What is a Short Sale?

In simple terms, a short sale happens when a lender accepts less than the principal amount of money that they are owed by the seller and allows the property to be sold. For example, if you are trying to sell a home that has a fair market value of $200,000 and you owe $210,000 on the property, once all the costs associated with selling are paid you will be well short of the principal amount owed to the lender. If you follow the lenders short sale procedures exactly, they may allow the sale to take place and incur a loss on the property. Keep in mind this is a simplified version of the process, as we will reveal.

Why Should You Try To Do a Short Sale?

From a seller’s perspective, a short sale may be the only way to sell the property and stop further financial hardship. Without the money to pay off the principal owed to the lender, technically the seller cannot sell the home. A short sale provides a workaround to this dilemma by allowing the seller a way to sell the property without paying off the principal loan amount owed.

From a buyer’s perspective, a short sale is a tool that can be used to purchase a home that otherwise most likely would be going into foreclosure and be unavailable for sale for an extended period of time. In a few cases, a short sale can also be a way to get a great deal on a home purchase. It is wrong to view all homes that are potential candidates for a short sale as a good investment, but with proper due diligence one can assure themselves they are receiving a fair deal for the home they intend to purchase.

How Do You Do a Short Sale?

For both buyers and sellers the most sound advice I can offer is to secure the services of a competent, experienced real estate agent to guide you through the short sale process. As a seller you must know that a lender will not allow a short sale to take place unless the home is listed for sale with an agent. This is done to protect the lender’s interests in the home by ensuring the home is fully exposed to the open market and the highest and best offer for the property is obtained. The seller’s agent must know how to manage a short sale, how to deal with the lender’s loss mitigation department, and how to advise the seller to protect the interests of all represented parties.

A buyer’s agent must also know how to manage a short sale, how to deal with the lender’s loss mitigation department, and how to best protect their client’s interests. Besides knowing how to find properties that are offered for sale as a short sale, the buyer’s agent must also ensure any property their client is interested in purchasing must be inspected in great detail, a thorough market analysis provided to verify the purchase price is correct for the current market, and all of the necessary paperwork is completed exactly as the lender specifies.

The general steps to a short sale involve first determining if the home is a viable candidate for a short sale. This is done by the seller with guidance from the seller’s agent by contacting the lender and getting all of the required documents for effecting a short sale. This documentation must be completed accurately and all of the supporting documentation provided so the lender can make a determination if they will allow a short sale to occur.

If the lender decides that the home is a candidate for a short sale they will have at least one, if not more, price opinions done on the home by third party appraisers or real estate brokers to give them an idea of what the home should bring on the open market. This number will be a key feature of the short sale. It is going to be used by the lender to determine whether or not they will accept an offer on the property for a particular price. Some lenders will make this number known to the seller and some will keep it private, so I recommend seller’s agents to submit their own opinion on pricing to the lender as they will typically have access to the house that the lender’s representatives will not. Send a full explanation with your price opinion, as well. If the lender gets the price wrong, the home will never sell as competent, well-represented buyers will know the current fair market value as well as anyone.

Once the lender has received all of the paperwork and they have a good idea of the fair market value of the home they will ask that the home be marketed for sale to the general public. Each lender will have different procedures, but mostly they will want to view all offers on the property themselves and then specify exactly what they will accept, and which parts of any offer to counteroffer. Once the lender is satisfied with the complete offer, you will then proceed forward as normal with the transaction per the contract and begin working towards closing.

Short Sale Tips and Advice

A short sale can either be a pleasant real estate experience, or it can be a real pain in the you know where. My experience has shown me that it all depends on how the lender’s representatives and the seller’s agent interact and work together. If the seller’s agent knows what they are doing and can anticipate the lender’s needs to ensure all of the necessary paperwork is completed in a timely manner exactly as requested, then the process stands a good chance of going well. This is why you need an experienced agent to manage this transaction. Don’t worry about the cost of an agent at this time because part of the short sale process is the lender agrees to pay the agent’s commission.

Seller’s need to make sure they fully understand the contractual obligations they face by doing a short sale. The lender may force you to sign a promissory note for the loss they incurred from the short sale. There may be negative credit score or credit report actions that will affect the seller’s ability to get new housing. It is possible that there are tax consequences, as well. Seller’s need to discuss all of this and more with their real estate agent, plus they should seek guidance from a real estate attorney and tax professional to ensure they are aware of all possible outcomes.

Buyers need to know that a short sale does not necessarily mean they are receiving a good deal on the purchase of a new home. It can be quite the opposite without a complete understanding of the local market conditions, a thorough market analysis, detailed home inspections, and a real estate agent looking out for their best interests. A short sale gives a buyer the opportunity to buy a home that was going into foreclosure, but that is all it can guarantee. Lenders are not going to just give away their money, but on occasion they will allow a property to go for less than fair market value given the particular home’s condition. If you happen to be in a position to find and purchase one of these homes, congratulations, but know that you are in the minority.

As you may have guessed from this post, I have been in a position to work short sales as a representative of both buyers and sellers. I have tried to give you a fair overview of the process, but each situation is unique and must be approached from that perspective. I will be happy to answer all of your questions and to help you in any way I am able with all of you real estate needs. You can search for all Louisville, KY Homes for Sale, or contact me, Joe Hayden, Realtor, at the highlighted links.

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The Estates at Locust Lake consists of three luxury lots on Wooldridge Avenue just waiting for your new home. The lots range in size from 1.2 acres to 1.4 acres, and include access to all available local utilities. Once completed, the Estates at Locust Lake will have a beautiful stone entranceway, a private access drive leading to your new home, an abundance of mature trees, plus the peace and comfort that can only come from living in exclusive Pewee Valley, KY.

Finding land in Pewee Valley, KY that has been meticulously prepared for your new custom-built home is a challenge. The Estates at Locust Lake will meet and exceed your needs for a custom home site, affording you the opportunity to build with confidence in a highly desirable location. Pewee Valley is located in Oldham County, KY and features a fascinating history that makes it a unique and special place to call home.

Oldham County is just east of Jefferson County, KY and features rolling countrysides, picturesque farmland, convenient access to major thoroughfares and amenities, plus an award-winning school system. You will find that living in Pewee Valley is a treasured experience that engages you with some of the most beautiful land, interesting architecture, and peaceful surroundings in all of Kentucky.

Please Contact Joe Hayden at any time to set up a personalized showing of The Estates at Locust Lake at your convenience. In addition, if you have not selected a luxury custom home builder, please contact Denis Littrell of the Louisville Building Company to set up an interview.

]]> http://expertrealestatelouisville.com/buying-a-home/land-for-sale-pewee-valley-ky-wooldridge/feed/ http://expertrealestatelouisville.com/contractor-remodeling/custom-home-builder-louisville-ky/ http://expertrealestatelouisville.com/contractor-remodeling/custom-home-builder-louisville-ky/#comments Thu, 22 May 2008 22:33:44 +0000 Joe Hayden, Realtor http://expertrealestatelouisville.com/?p=68 If you are considering buying a home, you may be surprised to discover that having a custom home built is a realistic possibility. A custom-built home opens up an entirely new range of possibilities for you because you have so much control over the location, the design, the amenities, plus with careful planning you may end up with valuable equity after the home is completed.

We have been fortunate to sit down with luxury custom home builder Denis Littrell, CEO of the Louisville Building Company to discuss the process of having a custom home built. Denis has been in the custom home building business for over eight years, with a five year stint prior to that with one of the largest commercial design firms in the South. Denis’ specialty is his ability to do all of the custom design of the home in-house, plus supervise the building process through completion.

What is the difference between a custom home builder and a production builder?

A true custom home builder defines multiple completely original features in the home. In addition, a true custom home builder is multi-disciplined meaning they are able to incorporate the process of designing and building the home together in full cooperation with the client. A very beneficial difference is the ability to manage the budget to the client’s advantage because the custom home builder has intimate knowledge of the complete design and materials required.

What are the general steps in having a custom home built?

For me, the first step involves asking a potential client to fill out a detailed questionnaire to help define exactly what they want in a new home. From this questionnaire I am able to get a clear understanding of their wants and needs. The next step involves programming where we make a determination of the client’s budget and decide what features are going to be prioritized in terms of money. Next, we discuss design theory and I ask that the clients bring in magazine clippings, photos, and books that show features they find appealing. From this point we begin to sketch the design, first on paper, and then on the computer, from there adding detail to the design as my clients begin to see their new home come to life.

What are some ways to finance a custom-built home?

This really depends on whether or not the client has already purchased a lot for the new home. If there is a lot available, then that property can be used as collateral for a construction loan. Construction loans are different from a typical mortgage loan because the funds are always dispersed through a number of draws. Each phase of construction is defined in an agreement between the buyer, the builder, and the loan provider, and a certain amount of money will be provided for each phase. At the completion of each phase, the lender will inspect the work and determine if it has been completed as agreed upon. If the lender is satisfied, then they will release funds for the next phase of construction and the process continues. Depending on the specific terms of the loan, the construction loan may mature into permanent financing at the completion of the project.

If the client has not purchased a lot prior to initially contacting me, I can help them locate property that fits within their general design criteria, plus we will be able to look at all available financing options together to find the best fit for their investment needs. It is always an option for my clients to do owner financing if that is the best choice for their individual needs.

What terms are typically found in the contract you use when commissioning a custom-built home?

I use an industry standard construction agreement with additional provisions that identify all specific details of the project. The terms have been revised continually over the years and it is fairly well balanced between my needs and the buyer’s needs. The contract is similar to a normal real estate purchase contract except for a few key sections. The first is the warranty section. You should expect to receive a warranty for any home you have custom built, and you will typically find builders give a one-year warranty. For my homes I do provide a two-year warranty and will spell out the exact terms in writing.

Also, there will be a schedule of events in the contract that not only specifies an estimated completion date, but also details the buyer’s role in selecting and purchasing fixtures at certain times. Though we will have discussed in detail things like paint colors, cabinet styles, light fixtures, trim, faucets, door handles, etc., the buyer must make their final decisions and purchases by certain dates so we can maintain our agreed upon schedule. These items are called allowances and are important to not only the schedule and styling of the home, but to the budget, as well.

How does the design process work?

Using the initial questionnaire, extensive discussion, and the written contract, I begin to make hand sketches that are used to get the basic design into the computer. I use the computer for quite a few beneficial reasons such as time and cost savings, ease of design changes, plus the ability to email my clients any updates or changes to the design.

All adjustments to the design are made according to the contractual agreement. Anytime the design is modified, it requires a change order, plus any cost adjustments are calculated and agreed upon. The original drawings will be red-lined to show all changes, plus all parties involved will initial the updated design. This record keeping is necessary for effective communication, plus to precisely manage the budget.

How long does it take to build a custom home?

You can expect the initial specification phase to take roughly two weeks, with the design phase taking one or more months, depending on the complexity. The actual building process will take anywhere from six to eight months, or more, depending on the size of the home, the intricacy of the build, and the weather. It is also possible that certain materials for custom designs may take extra time to acquire. All of this will be explained in the schedule, and any delays will be noted and accounted for to keep the build on track.

What should the buyer be doing during the construction phase of the new home?

The buyer should be shopping for allowances. This will include all of the finishes in the home, such as paint, flooring, cabinets, fixtures, plumbing, appliances, and landscaping. The buyers will have a detailed schedule that they will need to follow to keep pace with the construction of the home. In addition, the buyers should be paying attention to the build-out and asking questions if they do not understand what is happening, or if they see something that is not to their satisfaction. It is much better to have open, effective communication and resolve any conflicts immediately to prevent scheduling and budget issues.

Denis Littrell is the CEO and principal designer of the Louisville Building Company. Examples of his work are at the link provided, and he can be contacted directly at 502.645.7991.

Looking at the numbers, the pace of selling has slowed slightly, but the average sales price has risen overall. This is not a major market fluctuation. Our challenges in the Louisville market remain an unusually high inventory of unsold homes, plus lenders have tightened underwriting requirements removing a significant amount of capital available to purchase a home.

I recommend all persons interested in buying a home take advantage of this market. Improve your credit score, get professional financial guidance, and save your money. There are numerous viable loan options still on the table for a majority of buyers.

April 2008

Number of Houses Sold This Month……………..1006
Average Selling Price This Month…………………$170,244
Average Days on the Market This Month……….89
Median Selling Price This Month………………….$132,000

April 2007

Number of Houses Sold This Month……………..1320
Average Selling Price This Month…………………$168,673
Average Days on the Market This Month……….85
Median Selling Price This Month………………….$135,600

Number of Houses on the Market this Month (As of 5/20/2008 12:10:44 AM) 10438

Contact me so I can help you make plans to take advantage of this buyer’s market, or if you would like any expert buying guidance. You can search the Louisville MLS for free to find your new home.

All statistics are based on information from the Greater Louisville Association of REALTORS® and from Metro Search, Inc., and are current for the date of this post.

For this topic we are joined by Mr. Chris Mackey, the Agency Manager for the Gardiner Lane office of the Kentucky Farm Bureau Insurance Company. Mr. Mackey has been involved with the business of insurance for over 13 years, in various roles from claims adjuster, to agent, to his current position as agency manager. We sat down with him for a question and answer session designed to help you learn all about homeowners insurance.

In general, what are the basic types of homeowners insurance policies available to the consumer?

One of the best policies on the market is referred to as “all-risk“. In this policy, your home is covered for a number of possible losses, unless a particular loss is specifically excluded in the policy. Make sure you review this in detail with your insurance agent. Another type of insurance policy is called “named peril“. This type of insurance covers you from loss due to specific occurrences.

What policy minimums are typically required by a lender?

Most of the time, the lender requires you to maintain coverage at least equal to the value of the loan. When you close on your home you will see in the mortgage contract that the lender requires hazard insurance. Sometimes, an escrow account is used to ensure that adequate funds are available to pay the annual insurance premiums.

A lender may also specify a maximum deductible that you may carry on your policy, plus you may be required by policy or regulation to carry separate flood insurance on your home.

What additional coverages do you frequently see requested for insurance?

Due to the recent rumblings from the Wabash Valley Fault Line we have seen a dramatic increase in requests for earthquake insurance! It is something we don’t usually think about in this area, but there are major fault systems nearby that are capable of damaging your house.

Other types of additional coverage can include protection if your sump pump overflows, or if there is a water backup through the drainage system in the basement. There are numerous important exclusions that usually come with water backup coverage, so be sure to ask questions and thoroughly read your policy. Also, some homeowners opt for coverage for jewelry, silverware, or other valuables in case of loss.

How does the style of the home affect insurance rates?

A few types of homes are going to incur higher premiums due to the materials used in construction. A frame home where the majority is not brick will have a slightly higher premium than an all-brick home. More expensive materials will require a higher coverage amount on the home which will result in a higher insurance premium. Newer homes are relatively less expensive to insure since they should all be up to current code with current materials.

How is a condominium insurance policy different from one for a detached single-family home?

Condominium complexes are covered by a master insurance policy that insures the actual structure, the roof, and the exterior walls. Homeowners must insure the interior of the condo, and you will typically hear this referred to as “the drywall in”, literally meaning that the insurance coverage begins at the drywall and continues into the interior of the condo. You must review your specific policy to fully understand exactly what is covered for you. Some policies may only cover the “paint in” so touch base with your insurance agent on how this pertains to you.

What information do you need to know to give an accurate insurance quote?

Some items that the agent will review when you call for a quote are the address, the purchase price, the style of construction, the year built, plus any known liabilities such as a pool or vicious dogs (some companies will not cover you for liability if you have a dog that is classified as ‘vicious’). Without getting into a great bit of detail, these give you a rough idea of what types of questions will be asked.

Also, if you intend to request additional coverages for personal property, earthquake coverage, additional water backup, or any other coverage requirement, it is a good time to ask that these be included in the quote.

How can I save money when getting homeowners insurance?

One of the best ways to get a better rate is to make some inexpensive changes to your home. Install deadbolts, have a fire extinguisher on hand, get smoke detectors, and consider having a security system installed that is wired through the phone lines to a call center. In addition, you will be eligible for discounts for getting all of your insurance from one carrier as a package, including home, auto, life, etc.

Mr. Chris Mackey can be contacted through the Kentucky Farm Bureau website, or by calling 502-459-4507 during business hours. It would be his pleasure to help you with all of your insurance needs.

In this installment of our interview series we are joined by Mark Hunter of K&I Inspections in Louisville, KY. K&I Inspections was founded by Mark’s father, Charlie, and has been a staple of the local home inspection business for over six years. K&I Inspections has performed over 1500 inspections for local customers and the company follows the American Society of Home Inspectors (ASHI) Standards of Practice.

What is the purpose of a home inspection?

The primary purpose of a home inspection is to locate any defects that might exist in a property. The defects could be structural, such as foundation issues, or mechanical, such as plumbing or electrical. In addition, we strive to protect our client’s investment by giving them an objective opinion regarding the property they are contemplating purchasing.

How are the standards and guidelines for a home inspection determined?

In Kentucky, a home inspector must be licensed through the state, and complete continuing education requirements. Kentucky gives home inspectors the option as to which standard of practice they wish to follow, and their education centers around that specific standard of practice. At K&I, we follow the American Society of Home Inspectors (ASHI) Standards of Practice because we believe they provide us with the most comprehensive guidance for inspecting your home.

What are the basic steps in a home inspection?

The first step for us is to meet our client at the property and review the Pre-Inspection Agreement. This Agreement details exactly what we will be inspecting and what we do not inspect. The best way to describe our inspection is a “non-invasive inspection of readily accessible areas“. This means we do not move anything to perform our inspection, and we are not able to inspect anything that is inside the walls, floor, or ceiling. Our inspection only covers areas of the home that are visible and exposed. That being said, we also look for visible evidence that may indicate a defect or problem hidden behind a wall, in the floor, or the ceiling.

After explaining our services to our client, we fully inspect the exterior of the home, including the roof, gutters, and flashing. We inspect the interior of the home, including the visible plumbing, facets, shut-offs, and drains. We verify that there are no observable issues with the electrical system, and look for features such as ground-fault-interrupt (GFI) plugs near water sources. We also inspect the furnace, AC unit, and water heater for signs of abnormal wear and we will let you know if any unit is beyond it’s useful life according to ASHI standards.

Will a home inspection reveal if the home has all of the necessary building and electrical permits?

No. It is not within the scope of the inspection to verify the home is up to the current local codes. We may point out that inspection stickers are missing, but we are not equipped to inspect the home for code violations. If you suspect there is an issue with building or electrical codes you must contact the local government office that issues permits and follow their instructions.

Do you inspect attics and crawl spaces?

Yes, as long as the space is readily accessible. We will not move furniture, boxes, or anything else that blocks the entrance to these spaces except for the normal coverings. It is very important that the homeowner clear their belongings from these access points before the inspection, but we are willing to return at a later date to inspect a blocked area if that is necessary.

Also, a home that as been winterized with the water shut off will not be able to be completely inspected. If either the electrical or gas is shut off, we will not be able to verify those systems. We will explain these limitations to our clients as the situation arises.

How do you report to your clients the results of the inspection?

Our clients receive a detailed written report that covers every inspected system. Also, we include a summary page that highlights any issues or defects we found during the inspection. We go over this report with both our clients and their Realtor to ensure they fully understand our findings. We prefer that our clients be present for the inspection so we can show them any issues in person and try to answer any questions they may have in the presence of the defect.

Keep in mind that the report will recommend that certain items need to be addressed and repaired, but we do not suggest who should make the repair, or how it should be made. We also do not make any repairs ourselves as it would be a conflict of interest. However, we do strongly recommend that you only use certified professionals when making any repairs to the home so you have receipts, warranties, and can be assured the repairs are made according to the current codes.

The ASHI website includes a frequently asked questions section that has additional information for buyers.

Mark Hunter is a licensed home inspector with K&I Inspections in Louisville, KY. He can be contact through K&I’s website, or by calling (502) 744-1967.  K&I Inspections has four staff inspectors available seven days a week to fit any schedule.

Think about it… Basic supply and demand principals say prices will need to be adjusted in favor of the buyer for quite a number of homes due to the significant inventory of homes for sale. And this is actually happening. As always, the homes that have been correctly updated, in desirable locations, and priced fairly are going to hold value, but this is not the norm in our current market. It is more likely that you are going to find a home that needs some basic updating, and you can use that as a negotiating point.

Unfortunately, we have been inundated by media resources that seem to think promoting doom and gloom is the way to report a story. The story that is not being told is the fact all real estate markets are isolated and local. Louisville, KY is very, very different from San Diego, CA. There is little comparison. We have endured several market setbacks, including a high foreclosure rate, a significant increase in homes for sale, changing mortgage rules that make it harder to get money, and a few local economic issues, but for the most part we are still far from the negativity portrayed in the media.

My professional opinion is that we are going to see a few more years of a “soft” real estate market as we emerge from the mortgage lending debacle that hurt so many homeowners. During this time, buyers are going to be afforded very favorable conditions for committing to joining the ranks of homeownership. At some point in time our market is going to begin to appreciate at a much faster rate. Unless new mortgage products become available to allow buyers to keep pace with the market, it will be a challenge to exercise the same purchasing power now available.

What does all of this mean? Simple… If you have had any inkling of a thought of buying a home in the Louisville, KY area it is time to act. You need to get your finances in order, and give serious consideration to speaking with a professional financial adviser, especially if you are a first time home buyer. The cost is nothing compared to the confidence, knowledge, and peace of mind you will have when starting the process of buying a home. Here are a few more tips for buyers in this market.

You need to speak with a mortgage professional who can guide you through the murky waters of the current lending industry. No matter what you have heard, there are still a huge variety of mortgage products that can fit all manners of incomes and credit scores. In addition, there are down payment assistance programs and other alternative financing options that can sweeten the deal for the buyer.

You need to find yourself a competent, professional, Realtor (okay, I’ll volunteer for the job ;). You need a quarterback who can guide you through the transaction, protect your interests, introduce you to real estate vendors that can help you with all of the various facets of the transaction, and educate you completely about this market.

But most of all you need to, as Nike says, just do it! You need to take action now because you may need to save money for a down payment, work on your credit scores, or pay down other debts. In the meantime, you can visit this link to begin to view all Louisville, KY homes for sale, and then give me a call so we can begin to make plans for you to take advantage of this perfect market!

Fortunately, we have been able to interview Mr. Harry Borders of Borders and Borders Attorneys, and he has provided excellent answers for you, the real estate consumer. These questions and answers should help anyone who has a pending closing on a piece of residential property in Kentucky.

Borders and Borders Attorneys has been a staple of the local real estate community since the mid-1970s. Mr. Borders has been involved with the family business for 17 years, and works primarily in residential real estate. He has presided over literally thousands of closings and draws from a vast storehouse of knowledge and experience to help you understand how real estate closings work.

What is a closing?

A closing is most easily defined as a final compliance with the terms of the Sales and Purchase Agreement (S&P). During the closing, all of the required loan documents will be explained and signed, and the new title to the property will also be signed.

Is an attorney required to conduct a closing in Kentucky?

Attorneys are not required to conduct a closing in Kentucky. The requirements for the person administering the closing are they must be a notary, and they must not be a felon. The reason using an attorney is beneficial to you during closing is they are able to provide legal interpretations of the documents being signed, though technically they remain a neutral party in the transaction.

What are the general steps involved in a real estate closing?

After a Sales and Purchase Agreement has been accepted on a property, the lender will coordinate with the closing attorney to ensure all of the required documents are available at closing, and to help generate the closing settlement statement (HUD-1). The lender will notify all parties when the transaction is “clear to close” and all parties involved will attempt to coordinate a specific date and time to conduct the closing. This will be guided by the S&P Agreement. In addition, the closing attorney will need at least one day to draft all of the documents.

On the day of closing, all parties will meet at the agreed upon location and the buyers and sellers will sign all of the required documents. Typically, both parties are present at the closing table, but it is possible to conduct the closing separately. In addition, if one party to the contract is unable to be present due to logistical reasons, a power of attorney can be prepared to allow a designated person to sign the paperwork and complete the closing.

What happens if I want to read all of the closing documents?

You absolutely have the right to fully read and completely understand every document you sign during closing. Because there is a large amount of paperwork associated with a real estate transfer, it is best to let the closing attorney know in advance you intend to read every document, and they will provide you with the paperwork prior to the closing for you to study. Keep in mind that the closing attorney is obligated to explain to you every document that you will be signing.

Does the closing attorney need to know your marital status and how you wish to hold the title?

Definitely. How you choose to hold the title affects the specific wording in the title, and even more importantly, what happens to the property in the event one of the parties should pass away. It is also a good idea to consult with an estate planner to best determine how you should hold title.

What is a HUD-1 / Settlement Statement?

It is a document required by the Real Estate Settlement Procedures Act (RESPA) that clearly defines all charges and credits to the buyer and seller related to the real estate transfer. It also includes such expenses as taxes, commissions, fees, and any monies due to or from the buyer and seller. No money can change hands between the buyer and seller that is not included on the Settlement Statement. The HUD-1 is required by law to be provided to the buyer and seller 24 hours prior to closing.

What is a title examination and how is it conducted?

The title examination is required by the lender to ensure that there are no outstanding claims against the property that could affect ownership rights. It is usually conducted by an experience title examiner who follows general practices to verify no valid claims exist against the title. The title examination is used to generate a title commitment that the lender uses to insure their interests in the property through a Lender’s Title Insurance policy. If there are any problems with the title, they will need to be resolved prior to closing per the S&P Agreement.

What is you opinion regarding Owner’s Title Insurance?

Simple, if you cannot afford Owner’s Title Insurance, you cannot afford the home. It is usually a very minimal expense, and provides a critical protection to you, the buyer, in the event a claim arises against the property. The Lender’s Title Policy will not cover you!

You will have the option to purchase an Owner’s Title Insurance policy at the original price offered at closing for up to 30 days after closing, but I suggest making the commitment at the closing table so you do not forget.

What documents must a buyer and seller ensure they bring to closing?

To verify their identity, buyers and sellers must bring a government-issued photo ID, whether it is a driver’s license, passport, military ID, etc. If a power of attorney (POA) is going to be used, the original document must be present at closing. In addition, the closing attorney will most likely want to review the POA prior to closing if they did not draft the document to ensure it a valid POA.

Any money that needs to be brought to closing must come in the form of a certified check. Each attorney will have a different policy regarding acceptable funds, so be sure to call ahead to get this information. You can use the HUD-1 statement to find out the correct amount of the check.

What happens to all of the paperwork after everyone leaves the closing table?

Once all of the documents are signed, everyone will receive copies of the documents they signed, and anything else required by law. The attorney will scan a copy of the documents for their records and forward the originals to the lender. All monies taken in by the attorney will be distributed to the appropriate parties, and the attorney will ensure all the necessary paperwork is recorded at the county clerk’s office.

The buyers should expect to receive the newly recorded title in the mail in a few weeks (and should store it in a very secure location), and will receive a copy of the Owner’s Title Insurance policy. The sellers should be on the lookout for any tax bills that might arrive in the mail. While all tax prorations are taken care of at the closing table, it is possible that the seller’s lender could double pay the taxes. The seller should be expecting a refund from their escrow account and ensure they receive all of their money back.

What is one good piece of advice you would give to anyone contemplating buying or selling a home?

Use a Realtor to help you with the transaction. Realtors act as your quarterback in the transaction and there is always a noticeable difference in organization, detail, and completeness between closings that involve a Realtor and ones that do not.

Mr. Harry Borders is a practicing real estate attorney with Borders and Borders Attorneys in Louisville, KY. You can contact him by calling (502) 894-9200.

I am going to keep my comments on the market analysis relatively brief as I feel it speaks for itself, but I do want to re-emphasize a point I continually make to my clients…Louisville, KY is an isolated real estate market that, in general, fares much better than the rest of the Nation. Regardless of what you hear on the radio, see on the news, or read in the papers, Louisville’s market continues to hold it’s ground as the rest of the Nation faces significant real estate setbacks.

Now, that being said, our unique market has unique challenges. The first and foremost is the tremendous number of homes available on the market today. We are averaging 40% more homes on the market than in years past. This over-supply has stagnated prices, overwhelmed buyers, and forced sellers to make additional updates and concessions to sell.

My professional opinion remains that while Louisville is much better off than the rest of the Nation in terms of our real estate market, we still must continue to work together to find solutions, educate buyers and sellers, remain honest and realistic with our expectations, and be prepared for several more years of a less-than-stellar marketplace. It will remain a great time to buy a home, but will present challenges to sellers, especially those who are financially burdened through job loss, or a poor mortgage product.

I recommend that all buyers take advantage of this market, with the great interest rates still offered and the tremendous number of homes available. I also strongly recommend that all buyers consult a professional financial adviser prior to purchasing a home and work with that person to maximize your credit scores. You will also need to consult with a competent mortgage professional for the latest information regarding lending products. Keep in mind that there are numerous ways to finance a home, so be patient, be prepared to do a little research, and don’t be afraid to negotiate. In addition, it is imperative that you seek out and secure competent, professional representation from a real estate agent to guide you through the process of buying a home.

As for sellers, I recommend that you give serious consideration to not selling your home at this time. Unless you must move due to financial distress, a job, or any other pressing reason, I would consider holding out until the market improves to get a much better return on your investment. If you decide to sell, I strongly recommend securing the services of a competent, professional real estate agent to guide you through the transaction, plus to seek the services of a professional home stager. A properly updated, staged, and marketed home is far more likely to sell in this market than not. You must be prepared to make that commitment.

I will be happy to recommend the professional services of local vendors to help you buy or sell a home. In addition, I can provide both buyers and sellers with competent, professional representation designed to meet all of your real estate needs. Contact me at any time for further details…

Times have changed.

With rising foreclosures, mortgage companies are sustaining record losses and are tightening their lending qualification criteria, plus altering or eliminating numerous conventional loan products. The first to go was the 100% loan-to-value or zero-down conventional mortgage. In January of this past year, Fannie Mae (a company that buys and sells mortgages on the secondary market as investments, and has a huge influence over the types of loans available to the consumer) announced risk-based pricing adjustments (mortgage-speak for “costing you more money”) for high loan-to-value ratios, low credit scores, and features such as taking “cash-out” of the property on a refinance.

For example, prior to the change a conventional borrower with a 640 credit score borrowing at 95% loan-to-value could get the exact same interest rate as a 740 credit score borrower putting 20% down. During those times you were either in the club or you were out. You were either an “A Paper” or “Conforming” borrower or you were a “Sub-Prime” borrower. The main difference now is that there are many different levels of qualification for conventional borrowing. Today, a 740 credit score will get a better rate than a 640 credit score, and 20% down will get a better deal than 10% down. The greater the risk, the greater the rate when it comes to conventional loans.

FHA Government Loans have become the better alternative in many cases for those who are not eligible for the absolute best rates on conventional mortgages. This group mainly consists of those with credit scores under 720, those exceeding 80% of their homes value, or especially those taking “cash-out” greater than 80% of their home’s value. There is small rate adjustment for credit scores between 580-600 with FHA, and a bigger one for those under 580, but 600 plus borrowers are on the same playing field as everyone else. Because FHA interest rates are in line with the best conventional rates, it will usually result in a better deal for those subject to Fannie Mae pricing adjustments. Additionally, FHA has become almost a no-brainer for those who are still stuck with a sub-prime mortgage. They allow for manual underwriting which looks at the person more than the credit score.

Now more than ever, borrowers need a competent mortgage professional who is up to date on the current market conditions. Gone are the days where you can call around asking what interest rates are and hope to get a fair deal. All the numbers for your specific situation have to be plugged in to see what adjustments you may be subject to, and what type of mortgage is best. I offer a 100% free mortgage analysis to all Louisville area residents. To learn more visit www.billsexpert.com.

Mike Roberts is a senior loan officer at The Mortgage Warehouse. You can reach him at 502-244-4700, ext. 117 with any of your questions.