What the market is doing in the greater Nashua NH real estate market

This morning the National Association of Realtors released their monthly existing home sales report. 

October’s existing home sales were down 1.2% to 4.97 million homes compared to September’s 5.03 million home sales.

While the existing home sales number for the nation was down 1.3%, regionally the numbers did deviate.  The west took the brunt of the reduction with that region coming in down 4.4% with the Midwest coming in down 1.7%.  Both the South and the Northeast actually held the line at breakeven, good news for sellers in the greater Nashua NH real estate marketplace implying a potential recovery. 

Comparing October 2007’s numbers to October 2006, we still can see that the market is having some difficulty.  Nationally existing home sales are down 20.7% compared to the same time last year.  When looking at the Northeast only, existing home sales are down 16.9%. 

Part of the correction could be rooted in the amount of distress sales that are being absorbed by the market.

Sellers can view this information as just underscoring the importance of making sure that when you want to sell, to price your home in accordance with what the market will support.  Many sellers who didn’t keep track of the market and stuck to old pricing models found themselves chasing the market as home prices slid.   Also, there are some great tips on what to do to get your home sold for the most amount of money, even in a buyer’s market. 

Andy Benjamin
RE/MAX Properties
603-674-5864 (cell - best way to reach)

An in depth look at something happening more and more in the greater Nashua NH real estate market

You have probably heard the term “short sale”, maybe in relation to NH foreclosure properties.   A short sale is one of the alternatives to foreclosure to which a seller can turn when the seller is unable to continue to pay for their home. 

If a seller finds themselves “upside down” in their loan, i.e. they owe more against the property than it is worth, they can try and sell the property to a buyer and then go back to the bank and see if the bank will forgive the difference between what is owed and what the property will sell for.  Basically the argument to the bank is that they will take less of a financial loss if they sell it to a buyer on the open market as opposed to going through the process of hiring an attorney to foreclose on the home and then trying to dispose of the property at auction. Many times the property ends up back in their possession at which time they have to try and sell the property to recoup their loss.  This doesn’t happen instantaneously; sometimes it takes the bank months to get the property back on the market, all the time the bank has to pay the taxes, to insure it, to winterize it if necessary, etc.

Sellers prefer the short option when faced with an impending foreclosure because they don’t have a foreclosure show up on their credit report when they do a short sale.  Banks vary as to how they report a short sale to the credit bureaus.  Sometimes if they are lucky they may just see it as an account that is closed, other times they may report it as closed with a deficiency.  The net effect is that however they report it, it is usually better than a foreclosure.

Buyers can sometimes negotiate good deals with banks in a short sale so there is a decent chance they can get a good price on a home.   

It’s “win”/ “win”/ “win”, or maybe more like “less loss”/ “less loss”/ “win”.  So if it clearly makes sense to do this, why don’t more banks go this route instead of foreclosing on people?

My theory:  Because some bank decision-makers don’t weigh all the facts.

Some banks will simply refuse to even entertain this idea, electing to go straight to the foreclosure route and not return your calls in trying to come up with an alternative solution. They can assume that they will instead take less of a loss going the foreclosure route than if they accept the short.  Incidentally, every time I have been involved in a transaction where the bank rejected a short they ended up taking a larger loss at the auction. 

Part of this estrangement from market realities is rooted in lack of understanding of what the real estate market can be like in a particular price range and area. Also, banks can have no understanding as to what the real estate experts on the ground are seeing who are working with buyers and sellers each day in a volatile market.  Many times these decision makers are in another state in some office and don’t really know how the greater Nashua NH real estate market is reacting to a particular property. 

The bigger joke here is that banks can take a bad situation (the homeowner not paying) and make it a worse situation (homeowner not paying and then rejecting a short to foreclose instead).   If publicly traded banks have an interest in increasing shareholder value you have to wonder how taking bigger losses is in their shareholders’ best interest. 

The glimmer of light in this is the banks who do understand that the longer their “Non Performing Asset” stays in their portfolio the more money it costs them in the long run.  There are some of them so if you are in a situation where a short is an option, give me a call and I’ll see what I can do to help.  With any luck your lender will be one of the few that understand this.  As foreclosures rise, I wouldn’t be surprised to see more banks be open to the idea of a short sale and recognize it is in everyone’s best interest when that is the only other choice for avoiding a foreclosure.

Andy Benjamin
RE/MAX Properties
Licensed in NH and MA
603-674-5864 (cell – best way to reach)

Cuts going in the right direction for the greater Nashua NH real estate market

The Federal Open Market Committee decided to cut the Federal Funds Rate by .25% today.  The announcement was expected, the only real question was whether the cut would be more than .25%. 

While this move is welcomed for buyers and sellers in the greater Nashua NH real estate market, the problem is that it won’t do a lot to change the current credit crunch that is going on in the mortgage industry today and have LITTLE effect on mortgage interest rates.  A lot of consumers make the mistake of thinking that their mortgage rates are directly tied to the Federal Funds Rate.  They aren’t.  What the Fed Funds Rates does do is make the rate at which banks lend money overnight to each other lower.  It will have an indirect effect as some credit cards and equity lines are related to this rate.

The bigger issue that is still out on Wall Street is the lack of liquidity for mortgage backed securities.  If you have ever heard the term “Fannie Mae” or “Freddie Mac”, then you have heard of two entities that buy mortgages on the secondary market.  Without going into too much detail, many times when you get a mortgage the lender doesn’t actually hold the loan themselves.  The lender turns around and then resells that loan on the secondary market.  It’s basically like a stock market, but instead of stocks they trade mortgages and two major buyers on that market are Fannie Mae and Freddie Mac.

The nice thing about Fannie Mae and Freddie Mac is that the lender always knows there will be a buyer for that “paper”, “paper” being lender parlance for “mortgage”.  Incidentially, if you ever heard of the old 20% down rule for mortgages that comes from rules on the secondary market.  The max mortgage that they would buy would be for 80% of the value of the property behind the mortgage.  So, the loan would be for 80% of the value and the buyer would have to foot the other 20%.  There was an exception to this 20% down rule.  This exception being if the buyer put less than 20% down they would have to buy private mortgage insurance to protect against the case of a default.   To make the example easier, let’s just assume that you need 20% down to play on the secondary market with these two buyers of mortgages.

It wasn’t too long that banks figured out that they were leaving money on the table by not allowing people who could afford the monthly payment but could not afford the 20% down requirement. 

Enter Wall Street. 

Banks figured out that they could take this segment of the homebuyer population and lend to them, but instead of reselling those mortgages on the secondary market which had more restrictive qualifications that the homebuyers had to have, they would classify these other less qualified homebuyer loans as “subprime” and package them up into what are called “mortgage backed securities” and resell them instead to investors on Wall Street.  Since the qualifications were more relaxed on these loans they were more risky to the investors.  Because they were more risky, the interest rates were normally higher on these loans, and investors bought them looking for a better return on investment. 

Everything works in this system as long as

1)     the real estate market keeps going up

2)     people keep paying their mortgages

Well, earlier in the year the crack in the dam started to show in the subprime market.  The real estate market started coming back down and subprime homebuyer defaults and foreclosures started to accelerate.  The Wall Street buyers picked up on what was going on and essentially disappeared, refusing to buy anymore en masse.  When that happened a lot of big name lenders got caught holding a bunch of subprime paper that they didn’t want and couldn’t get rid of anymore.  This is one of the major reasons why you hear about some big name banks either dropping their mortgage divisions or posting huge losses because of their exposure to these types of loans. 

So what does this mean for greater Nashua NH real estate buyers?  The good news is if you have good credit and some money to put down, you can capitalize on the better home sale prices currently on the market.  Even if you don’t have money to put down, while many no money down programs have been eliminated, there are still some lenders out there that have access to these programs.   This is where picking the right lender is absolutely crucial.

What does this mean for greater Nashua NH real estate sellers?  Scrutinizing your potential buyer’s financing is very important.  Also, it is critical to understand that because of mortgage changes of late, less buyers can get preapproved now than as little as 1 year ago.  Whenever you have less buyers, that puts more pressure on your price, so it is crucial to understand why a home sells and do whatever you can to pick the right agent and do the easy tips to fix up your home to get top dollar. 

Andy Benjamin

RE/MAX Properties

603-674-5864 (cell – best way to reach)

Monthly reports will give some insight into the Nashua, Hollis, Merrimack, Hudson NH and surround area real estate market

Two very important real estate reports are on the immediate horizon.  Tomorrow the National Association of Realtors will release their Existing Home Sales Report.  Currently it is estimated that the September number will be less by 250,000 homes to 5,250,000 compared to a previous number of 5,500,000 homes sold in the month of August. 

On Wednesday, the New Home Sales Report will be released.  It is estimated that the September number will be down by 25,000 new homes to 775,000 compared to August’s sale of 795,000 new homes.

What will this mean for homeowners in the greater Nashua NH real estate market?  With all the negative numbers in the previous months, especially with the last two Pending Home Sales Reports being well below estimates, the chance for lesser than expected numbers is very real.  Since the monthly Pending Home Sales Report (the report that tracks how many homes are under agreement) is in many cases a leading indicator of how many existing and new homes will sell, I would be willing to guess that the numbers will surprise to the downside. 

Some contributing factors to why the numbers may come out worse are that lending standards have been tightened in recent months because of all the issues in the mortgage marketplace, thereby removing buyers from the marketplace that normally would have been able to buy as little as a year ago.  Many of these lending changes are directly related to all the foreclosure properties that the banks now own from high risk loans that defaulted and have to be disposed of. 

More info: Foreclosures in the NH area.

Andy Benjamin

RE/MAX Properties I

603-674-5864 (cell – best way to reach)

Learning the importance of doing things differently in the greater Nashua NH real estate market

A few weeks ago I talked about what really makes a home sell in the greater Nashua NH real estate market.  It then occurred to me that I should also go into detail as to what you should do when your home doesn’t sell – something that is happening more and more in the current NH real estate market. 

When I sit down with clients whose homes have just expired with another agent I can usually hear a lot frustration in their voice.  They can be frustrated at the greater Nashua NH real estate market, at agents in general, circumstances, the number of competing distress sales on the market, pressure from having to move because of a job, etc.  My job is to understand where they are coming from and provide them with a solution out of that situation. 

In order to be successful as a seller, generally the more emotion you can remove from the home selling process the better.   One of the best ways to do that is to focus on some important questions whose answers can lead you towards getting your NH home sold.  (Conversely, you want a buyer to be emotional when buying your home.  If a buyer falls in love with your home, it is easier for them to move forward with an offer and a better price.)

The following info can help zero in on why your home might not have sold:

How is your NH home priced compared to your competition?  Big point to remember:  Home values in the greater Nashua NH real estate market don’t always go up!  Did you pick a price based on what you needed or what the market would support?  It is very, very easy for sellers to fall into the trap of thinking that their house is better than every other house they are competing with.  Every house has strengths and weaknesses.  Ignoring the weaknesses won’t help you in getting your home sold, addressing the weaknesses will! 

You get the most amount of money for a home from the bottom up, not the top down.  When you price a home high and then just say that you are going to back the price off if it doesn’t sell, what can happen is people start to ask why has it been on the market so long, what must be wrong with it, etc.  When you price the property correctly, that usually generates the most amount of interest and when done right, a multiple offer situation.  I have been able to create multiple offer situations with my homeselling system even though almost everyone in the real estate business would say we were in a buyer’s market right now.

How much work (honestly) would a new owner need to do in order to move in to your NH home?  Minor things that are easy to overlook because you own the house may not be so quickly dismissed by a prospective buyer.  Missing trim, chipped paint on doorframes, old worn carpets, etc aren’t necessarily charming to a buyer, they represent work and money that the buyer would need to fork over. 

Does the color scheme match the times?  Dark browns, harvest golds, olive drabs, etc should be sent back to the decade whence they came.  Basically if Marcia Brady would have called it groovy, it’s time to repaint or replace. 

How personalized is the house?  Religious articles, family photos, etc should be minimized.  Now I can totally understand that it is your house and those items have value, but here is the main thing to remember: You are trying to convince other people that they should make the house their house.  The more middle of the road you can make your NH home the better.  Make it easy for the potential buyers to imagine your home as their home. 

If you are a smoker, seriously consider taking the smoking outside and air out the inside of the house as much as possible.  A significant number of buyers are not smokers.  While another smoker may be fine with the house as it stands, many of the buyers who are non smokers could get put off from the smoke and move on.  

This is only a partial list of things to do.  For a free home evaluation to see what your greater Nashua NH area home would sell for feel free to contact me at 603-674-5864 and also order the free report 27 Tips To Get Your Home Sold Fast And For Top Dollar. 

Andy Benjamin
RE/MAX Properties
603-674-5864 (cell – best way to reach)

When do interest only loans make sense and when do they not?

With all the headlines in the mortgage industry today it can be difficult to figure out what mortgage make sense for a buyer and what mortgages don’t.  Terms like ARM, 80/20, mortgage backed securities, etc flood the news when you read about the greater Nashua NH real estate market. 

If we take a look at the traditional principal and interest loan, we find out that it has the buyer pay part of the principal and part of the interest in each monthly payment.  An interest only loan has the buyer pay just the interest on the loan.  Some of these loans even have no money down options.

Principal and interest mortgage proponents will say that interest only loans are dangerous because you never actually pay off the loan.  They usually also point out that one of the main reasons why there are many mortgage problems today is that many people took out interest only loans and then weren’t able to make the payments, causing themselves to get overextended and their home becoming one of the many foreclosure properties on the market today. 

Interest only proponents point out that interest only loans allow greater Nashua NH real estate homeowners to get into homes when sometimes they can’t afford the full principal and interest payment.  They argue that the buyer may not be paying off the loan balance, but if their other alternative is renting they are never paying off the apartment either.  On the contrary, they say, at least the buyer enjoys the tax benefits of a mortgage payment as well as the chance to earn equity in the property through the property’s value increasing over time.  Plus, many interest only loan programs allow the buyer to pay towards their principal if the buyer wants to.

The other thing that is important to know is that there is another variable to consider, that of the ARM.  ARM stands for “Adjustable Rate Mortgage”.  Usually an ARM will stay fixed for a few years and then float with a prevailing rate after the fixed interest rate period ends.  Both principal and interest and interest only loans come available in 30 year fixed as well as ARM options. 

Confused yet?  There are 4 different variations here:

Interest Only ARM: The buyer only pays the interest on the loan.  The rate stays fixed for a few years, then the rate floats.  This can have the potential for abuse if people are stretched to the max in terms of affording that payment and get into a home at a low initial rate but then can get over extended if rates go up.

Interest Only Fixed: The buyer pays only the interest on the loan.  The difference is here is that the rate stays fixed for the life of the loan.  If rates go up their mortgage payment is not affected because they locked their rate.  Many times the buyer has the option to pay towards the principal amount of the loan if they want to.

Principal and Interest ARM:  The buyer pays both interest on the loan and also part of the principal of the loan with each payment.  Since it is an ARM, the rate will usually stay fixed for a few years but then float after that point.  The buyer’s payments may increase if rates increase as well.

Principal and Interest Fixed: The buyer pays both interest on the loan as well as part of the principal each month.  The rate is fixed, so if rates change their principal and interest payments will not as they have a fixed rate.

So if you are a buyer in the greater Nashua NH real estate market, which loan is right for you?  If you can afford the payment of a 30 year fixed principal and interest loan, that might be the right one for you.  If you have income that isn’t always the same each month and want flexibility of paying more towards the mortgage during the boom months and less during the slow months, then an interest only fixed may be an option.  If you are a renter and can’t get afford the principal and interest payment but can swing an interest only payment, then a fixed interest only mortgage may be an option, especially if your other alternative is to rent something in the greater Nashua NH real estate market area.  Once you get preapproved, you will know the specifics as to what loan is better for you. 

ARMs, in my opinion, are better for people who know they will be in a home for a short period of time and want to take advantage of the lower initial rates that come with those loans.  The benefit of the fixed rate loan options is that even if rates start increasing your loan terms won’t change as you fixed that rate at the beginning of the loan. 

Are you ready to find your dream home?  Get started looking for distressed properties in the area many of which are available with no money down. 

Andy Benjamin
RE/MAX Properties
603-674-5864 (cell – best way to reach)

Understanding who is working for whom in a NH real estate transaction makes a big difference

A few weeks ago I started pointing out some real estate myths in the greater Nashua NH real estate marketplace.  Today I wanted to talk about yet another one that I have run across.

I’ll get a better deal if I just work with the seller agent. 

MYTH!

Although this myth has finally started to fade away, there still are a few consumers in the greater Nashua NH real estate market that think that they will somehow get a better deal on a property if they work directly with the seller agent.

Before we get started we should go into a little bit about how agency relationships work in real estate.  Years ago you could only deal with an agent that represented the interest of the seller.  Also, agents didn’t have to disclose who they were working for.  If you think those two things were a recipe for a conflict of interest, you are right.  As a buyer it was near impossible to have an agent looking out for your best interests.   

Fortunately the concept of buyer agency was put into law.  When you have a buyer agent you have someone who you have a confidentiality relationship with and also looks out for your best interests as the buyer.  It doesn’t matter who is listing the property that you are interested in – your NH buyer agent works for you and not the seller.  A NH buyer agent can help you identify the best financing, structure offers with your best interest in mind, give you advice as to how to reduce the price on your next house, and more.

Given all this, some buyers still want to deal direct with a seller agent.  Unfortunately what they usually end up doing is:

Paying too much for the home:  It is very easy to fall into the trap of thinking the seller agent is working for you as the buyer.  NOT TRUE!  The seller agent is on the hook to get the seller the most amount of money for the home, not to help you get a better price.

Don’t negotiate anywhere near as good as terms as they would have if they used a buyer agent.  A good buyer agent can look for ways to get a better deal on your home purchase. 

Pay the seller agent twice for working against them.  When an agent lists a property it is assumed that the seller agent will look for buyers themselves but also cooperate with buyer agents in the greater Nashua NH real estate marketplace.  If the seller agent works with a buyer agent to get the property sold, then part of the real estate fee goes to the seller agent and part goes to the buyer agent.  When you work directly with the seller agent, you essentially pay them twice to negotiate against you in the transaction. 

To really put it in perspective as to how much having a NH buyer agent helps, check out these comments from a past buyer:

Andy,

I can’t say enough about how dedicated you were in finding us a home.    If it weren’t for your due diligence, we would never had acquired our new property at such a great price.  How often does it happen that you walk into a piece of property with instant equity?

I would highly recommend you and REMAX to anyone, for your outstanding dedication, extensive knowledge of the real estate market and the excellent service provided.  If for some reason, I ever move again, you will be the first call I make.

See you at the house warming….

Regards,
CG
Hudson, NH

The right buyer agent can make a big difference as you can see. 

If you are ready to get started finding your own home in the greater Nashua NH real estate market, check out what distress sales are available. 

Andy Benjamin
RE/MAX Properties
603-674-5864 (cell - best way to reach)