I read with great disappointment a recent article by Binyamin Applebaum that appeared in the Boston Globe’s Sunday Magazine. The first issue I would like to take up is that Mr. Applebaum states, “The National Association of Realtors? “This is the best market in years in terms of choice,” said a recent radio ad. The Northeast Association of Realtors? “It’s a great time to be a home buyer in 2008.” The Massachusetts Association of Realtors? It’s a “buyer’s market.” Behold the eternal, unbearable optimism of real estate agents.” While all of these statements have been made by the above organizations, it is not because of ‘unbearable’ optimism. This is the best market in years in terms of choice. It’s a fact. The inventory is so high right now that buyers can view any number of homes without problem. It is a great time to be a home buyer this year. Sellers are beginning to realize that they will not get their high asking price, and many are willing to negotiate and offer incentives like HDTVs and $ that in other years they would never have thought about offering. It is a buyer’s market. This is not an optimistic statement, but rather a term that is widely used in the real estate industry. A buyer’s market occurs when there is more supply than demand, thus giving buyers the upper hand. In recent years the market was a seller’s market, when, you guessed it, there was more demand than supply, allowing sellers to ask for, and receive, top dollar for their properties. As a professional in this industry, I am disappointed that a ‘residential real estate reporter’ cannot figure these things out.

As for his claim that, “I write often about people facing foreclosure. With some regularity, real estate agents write me to ask if the people used an agent to buy the home. The answer usually is yes. Real estate agents in recent years helped many people buy homes they could not afford.“, I also take offense. Sure, there are unscrupulous agents out there who are more worried about their paychecks than about their clients. As an exclusive buyer’s agent, I sign a contract with each of my clients that states I will put their interests ahead of all others, including my own. In fact, all real estate agents are supposed to apply this to their dealings with buyers and sellers. Across the board, a few bad apples exist in any field, and real estate is not immune to this problem. Additionally, real estate agents are not finance professionals, lenders, nor lawyers, and we must, by law, state to our clients that we are not professionals in any industry except real estate and encourage them to obtain the advice of other professionals. We can provide the names of professionals to help out our clients so that they make an informed purchase, or in the case of traditional agents, and informed sale. The fact that many now cannot afford their homes has more to do with adjustable rate mortgages they may or may not have understood the consequences of at the time of signing (the lenders’ fault, most likely, for not explaining fully the terms of their mortgage), as well as the very real problem of the rating agencies that assigned higher grades to less-than-prime loans than they should have, which is its own separate issue I will expound upon later.

I realize this was a ‘perspective’ piece, but Mr. Applebaum should closely examine his perspective and perhaps do some fact checking before writing damaging statements in a highly visible magazine like the Sunday magazine that comes with the Sunday Boston Globe.

An interesting article appears in the March 2008 issue of “REALTOR” magazine. This publication is put out by the National Association of Realtors®, and you can find this article online as well. It involves a review of one of the many house hunting shows on TV. On the show, the family’s agents, who happen to be their current landlords, are ‘helping’ them find a new home. The family is approved for a much higher mortgage amount than what they are comfortable spending on a home, yet their agents first show them a property that is in their preapproval range but is way above what they would ideally like to pay. The reviewer of the show, Charmaine Englesman-Robins, correctly notes that this is not the way a professional agent should do business, and she questions their motivations.

Don’t let this happen to you. Look for an Exclusive Buyer Agent that will put in writing their pledge that they will work only in your best interests. Why waste time with an agent who doesn’t listen to your wants and needs. A real EBA acts as a consultant, not a salesperson, and will sit with you to develop a comprehensive home buying strategy, taking into account your particular situation. All too often, potential buyers are suckered in to working with the first person they discuss buying with, and many times they are left unsatisfied and disappointed with searching for a home. Buyers deserve representation and an agent who will work for them, not just show them any house they the agent happen to like.

What do you do with all the junk mail you get? Or, for that matter, any mail? Shred anything with personal information on it and keep it along with all discarded paper, and drop it at one of the many bins all over Massachusetts to be recycled. Even better, change every bill you have to electronic statements. Most companies save at least a year of statements to view online, and you can just save the statements on your computer for easy access. Can’t beat it - less paper mail also helps those of us who tend to be ‘organizationally challenged’.

Recycling is easy to do, and is becoming mandatory in cities and towns around the commonwealth.

My second tip involves saving money. All those plastic bottles of water we buy and drink and toss out? Buy a durable water bottle, wash it fairly often, and use a faucet-mounted water filter or a pitcher to put in the fridge if you don’t enjoy drinking regular tap water. Replacement filters are cheap and each filter lasts several months depending how much you use, but most estimates state the price for the unit and filters amounts to about a nickel per gallon. How much did you pay for your last bottle of water at the gas station?

As stated in our previous post, there are new restrictions regarding who can actually get approved for a loan. I’d again like to thank Dawn Davis, president of Rate One Mortgage, for her explanation of this issue. As we wrote previously, this will mostly affect potential buyers who do not have a large amount to put down on their purchase. Here are the details, as provided by Ms. Davis.

For those looking for 100% or 97% financing, it will not be available. 100% financing will be reduced to 95%, and 97% financing will be reduced to 92%. In these cases, buyers will need to increase their down payment by 5%. For some, this may not be possible and they may be forced to wait until they are able to save some money. But, for many, there are some alternatives to obtaining the additional funds needed for down payment.

Buyers who are approved for 100% financing and will actually receive 95% financing can use their own funds or gift funds for their down payment. They are not permitted to borrow the money unless they make a loan against retirement funds such as a 401k account. Lenders document gift funds by obtaining a gift letter from the donor and evidence that the gift funds have been received by the buyer.
After closing, many buyers actually repay the gift money they received. Clients who are approved for 97% financing and will actually receive 92% financing must demonstrate that 3% of their down payment is coming from their own funds. Lenders document this by obtaining a copy of the buyers’ most recent asset statement. The remaining 5% of their down payment can come from their own funds, from a gift, or from a loan against a 401k.

Buyers who are approved for 95% financing and will actually receive 90% financing must demonstrate that 5% of their down payment is coming from their own funds. Lenders document this by obtaining a copy of the buyers’ most recent asset statement. The remaining 5% of their down payment can come from their own funds, from a gift, or from a loan against a 401k.

Maximum allowable seller contributions are as follows: If the buyers are receiving 95% financing, the seller can contribute up to 3% of the purchase price toward the buyers’ closing costs and prepaid items.If the buyers are receiving 90% financing or less, the seller can contribute up to 6% of the purchase price toward the buyers’ closing costs and prepaid items.