Register Real Estate Advisors

This week’s White Board Monday is on the Short Sale Relocation Assistance Program. This is an amazing deal for sellers with a short sale.

Here are links to some of the topics covered on today’s show.

• Mike Blalock joins us via phone to talk about relocating to Houston. He is the publisher of Houston Newcomer Guides. He has guides for areas all over Houston. You can order a free guide at his website.
• Kacey Procheska calls in from Auburn Lakes. Auburn Lakes is a master-planned community just south of the Woodlands. See a map of where auburn lakes is HERE. They have some great promotions next week on Memorial Day Weekend. Swing by and check them out if you are in the market for a home.

We have an amazing show planned for next week. It’s Memorial Day Weekend and we have some real estate topics for veterans. One of our call-in questions next week will win a beautiful coffee table book called “Warriors Remembered.” This book is written by a West Point graduate and combat veteran, Al Nahas, and covers Vietnam Veteran Memorials around the country.

Here is the video of the segment with Mike Blalock, publisher of Houston Newcomer Guides:

Here is the video of the segment with Kacey Procheska, new home consultant with Lennar Homes at Auburn Lakes:

1. THOU SHALL NOT CHANGE JOBS OR BECOME SELF-EMPLOYED
2. THOU SHALL NOT BUY A CAR, TRUCK, OR VAN UNLESS YOU PLAN TO LIVE IN IT
3. THOU SHALL NOT USE YOUR CREDIT CARDS OR LET YOUR PAYMENTS FALL BEHIND
4. THOU SHALL NOT SPEND THE MONEY YOU HAVE SAVED FOR YOUR DOWN PAYMENT
5. THOU SHALL NOT BUY FURNITURE BEFORE YOU BUY YOUR HOME
6. THOU SHALL NOT ORIGINATE ANY NEW INQUIRIES ON YOUR CREDIT REPORT
7. THOU SHALL NOT MAKE ANY LARGE DEPOSITS INTO YOUR BANK ACCOUNT
8. THOU SHALL NOT CHANGE BANK ACCOUNTS
9. THOU SHALL NOT CO-SIGN FOR ANYONE
10. THOU SHALL NOT PURCHASE ANYTING UNTIL AFTER CLOSING

Seller Financing is when the seller is the lender.  I works like this – the seller passes ownership of the property to the buyer by deed. The deed describes whatever matters affect the ownership (or title) to the property and contains a promise by the seller to defend the buyer’s ownership (or title) to the property.  The seller gets a note for the difference between the sales price and cash paid by the buyer; this is money owed to the seller. The note generally provides for equal payments of principal (what is required to pay off the amount owed/borrowed over the time provided for repayment) and interest (the extra amount paid, as profit to the seller/lender, for having provided the money). Because of the interest, a note is a type of investment (a way the seller/lender can make money).  The property becomes the security for the note: the seller/lender gets the property back if the buyer does not pay the note as agreed.  The mechanism used to make the property security for the note is a document called the “deed of trust.” This document creates a lien against the property. When the note is paid in full, the seller/lender releases his lien, and the buyer owns the property “free and clear” of the lien. If the note is not paid as agreed, the seller/lender can recover ownership of the property by foreclosing on his lien.

Here are some negotiable points when using seller financing:
• Typically, the buyer pays taxes and insurance. The seller/lender can decide to collect the money to pay these items along with the monthly payment on the note (collecting 1/12th of what will be due and paying the tax or insurance premium when it becomes due) or to allow the buyer to pay these items directly and provide proof of payment. The appropriate provision must be put in the deed of trust.
• If the buyer is late in making the monthly payments due the seller/lender, a late charge (typically 5% of the payment amount if the payment is made more than ten days after it is due) can be collected by the seller/lender along with the payment. The appropriate provision must be put in the note.
• If the buyer wants to pay off the note early, before the scheduled payoff date, the seller/lender, who will not receive all of the interest he would have received over the full term of the note, can charge a prepayment penalty. However, the prepayment penalty cannot exceed the amount of interest the seller/lender would have earned if the note had been paid as scheduled.
• In the event that the buyer wants to sell the property before the note is paid in full, the seller/lender must decide whether he will allow the note to be assumed by a new buyer or require that the note be paid off at the time the buyer sells the property. The appropriate provision must be put in the deed of trust.
o If the seller/lender allows the note to be assumed, there is a requirement that the seller/lender be satisfied regarding the new buyer’s credit and ability to repay the note. The seller/lender must also decide whether the original buyer will remain liable to pay the note or will be released from liability to pay the note.
o If the seller/lender requires that the note be paid off, then a “due on sale clause” is put in the deed of trust.
• If the deed of trust contains a “due on sale clause” and the buyer sells the property without paying the note to the seller/lender, the seller/lender can get ownership of the property back by foreclosing on his lien.
• Prior to the foreclosure process, the buyer would be given certain notices. If the buyer fails to pay what is owed, the property is sold at a public auction to the highest bidder.
o If the property is the principal residence of the buyer, then the buyer must be given a warning notice that the payment under the note is delinquent. The buyer is given 20 days from the date of the sending of the notice to pay what is currently owed. (If the property is not the buyer’s principal residence, then this notice does not have to be given.)
o If the buyer does not pay the delinquent amount in full, then the seller/lender can “accelerate the note”; the seller/lender can say that all money due under the note (whatever is required to pay the note in full) is due. A notice that the note has been accelerated is sent to the buyer.
o A Notice of Foreclosure Sale is filed with the County Clerk and put up (posted) at the place in the county provided for public notice of foreclosure. The Notice of Foreclosure Sale is also sent to the buyer, usually with the notice that the note has been accelerated.
o Foreclosure sales are held on the first Tuesday of each month. The Notice of Foreclosure Sale must give the buyer at least 21 days to pay everything that is due on the note. Therefore, the foreclosure sale will be held on the first Tuesday of the month that occurs more than 21 days after the Notice of Foreclosure is sent.
o The foreclosure process is generally conducted by the Trustee under the deed of trust. If a foreclosure sale does occur, the Trustee takes bids from all interested parties. Usually the seller/lender bids the full amount owed on his note, and usually the seller/lender is the successful bidder. If someone else bids more, that person has to pay cash for the property, and the seller/lender’s note gets paid off.
o The Trustee conveys the property to the successful bidder at the foreclosure sale, and the buyer loses ownership to the property.
• There are two (2) situations which can interfere with the foreclosure process:
o The buyer can file bankruptcy. In this situation, the seller/lender will either be allowed to foreclose, but under the timing allowed in the bankruptcy proceeding, or the note will be paid off in accordance with a plan developed in the bankruptcy proceeding.
o The buyer can die. In this situation, the seller/lender can foreclose after a probate proceeding on the buyer has been started or after the seller/lender can identify the buyer’s heirs-at-law.
• Lender’s title insurance (loan policy). The seller/lender should get a loan policy that insures the lien created by his deed of trust.
o The loan policy protects the seller/lender against title defects, but is particularly useful if the seller/lender wants to sell the note and get cash, rather than waiting for the note to be paid off.
o If obtained at the same time as the owner policy to the buyer, the loan policy only costs an extra $100 plus endorsements. If obtained later, a credit may be given, but the charge will not be as minimal as it would have been if the loan policy was obtained at the same time as the owner policy to the buyer.

Want to know more about Contract for Deed?

Below is the process:
1. The seller and buyer execute a document called a Contract for Deed. By law, the document must be recorded in the real property records of the county.

2. The document provides that the seller/lender does not provide a deed to the buyer until the purchase price for the property is paid in full. The payment of the purchase price is similar to payments on a note, and the payment schedule is set out in the Contract for Deed.
3. If the buyer does not make the payments set out in the Contract for Deed, the seller/lender can take possession of the property.
a. If the buyer has paid less than 48 payments or less that 40% of the purchase price on the Contract for Deed, he is given a notice of delinquency. If he does not pay the delinquency within 30 days, the seller/lender can cancel the Contract for Deed, take possession of the property, and record a notice canceling the Contract for Deed in the real property records of the county.
b. If the buyer has paid more than 48 payments or more than 40% of the purchase price on the Contract for Deed, he is given a notice of delinquency. If he does not pay the delinquency within 60 days, the seller/lender can foreclose in the same way that a deed of trust would be foreclosed.

Some considerations:
• The risk to the buyer is that the seller/lender may do something to affect the title before the buyer can pay off the purchase price and get the deed from the seller/lender. Recording the Contract for Deed protects the buyer against any creditors of the seller/lender that have rights arising after the date that the Contract for Deed is recorded.
• The Contract for Deed is often used when the buyer does not qualify for a loan at the time of sale but expects to obtain a loan in the foreseeable future.
• Title insurance may be issued on a Contract for Deed transaction. Only an Owner Policy is issued (because there is no note and lien, just a contract for the buyer to pay money and the seller/lender to convey title sometime in the future). The insureds under the policy are both the seller and the buyer.
• A real estate commission can be collected on a Contract for Deed transaction.

Don’t do it!  There are many reasons why I recommend seller financing over rent to own in Texas.

If a buyer does not have adequate funds for a down payment and has poor enough credit or income to keep a lender from offering them a loan, I don’t think they should be purchasing a home.  If they do have the income or the down payment, regardless of credit, then seller financing is a great option for them.  I don’t believe a landlord should offer to sell to someone that has poor credit, limited down payment, and unsteady employment.  That sounds like trouble to me – so I would never recommend this to one of my landlords or sellers.

If a tenant needs more time to get adequate financing, then I feel they should  purcahse a home at a later date – that is my opinion.  What if they are never able to get their credit in better shape and now the seller/landlord has agreed to sell their house to this renter?

It doesn’t help that ForSaleByOwner.com is now offering a lease to own advanced search option.  Other states that have different real estate laws, may be more suitable for rent to own tenants than Texas.

All rent to own contracts should be written up by attorneys or atleast reviewed by a real estate attorney.  The contract has to have a lease component and a sale component.  They are legal in all the United States, but I do not recommend doing it.

What if the seller is entering foreclosure?  Would you the tenant buyer know it?  If they got foreclosed on, you’d lose all your equity and get booted out of the house.  There has also been fraud associated with rent to own transcations.

Now for more down side to buyers – what if prices go down and you are locked into purchasing the home for more than it’s worth.  What if interest rates go way up?  If you don’t buy the home, then you lose all your money that was supposed to be going to the down payment.  Some contracts say that if buyers are late on a payment, that payment cannot count towards the down payment.

Realtors don’t have promulgated forms for rent to own options, so you have to pay an attorney to write it up.  Do you know everything you need to put in that contract to protect you and your property?  Neither do I.  That’s why I encourage rent to own buyers to instead use the option of Seller Financing.   Seller Financing can be completed on Realtor promulgated forms and all title company attorneys can write these up easily.  I believe seller financing is a better option for both sellers and buyers/renters.  It’s not just about the forms.  The forms are there because seller financing is more simplistic.  The buyer takes possession right away.  They don’t have to wait to own the property.

If you want to rent to own a home, I recommend you set up seller financing if you are in the state of Texas.  Call me if you want more details.  I can explain better over the phone – 281.288.3500.  Let me know if you want the buyer or seller’s point of view!

Did you know that some of the things in your home could be toxic for your family? Air fresheners, carpeting, and even granite countertops can be toxic!

Those air fresheners smell nice, but some contain formaldehyde and other toxic substances. Don’t breath the air when you spray an air freshener. Also, don’t keep plug in air fresheners down low where animals or children could reach them. If you would prefer not to use air fresheners after hearing this…use the old baking soda box to natually absorb those bad odors. You can also boil some nice herbs in water on the stove to make the house smell nice or light a few scented candles.

When carpet is installed it emits more than just a smell. There are chemicals that can cause headaches and throat irritations and more. If carpet or rugs get wet, they can start growing mold which can cause allergic reactions. Many consumers are now requesting hardwood floors in both new and resale homes.

Granite has been known to emit low levels of radon, which is a colorless and odorless gas. You wouldn’t know it’s being emitted into the air. Most homes have radon anyway because it comes from the soil. You can buy at home testing kits if radon is a concern for your family. High levels have been known to cause lung cancer.

To learn more about things that could be toxic in your home, visit the environmental protection agency online. They can provide additional information.

This article below contains information from an article by Dr.Mark Dotzour in the July 2011 Tierra Grande Magazine.  He is a chief economist with the Real Estate Center at Texas A&M University.

This year we went from extreme drought to a rainy winter and spring.  You never know what the Texas weather will bring and the housing market is very similar.

Many factors influence the underlying reasons for increases and decreases in sales volume that predicts future real estate sales.  The normal flow of the residential real estate market is affected by demand for housing.  Demand in turn is influenced by many “life events” that occur throughout peoples’ lives.  For example, they may:

• graduate from college and get a job;
• get married;
• have children and need a bigger home or a different school district;
• get promoted and move to another city or another neighborhood;
• lose their job and no longer be able to afford the house;
• get divorced and have to sell the house or move into a smaller one;
• buy a second home near their adult children;
• need to move into a smaller, one-story house with less maintenance;
• reach a point at which they can no longer care for themselves and need to move to an assisted-living facility;
• move to the United States from other countries to improve their quality of life; or
• move from other countries and buy homes here to protect their wealth and secure their safety.

The expansive Midwest flooding that made headlines for weeks this spring is a reminder that every now and then nature plays havoc with rivers.  Similarly, certain events and circumstances can cause housing transaction volume to rise significantly.  For example, increases may occur when:

• home prices increase fast enough that the investment motive spurs purchases;
• prices increase even faster and speculators buy homes to flip them;
• prices increase consistently, so people prefer to buy now rather than pay a higher price later;
• mortgage rates drop enough that many people can afford to buy a bigger house or move to a nicer neighborhood without a significant increase in their house payments;
• the government offers tax incentives to homebuyers; or
• houses are affordable to a broad segment of all households and mortgage underwriting standards are lowered to include a broader range of credit risk.

The extreme weather patterns that spawn floods do not last forever.  When they end, the river returns to the normal level within its banks.

At the other end of the weather spectrum is drought, which lowers the river’s water volume.  Transaction volume ebbs, too, when circumstances such as the following occur:

• people are worried about losing their jobs so they postpone buying decisions;
• people are worried that home prices will fall, and they might lose their equity;
• house prices rise so fast that they become unaffordable;
• lenders tighten mortgage underwriting standards, and by doing so remove potential buyers from the market;
• appraisals come in  well below the contract price agreed to by a seller and a buyer;
• cost of homeownership increases (taxes, utilities and insurance);
• lack of liquidity in the market makes it harder to sell homes;
• employers reduce corporate transfers to save money; or
• random scares, such as radon gas or black mold, make media headlines.

Buyers all over the country are still skittish because of all the negative housing headlines.  But there is evidence that Texas’ residential housing market is beginning the gradual, lengthy process of moving back to normal.

And remember, real estate operates in local markets.  What happens in Las Vegas does not really matter to a homebuyer in Abilene.  Each local market has its own story and its own dynamics.  So be familiar with where you are purchasing a home.

Real estate professionals must understand their clients’ psychology—their hopes and fears.  Careful consideration of the factors influencing home sales volume will help buyers and sellers make the best decisions for their circumstances.

1. Social Security Numbers
2. Driver’s License
3. Employment Info for the past two years, Current Pay Stubs
4. 2 Years Tax Returns
5. If renting, landlord info
6. Addresses for past two years
7. 2 Months Bank Statements
8. Current Loan Information
9. Homeowners Insurance Info
10. Purchase Contract for the Property if it has been chosen
11. Bankruptcy Documentation if applicable
12. Divorce Decree if applicable

For more information, contact your RREA lending professional at 281.288.3500.  We want to help you purchase your next property!

I was shopping in Kroger and picked up one of their pamphlets off the meat market counter and thought you might like to have this info, too.  Now that summer is fast approaching, it’s a great time to start grilling!  I love Kroger’s meat market!

1.  REFRIGERATE fresh meat promptly.

- USE a cooler or chill bag to keep meat cold on the way home from the store or outside by the grill, especially on warm
days.

- SET your refrigerator at home to 40° F.

- THAW or marinate beef, pork and poultry in the refrigerator, not on the kitchen
counter.

- KEEP cold food and perishables on ice at picnics and cookouts.

- PLACE leftover cooked foods in a refrigerator or cooler with ice within two hours.

2. CLEAN hands & surfaces often.

- WASH hands with warm water and soap for 20 seconds before and after handling food.

- WASH cutting boards, dishes and utensils with hot soapy water after preparing each food item.

- USE paper towels and soap to clean kitchen surfaces often.  Or clean cloth towels frequently in your washing machine’s hot
cycle to kill bacteria.

3. DON’T cross contaminate.

- SEPARATE fresh meat from other food in your grocery cart, shopping bags, in the refrigerator and by the grill.

- KEEP cutting boards and utensils separate to prevent spreading germs.

- PLACE cooked food on a clean plate – never on a plate that held raw meat.

4.  COOK to a safe temperature.

- USE a food thermometer every time you cook fresh beef, pork and poultry to reach its
proper internal temperature and kill harmful bacteria.

- COOK ground beef and pork to 160° F, and cook ground turkey and chicken to 165°
F.

- CHECK this cooking temperature guide to safely grill other cuts of fresh beef, pork and poultry.

- REMEMBER:  You can never tell if meat is cooked properly by looking at it.

Safe Cooking Temperatures

Internal temperature as measured with a food thermometer.

Ground Meat

Beef, Pork, Veal, Lamb                       160° F

Turkey, Chicken                                  165° F

Fresh Beef, Veal,
Lamb

Medium Rare                                      145° F

Medium                                              160° F

Well Done                                           170° F

Poultry

Chicken, Turkey, whole                       165° F

Poultry parts                                       165° F

Duck & Goose                                     165° F

Stuffing (cooked alone or in bird)       165° F

Fresh Pork

All Pork                                                160° F

Ham

Fresh (raw)                                          160° F

Pre-cooked (to reheat)                       140° F

It’s White Board Monday. This is the 61st edition and it is on what happens if you list your home at too high of a price. Enjoy!