To Contribute to Buyer’s Closing Costs or NOT!

 

Is there a defined rule when it comes to closing cost assistance for financing buyers? Many might think there is an industry standard to expect. Buyer’s closing costs assistance or seller’s concessions are always a topic of discussion in any financing negotiations. Why not? If the Buyer is purchasing a home and paying for the down payment, closing costs, home inspections, appraisal, HOA applications, etc., a little money saved can go a long way. Thousands of dollars just vanish from the buyer’s pocket. I’m not saying it’s not worth the investment, but if the Buyer could save a little in their pockets, then Why Not?

Any new buyer I work with, I’ll explain to them that we’ll ask the seller to contribute and pay for up to half of their closing costs. In some cases, I can negotiate that all of their closing costs be paid. On the selling side, when I represent a seller, the seller’s net sheet is calculated to include 3% seller concessions as a variable cost. It’s not mandatory, but if a Buyer asks, at least the seller is able to make concessions as they see fit.

I never really gave this practice much thought until I submitted an offer on a property for one of my Buyers recently. The listing agent countered our offer stating that the Seller won’t contribute to our closing costs. The listing agent further explained that she never asks for closing costs for a buyer or recommends a seller to contribute to the Buyer’s closing costs unless it’s a foreclosure or new construction property. Foreclosures and new construction purchases are easy outlets to obtain closing cost assistance for the Buyer. New construction builders almost ALWAYS offer seller concessions as part of their appeal to Buyers. I was certainly taken back by her real estate practice. She eloquently added that, if a Buyer wants to buy a home, they should the necessary money saved to cover all costs. I chuckled to myself.

Perhaps this is the service she provides to her clients, but I feel this is a Disservice. Saving a few thousand dollars for a Buyer shows that you care. It shows that you understand that even after the  home purchase, there’s money that goes towards cosmetic improvements, furniture, utility connections, among other items. It hurts my heart that this is her belief and practice. I feel this is why when I speak to so many Buyers, they feel that home ownership is out of reach. They feel that they cannot afford it, and have to save for years. They eventually give up on this dream because of kids, bills, and other items that may slowly nibble at their saving opportunities.

I believe that Home Ownership is a dream. As your Real Estate Professional, it’s my job to make this dream come true. Anyway I can.

If you are wondering how to begin the journey to home ownership, call me today at 813-419-7009 or email me at info@gloriawalters.com.

Photo credit: www.totalmortgage.com

Homeowner Flood Insurance Affordability Act

The United States Senate has just passed "The Homeowner Flood Insurance Affordability Act" by a vote of 72-22 (both US Senator Nelson and Senator Rubio voted in favor of the bill. This is the bill the US House passed on March 4. This is incredible news for Florida REALTORS® and property owners. The bill will now be sent directly to President Obama for his signature!

* Reinstates Grandfathering - This bill permanently repeals Section 207 of the Biggert-Waters Act, meaning that grandfathering is reinstated. All post-FIRM properties built to code at the time of construction will have protection from rate spikes due to new mapping - for example, if you built to +2 Base Flood Elevation, you stay at +2, regardless of new maps. Also importantly, the grandfathering stays with the property, not the policy.

* Caps Annual Rate Increases at 18% - This bill decreases FEMA's authority to raise premiums. The bill prevents FEMA from increasing premiums within a single property class beyond a 15 percent average a year, with an individual cap of eighteen percent a year. Pre Biggert-Waters, the class average cap was 10%. Currently (Post Biggert-Waters), the class average cap is 20%. The bill also requires a 5% minimum annual increase on pre-FIRM primary residence policies that are not at full risk. The updated legislation also states that FEMA shall strive to minimize the number of policies with premium increases that exceed one percent of the total coverage of the policy (e.g., 1% of $250,000 = $2,500).

* Refunds policyholders who purchased pre-FIRM homes after Biggert-Waters (7/6/12) and were subsequently charged higher rates

* Permanently Removes the Sales Trigger - This bill removes the policy sales trigger, which allows a purchaser to take advantage of a phase in. The new purchaser is treated the same as the current property owner.

* Allows for Annual Surcharges - This legislation applies an annual surcharge of $25 for primary residences and $250 for second homes and businesses, until subsidized policies reach full risk rates. All revenue from these assessments would be placed in the NFIP reserve fund, which was established to ensure funds are available for meeting the expected future obligations of the NFIP.

* Funds the Affordability Study and Mandates Completion - This legislation funds the affordability study required by Biggert-Waters and mandates its completion in two years.

* Includes the Home Improvement Threshold - This bill returns the "substantial improvement threshold" (i.e. renovations and remodeling) to the historic 50% of a structure's fair market value level. Under Biggert-Waters, premium increases are triggered when the renovation investments meet 30% of the home's value.

* Additional provisions: This legislation includes several other provisions including preserving the basement exception, allowing for payments to be made in monthly installments, and reimbursing policy holders for successful map appeals.

What can you expect from the Florida real estate market in 2014?

Real estate market never remains the same for long. The market trends keep changing as per the alterations in global economy. Now, the same trend applies for the Florida real estate market as well. As the experienced economists stated at the Florida Realtors' 2014 Real Estate and Economic Summit in December, the upcoming changes in global economy can make the housing sector in Florida grow slowly in 2014.

How strong Florida real estate market is going?

There was a hint of substantial growth in Florida’s housing market in 2013 as well. By the third quarter of 2013, the number of closed sales and properties in inventory increased considerably. Apart from that, the median prices were high enough. Home affordability was also high. Dean Asher, the 2013 Florida Realtors President stated, “Data from the third quarter of 2013 shows that Florida’s housing market continues to grow and gain strength”.

2013 Was a really positive year for the realtors in Florida and market experts believe that this positivity will continue in 2014 as well.

What are the prospects in 2014?

The experienced economist of Florida Realtors, John Tuccillo believes, "The real estate market is going to grow, and we'll probably see about a 10 percent increase in residential sales". The value of home will increase considerably. There are chances for the price to go up gradually by almost 5%. In the last 18 months, the property prices have increased almost about 12%. This is an incredible increase.

There is a slight increase in the number of vacant properties as well. Federal Reserve has planned to modify its bond-buying program in the upcoming months. After the modification, the property prices are supposed to increase considerably.

Dr. Frank Nothaft, the chief Freddie Mac economist said at a recent conference, "Mortgage rates have gone from dirt cheap to cheap and now I expect them to rise to low - maybe 5 to 5.5 percent toward the end of next year - still very low to where they've been historically". So, there is hardly any doubt that mortgage rates will maintain a moderated increase in Florida in the coming months of 2014.

So, how the housing market may change in Florida?

As Nothaft pointed, there are also a few challenges to face in 2014. For instance, there is the restricted access to credit. Apart from that, most of the market experts are predicting that home buyers may face problems to deal in a market where rates are going up. The increased value of properties and continuous increase in mortgage rates may force the homeownership rate to drop significantly. However, with improvement in job market, home buying may be a bit easier. But the question is how steady will be the growth in job market. Sean Snaith, the professor of University of Central Florida recently said that uncertain growth in employment will only make people avoid home buying. Nothaft also feels that unemployment matter and he said, "People who want full-time jobs but can't find them and have to work part time add to the underemployment rate of 13.5 percent. That's a large share of the market that doesn't have the resources to buy."

So, it’s quite evident that home buyers in Florida need to stay updated about the changes in real estate market. As inventory is huge, the competition will be less enough. Mortgages will be easier to get but people may have to pay extra for the interest rates. That’s why, prospective buyers who’ve enough resources or a steady job must make the move now and opt for the mortgage before the rates go up even more.

By Rikk Miller