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Myths of Credit Scoring

by Mark Brace
Myths of Credit Scoring

There is a tremendous amount of misinformation spun into the marketplace regarding consumers' credit rights. Here are a few examples of the most prevalent myths.

Myth #1- When I pay off an account, it will no longer be reported or be considered negative…Wrong!

Myth #2- If a negative item is deleted, it will just come right back on my report…Wrong!
Myth #3- Certain items such as bankruptcies, foreclosures, and tax liens are impossible to remove from a credit report... Wrong!
Myth #4- Disputing a credit report is easy and any consumer can do it for themselves… Wrong!
Myth #5- Creditors will read my 100-word statement and take my side of the story into account... Wrong!
Myth #6- Credit Bureaus are infallible, a branch of the government, or otherwise beyond reproach... Wrong!
Myth #7- I can get a new credit file by getting a federal ID number... VERY, BIG MISTAKE!
Myth #8-If I build enough good credit; it will offset my bad credit... Wrong!
Myth #9-A Credit Counseling Service can help me restore my credit rating... Wrong!
Myth #10-The law requires that an item remains on a credit report for 7 years... Simply not so.
Myth #11- I can’t have too much good credit... Wrong!
Myth #12 Multiple mortgage inquiries will NOT hurt your credit as long as they are pulled within x number of days. If you are telling your clients this, you are doing them a disservice. Invest a few minutes to find out the truth. (Your clients deserve it)


$ Credit Bureau Mistakes Cost You $
Results of a research study conducted by (PIRG), Public Information Research Group-Washington, DC.
• 29% of credit reports contained serious errors, false delinquencies, or accounts that do not belong to the consumer.
• 41% contained demographic information that was misspelled, outdated or incorrect.
• 20% were missing major credit, loan, mortgage or other information to demonstrate the positive credit worthiness of the consumer.
• 26% contained closed accounts that were closed by the consumer but listed as open.
•70% of the reports contained mistakes.
THESE ERRORS LOWER CREDIT SCORES AND COST YOU MONEY & CAN BE CORRECTED

Please everyone check your credit every once and a while.

Bargain Smartly to Get the Best Deal

by Mark Brace

Bargaining is an art, particularly when the buyer wants to make a rock-bottom bid without insulting the seller.

"The offer has to be palatable and show you've done your homework," says Deb Greene, president of the Minneapolis Area Association of REALTORS®.

Sheri Fine, an associate with Edina Realty in Minneapolis, agrees. "Sometimes an unreasonably lowball offer can make a seller so angry they won't make a counter offer or deal with a buyer."

Here are their suggestions for coming up with a number that is competitive and compelling.
  • That an offer that is more than 10 percent off the list price isn’t customary and is likely to be rejected.
  • Realizes that there are other attractive homes on the market and won’t be shattered if the sellers reject their lowball offer.
  • Recognize the home’s strengths as well as its weakness.
  • Make a list of reasons to share with the seller for offering less than list price.
  • Instead of asking for the price to be lowered, negotiate other tangibles such as repairs, closing dates, and closing costs.
  • And lastly be respectful whenever you are around the seller.

Source: Star-Tribune, Lynn Underwood (11/17/07)

As the Public may not be aware yet, but the Grand Rapids Association of Realtors (GRAR) is switching technology used to run its MLS system. For the past 14 years GRAR has programmed and operated it’s own RE/Source (in-house MLS), This MLS has proved to costly and difficult to keep-up in today’s highly connected society to maintain and program. On February 1, 2007 GRAR elected to convert its in-house MLS system to an outside Provider, and Solid Earth’s “LIST-IT MLS” system was selected. The anticipated conversion date is December 6, 2007, and then all GRAR Realtors will be using a Forced over to the new MLS system.

 

For me I’m very excited about all of the extremely powerful tools that are now going to be available to the realtors that we could only dream of a for the last several years. It’s about time we as Realtor s caught up to the emerging technology to provide high quality detailed information to our Clients. I feel fortunate to have a strong computer background, and know that all Realtors are going to be on a learning curve for the next 6 months to a year. After previewing the new Solid Earth system today, I think most realtors won’t even be able to utilize all the power tools and features available, and they will continue operate the way they have been doing without embracing the technology change. Realtors will now have such comprehensive local area information that if you were buying and selling a home, you would absolutely want to consult with a Realtor, the database and statistical features will be seen as a must have to be able to accurately position a property to draw an offer, and or value a property to determine a proper and most likely offer price for any property for buyers.

For Sale By Owner people are going to be left in the dust, because they won’t be able to compete with the tools and information available to the professionals that buy and sell everyday. Again I’m so very excited we are moving to this incredibly powerful new MLS system. Looking forawrd to amazing my clients in the future.

 

The Top Ten Reasons It's a Great Time To Buy Real Estate!

by Mark Brace
  1. Selection, selection, selection. There are about 57,000 resale homes on the market in Maricopa county(Phoenix). Regardless of the price range a buyer desires, there are plenty of houses from which to choose. Just a few years ago the resale inventory dropped below 5,000 units. A buyer was forced to make compromises if they were going to locate the home of their dreams. There is a great selection of attached homes, condos, and townhouses. You can find large lots, small lots, and a lot that will accommodate your boat or RV. There are lots of options in this market.

  2. No Bidding Wars. In 2005 we had one client that made an offer on ten homes. They lost the first nine to the 'feeding frenzy' that existed. Other buyers bid the properties up substantially from the original listing price. There were escalation clauses where buyers authorized their agents to outbid other offers by thousands of dollars. There is no competitive bidding in this buyer's market.

  3. You can make an offer. A few years ago when you made an offer, the only question was how high above the list price could the buyer reach in hopes of being the best offer on the table. Today the sell price list vs. price ration is about 96%. A seller will not be insulted if you 'make them an offer they can't refuse'.

  4. Patience is tolerated. In the hot seller's market that existed everything was rushed. Find a house before other buyers did. Hurry up and make the offer.  Today a buyer can take their time. Look at several homes and think about your decision for a few hours.

  5. Due diligence is welcomed. In this market a buyer is encouraged to obtain a home inspection, termite inspection, and appraisal. In 2005 many buyers waived these contingencies in order gain an advantage with multiple offers.

  6. There are plenty of specs. In the not too distant past buyer had to 'play games' if they wanted a new home. There were lotteries and waiting lists in order to obtain new construction. Some buyers slept in their cars in order to get to the head of the lines. R.L. Brown estimates that builders have thousands of specs ready for immediate occupancy.

  7. Repair requests are welcomed. After a buyer completes a home inspection, they are allowed to submit a repair request to the seller. In the past a seller might insist the home was sold 'as is'. Many times, there were back-up buyers waiting for a primary buyer to upset the seller whose home was increasing in value almost daily.

  8. Few, if any investors. It is estimated that one third of all sales in 2005 were to investors. These non-owner occupied buyer caused the market to inflate and affordability to decline. Mortgage fraud became commonplace. It's a great time to buy without having to compete with hundreds of prospective landlords.

  9. Location, location, location. Today's buyers can find homes closer to work. In the past buyers flocked to Maricopa and Queen Creek in order to find affordable homes. In this market, reasonably priced homes are within biking or walking distance to schools, rapid transit lines, and relatives.

  10. Real Financing is available. The 'wink, wink' zero down, no doc, adjustable, sub-prime loans are gone. Fixed rates are back. FHA financing, first time homeowner bond programs, special loans for teachers, and police officers are back in business. It's a great time to buy real estate!

Grand Rapids area home prices keep falling

by Mark Brace

It's the mantra of the real estate industry, posted on yard signs everywhere: It's a great time to buy.

If you are in a financial position to do so, statistics continue to show the mantra is true.

The average home price in the Grand Rapids area last month was $147,148, a drop of 6.5 percent from September 2006. The average price year to date -- $152,742 -- represents a 4.4 percent drop from this time last year.

Part of that reduction is attributed to the laws of supply and demand.

While there are 8.5 percent more listings than this time last year, residential sales last month were down 6.7 percent from September 2006.

Jamie Starner, president of the Grand Rapids Association of Realtors, said he would like to see more sales, but a drop in the number of listings joining the market was promising.

Nearly 11,700 residential properties were on the market last month. Based on overall sales figures, that equates to more than a year's supply of homes for sale.

But the number of listings entering the market in September was more than 10 percent lower than last September.

"We've got to burn off some of that inventory that we have," Starner said. "We've got to get back to a balanced market."

Pat Vredevoogd, a real estate agent and president of the National Association of Realtors, believes the market is turning.

"I see this in a number of marketplaces, where that number of new listings is stagnating a little bit now, and the number of homes being put on the market is quieting down," she said. "We're also seeing quite a few more people out in the marketplace."

The market is taking its toll on real estate agents.

Membership in the association is down 9 percent from a year ago. And agents say they are working harder for the same or less money.

The decrease in the sale price means a decrease in my paycheck, because it's all based on commission," said Ethan , an agent with A local Realty Company. "I sold about six more units last year than I did in '05 and made the same amount of money."

But as a real estate investor, Ethan also is reaping the benefits of the lower prices. He bought four homes this year to add to his stock of rental houses. They included a property next door to one he already owned.

"I paid less for a neighboring house than my wife and I paid five years ago for the house next door," he said.

The average sale price also is affected by the prices of homes being sold. Sixty percent of homes sold last month were priced for less than $140,000. Last September, it was 54 percent.

Twenty-two percent of homes sold were priced between $140,000 and $200,000, and 18 percent were more than that, including three priced at more than $1 million.

By Cami Reister
The Grand Rapids Press

Run the Numbers Before Buying an Investment Property

by Mark Brace
People talk about running the numbers before buying an investment property, but what are the numbers and how do you get accurate numbers? Running the wrong numbers can make the difference of making $500 or losing $1000 per month. In this article, we will go through the costs and factors to consider making your investments successful.

RENTAL INCOME

Rental income is not as straightforward as it seems. Sometimes properties are under-rented and sometimes properties are over-rented, so be sure to find out the market rents when you consider a property. When we bought our first fourplex, we looked at comparable leases and realized our rents were too high, so instead of assuming we would continue to receive $3600 of rental income, we had to be realistic and assume it was more like $3200.

MORTGAGE INTEREST

A huge cost is mortgage interest. You should definitely sort out the details of your loan options and get an idea of current rates before running the numbers. It could make or break a deal. If you are getting a duplex or a house, the loans are generally similar to other home loan programs. Triplexes and fourplexes tend to have higher rates, and commercial is a whole other ballgame. One thing to consider is to put more down because the more you put down, the less your loan will be, which means less monthly interest to pay. Another consideration is the type of loan. We usually recommend people to get a fixed rate mortgage these days because the current ARM (adjustable rate mortgage) rates are not all that much lower than fixed rates.

Just get educated about the loan options and run the numbers with them. Oh, and do not just take advice from one mortgage person. The best way to get educated is to talk to a variety of mortgage brokers and banks to find your best solution; not all loan places have the same programs.

TAXES

People frequently use the taxes from the year when they purchased the property, assuming the taxes will stay the same. Taxes change every year. Taxes can go up drastically after a purchase. For example, an owner occupied property usually has tax breaks, so unless you intend to owner occupy too, your taxes will go up.

In addition, the county appraisal that your taxes are based on could go up after your purchase. For example, if you buy a property for 100,000 but the tax appraisal last year was for 50,000, don't count on it remaining at 50,000. In fact, I have seen cases where a year after a property was purchased the tax assessor increased the appraisal value to the purchase price. The safest approach is to look at the tax rate and the purchase price to determine your future taxes.

VACANCY COST

For some reason people tend to forget to take into account vacancy rate. Even when looking to invest in a desirable rental area, it's best to always take into account at least an 8-10% vacancy rate. Do some investigation, look at your market and find statistics on the average vacancy rate.

TENANT TURNOVER COST

We have personally found the biggest surprise to be the expense of tenant turnover. This includes advertising for a new tenant, cleaning, repainting, replacing carpet, etc. If you expect to have high tenant turnover, like next to a college campus, anticipate this to be a significant cost.

INSURANCE COST

Insurance on investment properties are typically higher than owner occupied, single family properties. So get an insurance quote on the property instead of basing your expected insurance off of the insurance bill for your house. You also should purchase liability insurance, which can be expensive.

MAINTENANCE COSTS

This is by far the most difficult number to estimate. It depends on the property, whether you fix some of the problems yourself or hire outside help, and random luck. So we can't give you a hard and fast number but we can look into different factors to take into account.

**Property Type - When you evaluate different properties remember to take into account the type of property. If it's brick you won't have to paint or worry about wood root. Decks need constant maintenance. A property with wood or concrete floors will be easier to clean and will not have to be replaced when a tenant moves out. Just think about the aspects of the property and their maintenance costs.

**Property Size - A smaller property is easier to maintain than a larger property. For instance, say there are two properties for sale for 200,000 and each have a combined rent of 2000. A property with 2 units and a total of 1000 square feet will be cheaper to maintain than a property with 6 units and 3000 square feet. The larger property will be more expensive to maintain when you are replacing the larger roof, painting the interior walls etc. More units mean more money spent on advertising, make-readies, and more appliances to repair.

**Property Location - Consider your proximity to the property. If you buy a property 30 miles away, over the course of a year you can spend a decent amount of gas money driving back and forth.

**Your personal management style - How often will you do maintenance work yourself vs. hiring help? For instance, when a unit needs painting will you paint the rooms or hire a painter? Hiring professionals is definitely more expensive, but you have to be realistic about how much you will personally do, especially if you are looking at many units.

UTILITY COSTS

Be sure to check what the tenants pay for and what the owner pays for. This includes all the utilities and lawn maintenance. In addition, there may be owner expenses like parking lot lights and trash bin service.

PROPERTY MANAGEMENT COSTS

If you are going to hire a property management company, definitely get their rates. We personally choose properties that we can manage ourselves.

SUMMING THE NUMBERS

We wrote a investment property calculator which is located here Investment real estate calculator. Once you add all the numbers up, you often find the property has 0 cash flow or even negative cash flow. This doesn't necessarily mean you should not purchase the property. There are positive tax benefits to rental properties and depending on your situation, a property with technically 0 cash flow could still put more money in your pocket due to tax benefits. If you think the property is going to appreciate in the future, a zero or negative cash flow property could still be appealing.

The point here is that if you are buying a property with zero or negative cash flow, it's best to know beforehand instead of after the property has been purchased.

Getting the Price Right On Home Value Sites

by Mark Brace
Getting the Price Right On Home Value Sites

Anyone can research the potential resale value or sales history of their home -- or their neighbor's -- by plugging in the address on Internet sites like Cyberhomes.com, RealEstateABC.com and Zillow.com.

However, while all three allow house hunters to price or compare properties they may be interested in, and potential sellers to get guidance in setting an asking price, the sites aren't always 100% accurate.

Zillow's calculation of a home's value  -- a "Zestimate" -- should be a "starting point," says Amy Bohutinsky, Zillow's director of communications.

All these sites utilize at least some public information, so in regions where housing data is not complete or up to date, these sites' calculations may fall short.

"In some places, we don't have enough information to complete a Zestimate," Ms. Bohutinsky says. According to Zillow, of the 70 million homes in their database, the site has Zestimates for 52 million of them, or approximately 74%.

Likewise, Cyberhomes has data on more than 100 million property records across the U.S., and RealEstateABC has property information for more than 60 million U.S. homes.

To counter these issues, Cyberhomes, RealEstateABC and Zillow invite consumers to update property data. On Zillow, anyone can view changes to a home's profile, so the site may be useful to sellers who want to market their properties. Zillow has several measures in place to restrict non-homeowners from editing other people's property profiles. "Any user can flag content for review by Zillow's customer service team," Ms. Bohutinsky says.

Any consumer can adjust a home's details on Cyberhomes and RealEstateABC, but the revised profiles are available only to the person who made the changes. As a result, these sites can be used by anyone who wants to factor in how multiple variables may affect the price a particular property may get on the market.

To get the most out of these sites, use these steps to update home profiles and price estimates:

Cyberhomes.com

Type your home's address to get to the property's highlights page. To adjust the home's estimated worth, click "Refine Value" and add the number of bedrooms/bathrooms, square feet, etc.

To factor fixes or remodels into a property's estimated value, click on the plus sign to the left of "Home Improvements." Select a project from the pull-down menu, type in the date it was completed and its total cost. Hit "Add" to factor in the changes. Repeat for additional home improvements and click "Apply changes & continue."

To further refine the site's estimate of a property's value, select similar nearby homes. To do so, hit "Choose Comparable Home Sales." Click on the properties most like the home in question and hit "Apply changes & continue."

Choose "Adjust Market/Home Conditions" to rate the property's lot size, view, privacy and other features on a scale ranging from "Worse" to "Same" to "Better," and to describe the local real-estate market as "Slow," "Average" or "Hot."

Click "Update" for a new calculation of the home's worth.

The information you supply will be used to create a new estimation of the property's value, which will be listed under "Your Changes" on the search results page, and isn't made public. "It is a clipboard just for you to use," explains Marty Frame, senior vice president and chief information officer of Fidelity National Real Estate Solutions. While homeowners may want an updated measure of their residence's worth, not all want that estimation to be public, say to a neighbor or tax assessor, he explains. "There is a real reluctance of people to come online and give up their private information," he says.

RealEstateABC.com

If RealEstateABC has calculated an "ABC Value" for your home, you can adjust it by clicking on the "Adjust Value" tab in the table to the left of the map. (If there is no ABC Value for your property, your changes will have no effect.) Rate the residence's interior, exterior, lot size, view and privacy/noise on a scale from "worst in group," to "average" to "best in group." For example, if you think the house is under par for a certain quality -- say, perhaps it's on a busy street -- slide the slider to the left.

Again, only if the home has an ABC Value assigned to it, you can fix or add property characteristics (e.g., number of bedrooms or bathrooms) by clicking on the edit button for that feature and entering the correct information.

To further refine the site's calculation of the property's worth, select homes that are a close match in value from the provided list of addresses. After making your choices, click "Done" to save.

The new ABC Value is available only to you and is not permanently kept on the site. RealEstateABC doesn't make these new calculations publicly available because of the "subjectivity" involved in estimating a home's value, says Michael Dodge, general manager of the home and real-estate division of Internet Brands. "What is valuable to one seller or buyer isn't valuable to another," he explains. Homeowners can use ABC values to set a selling price, while house hunters can utilize them to compare various properties they may be interested in, he says. "A buyer can go out and look at a few different homes and adjust [the scales] according to what they observed in a particular house," he says.

Zillow.com

Homeowners can "claim" their house or property on Zillow.com and update information for Zillow's users (and potential buyers) to see about their property, such as the number of bedrooms and square footage, and note recent remodels or important details about the home. "It is something we recommend any seller to do," says Ms. Bohutinsky, Zillow's director of communications. Homeowners can advertise their home for free on Zillow or suggest a "Make Me Move" price (a dollar amount that might convince a homeowner who isn't selling to move), so updating one's home facts on Zillow is potentially important for those reasons. At least 600,000 U.S. homeowners have claimed and edited the profiles on their properties, Ms. Bohutinsky says. For homes for which Zillow has a "Zestimate" (an estimation of the residence's market value, based on public data) adding additional details about a home will create an "owner's estimate," or a new calculation of that property's worth. Such estimates run side-by-side with Zestimates, but later this year, the site will incorporate homeowner-added information into the Zestimates, Ms. Bohutinsky says.

To claim a home and create a new estimate, enter in an address, click "Claim Your Home" and register with the site by choosing the legal name of the property's owner from a list of randomly generated ones and agree to a virtual affidavit.

To proceed, go to your home's details page, click on the address and hit "Edit Facts." Adding information to a property's profile is as simple as typing in the new data and saving.

By Lauren Baier Kim :Ms. Kim is a senior editor at  www.RealEstateJournal.com.

For Sale By Owner -- Is It Worth It?

by Mark Brace

Sell Your Home Yourself And…You Can Save The Commission! Many homeowners believe that to maximize their profit on a home sale, they should sell it themselves. At first glance, they feel selling a home is simple and why should they pay a broker fees for something they could do themselves? In fact, close to 25% of all the homes sold last year were sold For Sale By Owner (FSBO). However, close to half of the FSBOs said that they would hire a professional next time they sold. Thirty percent said they were unhappy with the results they achieved by choosing FSBO. Why? Many FSBOs told us that the time, paperwork and everyday responsibilities involved were not worth the amount of money they saved in commissions. For others, the financial savings were even more disappointing. By the time they figured the amount of fees paid to outside consultants, inspectors, appraisers, title lawyers, escrow and loan officers, marketing, advertising...they would have been better off having paid the broker’s fee (which would have included many of these charges up front). Selling a home requires an intimate understanding of the real estate market. If the property is priced too high, it will sit and develop a reputation for being a problem property. If the property is priced too low, you will cost yourself serious money. Some FSBOs discovered that the lost money as a result of poor decisions outweighed the commission. Before you decide to sell FSBO, consider these questions and weigh the answers of assuming the responsibility versus employing a professional. A little time spent investigating up front will pay off tenfold in the end.

Questions To Consider:

  1. Do I have the time, energy, know-how and ability to devote a full-forced effort to sell my home? One of the keys to selling your home efficiently and profitably is complete accessibility. Many homes have sat on the market much longer than necessary because the owner was unwilling or unavailable to show the property. Realize that a certain amount of hours each day is necessary to sell your home.
  2. Am I prepared to deal with an onslaught of buyers who perceive FSBOs as targets for low-balling? One of the challenges of selling a home is screening unqualified prospects and dealing with low-ballers. It often goes unnoticed...how much time, effort and expertise it requires to spot these people quickly. Settling for a low-ball bid is usually worse than paying broker commissions.
  3. Am I offering financing options to the buyer? Am I prepared to answer questions about financing? One of the keys to selling, whether it’s a home, a car...anything, is to have all the necessary information the prospective buyer needs readily available and to offer them options. Think about the last time you purchased something of value: did you make a decision before you had all your ducks in a row? By offering financing options, you give the home buyer the ability to work on their terms and you open up the possibilities of selling your home quickly and more profitably. A professional real estate agent will have a complete team, from lenders to title reps, for you to utilize...they’ll all be at your disposal.
  4. Do I fully understand the legal ramifications and necessary steps required in selling a home? Many home sales have been lost due to incomplete paperwork, lack of inspections or not meeting your state's disclosure laws. Are you completely informed of all the steps necessary to sell real estate? If not, a professional would be a wise choice.
  5. Do I have the capability of handling the legal contracts, agreements and any disputes with buyers before or after the offer is presented? Ask yourself if you are well-versed in legalese and if you are prepared to handle disputes with buyers. To avoid disputes, it is wise to put all negotiations and agreements in writing. Many home sales have been lost due to misinterpretation of what was negotiated.
  6. Have I contacted the necessary professionals... title, inspector (home and pest), attorney and escrow company? Are you familiar with the top inspectors and escrow companies? Don’t randomly select inspectors, attorneys and title reps. Like any profession, there are inadequate individuals who will slow, delay and possibly even cost you the transaction.

If these questions raise some concerns, you may want to speak with a professional. We sincerely hope these tips and ideas are of value to you. If there is any way we can be of service, please contact our office. We would consider it a privilege to serve you! Best regards, Mark Brace

Displaying blog entries 41-48 of 48

Contact Information

Mark Brace, Realtor, ABR, GRI, CRS, SRES, e-PRO, A
Berkshire Hathaway HomeServices Michigan Real Estate
3000 East Beltline NE
Grand Rapids MI 49525
Direct: (616) 447-7025
Cell: (616) 540-7705
Fax: (616) 447-7025

Berkshire Hathaway HomeServices - Michigan Real Estate is a full service, locally operated real estate brokerage company backed by the strength of a solid national and global brand. Our full service businesses include Residential, Commercial, Relocation, Mortgage, Insurance, Home Services and New Homes & Land. Our core values, service philosophy, cutting edge technology, and most importantly our people are what make us the leading real estate company in Michigan. We are committed to providing the highest quality real estate services possible and making each customer's experience one that surpasses their expectations.