Friday, February 10, 2006

Whats wrong with the latest site to offer real estate information to the masses. Want to know what your house is worth? Want to know how much to pay for your neighbors house? What a great idea, free real estate information at your fingertips.

I'm so glad that the expedia founder decided that this was a market worth pursuing because, it means two things to me. 1.) clients who use it, wont need me anymore (except to explain why the information on zillow is wrong) 2.) I won't have to work very hard (except for client's who have visited and think its a good thing and actually believe what they read).

Whats wrong with Nothing except for all of the features we tested. First off, real estate agents have been providing this information for years at no charge. Graphs, charts, and satellite photos are nice, but, its important to have a certain amount of human experience an knowledge in marketing and valuing real estate. Of the properties we tested, comparables were flawed to the point of being useless. Although, I'm sure that lots of people will be pleased to know that you can buy 3 million dollar home with ocean view for the low low price of $850,000.

The real problem here is that there are no comps for special properties. So the numbers given by zillow are as useful as a hole in the head. The only way to value these properties is with knowledge of the buyers, sellers, and properties in the area and trends in the marketplace. The only good thing about this site is the historical value trends chart which of course charted fairly accurately (minimal margin) the upward trend in prices in our area.

Its too bad that the math doesn't work out. The trend doesn't support estimates and vice versa. My own estimates are almost always dead on without the help of computer data (its usually outdated anyway). The idea is good, but there is no way for zillow to replace actual experience. Without human interpretation of numbers, and personal knowledge, "zestimates" will always be wrong. I know, I'm being hard on zillow's estimates because we all know that estimate means "guess", but, the best guesses from zillow are off by hundreds of thousands of dollars. That could be a very costly mistake for a buyer or seller. And if I made the same mistakes, I'd be broke and in jail.

Monday, February 06, 2006

Low Down Mortgage Programs


     There’s no question about it:  Buying a first home is a big financial commitment.  In most cases, a home is the largest single purchase an individual or family will make in a lifetime.  However, because of the tax advantages afforded to homeowners, buying a home also can be one of the best financial decisions you’ll ever make.
     Problem is, many would-be homeowners remain renters simply because they mistakenly believe mortgage lenders require that buyers come up with 20 percent of the purchase price as a down payment.  While it’s true lenders feel it’s less risky to work with buyers who are able to bring a substantial down payment to the table, the standard 20 percent requirement is fast becoming a relic of the past.  In recent years, lenders have become more flexible in working with first-time homebuyers by creating a variety of special programs that require only a small down payment.  These programs, combined with the most favorable interest rates in two decades, have encouraged growing numbers of renters to consider the tremendous benefits of home ownership.
     While the list of programs offered by individual lenders is too extensive to mention in detail, here are some common programs you are likely to come across as you work with your real estate agent to purchase your first home:
Federal Housing Administration (FHA):  FHS mortgages allow homebuyers to purchase a home with as little as a 5 percent down payment, and to finance all non-recurring closing costs.  The current maximum loan amount in most urban markets is $151,725.  In addition, borrowers are allowed to use up to 41 percent of their gross income toward paying mortgage debt – well above the ratio allowed under most private programs.
Department of Veterans Affairs (VA): VA mortgages allow veteran or active service personnel purchase home with no down payment, up to the current maximum price of $184.000.  However, there is no purchase price limitation for buyers able to make a down payment.  Like the FHA program, VA borrowers can put up to 41 percent of gross income toward their mortgage debt.
Mortgage Revenue Bonds and Mortgage Credit Certificates:  Mortgages funded with these instruments typically require a minimum of 5 percent down and have interest rates that are 1.5 to 2 percentage points below conventional 30-year fixed rates.  These types of loans, offered by state and local housing agencies, are available only to first-time homebuyers.  There generally are income and purchase price caps that vary, depending on where you plan to buy.
Private Mortgage Insurance: Most major lenders offer privately insured mortgages, which generally require a 10 percent down payment (although some lenders offer loans with a 5 percent down payment to buyers with exceptional credit).  These loans typically are not limited by maximum loan amount or purchase price limitation.
Community Homebuyer Program:  Through their networks of mortgage lenders, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) offer Community Homebuyer Program loans.  These programs require a 5 percent down payment, 3 percent of which may be a gift.  To further help buyers qualify, applicants may use 38 percent of their gross income.  Currently, the maximum loan amount available through these programs is $203,150.
     Clearly, there are a lot of options for first-time homebuyers.  While lenders will be more than happy to share information about their own programs, you can save yourself a good deal of time by first selecting a professional real estate agent who is experienced in working with first-time buyers in the areas where you plan to buy.  As agent who focuses on first-time buyers will know from experience which lenders in your area offer a low down payment program that will meet your unique needs.
     Today, taking the first step toward owning your own home is easier than before.  Your real estate agent is your best resource for finding innovative ways to help you come up with a down payment and qualify for financing.  There’s certainly no need to wait until you’ve saved a 20 percent down payment!