Massachusetts Real Estate News

Short Sale Negotiations|Seller Cash Contribution

Bill Gassett — Mon, 23 Jan 2012 12:47:00 +0000

Negotiation With Short Sale Lenders

In working in the short sale arena for the last five plus years, I have seen lenders do just about everything when it comes to negotiating short sales with home owners. There really is no “standard” in short sales. The way one short sale file at one particular lender is handled can be totally different on the next.

One of the biggest reasons for this is that every lender has different investors that actually own the loans. There could be more than twenty five different investors that have interests in loans at one lending institution. So for example just because Bank of America may have done something for a home owner in one circumstance does not mean they would do the same thing for another home owner in the exact same circumstance.

More often than not this is because one investor may not have the same needs or requirements as another investor.

There are basically three scenarios for a seller when completing a short sale. They are a:

Cash contribution to the lender at closing.
Signing a promissory note to pay back some portion of the short sale debt.
A combination of these two things.
A complete debt removal.

The biggest consideration for most home owners completing a short sale is debt removal. My goal of course in any short sale is to get the most favorable terms and conditions for the seller which is a complete debt removal. Going back five years ago getting complete short sale debt removal was a lot easier than it is today. Many lenders today want sellers to have some kind of “skin in the game” if they are going to grant a short sale.

In my experience the terms that most home owners get from short sale lenders is very favorable. Home owners are typically asked to bring a cash contribution or sign a note that basically amounts to pennies on the dollar compared to what they owe.

A typical scenario could be a home owner being substantially under water…..for argument sake let’s say $100,000. It would not be unusual for a lender to ask the seller to bring $5000 to the closing and letting the short sale take place. Another possibility if the seller does not have $5000 is to work out a promissory note. Maybe the lender asks for a$15,000 note to be paid back over the next five years at an attractive interest rate. As mentioned previously it could be a combination of these two options. These are just quick examples to give you an understanding of what happens in the short sale world on a daily basis.

There can be circumstances although not real often, where the lender will only accept a cash contribution in order to close. The short sale lender may have this requirement for one of the following reasons:

The seller has money in liquid accounts.
The seller has not been late with any mortgage payments.
The cash contribution is a requirement of waiving the deficiency (debt removal).
The seller has a good credit score and are current with other debt.
The residence is an investment property.

One of the most difficult parts of going through a short sale as a seller is the long wait involved from the time you get an offer from a buyer until the time you actually begin negotiations with the lender. Sometimes there can be months in between the two. As a seller it is easy to feel in the dark and helpless. There can be times where you will be in this waiting game wondering what the lender is going to require of you and then their request finally comes. They ask you for a cash contribution that you just don’t have.

I have an outstanding short sale attorney that works on behalf of the seller with all of my short sale transactions. In a circumstance where the lender asks for a cash contribution that the seller just can’t come up with the first course of action will be to try to work out an amicable compromise with the lender/investor. This would typically be one of the following:

Negotiate to get the cash contribution lowered to something the seller was able to bring to closing.
See if the seller can get the funds from a family member or borrow from them.
Try to get the lender to accept a promissory note instead.
Ask the buyer to pay the cash contribution if lender allowed this to occur.

In the vast majority of the short sales I have been involved in we have been able to work it out so a compromise was reached and everyone got what they wanted. Should sale negotiations can be difficult at times but if you know what your doing common ground can often be reached.

What would you need to do in the rare instance where a large cash contribution was required that the owner just did not have and the lender would not budge? If all else fails what you would need to do in the scenario above is to put the home back on the market and build in a cash contribution to the lender right into the transaction.

So for example you would add a cash contribution for the lender on behalf of the seller on line 104 of the buyer’s side of the HUD settlement statement. You would also place the same contribution on line 404 of the seller’s side of the HUD as a “Cash Contribution To The Lender”. The payoff amount would then go to the lender.

This is how short sale negotiations work with lenders. If you know what you are doing you can usually find common ground. Of course there are numerous things to look for in a short sale contract which I have covered in a number of articles I have written.

Other short sales articles worth a look:

If you are need to short sale your home or condominium in Ashland, Bellingham, Blackstone, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northboro, Northbridge, Shrewsbury, Southboro, Sutton, Wayland, Westboro, Whitinsville, Worcester, Upton and Uxbridge MA.

I am successfully completing short sales through out the Metrowest Massachusetts and Worcester County areas. So far, knock on wood, I have a 100% success rate for short sale approval! Short sales are specialized transactions that are critical to have the right Realtor representing you. Do not make the mistake of picking an agent that does not understand how to get to the closing table on a short sale. Nationally less than 30% of all short sales close!

If you are outside of the Metrowest Massachusetts area and need to do a short sale please feel free to contact me and I would be happy to refer you to a Realtor in your location that handles short sales and knows what they are doing! I have referred short sales to other Realtors all around the country.

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About the author: The above Real Estate information on Short sale negotiations – seller cash contributions was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following towns in Metrowest MA: Ashland, Bellingham, Blackstone, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northboro, Northbridge, Shrewsbury, Southboro, Sutton, Wayland, Westboro, Whitinsville, Worcester, Upton and Uxbridge MA.

What is Real Estate Title Insurance

Bill Gassett — Tue, 29 Nov 2011 13:03:48 +0000

Real Estate Title Insurance Explained

When purchasing a home one of the things that buyer’s will be asked is whether or not they want Real Estate title insurance. Often times I find that home buyer’s lament over this decision because of the expense involved. Real Estate title insurance is certainly not cheap!

While title insurance is a one time expense, it can be disturbing for a buyer tight on cash to have to come up with such a large unexpected expenditure. Real Estate title insurance can easily run into thousands of dollars in a home purchase. Unlike other insurance policies there is no monthly premiums with title insurance. It is a one time expense covering the owner until the property is sold.

One of the questions I get asked a lot by my clients is “should I purchase title insurance’?

Let me first explain what title insurance is and what it covers. Real Estate title insurance is a type of insurance that covers financial loss from defects in title to real property and from the invalidity of mortgage liens.

A title policy is put in place to protect an owner’s or lender’s financial interest in a property against loss due to title defects, liens or other matters. The insurance will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the monetary loss incurred, up to the dollar amount of insurance provided for in the policy.

In my experience all major lenders require title insurance to protect their interest in the mortgage secured by real estate. This is called a lenders insurance policy. An owner’s insurance policy is not required but in my opinion is a highly valuable insurance that is risky not to have.

There is an opportunity for a buyer to get a substantial discount when they purchases both a lenders and owner’s policy at the same time. This is called a simultaneous issuance. For an enhanced policy, it runs about $4.00 per thousand based on purchase price + $175.00 in Massachusetts. This is a one time premium paid at closing which lasts the lifetime of the property ownership.

The Real Estate Title Search

Prior to a buyer taking title to a property or completing the “closing”, the lender through which the borrower is getting the mortgage will have a title search done on the Real Estate.

The purpose of the title search is to find any defects in the title. There could be any number of defects including liens, unpaid Real Estate taxes, judgments, unpaid condo fees, or others.

If title defects are found the buyer’s or lender’s lawyer will inform the buyer of such defects and then work towards getting them removed so that a clean and marketable title is given to the buyer.

Title insurance becomes of great value when something is discovered in the future that was not found when the initial title search was done.

A Title search starts with the most recent deed searching the grantees name (the person who holds title) back in time until the deed from which the grantee acquired the property is found.

That grantors name is then searched back in time in the grantees book to find when the grantor acquired the title as grantee. The typical title examination goes back fifty years but title insurance would cover beyond the fifty year search.

Anyone who has not purchased title insurance could surely tell you what a nightmare it can become without it!

Common Reason For Title Insurance Claims

Example of some of the more common reasons for claims against a Real Estate title insurance policy are as follows:

False impersonation of the true owner of the property
Forgery of the deed, releases, or wills
Real Estate fraud
Missing or undisclosed heirs to the property
Any Instruments executed under invalid or expired power of attorney
Mistakes in recording legal documents
Deeds by someone of unsound mind
Deeds by a minor
Misinterpretations of wills
Deeds with misrepresentation of marital status
Liens for unpaid estate, income, inheritance, or gift taxes

For an astute buyer who really thinks about the expense of title insurance the follow up question I get is why do I need it if the lender is going to have a policy anyways?

The easiest way to answer this question would be to ask is what would you do if one of the above title defects were discovered and the attorney who did the title search was no longer in business? While you could certainly sue the attorney for negligence if he was still around practicing; what if he was not? You would have a very large issue on your hands! To be clear an attorney would only be responsible for negligence not the issues outlined above. This is why it is important to have title insurance!

One other important note about Real Estate title insurance:

A federal law called the Real Estate Settlement Procedures Act (RESPA) allows the individual homeowner to choose a title insurance company when buying or refinancing residential property. Most of the time, homeowners do not make title insurance decisions for themselves.

They are typically handled by their lender’s or attorney’s choice; however, the homeowner does retain the right. RESPA makes it unlawful for any lender, attorney, or Real Estate agent to mandate that a certain title insurance company be used. Doing so is a violation of federal law and any person or business doing so can be heavily fined or lose their license.

Section 9 of RESPA denies a seller from mandating a home buyer to use a specific title insurance company, as a condition of the sale. Buyers may sue a seller who violates this provision for an amount equal to three times the cost of all charges related to the title insurance.

Some of the most prevalent title insurance companies are Fidelity National Financial, First American, Land America, Stewart and Old Republic.

In my mind having an owners insurance title policy is a no brainer and is certainly something you should consider unless you absolutely can not afford it! A title policy can be purchased in the future should you not have the funds available at closing time.

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About the author: The above Real Estate information on Real Estate title insurance was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following towns in Metrowest MA: Hopkinton, Milford, Southboro, Westboro, Ashland, Holliston, Medway, Franklin, Framingham, Grafton, Hopedale, Mendon, Upton, Northbridge, Shrewsbury, Northboro, Bellingham, Uxbridge, Millbury, Worcester, Sutton and Douglas.

Credit Scoring Impacts Short Sale vs Foreclosure

Bill Gassett — Tue, 11 Oct 2011 11:29:42 +0000

It is probably safe to assume that most consumers like to work with folks they know can be trusted. In Real Estate, like some other businesses there are those that can always be counted on for delivering great advice and others that only care about their own pocket book.

I always tell people some of the best Real Estate agents are those that don’t NEED to make a sale! It makes perfect sense because an agent that NEEDS business is far more likely to tell a buyer or seller something they want to hear rather than the truth.

Short sales unfortunately are a specialized Real Estate transaction where information is often times bandied about with no basis of fact. Many Realtors blindly go around telling people in financial distress that a short sale is better for their financial future because their credit score will not be impacted like going through a foreclosure.

Folks this could not be further from the truth! While there are certainly advantages of pursuing a short sale vs foreclosure, credit scoring is NOT one of them. There will be plenty of Realtors that will read this and argue with me telling me I am wrong.

As a Realtor who is tech savvy and social media connected you will see many of my articles in places such as Linkedin, Twitter and other Real Estate forums.

They will see some of my short sale articles and flat out tell me that I have incorrect information. When I mention the credit scoring impact of a short sale compared to a foreclosure is just about the same they scowl in disbelief. They will tell me I don’t know what I am talking about because they just learned differently at some short sale course their local Real Estate board was putting on. At this point I will be laughing because the people that teach these courses are usually Realtors that couldn’t make it in the business. They teach this nonsense because it is propaganda that helps get Realtors more business.

By now you are probably thinking how do I know the credit scoring impact is similar in these two financially stressful events. You have every right to be wondering! I know because I go right to the source. My FICO is the governing body for credit scoring including what happens in both a short sale and foreclosure.

Short sale vs foreclosure credit scoring impacts

Since I am often getting challenged on the credit scoring impacts by other Realtors and get asked all the time by my clients, I am going to share a very interesting study that was conducted by Fair Issac corporation.

The FICO study took various types of mortgage delinquencies on three credit bureau profiles of consumers that had scores of 680, 720 and 780, respectively. The study focused on consumers whose credit characteristics (e.g., utilization, delinquency history, age of file) were typical of the three score points considered. All of the consumers had an active currently-paid-as-agreed mortgage on file.

Results of this credit scoring study are shown below. The first chart shows the impact on the credit score for each stage of delinquency and the second shows how long it takes the score to fully “recover” after the fact including a short sale or foreclosure.

What you can easily see by this study is that there is a negligible difference in credit scoring when comparing a foreclosure or short sale. While it seems unfair, those that had a higher credit score to start will see a greater scoring drop. In addition, the higher starting score, the longer it takes for the score to fully recover.

While there is a minimal difference in scoring impact between moderate and severe delinquencies, there may be a significant difference in time required for the score to recover completely.

These statistics are right from the guys that make credit scoring. They are not opinions. This is actual data that was put together and sourced by FICO themselves.

Benefits of a short sale vs foreclosure

So what are the benefits of going through a short sale rather than letting a lender foreclose on your property? The biggest advantage is that you will be able to buy another home in the future a lot quicker than you would with a foreclosure. Generally speaking the turnaround time for getting another loan after completing a short sale is two to three years. In a foreclosure it is typically five to seven years. There are a number of circumstances that can affect the time frame including whether the loan is FHA, Fannie Mae or Freddie Mac. For a complete financing guide see buying a home after short sale or foreclosure.

One of the other big factors you need to consider is your employment status. There are a number of large companies that will not hire a new employee that has a foreclosure on their resume. While this may not seem fair with all the financial turmoil that has taken place over the last five years, employers look at a foreclosure as a black mark on your record. In other words when you short sale a property you are owing up to a financial commitment. In a foreclosure you are walking away and taking no responsibility for your debt.

The last reason why more and more will choose a short sale over a foreclosure is just the sheer embarrassment of going through a foreclosure proceeding. In some states an auction is held right on the front lawn of the property. Who wants to lose their home and then have salt rubbed in the wound by watching a bunch of buyers compete over it. This is an unsettling experience for most.

The goal of almost anyone that goes through a short sale or foreclosure will be to improve their financial stability moving forward. Of course improving the impact a short sale or foreclosure had on their credit scores will typically be one of the first areas that people look at once they are back on their feet. There are certain things you can do to help fix your finances after a short sale or foreclosure that are covered in this helpful article.

Unfortunately, sometimes people just don’t realize they have options and just lose their home to foreclosure. Many have never taken the time to do any research and just assume there are no alternatives. A short sale can be a great alternative for some home owners – best of luck if you are one of them!

If you are need to short sale your home or condo in Ashland, Bellingham, Framingham, Franklin, Grafton, Holden, Holliston, Hopedale, Hopkinton, Medway, Mendon, Millbury, Milford, Southboro, Westboro, Natick, Northboro, Northbridge, Whitinsville, Upton, Uxbridge, Shrewsbury, Sutton, or Worcester get in touch! I would love to interview for the chance to represent your short sale transaction.

I am successfully completing short sales through out the Metrowest Massachusetts and Worcester County areas. So far, knock on wood, I have a 100% success rate for short sale approval! Short sales are difficult transactions that are critical to have the right Realtor representing you. Do not make the mistake of picking a Real Estate agent that does not have experience closing short sale transactions.

If you are outside of the Metrowest/Worcester Massachusetts area and need to do a short sale please feel free to contact me and I would be happy to refer you to a Realtor in your location that handles short sales and knows what they are doing! I have referred short sales to other Realtors all around the country.

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About the author: The above Real Estate information on Credit scoring impacts of short sale vs foreclosure was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

A Guide To Mortgage Equity Loan Options

Bill Gassett — Mon, 19 Sep 2011 11:31:04 +0000

When looking to take money out of an existing home or other Real Estate borrowers often have a decision to make on what is the best method to do so.

There are basically three financing options that are available to home owners. These include a cash out re-finance, home equity loan or a home equity line of credit (HELOC). Determining which of these type of loan options will work best basically comes down to what purpose the money is going to be used for.

Unfortunately being in the Real Estate field, I often come across folks who have over extended themselves and find that they have created undue hardships. Going back ten years ago this was not so much of a problem as Real Estate markets around the country were booming and a home was an investment windfall. Every few months the value of homes would continue to rise and did so for over a decade. Of course all good things must come to an end eventually and now we are left with property values decreasing in most areas.

When the economy and Real Estate values are soaring it is hard not to look at a home as a giant piggy bank from which you can tap at a moments notice. When times are tough however, you may regret taking your equity for granted by pulling it out of the home.

Below is a guide to help you determine whether borrowing against the equity in your home via a home equity line of credit (HELOC), home equity loan or a cash out refinance makes the most sense.

Home Equity Line of Credit (HELOC)

Home equity lines of credit work much like credit cards do. As a borrower you are given a credit limit up to which you are allowed borrow. Also similar to credit cards is the fact that the loan is open ended and carries an adjustable interest rate. Home equity lines of credit are tied to the prime rate as a basis to lend money.

Typically borrows can expect to pay the prime rate plus 2% as an example. Like credit cards HELOC’S can be closed by lenders at any point in time. Like any other loan it is prudent to shop around for the best rate and terms. Make sure you only borrow what you can afford as this loan is directly tied to your home and if you can not afford to make payments you could potentially lose your home to foreclosure.

The biggest advantage to a home equity line of credit is you can borrower whatever you need, up to whatever amount the lender has set, whenever you need it. The big draw back however is the lender can shut off the line of credit if the value of your home falls, your credit takes a hit or if the lender just decides they don’t want to offer you credit anymore.

Home Equity Loan

A home equity loan is a form of a second mortgage against your home. The terms of which can vary greatly from a first mortgage. With a home equity loan you borrow a set sum of money at one time and it is paid back over a certain amount of years and interest rate that can vary greatly.

Often times a home equity loan has a fixed interest rate but also could be variable as well. Like either of the other financing options if you don’t pay it back the lender would have the option to foreclose!

Most of the time a home equity loan option is used for a specific purpose where the cost is known ahead of time. For example paying for the kids college education or buying a new car. What you need to decide is whether you would get more favorable loan terms by going this route or by getting an unsecured loan somewhere else such as at credit union or local lender. Sometimes this decision boils down to how conservative you want to be. You may get a better interest rate by getting a home equity loan but is it worth the risk of having it secured against your home?

Some borrowers would say no. If you happen to lose your job and have an equity loan against the family home for $150,000 this may not put you in a comfortable position. You should also check to see if there are any penalties for paying off the loan balance early. A number of lenders will charge a pre-payment penalty fee if you sell the home.

Cash Out Re-finance

A cash out re-finance is when you pay off your existing loan and get a new loan for the old mortgage balance plus whatever additional amount you need to borrow plus any closing costs. If the cash out refinance interest rate is lower than the existing mortgage rate, this option is probably going to be the best route to take. Most of the time you are going to be able to get a better interest rate with a 1st mortgage than going to the 2nd mortgage option. It is likely cheaper to borrow this way than having the combination of two mortgages. This is especially true when fixed rate mortgages are very low.

Nowadays when getting any type of mortgage it really makes sense to look over your ability to pay it back. The last thing you want to do is find yourself in an uncomfortable financial situation. Carefully studying the above home equity mortgage scenarios to determine which fits your situation best is a good business decision!

Fixing Your Finances After Foreclosure or Short Sale

Bill Gassett — Mon, 15 Aug 2011 11:30:48 +0000

There are not many things that can negatively impact your credit score more than a foreclosure or short sale. In fact one of the more common untruths you will hear from many Realtors is that short sales don’t impact your credit scores like foreclosures do. This is absolutely WRONG!

If you fail to pay your mortgage during a short sale the credit score impact will be nearly identical to a foreclosure according to My FICO the governing body for credit scoring.

Being a Realtor myself for the last twenty five years it does not surprise me when I hear this misinformation being spewed in person or around the internet. Some Real Estate agents will paint a short sale as your ticket to the promised land and a foreclosure as a ticket to financial misery for the rest of your life.

They do this of course because they want you to list the property with them as a short sale. A true Real Estate professional should be going over all possible financial options with you and not just looking to put money in their wallet.

There are of course advantages to doing a short sale but a better credit score is not one of them unless you are able to complete a short sale without missing mortgage payments. The sad truth is that most but not all of the time a lender is not going to grant short sale approval unless you are behind in your mortgage payments. From a lender’s perspective if you are able to continue paying your mortgage why should they grant you a short sale?

The advantages of a short sale vs a foreclosure center around the time you will be able to purchase a home again in the future. You will be able to buy a home after completing a short sale much quicker than a foreclosure.

For a complete breakdown of how quickly you can get financing after both of these events see getting a mortgage after short sale or foreclosure. If you can show extenuating circumstances of why you had to do a short sale or lost your home to foreclosure you may be able to get a loan sooner. Some of the acceptable hardships that could factor into a lenders decision are divorce, loss of a job and unexpected medical expenses.

Another advantage of a short sale is how future employers, as well as other types of creditors look at you in the future. Having a foreclosure on your resume is not something an employer is going to look at favorably. In a short sale you have at least attempted to live up to your debt and not just walk away.

Owning a home again after a foreclosure/short sale

Work on increasing your credit score

One of the most important steps you can take to getting back into the home ownership arena after a foreclosure is to work on increasing your credit scores. This article provides some excellent tips on building back your credit score as quickly as possible. There is no doubt that building your credit score after a foreclosure or short sale is a difficult task. On average you can expect your score to drop between 150-200 points so you will have a lot of work to do!

Two or the most important things you can do to raise your score is to pay your bills on time and keep your credit card bills below the maximum levels.

Keep your employment stable

One of the things lenders look for with borrowers especially after a short sale or foreclosure is employment stability. Unless you have the opportunity to move into a position that offers a much higher pay you will be better off sticking with the job you have. The lender is going to want to see you are grounded with work and not changing jobs.

Rebuild your savings after foreclosure

Lenders are also going to want to see that you have squirreled away some money. Working on saving any extra money so that your nest egg is built back up becomes important. A six month reserve is a safe bet to show lenders that you have a fall back plan should you happen to become unemployed.

Owning a home again after short sale or foreclosure is certainly achievable is you work diligently towards getting your financial house in order!

Homeowners Insurance: Getting The Right Insurance Coverage

Bill Gassett — Sun, 10 Jul 2011 20:25:52 +0000

Homeowners insurance is not optional if you have a mortgage and is a very important decision you must make in order to protect what will most likely be one of your largest investments.

To get the right amount of coverage at the most affordable rate for your home, condo or rental property, you should plan on getting homeowners insurance quotes from multiple companies and choose the quote that is best fit for your particular situation.

There can be a fine line between having too much or too little insurance coverage. Nobody wants to pay for more insurance than they need but having too little coverage can be disastrous financially.

Knock on wood but if you suffer from a devastating loss from a fire, flood, theft or other calamity and you are under insured you are not going to be a happy camper! Of course if you over insure your property you will be throwing money out the window every year.

Types of insurance policies/coverage

Understanding the type of insurance coverage you need plays a large part in determining the policy that is best for your situation.

Cash value insurance

Actual cash value insurance only reimburses you for the value of your home in it’s current condition. So if your home is twenty years old there will be depreciation taken on all the components such as the heating system, windows, appliances, etc. If an event occurred where you needed to make an insurance claim you would be given far less money than if you had replacement cost coverage.

Replacement cost insurance

Having replacement cost coverage is the preferred method of insuring most homes today. With replacement cost insurance you would be reimbursed for the amount it would take to re-build your home new with the same existing quality of materials. Replacement cost insurance does not have a depreciation component.

Figuring out what the cost will be to re-build a home is where many home owners make the wrong insurance coverage choices. You MUST remember you are not insuring the market value of the property! Many home owners mistakenly do not take into consideration that you do not need to insure the land but just the buildings such as the home, garage, shed, etc.

When calculating the cost to rebuild your home you will want to look at your square footage, materials used, type of construction and any special features you might have.

Local builders or even some Realtors could be helpful information sources to guide you on what the going cost per square foot to build a new home are estimated at. If you own a 3000 square foot home and construction costs are running $150 per square foot you would be purchasing $450,000 in coverage.

One of the things you need to be cognoscente of is making sure you adjust your insurance policy when you make a large improvement such as a bath or kitchen remodel.

Content insurance

Last but not least don’t forget to insure the contents of your property. Most home owners insurance policies only cover your possessions for their cash value and not the replacement cost. In order to get replacement cost coverage you will need to purchase what is called an “endorsement”.

Checking your policy for exactly what is covered is important because valuables such as jewelery, silverware, furs, etc may not be covered. In that case you will want to add them to an insurance rider.

Liability insurance

Someone falling on your property and suing you would not be fun. Often times folks are under insured in this department because they spend so much time figuring out the rest of their policy they neglect the liability coverage. Increasing liability insurance coverage is usually relatively cheap and well worth it in the event someone does happen to injure themselves at your home.

Obviously getting the right amount of insurance coverage for your home is critical if you actually have to make a claim! Secondarily nobody wants to throw money out the window especially with insurance coverage. See this article on home owners insurance savings tips for additional ways to save a few bucks.

Other Real Estate articles worth a look:

Insurance claims from hail

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About the author: The above Real Estate information on Getting the right homeowners insurance coverage was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

Fixing Home Water Damage

Bill Gassett — Sat, 04 Jun 2011 21:52:55 +0000

If you have ever been in the unfortunate position of having a pipe burst in your home, a washing machine hose give way while you were gone for the weekend, or a finished basement become flooded by a 100 year storm, you know what a royal pain in the $#@ it is to clean up and remedy water damage!

There are few things that can damage a home more than water. One of the most important things you can do when faced with a water damage problem is to tackle it right away.

Without taking immediate action the threat of getting mold becomes very likely which can further increase an already expensive proposition.

If you can get take care of the water in under 48-72 hours you stand a much greater chance that you can keep the mold at bay.

If it all possibly the 1st thing that you are going to want to do is take everything out of the area where the water damage has occurred and get it into a warm and dry environment. Even if it means taking these things outside that is what you should do.

The next step will be to either get in touch with a water damage and restoration company or take the same steps they would make in getting the water re-mediated from the home.

Open doors and/or windows ~ It goes without saying that you want to get as much fresh air circulating throughout the home as soon as possible.

Purchase or rent high powered fans ~ Most of the time opening the windows is not going to be enough to dry out serious water infiltration. You are going to need to get a hold of a few large fans that circulate a tremendous amount of air. Most of the fans needed to solve a water issue are going to run at least a few hundred dollars to purchase. Renting a fan could run you about $25 – $50 a day.

Water in the basement ~ If the water is in the basement an additional suggestion would be to use a large dehumidifier which can suck all the moisture right out of the area.

Of course one of the 1st things you should determine is how the water actually got into the basement in the 1st place. Was it ground water, water from a crack or surface water that is being improperly directed towards the home. Sometimes something as simple as a gutter or downspout coming away from the home can be the culprit.

See fixing basement water problems for a complete list of possible basement water problem solutions.

Check the sump pump ~ If your basement has an operational sump pump you will want to make sure it is working properly. On many occasions a sump pump can fail causing the water to flood a basement. If you find this is the case you can always purchase a pump to get a significant amount of water out of a basement. For smaller jobs a wet vac should suffice.

When water damage occurs in your home you will be able to salvage some things but definitely not others. Some of the items that potentially can be saved include sub-flooring, hardwood flooring and linoleum provided you dry them quickly. Draperies and other such cloth goods can also be salvaged with a cleaning and disinfectant.

Most of the time you are not going to be able to save such things as insulation, drywall, plaster, laminated furniture, and carpet padding. These items absorb water very quickly and offer the perfect environment for mold to grow.

If the water damage in the home is extensive you may want to really consider hiring a professional restoration specialist that will come to your home with the whole gamete of remedies including dehumidifiers, air purifiers, fans, and special equipment to dry floors. A professional water damage specialist will also employ cleaners to quickly and efficiently dry out a water damaged home.

Beyond these typical steps, a water damage specialist may also employ the use of wall driers, sanitizers, and mold and mildew remediation techniques to ensure that what is already a bad situation doesn’t get worse over time.

When fixing water damage in a home, addressing the problem head on becomes paramount. Keep these tips in mind if you are faced with this unforeseen issue.

Other Real Estate articles worth a look:

Removing radon from well water

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About the author: The above Real Estate information on Fixing home water damage was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

8 Reasons Why You Will Not Buy My Short Sale Listing

Bill Gassett — Thu, 05 May 2011 11:41:18 +0000

One of the grossly misunderstood topics in Real Estate is the short sale transaction. There are a large number of Realtors who unfortunately do not possess the knowledge to properly educate their clients on what should be expected of them when trying to make a short sale purchase.

The problem is further exacerbated because there are an inordinate amount of Realtors who are now listing short sales who have no business doing so!

Having poor seller representation in a short sale is far worse than a traditional sale because the home owner is relying on this person to help them navigate out of a financially difficult time. Without a short sale approval the most likely outcome is a foreclosure which is the very thing a seller was trying to avoid by going the short sale route.

As the volume of short sales has grown so has the amount of Realtors who are looking to cash in. Money all too often gets in the way of sound decision making.

The code of ethics in Real Estate clearly states that you should not get involved in a type of Real Estate transaction in which you have no expertise.

This is the reason why there will be short sale lawsuits against Realtors! When I am representing a seller in a short sale and receive an offer from a buyer’s agent, most of the time the offer will have significant changes that need to be made in order to protect the seller’s interest.

Below are 8 reasons why you will more than likely NOT be buying one of my clients short sales if you don’t agree to modify your offer:

Low ball short sale offer ~ If you think a short sale is an automatic invitation to submit a ridiculous offer to the seller you might as well not even bother. The majority of the time you will see my short sales priced right at market value or even slightly below market.

The property is already a bargain to begin with. Both buyer’s and seller’s need to understand that once a short sale offer is submitted to the lender they will be sending out either an appraiser or Real Estate agent to do a broker price opinion (BPO). The contract price needs to be within reasonable proximity to market value or the offer will be rejected.

Inappropriate escrow funds ~ In Massachusetts the typical deposit when buying a home is $1000 at the offer and a balance of 5% upon signing a purchase and sale agreement, as we are a two contract state. These figures are of course negotiable but don’t expect you are going to be putting up two nickels the seller can rub together. The whole point of having escrow funds is to ensure a buyer does not walk away from the transaction. You need to have enough funds to prevent that from being easy to do.

Doing a home inspection after short sale approval ~ This is not in the slightest bit negotiable. A buyer will do their home inspection up front in the normal time frame for doing an inspection which is typically 7-10 days from the offer being accepted. Do you really think we are going to wait a significant amount of time to get short sale approval and then you are going to be able to walk because you don’t like the the fact there are no GFI plugs in the bathroom or the water heater is at the end of it’s life expectancy? Sorry friend it does not work that way.

If you are buying a short sale and are worrying about losing $400-500 you shouldn’t be looking at one. Additionally, if there are issues from a home inspection you can negotiate a possible credit. Once short sale approval comes the lender doesn’t want to hear about any problems.

As a buyer the other thing to consider is the fact that you would be out of the market for months when you could have discovered an issue that might cause you not to move forward without waiting all that time.

Leaving the purchase and sale signing date until after short sale approval ~ You are either going to purchase the home or you aren’t. We will not be waiting until after short sale approval to have a contract in place. Everything will be negotiated and agreed to up front.

Not getting a financing commitment right away ~ If you are going to purchase one of my short sale listings you will apply and get your financing before short sale approval. When the lender approves the short sale they will more than likely ask for a 30 day closing. We will NOT be waiting to find out if you are able to get financing that quickly or if at all!

Submitting an unrealistic closing date ~ Short sales should really be called “long sales” because most of the time they take longer to complete than a traditional sale. If you are buying a short sale you need to take this into consideration. If you are not committed to waiting then don’t get involved with a short sale. My short sales on average take about 90 days for short sale approval. The closing date should read “30 days from short sale approval”. You can not put an exact date when we don’t know when it will be!

Not agreeing to wait 90 days for short sale approval ~ The buyer we will be looking for is going to be committed to the property. If you think that you are going to find your self restless 5 weeks later because we don’t have an approval yet then a short sale is not right for you. Don’t forget you are purchasing a home that is probably a pretty decent value. It is worth the wait! It clearly would not be in the best interest of the seller if a buyer bailed on the transaction a month or two in and they had to start the process all over again.

Asking to take over the short sale because you are an investor ~ Sorry my friend if you are an investor please feel free to make a realistic offer but don’t think you are going to take over the negotiations with the lender. Don’t think you are going to make a low ball offer and the seller is going to accept it while you look for an end buyer to sell to and make a handsome profit. No I don’t think so! The seller hired me to complete the short sale. I don’t feel like defending myself in court on why I let an investor take over the obligations I was hired to perform.

Folks these are the kind of things that go on every day in short sales because seller’s do not do their home work in picking a short sale Realtor to work with. Don’t make that mistake. When you need to short sell your home do your research and hire a pro! These are all great reasons to reject short sale offers.

Who you work with to complete your short sale will have the greatest impact in helping you reach your financial goals. Completing a short sale remains a much better alternative than letting a property go to foreclosure for a number of reasons centered around credit and your ability to buy another property in the future.

I am successfully completing short sales through out the Metrowest Massachusetts area as well as parts of Worcester County. As of this writing in four years, knock on wood, I have a 100% success rate for short sale approval!

I work hand in hand with a local short sale Real Estate attorney who knows how to get short sales to the closing table!

If you are outside of the Metrowest Massachusetts area or even in another state and need to do a short sale please feel free to contact me and I will be happy to refer you to a Realtor in your location that handles short sales and knows what they are doing! I have referred short sales to numerous Realtors all around the country.

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About the author: The above Real Estate information on 8 reasons why you will not buy my short sale listing was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

Disclosing Murder Suicide or Haunted Homes in Real Estate

Bill Gassett — Tue, 12 Apr 2011 11:16:38 +0000

While working as a Massachusetts Realtor over the last twenty five years one of the questions that always seems to come up is whether or not a Realtor is obligated to disclose a murder, suicide, haunting or other type of paranormal activity that may have occurred in a home or other Real Estate.

Wikepedia defines a haunted house as a home or other Real Estate often perceived as being inhabited by disembodied spirits of the deceased who may have been former residents or were familiar with the property. Supernatural activity inside homes is said to be mainly associated with violent or tragic events in the building’s past such as murder, accidental death, or suicide.

Disclosing Murder, Suicide, and Haunted Homes in Massachusetts

This is one of those topics that I would be willing to bet at least half the Realtors polled would get the answer wrong. I am sure most Real Estate agents would say that they are required to disclose a haunted house or if someone died in a property by murder or suicide. They would be dead wrong:)

One of my beliefs is that every buyer should be entitled to know anything that could materially effect the value of a home or the ability to sell in the future. This in fact is one of the articles in the Real Estate code of ethics.

In Massachusetts anyways, a Realtor is not required to disclose these kinds of events in a property. Apparently lawmakers do not feel these kind of events are worthy of Real Estate disclosure. I suppose in the case of a haunted home it would be much harder to prove the actual existence of ghosts.

Many states require full disclosure of violent crimes such as murder and any other event that may stigmatize a property before it is sold. Not the case in Massachusetts!

Below is the excerpt from the Massachusetts General Laws Chapter 93, section 114 that discusses Real Estate disclosure for alleged haunted homes, murder and suicide:

The fact or suspicion that real property may be or is psychologically impacted shall not be deemed to be a material fact required to be disclosed in a real estate transaction. “Psychologically impacted” shall mean an impact being the result of facts or suspicions including, but not limited to, the following:

(a) that an occupant of real property is now or has been suspected to be infected with the Human Immunodeficiency Virus or with Acquired Immune Deficiency Syndrome or any other disease which reasonable medical evidence suggests to be highly unlikely to be transmitted through the occupying of a dwelling;

(b) that the real property was the site of a felony, suicide or homicide; and

No cause of action shall arise or be maintained against a seller or lessor of real property or a real estate broker or salesman, by statute or at common law, for failure to disclose to a buyer or tenant that the real property is or was psychologically impacted.

While this is the case in Massachusetts you can not assume that in other states it is alright not to disclose known events such as a murder or haunting.

I find it kind of interesting that disclosure of a person who had AIDS was lumped into this kind of stigmatization. It does not seem all that similar of a disclosure issue?

If you are a Massachusetts Realtor another thing to pay careful attention to is purposely deceiving someone. While non disclosure may not be an issue, blatantly lying to someone certainly could be. If you are marketing a home that is well know to be suspected of being haunted and a buyer ask you a direct question about it you should always be truthful of what you know.

Other Real Estate articles worth a look:

Massachusetts seller’s disclosure statement

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About the author: The above Real Estate information on disclosing murder, suicide and haunted Massachusetts homes was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

Buying a Home After Short Sale or Foreclosure

Bill Gassett — Mon, 21 Mar 2011 11:43:23 +0000

As a Realtor who has been heavily involved closing Massachusetts short sales over the last five years, one of the questions that I get asked quite often from home sellers is how long will it take before I will be able to buy a home again.

The answer to this question does not have any clear cut and dry answer. There are quite a few variables involved when trying to figure out when someone will be able to purchase a home after a foreclosure or short sale.

Going through either a short sale or a foreclosure has the potential to seriously impact ones credit. Government entities Fannie Mae, Freddie Mac and FHA do not directly loan money to individuals but are the governing body that work with lenders to guarantee loans and free up money to provide mortgages.

Banks typically have the authority to lend to whoever they want but will generally follow the guidelines set forth by these entities. There are some lenders of course that will take greater risks with some borrowers than others.

Below are the general guidelines that FHA, Fannie Mae and Freddie Mac follow when considering a loan after a short sale or foreclosure:

Short sale with FHA Loan

Can purchase right away with no mortgage default
3 year wait if in default at the closing
Reduced wait if the borrower has re-established good credit and can show extenuating circumstances

Short Sale With Fannie Mae Loan

2 year wait if the borrower puts 20 % down
4 year wait if the borrower puts between 10% to 20% down
7 year wait if the borrower puts less than 10% down
2 year wait if the borrower can show extenuating circumstances and puts more than 10% down

Short Sale with Freddie Mac Loan

4 year wait before being able to get a loan
2 year wait if the borrower can show extenuating circumstances

Foreclosure with an FHA Loan

3 year wait before being able to get a loan
Reduced wait if the borrower can show extenuating circumstances and re-establishes good credit

Foreclosure with a Fannie Mae Loan

7 year wait from the completed foreclosure sale date
3 year wait if the borrower can show extenuating circumstances. Additional underwriting requirements apply for 4 years after a 3 year waiting period.
7 year wait for a 2nd home, cash out re-financing, or an investment property

Foreclosure with a Freddie Mac Loan

5 year wait from the completed foreclosure sale date
3 year wait if the borrower can show extenuating circumstances

** As a side note a deed in lieu of foreclosure follows the same guidelines as FHA’s foreclosure policy, the same as Fannie Mae and Freddie Macs short sale policy.

When analyzing the difference between completing a short sale or going through a foreclosure in regards to purchasing another property in the future it boils down to the waiting time which is more favorable in a short sale.

Credit Scoring After Short Sale and Foreclosure

The other question that I get from folks considering a short sale is how it will impact their credit. There is a lot of misleading information that come from Realtors, as well as online forums about the impact on credit scores. On many occasions you will hear that a short sale is far better for your credit than getting foreclosed on. This is incorrect! A credit score in a short sale or a foreclosure have the potential to be about the same. Maybe marginally better in a short sale.

According to Fair Issac (My FICO) a company that provides analytic, decision making, and credit scoring services for financial service companies a credit score will go down by 40 to 110 points after being 30 days late. Further, the scoring drop will increase to 70 to 135 points after 90 days late on a mortgage payment.

The average scoring drop in a short sale, foreclosure or deed in lieu is 85 to 160 points. You need to keep in mind that in both short sales and foreclosure it is possible that the credit score drop could be closer to 200-300 points.

Credit scoring factors vary from individual to individual. The scoring change is heavily dependent on where the credit score was before the negative event took place. Both a short sale and foreclosure are considered a loan that was not paid as agreed.

What happens to your credit score in each of these events could be different than someone else who goes through the same financial event. Unfortunately, most of the time the higher the credit score the greater the decrease from where you started.

When trying to decide whether a short sale is right for you don’t be fooled into making the decision under false hopes that your credit will not be impacted all that much. The biggest advantage in a short sale is the shortened time frame in which you will be able to purchase a home in the future.

One of the most important steps after going through either a short sale or foreclosure is to be conscious about trying to improve your credit standing. Here are some excellent tips on how to increase a credit score.

*** The above information for waiting periods before buying a home after completing a short sale and foreclosure was sourced by the Fannie Mae and Freddie Mac selling guides along with the FHA handbook.