Reverse Mortgages

Every morning I wake up to my tv turning on.  Because I feel I owe it to myself and those around me to keep up on financial and business news, and becuase I've had a small obsession with investing since the time I was 9, I watch CNBC.  

Every morning the same grouping of ads appear.  Every monring I see an ad for reverse mortgage, and every morning I get a  little peeved.

You've probably seen them.  The lenders that participate in them get actors from yesteryear to support them such as Robert Wagner or in a case specifically to St. Louis even former St. Louis University Billikin's former coach Charlie Spoonhour.

The process sounds simple right?  Call a lender, and instead of them giving you money to buy the house, they'll give you the cash in exchange for the right to the house in the future.  

Let me explain how these work:

The the lender looks at the following different factors:

• Current appraised value
• Your Current age
  
• Life expectancy
• Current prevaling interest rate based on 1 Year T-Bill, LIBOR, or 1 Year CMT
• Payment taken as monthly installments, lump sum, or line of credit
• Location of home and any maximum restrictions

These items create what's called a TALC or Total Annual Lending Cost.  A value for the home's equity is then made.  Closing costs are then deducted from the value, usually around 4%.  2% usually goes to buy insurance for the lender against the value dropping and 2% is an origination fee the lender gets as profit. 

The value is then divided by the number of months left in life according to the life expectancy table.  

You then either get monthly payments until you die, move out of the home for 12 months, or sell the home or the lump sum.  (Most people choose the monthly payments.)  If you choose the monthly payment option, the lender usually charges between $25-35 a month for a "check processing fee."

One important item to know is that most of these loans are ARMs or Adjustable Rate Mortgages.  That means if rates go up the lender can send a lower check.  For a senior relying on that income, that could be devastating!

After the person vacates the home or dies, the home is then sold and the bank is paid back their money.  They get to keep the interest collected that made the difference between what the actual equity in the house was and what they agreed to pay. (Beyond that figure the bank is required to give back any additional funds to the heirs.)

The homeowner must also remember to continue to pay taxes and insurance on the home as they are not escrowed.

The reason you've seen an increase in the number of ads for these lenders is because they are smart.  They know that right now the values of real estate are down and they can go in and value the homes at a much lower rate then at the highs of the market thereby taking less risk.  They also know that in a climate where it's difficult to sell loans to people participating in a regular mortgage, this option might get their fees up.  Remember the lenders usually make more on these than on a regular loan.  

My issue here is that due to all the fees and changing payments etc that are involved these typically aren't a good decision for most elderly individuals.  The goverment is so worried about them getting taken advantage of that they now require people taking out these loans to attend a 45 minute class at a HUD office.

With these two factors it's important to realize there are other options available to borrowers that might be more advantageous including taking a HELOC or Home Equity Line of Credit out of the home.  That way the homeowner is only charged interest on taking out the money they really need thereby accruing less total interest over the life of the loan.

I'm not saying that a reverse mortgage is bad for everyone, but please understand it isn't as peachy as they make it look on tv.  If you or a family member are considering a Reverse Mortgage please seek out the advice of at least a few mortgage representatives before going forward.  If you have a financial advisor I would definitely recommend you seek their advice first.

Click here for more information on Reverse Mortgages from WikiPedia

Click here for more information on Reverse Mortgages from AARP

No CBS FOR YOU! Says Charter Communications

Ready To Get Upset St. Louis Residents?

Here's a story for you: 

You wake up January 1st to try and catch a new version of Regis and Kelly only to find static...you leave and enjoy New Years Day with your family and come home and decide to watch CSI only to find....static.

If you have Charter Cable, that's exactly what will happen to you on January 1st, 2009 - less than 10 days from now.

Charter and Belo, the organization that owns the local CBS affiliate, KMOV channel 4 got into a dispute and Charter decided to drop them from the lineup.

Let me say this one more time...if you have have Charter Cable on January 1st you will no longer be able to get CBS and Channel 4.

If you are under contract with Chater, there probably isn't too much you can do other than to call and complain to Charter's local headquarters at 314-965-0555

If you are not under contract with Charter we can help you switch to Dish Network and get you a discount.  Call our St. Charles office today to get your real estate discount code: (636) 946-7273

You'll get free activation a $99 value, $30 off your first month's bill, free installation and boxes in up to 4 rooms and still qualify for all the holiday specials they have available right now.

For Press Information On This Issue:

KMOV's Release

St. Louis Business Journal's Article

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Rates Dip Below 5%

We just got word from one of our trusted mortgage professionals,
Joe Calcaterra from USA Mortgage that a 30 year fixed can now be had for just 4.875% !  

A few Princiapal and Interest Examples:

1. $100,000 loan would be just $529.20 / month
   
2. $150,000 loan : $793.81 / month
3. $200,000 loan : $1,058.41 / month
4. $250,000 loan : $1,323.02 / month

*This rate is available with just 1 point paid.  If you want no points, USA has a rate of just 5.125%

With these low rates and with some great deals out there, it couldn't be a better time to buy!

If you're interested in getting pre-approved or interested in a refinance you can visit Joe's webiste at http://jcalcaterra.usa-mortgage.com/

Or you can call Joe right now at 314-628-2072

Foreclosure and Short Sale Buying Tips

You'll find a brand new page on our site today called Tips for Buying Foreclosures and Short Sales .  This page features some excellent advice written by specialists in this field on what to remember when purchasing a these types of properties.  Buying them can be a great deal if you know to look out for the pitfalls that unfortunately many buyers face.  Remember, if you're considering the purchase of one of these properties to use a specialist in this area.  At River City Real Estate we have these specialists on staff ready to assist you.  They do not charge any additional fees to represent you in these transaction and unlike many other large brokers in the area, we do not charge broker administrative fees or transaction fees.

Featured Foreclosure Buying Tip: Know if a Municipal Inpsection is Required - the foreclosure company will not under any circumstances unless required by law provide the Buyer a occupancy inpsection or fix the repairs requested.  Therefore it's important to factor this into your bid.  There are often times 100s-1000s of dollars in required repairs for these inspections.

Featured Short Sale Buying Tip: Be Prepared To Wait - While some smaller lenders are giving approvals within 14 days, many larger lenders are taking much longer.  As indicated in a previous post about Countrywide it can take as long as 120 days.

You might also be interested in : What Is A Short Sale?

They Said It Couldn't Be Done

River City Real Estate: The Little Engine That Could

When River City Real Estate was started over 4 years ago, many brokers in charge of the large area companies quietly laughed and whispered amongst themselves..."It can't be done"  "No way you can charge that little and stay in business," "You can't pay agents that much and make a profit."

Well as our fourth fiscal year winds down to an end, I 

can happily report they have and continue to be wrong. 

The key strengths to our enterprise?

• Hard Work
• Determination
• Technology Better Than Any Other Company In St. Louis
• Innovation
• Pay based upon performance from agents and brokers

Unlike some of the large area companies, our employees aren't paid regardless of performance.  That means if you list your home with us, every single agent and employee all the way up to the top has a vested interest in seeing your home sold.

In a year when other major real estate companies boast about having 20% more listings than last year.. (Read: They have 20% more listings because they can't move inventory.)....when they are laying off salaried staff...when their total unit sales volume is down over 30%...when they have agents leaving the business left and right...They have cut marketing expenditures in half or more (Notice the real estate section of the newspaper a little thinner these days?)

Here we are at River City Real Estate, this year we:

• Added agents, purchased other real estate companies
• Increased total value of all homes sold by 38%
• Increased number of homes sold by almost 50%

So yes this post toots our own horn a bit.   But we want you to understand the landscape we work in and make sure people know we aren't going anywhere anytime soon!  We hope that whether you are looking to buy or sell in 2009 that you'll consider using the "Up and Commer" in real estate.

C'Mon Countrywide! Countrywide's Flawed Short Sale Process

Everyone that works in the industry knows that Short Sales (link goes to a description of what a short sale is)are a pain.  The biggest issue we have with banks over the short sale process, is the complete lack of common sense that they use.

Those of us that have to deal with the banks directly are used to the run arounds.  But these are people's lives, and more important to the banks, it's their bottom line!

An Example:

River City Real Estate submitted an offer to Countrywide on November 3rd.  We were told we'd have an answer in 14 days after an appraisal was completed.  That date came and passed and the appraisal wasn't completed.  The buyers were frustrated but still stuck with it becuase they loved the home.  Another week and a half passed and finally the Appraisal was received.

  However, at this point we were then told they would need another week before it would be assigned to a negotiator and we would then finally have an answer.  The date we were promised to receive an answer came and went last week.  Then we were told we'd hear Friday, nothing.I called in "we don't know anything yet."  Then Monday, nothing.  Today, I called myself to try and get someone who could give it to me straight.  "It's currently with a Phase 1 negotiator, you won't know anything for at least another week."  

So let me recap this for you:  After 45 days, we know nothing more than we did the day we submitted the offer to Countrywide.  We also know that we probably will not have a definitive answer with someone signing off on it until the 60th day after we submitted the offer.

What primary home buyer is willing to wait this long?  Do you think these people are getting such a good deal that they are willing to wait?  That's simply not true!  In fact, these Buyers could offer on the house down the street that's similar but listed lower than than the offer they submitted 45 days ago.

Why does a bank allow a short sale to take place?   Becuase they will lose less money on it before it forecloses than after.  They save money on attorney's fees, clean out fees, Realtor fees, and more.

Countrywide had to be bailed out by Bank of America.  They were losing hundreds of millions, and by some estimates now, billions (yes with a B) on these bad loans.  Well maybe they would lose less if they had a better process and made decisions that made sense instead of shuffling paperwork for 60 days before getting an answer.  

Think about the implications.  Countrywide would get the loan off their books in 30 days not 90-120.  That's two months faster they would have the loan paid off and a bad loan off their books.

The other issue at play here: Most other banks can handle this within 3 weeks.  Even Wells Fargo, the other large nationwide lender can handle the process within 30 days usually.

So this begs the question, Countrywide, why can't you get your act together to save you, your investors, and your clients some heartache and money!?  Why not turn a tough situation for all into an opportunity to shine and look like a hero?

List My Home During the Holidays?

A question every real estate broker receives in November and December each year is "Should I take my home off the market for a while?"

There are two approaches to the answer to this question:

A} If your home is priced at true current market value and is in great condition inside.  Then we would recommend that you continue to keep your home on the market.  Buyers that are in the market at the present time are serious buyers.  They know enough about the market to understand that the best deals are found at this time, or they must purchase a home due to relocation, etc.  However, they know they can find many homes out there with Seller's that are willing to settle on a price below market value.  Therefore it's the homes that are already priced below value that sell during this time.  If you decide to keep your property on the market duing these months, we would usually recommend a price reduction.

B}If your price is at the top or over market rate or if your home needs work done to the interior that you are deferring (whether its necessary repairs or updates) then we would recommend you take your home off the market until March 1st.  

Strategy B offers another advantage.  By taking your home off the market for at least 60 days, the MLS allows a Realtor to reset the days your property has been on the market.  The amount of time the home has been on the market is many times the first question Buyer's ask when considering to write an offer.  By resetting this time period back to zero when the most Buyers enter back into the market, a higher offer can sometimes be achieved.

In a future post we'll write about the pricing pyrmaid and why you get more for your home if it's priced correctly immediately when listed.

Real Estate Trumpet

Last night we rolled out to all of our agents our new Real Estate Trumpet system.  We've worked hard for over a year to come with an all encompassing system to market your home, and we're finally happy with what we have to offer.

Real Estate Trumpet works with multiple different systems to do many things.

1. Create over 70 internet links to your listing, on sites like Trulia.com , Craigslist.com , Zillow.com , and many more!  The more links, the easier it is for someone to find via search engines.
2. Your property is marketed on www.RCREonline.com as well as most other broker websites
3. Create a virtual tour for every listing by every agent in our company
4. Virtual Tours sent and searchable on www.Realtor.com and  www.YouTube.com
5. Marketed via Social Media sites like Twitter , Facebook, MySpace, etc
6. Online Flyers that can be viewed anywhere ( See Sample)
7. We can track the number of visitors that have viewed each virtual tour, flyer, etc

There are even more features we are working on we plan to have soon.  But rest assured, listing with River City Real Estate means your property will receive more exposure than with any other company.