May 2010

What Is A Real Estate Broker And How Are They Different From An Agent?

by Lisa Udy on May 27, 2010

Many people believe that a real estate broker and a real estate agent are the same thing. This is just not true. So, what is the difference between a real estate broker and a real estate agent?

Similarities Between Real Estate Broker’s And Real Estate Agent’s

Businesswoman on phone.Similarities: Both real estate broker’s and real estate agent’s are required to maintain an active real estate license.  They must pass the state real estate exams of their states. Here in Utah, if you want to be a Utah real estate agent, you have to have 120 hours of education completed and pass the state exam, and you have to pass a federal criminal background check.

Both broker and agent are held to high standards when it comes to representing their clients. According to the Utah real estate agency agreement contract, agents fiduciary duties include loyalty, obedience, full disclosure, confidentiality, reasonable care, and any other duties required by Utah law.

What does this mean? It means that both broker and agent are held to high standards when representing their clients. If they fail to perform the fiduciary duties required by Utah real estate law, they can lose their license, face excessive fines, and can even go to prison.

The Difference Between Real Estate Broker And Real Estate Agent

Mature students studying in libraryThe difference between real estate broker and real estate agent, if you get technical, is the difference in licenses they hold. A real estate agent holds a real estate license while a broker holds a broker’s license. What’s the difference?

In Utah, in order to qualify for a Utah real estate broker’s license, an agent must perform more hours of education, have at least three years of real estate experience, and they must have at least 60 points worth of real estate transaction experience. The point system in Utah is like this:

Real Estate Transactions –  Residential Commercial
A. One Unit Dwelling 2.5 points
B. Two to Four Unit Dwelling 5 points
C. Apartments, 5 Units or More 10 points
D. Improved Lot 2 points I. Retail Building 10 points
E. Vacant Land/Subdivision 10 points
F. Hotel or Motel 10 points
G. Industrial or Warehouse 10 points
H. Office Building 10 points
J. Commercial Leasing 5 points

Property Management - Residential Commercial
A. Each Unit Managed 0.25 pt/month
B. Each Contract or Property 1 pt/month
Info gathered from the Utah Division Of Real Estate.

As you can see, in order for a real estate agent to become a real estate broker, they have to actually sell real estate. They must be experienced in real estate transactions and have a license for at least three years. But there’s more.  In order to get a broker’s license, the applicant must complete another 120 hours of education and then pass the Broker’s exam, which is more difficult than an agent exam.

Who Should You Use To Help Buy And Sell Real Estate?

Real Estate Brokers And Agents TeamHonestly, you should pick an agent that you are comfortable with no matter if they are a broker or an agent. Just because an agent ins’t a broker, it doesn’t mean they are inadequate. In fact, that couldn’t be farther from the truth.  Many real estate agents are well qualified to obtain a broker’s license, but they choose not to for numerous reasons.  You see, being a real estate broker has two sides.

Real estate broker’s are more liable then a real estate agent. Every real estate agent has to work under a broker’s license. The reason being is, in a real estate transaction, there are certain liabilities that the real estate agents take on when helping people buy and sell real estate. By being a real estate broker, every agent that works under their brokerage adds more liability for the broker.

Because the broker takes on more liability, they can also make a little more money then agents. That’s where commission splits come into the picture. The reason real estate agents are willing to pay a commission split to a  broker is because of the limited liability the agent has in a transaction.

They pass on that liability to their broker and pay them a split to cover it. The broker is required to oversee their agents actions to ensure the agents are working within the laws and they deserve compensation for their efforts.

The reason agent’s have to work under a licensed broker or obtain their brokers license themselves is; to provide you with the comfort of knowing the people handling your real estate transaction are performing their duties lawfully and honestly.

It gives you, as the consumer, more experience behind the transaction, and it gives you a safety net. A real estate transaction can be as easy as signing a contract or it can be a very complicated legal process.  Having an experienced broker aiding in the transaction ensures that if their is a problem, the broker can step in and ensure you are being taken care of correctly. If they don’t, they could lose their license as well as the agent.

That’s why, when you buy or sell real estate, choosing an experienced agent with integrity and a solid reputation within the communities they serve is vital. I like to say every real estate transaction is different.

No matter how simple it looks on the outside, there is always something that comes up in a real estate transaction. From a little chipped paint, to funding being delayed, to major structural problems, getting real estate transactions to close on a consistent basis takes expertise, hard work, and some incredible problem solving.

Successful real estate agents and brokers aren’t just sales people, they are adept problem solvers, social workers, extremely knowledgeable, but above all, they are honest, caring people. Choose the right real estate agent in your real estate transaction and you will know first hand how much they can do to ensure your real estate dreams come true.

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How Much Home Can You Afford Without Being House Broke?

by Lisa Udy on May 26, 2010

If you’re looking at buying a home, it’s very important for you to budget correctly so your mortgage payment doesn’t make you house broke. If you didn’t know, house broke is where your mortgage payments are so high, you can’t afford to pay for anything else.  It’s a dire situation and here are some tips to avoid it.

Businessman sitting in office with laptopLower Your Debt-To-Income Ratio Before You Buy

Prior to the recession, many home buyers figured the home they were buying would appreciate in value exponentially, and they wouldn’t have to worry about using credit recklessly. People were taught that buying a home was an investment, and it was okay to think you could just sell in a couple years and make a profit.

Because of this mindset, people used credit freely to buy the extra toys thinking they were going to make more money from their jobs in a couple years and their house was going to be worth more in a few years.

Today, you don’t have the luxury of an exponentially appreciating home to borrow against. The third and fourth mortgages just won’t cut it anymore and that’s why, before you buy a home, it’s so important to reduce your debt-to-income ratio.

Plus, you can  get a better rate on your loan, which will also save you money. Reduce your ratio to about 25-30%, which is about average, and you will feel a lot more comfortable in your home then with high debt.

Close-Up Of ReceiptGet A Loan Based On What You’re Making, Not What You Could Be Making

One of the major factors that brought the housing economy down were risky loans called Adjustable Rate Mortgages. These loans would start off at a low interest rate, say around 4%, but as the years go buy, the “adjustable rate” would adjust. Say, after just a couple years, your payment went from $1,400 a month to $2,200 a month, how would that effect you?

Many people got these loans because they figured they would be making more money in a couple of years, and they would be able to afford the payment without a problem. And, if they didn’t make more money when their payments went up, they assumed they could just sell the property for more then they paid for it and come out ahead.

We all know what happened instead. The bubble burst, people lost their jobs, homes lost value, and those adjustable rates still went up leaving many people underwater in their homes. It was, and still is for that matter, a huge disaster.

Instead of thinking about what you can afford in five years with a nice raise from your employer.  Plan on making the exact same as you are now, and if you do get that raise, pay down your mortgage faster instead of using that money to catch up on an adjustable rate mortgage.  Be smart with the loan you choose and you will be ahead of the game when the market returns.

Interest Rates Can Make Or Break You

Paying The BillsThe difference you pay over the life of your mortgage is dependent on your interest rate. That difference can be huge. For example, if you buy a $200,000 home at an interest rate at 5% compared to 6%, the difference you would pay is $2,000 a year or $60,000 over the 30 year term. That’s a huge number.

Right now, interest rates are at 50 year lows, but how long will they last? Who knows. When they go up, you can be sure, their are going to be a lot of people wishing they bought with the better rates.

But if rates do go up, can you still get a better rate? Yes, you can always buy discount points. Discount points are fees paid to the lender when you get the loan that can lower your interest rate. A discount point is usually 1% of the loan amount.  So a discount point on a $200,000 loan would be $2,000.

The discount point on a 30 year loan usually reduces your interest rate by 0.125%. So, if you pay one discount point at $2,000, and lowered your interest rate from 5% to 4.875%, how much would you save?

Before you consider buying discount points, know the math, and know how long you plan to stay in the home. Let’s do the math:

  • $200,000 loan at 5% interest = $10,000 a year interest,
  • $200,000 loan at 4.875% interest = $9750 a year interest,
  • Yearly savings = $250,
  • $2,000 paid for discount point/$250 a year savings = 8 years to get your money back.

As you can see, buying discount points is wise only if you plan on staying in the home long enough to make your money back and time enough to make a little money. However, be cautious with buying discount points, you may be able to get a better rate anyways by refinancing later on.

Safe Full Of Gold BarsMake A Larger Down Payment

Easier said then done. If you had a down payment of around $10,000 and qualified for a loan at $200,000, you could buy a home up to $210,000. If you waited a year and saved up some money to put down around $25,000, you could get more home for the money.

Also, putting down the larger down payment will give you instant equity which is always a good thing.  That larger down payment will give you a better rate, more equity in your home, and will allow you to afford more home for your money.

Home buyers that put little to no money down during the bubble are largely the people under water on their mortgages today. You can’t blame all of them of course. For people that bought a home before 2005, no money down or very little money down was the norm. But we all know how a slip in home values can make that situation a nightmare.

Buying a home with no money down is a serious risk that you have to weigh yourself. If you can wait a little longer to put more money down, then do so. If you plan on buying with no money down, expect to stay in your home for a long time before you start to build some equity and gain appreciation.

All in all, if you want to buy a home without being housebroke, be smart with your decisions, put down a descent down payment, lower your debt for a better rate, and don’t buy a home that you plan on being able to afford when you get that raise.

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Utah Home Loan Programs

by Lisa Udy on May 21, 2010

Are you looking to buy a home but don’t know what loan programs you qualify for? If you are, here are some  less well known programs that I am aware of as a real estate agent, but if you’re serious about qualifying for a mortgage, you really should talk to a mortgage professional.

Qualify For Home LoansUtah Home Loan Programs

Utah Housing Loan Programs (There are six.)

  • First Home
  • First Home Plus
  • VEP First Home
  • VEP First Home Plus
  • Single Parent First Home
  • Single Parent First Home Plus

First Home Loans – Are geared to first-time homebuyers who have access to personal or family financial resources to pay all of their down payment and closing costs. FirstHome loans may also be used to purchase homes in Targeted Areas of Utah.

First Home Plus – Offers financial assistance for first-time homebuyers who do not have personal or family finances with which to pay their down payment and closing costs. These costs generally average 5% – 6% of the home purchase price. Applicants can borrow up to 6% of the amount of their first mortgage using a second mortgage that will have the same term as the first mortgage, but an interest rate of 7%.

VEP First Home - Is the preferred loan for Veteran homebuyers who have access to personal or family financial resources sufficient to pay all of their down payment and closing costs. Veterans may purchase a home in any location in Utah.

VEP-First Home Plus - Offers financial assistance for Veteran homebuyers who do not have personal or family finances with which to pay their down payment and closing costs. These costs generally average 5% – 6% of the home purchase price. Veterans can borrow up to 6% of the amount of their first mortgage using a second mortgage that has the same term as the first mortgage, but an interest rate of 7%.

Single Parent First Home Loans – are designed to assist single parents who have previously owned or co-owned their own residence and have primary custody of at least one minor dependent. These applicants have access to personal or family resources with which to pay all of their down payment and closing costs.

Single Parent First Home Plus Loans - assist singleparents who have previously owned or co-owned their own residence and have primary custody of at least one minor dependent. These applicants need to borrow funds from UHC to pay all or a part of their down payment and closing costs.

Data attained from: Utah Housing Corp

Benefits of a Utah Housing Loan:

  • Lower interest rates,
  • Elegible for more money
  • Down payment and closing cost assistance
  • Buying a house sooner then other loan programs

How are Utah Housing Loans Different?

  • Interest rates are lower
  • Which makes your house payments lower
  • Allows for more money to be borrowed
  • Assistance with down payment and closing costs

How Do You Qualify?

  • Not owned your personal residence for the last three years (except when using the First Home Program and buying in a Targeted area).
  • You have to meet household income limits (Income Limits).
  • The home has to meet Utah Housing acquisition limits.
  • You have to reside in the home; you can’t use it as an investment or rental property.
  • Have enough income to make payments and keep financial obligations.

Utah USDA Rural Housing Loan Program

The Rural Housing Loan is a great loan program to help lower income and mid-lower income families buy a home with little to no money down.

Requirements for rural housing are:

  • Meet basic eligibility requirements such as citizenship and unable to obtain conventional financing.
  • Good credit history, but can be reviewed on a case by case basis.
  • For lower income levels total adjusted income is at %50 lower then their perspective counties median income levels.
  • For mid-lower income families, total adjusted income is to be %20 lower then their counties median income levels.
  • Interest rates depend on the applicants income and qualifications for special programs.

More information @: USDA Rural Housing Loan Qualifications

In Cache County, residents can apply for the loan program when buying a home North of Hyde Park and South of Nibley, which is quite a large area. To find out if you qualify for the Rural Housing Loan, contact a mortgage professional that specializes in the program or contact us and we can recommend a professional.

The Rural Housing Loan and Utah Housing Loans are options that allow people that can’t qualify for conventional loans obtain a home. The information listed here are summaries of the qualifications of the programs, and I would recommend you talk to a mortgage professional that is certified in these programs before you assume you can qualify.

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Stomping Out Common Myths Associated With Short Sales

by Lisa Udy on May 19, 2010

Scared Property OwnerA short sale can be a great way for a distressed homeowner to sell their home if they owe more then the home is worth. However, there are many myths regarding the short sale process, and I wanted to stomp some of those out with this post.

Short Sale Myths

Myth – It’s better for a bank to foreclose on your home then short sale…

There are a lot of people that think banks want to foreclose on a home rather then deal with a short sale. That’s just not true. It costs banks thousands of dollars to go through with the foreclosure process.  According to the Joint Economic Committee of Congress, they estimate the average cost of a foreclosure is roughly $77,935. That number is staggering when compared to a short sale. To learn more on where that number came from read: Foreclosure Costs.

Compare to the cost of short selling a home. Depending on what you can get your home to sell for, the bank may come out with a number fairly close to what is owed on the home. If you think about it, the bank has two options: foreclose or approve the short sale.  If they foreclose, they still have to get as much money out of the property as they can just the same as if they short sale.

With a short sale though, there is someone in the home, and they will usually keep it maintained, allowing for a better price on the sale. Foreclosures usually end up sitting vacant for a long period of time and the bank has to go in and either repair the home or they have to reduce the selling price costing them more money.

Myth – In order to get approved for a short sale, you have to stop making payments…

If you can still pay your payments but can document hardship such as lower income, job loss, medical bills, or anything else that has put a strain on your financial situation; there’s a chance your bank will still approve your short sale without missing a payment.  Not every bank will allow this, but before you try to get your short sale approved, the last thing you want to do is stop making payments if you can still afford them.

The key is to contact your bank immediately once you know that you eventually won’t be able to make your house payment. Contact your bank and discuss your options. If you wait to long it may end up costing you a lot of money, stress, and your home.

Myth – I waited to long and and now the bank is going to foreclose…

Starting the short sale process is not only confusing, it’s emotionally draining. Knowing that you can no longer afford your home is an absolute nightmare.  Even if you receive a foreclosure notice, contact your bank, and tell them you’re trying to sell your home. Contact a real estate agent that is an expert with short sales and ask them if they can help you out.

There are many real estate agents out there, as well as attorneys, that know how to deal with banks that have already begun the foreclosure process.  Most lenders will stall a foreclosure if you can show that you are working on getting your home sold. In today’s market, banks are even more willing to work with you as more people are struggling to stay in their homes.

Myth – Short selling a home is embarrassing…

Short selling your home should not be embarrassing. According to a recent number released by Zillow, 14% of all homeowners are in a negative equity situation, which is 1 in 7.  You are not alone. It’s important for you to realize that starting the short sale process is going to save you from foreclosure. You may even be able to buy a new home through FHA financing if you don’t miss your payments during the process.  Here’s what FHA says about the time it takes to buy a home after you short sale:

FHA Guidance on Short Sales Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to take advantage of declining market conditions, and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
Reference:  For detailed information on converting existing principal residences into rental properties, see 4155.1 4.E.4.g

However…

Guidance on Borrowers current at the time of Short Sale Borrowers are considered eligible for a new FHA-insured mortgage if they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and the proceeds from the short sale serve as payment in full.
Reference:  For detailed information, see “Short Sales” at 4155.1 4.C.2.l.

This is true as long as you can afford the down payment on the home and you qualify for the loan to buy the home.  If you were more then 31 days late on your payments it will take longer to qualify for affordable financing, which is why it’s so important not to feel embarrassed and contact your bank immediately to work out a solution.

Myth – Short sales never get approved…

True, short sales can be a hassle, dealing with banks and red tape is never fun. But short sales are approved all the time. There are 1,000′s of agents out there where all they do is short sales. President Obama recently introduced the Home Affordable Foreclosure Alternatives (HAFA) short sale program that was designed to increase the amount of short sales banks approve.  Short sales are a common occurrence in today’s real estate market and people are experiencing successful short sales everyday.

Truth – Short sales are difficult and it’s important to get experienced help when dealing with the legalities.

The short sale process is a legal process and you should get many people involved. During your process you should consult a real estate agent that has experience with the process, an attorney for legal issues, and your accountant. Short sales are scary to people only because they aren’t sure what will happen. If you use the many professionals out there to explain the process, research online, and get the facts, you will learn that what you’ve heard about short sales is just a myth . Avoid foreclosure and talk to a professional about your short sale options.

If you need help with the short sale process in Cache Valley, please conact our Certified Distressed Property Expert Lisa Udy at 435-881-3022.

Looking to buy Cache Valley short sales? We can help you with that to.

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Stop Sailing Your Home And Start Selling!

May 17, 2010
Sail Boat On The Ocean

If you have ever been on a sailboat, you know that when the winds change, in order to get where you want to go, you have to adjust your sails. If your house has been on the market for longer then you hoped, maybe it’s time to change directions.  If you haven’t had any showings [...]

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Is Squatting The Way To Take Care Of Unsightly Vacant Homes?

May 12, 2010
Homeless Women Squatting

Imagine being a single mother with two children struggling to stay afloat supporting your kids. All of the sudden your company lays you off and you can’t find a job. Three months later you come home from a job search and find a foreclosure notice on your home. Next thing you know, you and your [...]

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Life After The First Time Home Buyer And Move Up Buyer Tax Credits

May 11, 2010
Read The Fine Print

If you haven’t heard, there was this huge commotion over the first time home buyer tax credit.  The commotion went a little something like this: Free Money!!!! If you bought a home for the first time in your life during the 2009-2010 home buyer tax credit days, you received or will receive $8,000 from the government. But Did You Read The Fine Print? Did [...]

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How Does A Real Estate Agent Price A Home?

May 11, 2010
Pricing Calculations

That’s a great question. Unfortunately, there is no answer, because a real estate agent doesn’t price a home. You do. Sure, a real estate agent can give you a price range your home should be in, but ultimately, pricing your home comes down to what you want. But beware, pricing a home to high or [...]

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Can You Use Price Per Square Foot To Compute A Homes Value?

May 11, 2010
Price Per Square Foot

As a REALTOR, I get asked all the time, what is the average price per square foot now a days? After answering the question, which is usually asked by home buyers, they figure they can compute a homes value based on the average of an entire area and submit an offer based on their math. [...]

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Instructions To Get The Greatest Bargain When Purchasing A Home

May 7, 2010

If you are considering purchasing a house, the flexibility and readiness to negotiate is necessary for both the seller and buyer.  Mostly, home sellers gun for more than they’re actually willing to agree to and home buyers offer less than they’re prepared to spend.  The trick is to discover the perfect balance to ensure that [...]

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