Are you PreApproved or Pre Qualified?

There is a huge difference between being pre qualified or being pre approved. There is a lot of confusion I hear from buyer so I would like to take a moment to clarify.

If you are just starting your Shakopee home search you may have been told by friends or your Realtor to first talk to a loan officer. Discussing your options with a loan office before you begin to look for a new home should be one of your first priorities. Many mistakes buyers, especially first time buyers make is looking too early and then either looking at too high of a price range, too low of a price range or unfortunately they may not even qualify to buy at all for the time being. I recommend to clients to sit down with a good local Shakopee loan officer with a reputable company. If you can, try to meet them in person rather than doing everything over the phone.  I think talking to the loan officer leads you into more questions you may have than if  it were just a phone conversation. I also think you can read the loan officer a bit better to see your level of comfortability.

PREQUALIFICATION

I hate hearing from buyers when they tell me their loan officer should have them approved within the next few weeks. A good loan officer should be able to give you some general numbers the same day or at least within 24-48  hours max. Loan Officers also should be able to be pretty accurate pending the information you give them is current. Getting pre qualified is one of the first steps in the home buying process. It’s easy, quick and painless. Typically the loan officer in Shakopee will ask for your income and ask about any debts you may have. After evaluating this information, the loan officer can give you an idea of the mortgage amount and monthly payment for which you qualify.

During your first meeting with the loan officer, they are going to gauge where you are also comfortable with payments. Make sure you stick to those numbers! A loan officer may tell you to qualify for a $1,000,000 home, but if you would like your payments to be $1,500…not going to happen, unless you have a gigantic down payment. They also may discuss various mortgage options and recommend the type of mortgage that might be best fit your situation.For example comparing a 5% conventional loan to a FHA loan or a 203k loan.

Remember, the loan officer has not pulled credit at this point and based their analysis only on the information you provided to them. Being told you are pre-qualified is not a sure thing the underwriters with give you a loan, it just give you a basis to start your search. For this reason, a pre-qualified buyer doesn’t carry the same weight as a pre-approved buyer who has been more thoroughly investigated and through the underwriting process. This is not a commitment to lend a buyer money.

PREAPPROVAL

Now obtaining a pre approval letter carries more weight and gives you more negotiating power and will put you in a better position as a buyer. Realtors feel much more comfortable presenting an offer if it has solid backing from a good loan officer and bank. I have seen lately even if you do have a pre approval letter from a bank, foreclosed homes are requesting buyers to get an approval letter also from their requested bank. Don’t be alarmed, you do not need to commit to them or anything, but they have seen a lot of transactions fall apart over the course of the past few years and are trying to protect their interests.

Pre Approval letters typically state the terms, loan amount and address, but do not need to include everything. Again some banks will request exactly what they prefer to be on the approval letter on occasion.

Getting pre approved involves completing a mortgage application, many companies have this online. From that point lenders need to get a hold of W-2’s and bank statements. One of the most important steps to the process is pulling your credit report. Many institutions now highly regard credit scores and tie that score to your interest rates more than ever. Insurance companies and even employers now lok at scores. It used to be if you had a pulse, you could buy a home and I am SO happy those days are gone. Not everyone is financially responible to buy a home. I have seen many hardships where I truely sypathize with the owner, but I have also seen many more where they are doing a short sale or geting foreclosured and it’s flat screen after flat screen, new cars isitting in the driveway because their garage is full with the boat, motorcycle, snowmobile and fourwheeler….sell your stuff! Okay, I went on a tangent and off course there, sorry. Again, take this as a reminder to stick to your budget and don’t get carried away with purchasing a home. Buying a home can be a very emotional experience so make sure you are also making a sounds financial and logical one as well. The biggest reason credit scores ar so important is because it can dicate who will lend to you, what programs you qualify for and what your interest rate and some fees may be.

Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home. Although a pre-approval letter lets you, the Realtors invloved and the seller know you are a solid purchasor,  it is subject to the appraisal of the home and often cases other conditions pending case by case. Getting pre-approved for a mortgage also enables you to move quickly when you find the perfect place.

If your financial situation changes for some reason such a job loss your Realtor should be able to protect you per the financing addendum of the real estate contract, or if interest rates rise. I

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Attorney Help for a Shakopee Short Sale

Thinking of doing a Short Sale in Shakopee? I bet your first thought is to talk to an expereinced short sale realtor in the Shakopee area. We are seeing more and more short sale homes in Shakopee, MN, but not many real estate agent know they should not be doing some negotiations as they are actually practicing law and not real estate.

A Realtors job is to market and sell your home, then negotiate the sale between you, the seller, and the buyer. It is not their job to negotiate terms of forgiven debt between you and the bank or lenders involved.

WHAT DOES AN ATTORNEY DO FOR A SHORT SALE IN SHAKOPEE?

  • Consult with the seller regarding legal issues of doing a short sale.
  • Order title work on the home as soon as the seller signs a retainer agreement.
  • Review title work to make sure the transaction can close if the short sale is appoved by the bank(s).
  • Advise the Shakopee Realtor as to any title issues preventing a timely closing.
  • Collect all financial documents from the seller and real estate agent necessary for short sale review by the bank(s).
  • Prepare a preliminary HUD (closing cost estimate) statement for the lender
  • Submit the short sale proposal to the bank(s)
  • Keep the listing agent up to date as to progress with the bank(s)
  • Negotiate short sale offer with banks, terms and costs for the short sale approval.
  • Provide all documentation to government agencies or authorities to obtain tax lein releases when necessary to clear title for the short sale.
  • Review terms of the short sale approval letter and consult with the seller.
  • Provide all documents necessary for closing to seller, Realtor and title company.

I have started working with a law firm in Minnesota on my Shakopee short sale listings and in many cases there is no cost to the seller doing the short sale if they have a hardship. The law firm I work with do provide my client a FREE consultation which I highly recommend so they know thier options and potential benefits and/or consquences of doing a short sale in Shakopee.

BENEFITS TO A SHAKOPEE SHORT SALE SELLER

  • Initial meeting with an attorney at no cost
  • Max cost to seller of $995 (strategic short sales), but as low as $0 for sellers with hardships
  • Referrals to tax specialists or bankruptcy attorney when applicable
  • Legal counseling regarding financial information provided to the lender
  • Updates throughout the short sale process
  • Negotiations.Having the bank hear from an attorney can be more authoritative.
  • Legal guidance regarding financial terms of the short sale.
  • Advise on potential occurances that could arise after closing

If you are curious if you qualify for a short sale in Shakopee because of a hardship you may have endured such as job loss, divorce, job transfer feel free to call Tom Scott of Re/Max Advantage Plus in Shakopee at 612-384-2178 or TomScott@Remax.net.

Seller Paid Closing Costs

Seller paid closing costs or seller paid loan costs as often termed, are simply that; closing costs that the seller pays. Although the seller has their own closing costs, the largest of those paying a real estate fee, the seller may often be willing to pay in full, or partially contribute to paying the buyers fees as well.

HOW MUCH ARE TYPICAL CLOSING COSTS FEES?

Closing costs fees range, maximum limits are generally 3% on conventional loans and up to 6% of FHA loans. Most FHA buyers I work with generally ask for 3.5-4.5% of the sales price for their closing costs and that generally covers everything. With that FHA up front mortgage insurance premieums are included in the loan amount as they can not be paid by the seller.

WHY WOULD THE SELLER PAY BUYER FEES?

This is probably one of the most fielded questions I receive from sellers irronically, not buyers. It does take a little explaining, but in most cases the seller does agree some instances may require contribution. Given the target market of your buyer, many buyers may need the costs paid by the seller. If you have a first time buyer scrambling to come up with their downpayment to equal the minimum down of 3.5%, any extra costs associated potentially could make it so they do not have their downpayment. Any buyer can ask for costs no matter if you are trying to come up with your 3.5% down payment, 5%, 10% or even if you are tyring to get to 20% down in order to avoid mortgage insurance.

When a buyer makes an offer on a home, the Realtor will do a net sheet so that the seller knows what their final check at closing will be, or in today’s market sometime how much money they will need to bring to closing. This is a general estimate based on title fees, real estate fees, state and county fees, and pending all payoffs the seller has for any mortgages, tax leins or judgements. If the seller is going to pay for the buyers closing costs this will be looked at on the net sheet and accounted for. If the seller is presented with two offers at the same time, a buyer may want to go above list price of the home if they are going to include closing costs. An example below depicts two offers and although the offer price of Option B is lower, the net price when closing costs are included still is higher and the seller would potentially lean toward that offer.

Option A
Sales Price $150,000
Buyer’s Closing Costs Paid $5,000
Net to Seller $145,000

Option B
Sales Price $148,000
Buyer’s Closing Costs Paid $0
Net to Seller $148,000

WILL BANKS & MN SHORT SALE LISTINGS PAY BUYER FEES?

Buyers almost assume ANY seller will pay all their fees when in fact some banks will limit the closing costs paid to 3-3.5% of the sales price. I have not had any issues with a bank not willing to pay at least some costs.

Remember, Ultimaltely YOU Are Paying The Costs!

They are called seller paid loan costs, however they are essentially rolled into your mortgage or financed over the term of the loan. I tell my buyers when negotiating that it is nice to have the seller pay the loan costs, but that is money they are paying when it comes time to sell a home.

Remember, if you purchased a home for $200,000 and the seller paid $7,000 in seller paid loan costs, they probably woud have taken a similar offer at $193,000 with NO loan costs being paid by the seller. When you go to resell, those “seller paid loan costs” magically reappear and hurt your bottom line, not to mention the extra interest you paid over the course of time you lived in the home. For example, with a 6% interest rate, if you lived in your home for 5 years and financed $7,000 of loan costs, your payments would be around $35 more per month X 60 months. That would total $2,100! Makes you think if there is a way to come up paying your own closing cost, TRY.

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Shakopee Short Sale Help

CERTIFIED DISTRESSED PROPERTY EXPERT (CDPE) and SHORT SALE FORECLOSURE SPECIALIST (SSFS)

One needs a thorough understanding of complex issues in today’s Shakopee real estatemarekt and the knowledge of foreclosure avoidance options available to homeowners. Being a CDPE has provided me and my clients a solutions for homeowners facing market hardships primarily short sales.

Homeowners regularly proceed without guidance of any kind through the often financially and emotionally devastating prospect of foreclosure. Setting up an appointment with a well-informed, licensed Shakopee real estate agent is the best course of action for a homeowner in distress.

There are thousands of licensed Realtors in the state of Minnesota and many Shakopee Realtors, but few decided to focus their efforts in helping those in need of assistance to avoid foreclosure. Through comprehensive training and experience, CDPEs have the tools to help homeowners find the best solutions for their unique situations and to avoid foreclosure through the efficient execution of a short sale.

Living through financial difficulties poses a challenge for any family, so why make the process of finding a qualified real estate professional difficult too? Select an agent with the CDPE Designation or Short Sale Foreclosure Specialist to ensure you have a trained professional to address your specific needs.

I have also teamed with an attorney to help answer any questions one may have tht goes beyond my real estate expertise.

Do I Need a Shakopee Realtor to Buy a Home?

Simple answer NO.

Surprised a Realtor told you that you do NOT need their services? I know this may seem odd and a bit confusing a real estate agent in Shakopee said you may not need a Shakopee realtor, but you as a buyer do have a choice to use someone or not.

Obviously I as a Shakopee realtor I do find it advantagous to use a real estate agent, but I do so for the following reasons:

1) Commission is Paid by the Seller. Typically the majority of the real estate commission is paid by the seller. In the state of Minnesota often times the total commission is split between both Realtors. Typically 55% of the total real estate commission going to the Realtor who has the home listed, and then 45% of the total real estate commission going to the Realtor who represents the buyer. Often the only real estate commission that is paid by the buyer is a broker administrative commission. That commission is part of the closing costs and generally around $375. It is a fee you can have the seller pay as part of seller paid loan costs.

2) Market Knowledge. I beleive if you select a good real estate agent they will have the knowledge of the area. I see this often with buyers and sellers. You can tell when a Realtor who is not familiar with the Shakopee real estate market. They come in  price homes incridibly high and those homes will sit on the market. Make sure when you have a free market analysis the agent does not just give you a price you want to hear, but backs that price up with homes that have sold recently,within the last 4 months. That also goes if you think they are pricing the home low, make them show you the comparable sales. A Shakopee realtor should be able to give you a value within 24 hours and may not even need to go to your home to give you a ballpark idea on price if they know the area well enough.

3) Contracts, contracts, contracts. No, a real estate contract is not the hardest document to disect, but having a Realtor who knows how to structure the contract to present your offer in the best light can be very helpful. Knowing the contingencies, how they are structured, timelines, how to negotie them can be very valuable.

4) Negotiations. I think many Realtors try to play the we offer A, you counter with C, and then we will meet in the middle at B. All negotiations do not have to go this way, otherwise you could easier do it yourself.  One reason in my opinion to have a Realtor is to take out the emotion of  buying a Shakopee home. Sure buying a house is one of the biggest decisin you can make and emtions run high, especially in multiple offers. We are seeing many mutltiple offer senarios with bank owned homes in Shakopee and knowing what banks are looking for and how to structure your offer can be crucial. I just heard of one accepted offer an agent in our office had that was only $200 higher than the offer that was accepted. Really $200? That was the difference between getting a home that sold over $125,000 more only a few years ago! Make sure you have a real estate agent in Shakopee who can structure your offer optimally.

5) Prelist Inventory. I can literally find out information on hundreds of homes for sale in Shakopee with networking with agents in my local office. Re/Max Advantage Plus is one of the top listing brokers in the state for bank owned homes.

6) Do You Want Representation? In my opinion this is the biggest reason to hire your own Shakopee Realtor. If you are going from open house to open house or call the agent on the signs, those agent represent the best interests of the seller. That’s right; those agent priming you for data are representing the seller and will use that infomation against you if you are trying to negotiate on the home they are standing in. If they ultimaely decide to represent you too, then you are in a dual agency representation senario in which the realtor almost needs to stay neutral.

Hopefully you found this information helpful and if you want any information on a Shakopee Realtor, I do not require my clients to sign buyer contracts with me until you are either comfortable or we eventually write an offer. I look at the process as I would, and if I were to buy a home I would not sign anything with anyone until i knew how they worked and if I knew they were going to do a great job.

Why Active Shakopee Homes Are Sold

Do you wonder why homes in Shakopee that are sold show up on many real estate agents websites?

There can be many reasons a home in Shakopee can show up this way. A few reasons are homes are sold subject to an inspection, sold subject to another home selling, or the most likely reason in todays Shakopee real estate market, sold subject to third party approval. Shakopee realtors are able to still show these homes as active because technically they could accept another offer, although that offer would be subject to a cancellation of the first offer.

The first two reasons are pretty obvious as to why a home in Shakopee is sold, but the third can be a bit more complicated. Houses in Shakopee sold subject to third party approval are essentially a short sale. They are homes that need bank approval because the owners mortgages total more than the home is worth. Still this really does not answer the question. To answer the question, Shakopee bank owned homes are getting smarter,hold your laughter because we all know that entertains us a little, but they really are. Often times a real estate agent is pressured by the bank to keep the home marketed so the bank feels they truly did receive the highest price for the home.

If you feel a little lucky and think you may have found “The One” Shakopee home out there for you, feel free to submit a back up offer, sometime banks do reject all short sale offers and yours could be net in line.