credit and long term financial goals.

 

Forbearance

This is the main one the that the news media has been talking about with the CARES Act which pertains to Conventional, FHA, VA & USDA loan types. It is an agreement with your lender to reduce or delay regular payments for a set time. When the forbearance period ends, the postponed payments will be due all at once.  It is important to know that you will not be able to refinance until you are at least one year out of forbearance.

 

Deferment

This plan allow you to postpone your payments for a set time then pay them at the end of your regular loan term. "Deferment" and "forbearance" are often used interchangeably, but they are different. A deferment is more beneficial for many because it eliminates the need to make up multiple payments at the end of a short postponement period. Deferments are not available from all servicers.

 

Payment Assistance Program

This is an arrangement that allows you to make up your postponed payments at the end of a forbearance period by spreading the cost over a period of time. Payment Assistance Programs are not available from all servicers.

 

Loan Modification

This is a legal process that alters the terms of your loan. For instance, a modification could lower your monthly payments by lengthening your loan term.

 

To set up the options listed above, please reach out using the contact information on your monthly loan statement. Document all calls and agreements, then check your monthly statements and credit reports to assure that the changes are reported correctly.

 

Additional Options to Consider:

 

Cash Out Refi or Home Equity Line of Credit (HELOC)

If you still have enough income to qualify, accessing the equity in your home by refinancing or obtaining a secured credit line may be a good option for lowering your payments, consolidating other debts, and/or creating a cash cushion. A refi will be especially beneficial if current rates are lower than those on your existing financing. 

 

I hope this helps you understand the available options out there. If you have any questions, please reach out - I would be happy to help!

September
24

How To Pick A Spokane Neighborhood for Your Family

Spokane Neighborhood

Moving to a new city or relocating within your current community is exciting. But there are also many factors to consider to ensure that you land in the right neighborhood. When you're shopping for Spokane homes for sale, learning about neighborhoods will help you find a home that you'll love. Our REALTORS® are here to help you find the perfect neighborhood, with our guide for how to pick a Spokane neighborhood to buy your next home.

Start Your Search Online

If you've come here to learn about picking a neighborhood, you're already off to a great start! Online research is crucial for getting an idea of what's out there and identifying which neighborhoods fit your needs. With a general idea of target neighborhoods, you'll be ready to get down to business.

Work with a Knowledgeable, Local Real Estate Agent

Whether you're familiar with Spokane or you're brand new to the area, picking the right real estate agent will make your move much easier. An experienced, local real estate agent will have an in-depth knowledge of your target neighborhoods in the city and can help you choose the right option.

Consider Your Commute for Work and Play

How long are you willing to commute for work, and are you planning to take public transportation? The Spokane Transit Authority offers bus routes throughout the city, so you can choose public transit or commute on your own. If you're looking to live close to the city's major areas, then Spokane Valley homes for sale are a great option. Many of Spokane's neighborhoods are very walkable as well, allowing you to explore all that your neighborhood has to offer without ever getting behind the wheel.

Figure Out What You'll Do for Fun

Of course, your commute isn't just about getting to work each day. You'll also want to plan on what you'll do for fun close to home. If you want to be close to the action in Spokane, then consider Millwood homes for sale. You'll never be far from fun attractions, and will have all of the services you need close to home. 

Will Schools Factor in Your Decision?

If you have kids or are planning to start a family in your next home, be sure to consider local schools. The quality of local schools can also have an impact on home prices. Even if you don't have kids, it doesn't hurt to learn about schools.

Take a Grand Tour Before Deciding on a Spokane Neighborhood

While you can learn plenty from online research and speaking with your real estate agent, there's no substitute for seeing neighborhoods first-hand. Once you have a list of promising candidates, get out there, start exploring, and find the neighborhood that works for you.

Finding the best neighborhood fit is easier with the right real estate team on your side, and we'd love to help you find your next home. Contact us to buy and sell homes throughout the Spokane, WA, area.

Disclaimer: All information deemed reliable but not guaranteed. All properties are subject to prior sale, change or withdrawal. Neither listing broker(s) or information provider(s) shall be responsible for any typographical errors, misinformation, misprints and shall be held totally harmless. Listing(s) information is provided for consumers personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Information on this site was last updated 01/29/2023. The listing information on this page last changed on 01/29/2023. The data relating to real estate for sale on this website comes in part from the Internet Data Exchange program of Coeur dAlene MLS (last updated Sun 01/29/2023 10:16:22 AM EST) or Spokane MLS (last updated Sun 01/29/2023 11:05:49 AM EST). Real estate listings held by brokerage firms other than Coldwell Banker Tomlinson may be marked with the Internet Data Exchange logo and detailed information about those properties will include the name of the listing broker(s) when required by the MLS. All rights reserved. --



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