Dawn Davis, president of Rate One Mortgage, recently alerted us to new lending regulations regarding conforming loans, which are loans that meet GSE guidelines. While this may seem like a mouthful, in reality it is a simple concept. Fannie Mae and Freddie Mac, two government agencies that purchase loans and repackage them to sell on the secondary market. Conforming loans have set standards which can be found at the link just presented, and they encompass the vast majority of loans that lenders will make, because they are much easier to sell than non-conforming loans.

Because of the vast purchasing power Fannie and Freddie have, every lender except local banks that portfolio all their loans (essentially use their own money and do not sell them) must follow the guidelines set forth by them.

All counties surrounding Boston have been named declining markets by Fannie and Freddie. What is a declining market? There’s no set definition, but basically it is any area (as defined by zip code for instance) where property values are falling. It is explained somewhat on a page from Fannie Mae’s website.

Now to the info - if you as a consumer/potential buyer have saved enough to put down 10% of your purchase, there should be no problems. The issue comes in with buyers who are seeking 95, 97, and 100% loan-to-value loans. These buyers will essentially have to come up with at least 5% for a down payment in order to qualify for funding. Private mortgage insurance companies have agreed to this new stipulation as well, and buyers generally must pay PMI if they finance more than 80% of the value of their home. Unfortunately, this will remove many potential buyers from the market until they save money. Also, a buyer must prove that a substantial amount of their down payment is coming from their own funds, so gifts and loans from a 401k will not pass muster.

If you have questions about loans and any terms that you come across in your research about financing a home purchase, please call us at 978.468.2138, or log on to Buyer’s Choice Realty to find more contact information. We will do our best to help answer any questions you may have. Creativity is key for buyers who do not have a significant amount of cash for a down payment.

Dirk Zeller wrote an informative article over at Real Blogging, a real estate industry site. If you get a chance, take a look at what he has to say. Mr. Zeller provided some solid insight regarding the current market and helping avoid conflicts between potential buyers and sellers with homes on the market. Some highlights - talk about every aspect of the offer before presenting the price. It is the hope here that you can find some common ground with the seller ahead of money talk. The next step is to present the offer price, and break down the difference between the offer and the asking price over a period of years so the amount does not appear as large to the sellers. Explain to the sellers that the $15k difference is only a few bucks a day that the sellers would have to pay on their next mortgage over the next ten or fifteen years. Most sellers would think differently about this as opposed to looking at receiving much less than they hoped. In the same way, this opens a path for negotiating between buyer and seller. Explain the same numbers to the buyer and see if there is any common ground that can help the deal get done. As with any offer, you should always explain how your buyers arrived at their offer price. Explain your interpretation of current market conditions, identify comparable properties that have sold recently, etc. This will help justify the offer being presented as legitimate.

This is all well and good, but many list agents (sellers’ agents) do not want you to present offers face-to-face to their seller. Presenting as much as you can about a buyer’s ability to close on the deal, and remember, the worst they can say is ‘no’. There are many different strategies for negotiating, and if you are a potential buyer, you must be sure to ask your agent about negotiating experience, if they have had any negotiation training, etc.

I came across an interesting video at 1000 Watt Blog . In it, various people talk about how they are not leads. We here at Buyer’s Choice Realty really like the message behind this video. Consumers in general, and especially potential buyers, do not like being treated as just another commission. Our goal of helping everyone who wants to purchase real estate by acting as consultants as opposed to salespeople goes hand-in-hand with this message. If you are currently interviewing real estate agents, please keep this in mind as you talk to them. Are they willing to describe, in detail, and back up in writing, what services they will provide to you and how they will provide them? If not, don’t deal with them. As a consumer, you essentially own your agent after signing an exclusive agreement to work with them, and they are responsible to work in your best interests. Unfortunately, in the REALTOR(r) culture, agents are encouraged to think of themselves and their paychecks ahead of everything else. Yet another reason to work with an Exclusive Buyer Agent (EBA), who will have your best interests at heart and will make every effort to show you every listing that is on the market. Consumers deserve that at least, and they do not deserve to have someone try to ’sell’ them a house.

The National Association of Exclusive Buyer Agents has released comments regarding the case that has found the national spotlight in which a couple sued their agent. You can read more about the case at MSNBC. Please read the press release below and feel free to comment with your thoughts.

BUYER AGENT ORGANIZATION COMMENTS ON UMMEL HOME BUYING CASE

The case of Marty and Vernon Ummel suing their real estate agent has increased media interest in the home buying process. The National Association of Exclusive Buyer Agents (NAEBA) suggests that this case be an important reminder to homebuyers that they need to be fully aware of their agent’s motivations and allegiances. Not all real estate agents will have the buyer’s best interest at heart. NAEBA recommends that buyers ask these four important questions before entering into a relationship with a real estate agent:

1. Will they discuss and evaluate the properties you view together and compare each property shown with your ideal property?

2. Before preparing an offer to purchase, will the real estate agent inform you about any defects or problems he/she has observed or in any way discovered.

3. Before preparing an offer on your behalf, will the real estate agent prepare a comparative market analysis, including explanations and documentation, to determine the market value of your potential purchase?

4. Finally, ask the agent to sign a contract that sets out explicitly the fact that they are working for you exclusively.

“Under the common law of agency, a buyer’s agent should always provide and discuss relevant valuation information with a buyer client,” said Barry Nystedt, President of NAEBA. “This certainly includes comparable sales data. However, many state real estate associations have worked to get legislation passed that distorts the buyer agent relationship to limit the liability of the real estate companies. Buyers need to understand who they are hiring and under what terms.”

“If the Ummel’s complaints are found to be true, then their “buyer agent” clearly breached his duties under common law,” continued Nystedt. “But, not knowing more of the specifics of the relationship and how the events unfolded, it is difficult to draw other conclusions at this time. If a buyer chooses to use agent representation such as the hybrid dual buyer agents currently being promoted by a national real estate trade associations, then buyers must be very careful to understand the level of service that the brokerage/agent is offering.”

The National Association of Exclusive Buyer Agents was founded in 1995 to help consumers become educated homebuyers. NAEBA is a nonprofit organization whose purpose is to be the “champions of real estate buyers’ rights and representation.” NAEBA offers industry standard certifications, ongoing education, client referral services, technology and information sharing. The NAEBA Code of Ethics pledges undivided loyalty to real estate buyers only. More information about NAEBA can be found at www.naeba.org.

The folks at Buyer’s Resource in Ohio wrote about this topic and mentioned a great resource that is available online. It’s called the The Home Energy Saver. If you are concerned about the environment, or just interested in saving money each month, you should utilize this free tool. One of the most useful features I found on their website was a page full of links to ways we as people - owners/renters/lessors/lessees etc. can make our home or business more energy efficient, either for free or at low cost. These are the types of resources that can make a difference, since so many have access to them. Even if you are not in the market to buy a home right now, I encourage you to check this site out.