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Closing Costs Clarified
How much closing costs should a home buyer expect to pay? Closing costs average 5% of a home’s purchase price.
Closing Cost Estimates
Looking for the exact amount? Lenders are required to disclose all closing costs within three days of when a buyer applies for a mortgage. The forms used to list closing costs have been standardized and simplified. The new Good Faith Estimate (GFE), circa January 2010, helps buyers shop and compare costs from different lenders. Lenders are held accountable to ensure that all costs, even title fees, on the Good Faith Estate match the final numbers on the Settlement Statement (HUD-1).
Who Pays What
While Tampa area home sellers pay for the owner’s title policy, commissions and state doc stamps on the deed, buyers are responsible for: lender fees, the lender’s title policy, doc stamps on the note, home insurance, pre-paid taxes, and prorated CDD / HOA fees. See this RIS Media report on new HUD & RESPA regulations.
Buyer Costs Will Increase
If the amount of cash required to close is an issue, potential home buyers may want to act now. Tampa home sellers can still pay up to 6% of a buyer’s closing costs, but those days are numbered. New FHA guidelines will be phased in over the coming months that will reduce seller contributions to 3% most likely, and will increase the financed Mortgage Insurance Premium (MIP) by a half percent. We expect to see loan costs increase in the coming months as: lenders require larger down-payments (6% up from 3.5%), tax credits expire, credit requirements tighten, and interest rates increase from historic lows.
To take advantage of this historic buying opportunity, contact Team Bohannon at Coldwell Banker today at (813) 979-4963.
“I am Not a Lead” – The Privilege of Serving
Ran across this manifesto last year and was impressed. Spoke to Marc Davison of 1000 Watt Consulting and enjoyed his thoughts on the real estate business and the mindset that traditional agents have about ”leads”. Rather than relying on technologies that de-personalize or attempt to automate “lead response”, Realtors should focus on listening, absorbing and responding with accurate information. This is not about us, it is about the client. The fundamental approach should be to provide high-value, relevant information that is aligned with a client’s goals. One can only build a lasting relationship by treating individuals with respect. Realtors seeking to create “raving fans” and a durable competitive advantage must connect at a deeper level over an extended period of time to earn the privilege.
Social Media Presentation
We are witnessing the birth of social media. Why do we care? Team Bohannon’s goal is to maintain and strengthen our client relationships by delivering high-value, relevant content more quickly. Most people buy a home once every seven years, but most Realtors do not stay in touch with past clients for seven years. We use social media to meet clients where they are online. We want to understand our clients online behavior, what and whom they value, and how they might use social media in the context of real estate.
In researching the use of social media in real estate, I came upon this general presentation that offers a helpful look at “Understanding You Customer’s Social Behavior” posted by the Altimiter Group from the other bay area:
Why Buy Now? 2010 May Bring Higher Overall Costs
Should you wait and see if home values in the Tampa Bay area drop further before buying? Everyone wants to pay the lowest possible price. The sales price, however, is not the only factor that determines monthly payment if you will be financing the purchase. A 1% increase in mortgage interest rates would result in a higher monthly payment than an additional 10% drop in value.
The financing cost associated with buying a home should increase as the federal government begins easing off stopgap measures to boost the housing market over the next few months. What factors will cause the increase?
- Tax Credits for First-Time Home-buyers & Move-Up Buyers are set to expire
- Upfront Mortgage Insurance Premiums for FHA Loans will go up a 1/2 point
- Credit Requirements for FHA Loans have been tightened
- Down Payment requirements for FHA Loans might increase to 6% (up from 3.5%)
- Interest Rates are expected to increase from historic lows
- Seller closing cost contribution limits may decrease from 6% to 3%.
Government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac have been the primary buyers of mortgage backed securities. The $11 trillion U.S. residential mortgage market has been dominated by GSEs since private investors exited the market in 2007. The Federal Reserve is set end its program of purchasing mortgage-backed securities by March 31. Such a move would likely cause mortgage rates to climb from record lows because private investors would demand higher returns to purchase residential mortgages. When combined with the above factors, we see cash-to-close and loan costs going up.
Consolidation in the credit markets may also be a factor. The concentration of power in the mega-banks, backed the Federal government guarantees, is limiting consumer choice. The remaining mega-banks can afford to enforce tighter requirements and charge higher rates since since much of their competition has been eliminated. Disintermediation has not been our friend.
To learn more about the Tampa real estate market and factors impacting home buying, contact Dale Bohannon at (813) 979-4963.
Don’t Get Soaked By Flood Insurance
We almost had a 300K short sale transaction fall apart at the last moment over flood insurance. The current owner was paying $1600 per year and the quote for the buyer’s insurance was $6000 per year because this older home was located in a Pinellas County flood zone that had recently changed. The high cost would have impacted the buyer’s loan ratios and willingness to buy. Flood insurance is not assumable if less than 6 months remain on the policy. The heroic efforts of everyone involved resolved the situation when we discovered the home was grandfathered into a different classification because the building permit was issued before the flood zones changed.
Why You Need Flood Insurance
Anywhere it rains, it can flood. While coastal areas have a higher risk of flooding, inland areas may also have a topography that is prone to flooding. Lenders insist on flood insurance if a property is located within certain flood zones to protect their collateral – the home. Most newer subdivision must be built at elevations above sea level and do not require flood insurance policies.
Elevation Certificates
If your lender and/or insurance agent claim that your home is in a flood zone, we may be able to obtain a Federal Emergency Management Agency (FEMA) elevation certificate, or flood certification, to verify that a home is above sea level and therefore may not need flood insurance. FEMA Flood Elevation Certificates are done by licensed Florida engineers in order to determine how much Flood Insurance a homeowner will have need. Sometimes flood zone classifications are incorrect. Even if a home in located within a flood zone, it may be grandfathered into a different classification. You might also perform a flood risk analysis to see how your home compares to FEMA’s risk assessment.
Flood Zone Maps
Flood-hazard maps have been created to show different degrees of risk for each area. FEMA updates digital flood maps and revises flood zones to offer up-to-date risk assessments. Click these links for Hillsborough County Flood Hazard Maps, Pasco County Flood Zones or general information from the Southwest Florida Water Management District about the watershed and the floodplain. See Flood Insurance Guide and consult flood insurance providers for more information.
If you are looking for an agent who has been in the trenches dealing with these issues for years, look no further. We have an experienced team, a repeatable contract-to-close process and an automated transaction management system to provide the peace of mind you deserve. Contact Doug or Dale Bohannon at (813) 979-4963.
