RE: Internet mortgage company using mortgage bait and switch, or not.
As a real estate agent I DO NOT LIKE when a borrower is using an internet mortgage company to process their loan. These big companies have no long term relationship with me and therefore have no reason to make my buyers their highest priority. My vendors, mortgage etc. treat my clients like they are their most important borrowers.
With that as a background I refer to the article heading Mortgage Bait & Switch Or Not? I am referring to a radio advertisement that has been running for quite a few days promoting that they have a program with the concept of locking your loan now and being able to pick a lower rate at some future date, providing that interest rates go down in the future. (All mortgage brokers have this option)
The pitch sounds great. The details not so great to most borrowers. The reason for the pitch is to get you to contact the advertiser.
My first days as a loan officer were for a large bank. They advertised a rate or program heavily. We were required to take the phone calls. It was not uncommon for the rate to have climbed by the time they published the quoted in the newspaper rate. However once I had them on the phone, gathered 15 minutes worth of information the consumer was so tired of the process that they stayed with us even if the rate or program had changed. In my history it took only a couple of experiences where I refused to take these calls.
I believe that is what the objective is for this new advertising program, which is to get you to contact them.
The pitfalls of locking now with a promise of a lower rate in the future is that you pay for this attractive program. You either pay with a higher rate or with fees. My experience in originating hundreds of loans is that the costs were not worth it. Another catch is the terms for the relock may be undesirable. You may have a specific period of time that you can exercise the re-lock or it may be available if you are about to close. I don’t remember one person finding this program one they wanted once they knew the facts.
The internet mortgage company running these ads do not care if you end up with the rate lock program. The reason is obvious to me, it is like a mortgage bait and switch, anything to get you to call.
Why do I title this article, The Wrong Loan Officer Can Get You Into Trouble? The shady ones don’t always look like this.
I write this because of a phone call I received from a very worried woman who knew that I used to own a large mortgage company.
She had committed loan fraud and that fact was just thrown at her by the company she did the mortgage with. She was terrified over the phone call she had just received.
She was guided into it by her loan officer. At the time it didn’t seem like a big deal to her, as it was explained to her she was just fine, so she thought.
The fraud was this: she and her husband refinanced their primary residence with this mortgage company. The interest rates were great at the time, it was a smart idea, they had purchased the home years ago with a VA loan and the refi paid that loan off.
A month later they went out and purchased another home using their current VA eligibility.
The events, refi and purchase, started the fraud. Investment properties have different underwriting rules and benefits. One big difference is that there is a higher interest rate on an investment property.
They turned the home they did the refi on into a rental. Now we have the fraud.
I asked her if she had all of the paperwork signed at closing. The answer was yes. I asked if they had signed an addendum warranting that they would remain in the home as their primary residence for at least a year. The answer turned out to be yes.
But…… she said when discussing the possibilities with their loan officer they were guided that they weren’t certain at the time they would be buying another home and renting this one out. They were told that since it wasn’t certain that it would be ok.
Now I refer back to the title of this post, “The Wrong Loan Officer Can Get You Into Trouble.” As far as the Feds go the intent is obvious. They purchased a new home 0 down VA 30 days later. It’s a pretty obvious crime. (Even if they did this months later, it is still loan fraud)
The lender came to her in a panic. The loan officer no longer works for this mortgage company. They must believe that they have some liability. Loans are usually sold to an investor. The investor in reviewing this loan found the fraud and rejected it. The mortgage company is now offering to refinance the fraudulent loan to a non owner loan at their cost. They will lose over $10,000 to make this old loan go away.
I have suggested to them to be cooperative with the mortgage company, it seems like it will suffer the costs to get rid of this fraudulent loan. I also referred them to an attorney that is a mortgage industry expert to guide them through these next days, and hopefully not with future problems.
My advice to you is to always use a loan officer that is personally recommended and introduced to you by a full time real estate agent. There are a few flakes out there and this person found one. There are some great loan officers in the business and they usually work with real estate agents. Real estate agents are demanding. They want loan officers that deliver what was promised, as promised.
Take note on my statement above, “deliver what was promised, as promised.” This is outside of fraud. It refers to delivering your loan on time to stay under contract with a seller. This refers to deliver the terms you were promised. One real estate branch broker sourly told me that, “too many transactions the buyers are told all along, the loan is ok and then at the end, “sorry not ok’.
I always refer my clients to Aaron Morgan, a producing branch manager of Academy Mortgage. (801-560-8162)To follow my proposed procedure, make sure I let him know that you are contacting him.
I use the cute little fraud guy to depict the Wrong Loan Officer by license with PresenterMedia.com
You Can Make The Mortgage Process Go Well. Consider these facts. Today more than ever before you need to be responsible to make your mortgage process go well. Federal Laws changed last week. They affect lenders and Title Companies, as well as you and your agent. Delays in closing are a huge hazard now. The new law is designed to help consumers understand better what they are receiving. There should be no last minute gotchas on rate or fees. That’s the good part. The rougher part is that everyone, including you, need to be diligent with their roles in bringing your purchase to an on time and satisfactory conclusion
What may excite a borrower is that the automated underwriting can give a quick approval. Yeah baby, you are done, you are approved.
Not so fast.
This is just step one. You have a long way to go to get to the end. It has always been a trek to the end, but with the advent of the meltdown everyone involved in your loan became fearful of making a mistake or being too lenient. This resulted in a lot of last minute issues.
Now I bring up the pressure event – the U Haul is rented and the loan must close on time. Nothing is more problematic than a delayed closing. It can actually be worse than the U Haul issue, closing late can kill the transaction. Sometimes a seller gets remorse, maybe has a better offer as a backup.
You are responsible to provide everything asked for, be it pay stubs, bank statements front and back, everything. So many of my borrowers have been slow, sloppy, even resistant to requests. And hey, your loan officer and processor might have more than your loan to get funded. Push Push push your way around. “What is the status, do you have everything, may I see the list of conditions by the underwriting” are all things you can do.
No matter what your nature, detailed or not, get involved in every detail of your loan. Make sure you see a copy of your credit report. See if anything is fishy. Fix everything fast that needs fixing or explaining. Ask your loan officer if they have a back up plan if trouble arises. I did. Doing loans was pressure packed for me. I laid awake at nights or woke up early in the morning scouring the loans in process in my mind. What if this happens, what will I do? I loved it, but it was grueling. At times I had 11 to 15 loans of my own in process. If you only knew what a gigantic list of details that created.
Don’t lie. The only loan that I had that blew up at the end was not my fault, yet I was the target of blame. The borrower was from Hawaii. Hawaii like Utah, isn’t a community property state. Spouses can buy real property separately. In Washington, where I was working, the opposite is the rule. This borrower – buyer, lied on his application. He said he was single. We came right down to closing and the underwriter conditioned a document to be signed by his wife. He was furious and wouldn’t comply. “How did you find out I was married?”. Dumb question! He made such a fuss that since I was working for a mortgage company owned in part by the real estate company he pressured the real estate company to fund the loan out of their own capital.
I will never forget the brokers statement. He too was out of step. He said he hated it – that loan officers say all the way through the process; he is approved, he is approved, he is approved and then at closing – sorry he’s not approved. He lied folks, and got caught.
I had another borrower that two days before closing came to me to back out by blaming it on me. He had $5,000 earnest money in escrow. I listened to his accusations which were many. I finally had had enough and said, “listen buddy this is all crap. I don’t know what is the real excuse but you better come clean with me right now. I have done loans for several members of your family, if you don’t come clean that’s it for the whole bunch of you.” He then humbly apologized and confessed that he had his accountant provide us with phony tax returns. I felt compassion for him, for he had already confessed this to his young wife. He said it broke her heart, both in losing this great home and in his actions. I assured him it was better to quit now and lose his earnest money than proceed with committing a crime. His conscience was his buddy even though the consequences were painful.
I once received a call from an underwriter. It was over one of our loan officers who had submitted his own loan. She tactfully said she was sending the loan back and that I should confront him over the income he claimed. I did. He blew up and threatened my with bodily harm that I should suggest that he faked his income. He said that he had filed amended returns and how dare I insult him. He was fired that moment and I informed him the underwriter had pulled a summary of all of his tax returns and I had copies. They did not match his application and he could leave now quietly or my next call was to the Feds.
So please do all you can do to make sure things go will with that you haul you have ordered. It’s on your shoulders too. Do it all, do it immediately, and do it right.
What About Investing In Real Estate? Part 1 of a series. We have seen the ups and downs, even the crashes of our investments. I have been through much, as you probably have. Where should we invest? Should we invest?
Here is the first of some random thoughts and opinions for your consideration. I will address others in future articles. This series has a Salt Lake City focus.
As you read these articles be sure that I see the safest investment is free and clear real estate that can earn you income. In a market crash you my just have to lower your rents. What is more likely in Utah is a 10 year run up. Some say that Salt Lake City is a future of being a world wide hub. Consider how much happier that you would be if you had made your real estate purchase as recent as three years ago. (Three years!)
1- Duplex and/or fourplexes. I’m not into encouraging your going this route. The exception might be if you are living in one of them. Why do I have this opinion? The answer comes from extensive study for a client who thought that this would be his preferred route. The problem here is that so many are after this piece of the market that sellers can get away with what I consider to be absurd. The typical pricing offers a 5% cap rate. In other words if you paid cash for a $400,000 property you would achieve a $20,000 cash return. That might sound nice but virtually every property offered with this return is absolutely a deferred maintenance pit. Most of these are assuming that you are going to manage the headaches yourself. So you get all the phone calls and you get to subtract these costs from your revenue. If you hire a property management company, reduce the rate of return. The 5% is in my opinion too low and it will be reduced by the upkeep and property management.
What went through my mind on this recent study was that these are absolute junk. Don’t pit your future on junk. That’s my opinion.
For your information, my background includes an extensive part of my real estate career in the commercial side of real estate. I was the director of real estate acquisitions for a commercial real estate developer. I have been CCIM trained on numerous aspects of commercial real estate. I focus on residential because of the consistency in this market. However, upon joining Windermere I have been motivated by their strong commercial real estate department to look for good options for my clients. There are good options. In my opinion duplexes and fourplexes aren’t currently a good way to go.
Larry K Cragun – Windermere Real Estate
Buyers Agency Contract, Will That Agent Want A Contract With You?
Buyers Agency Contract, Will That Agent Want A Contract With You? Yesterday I closed on a transaction where I was the buyers agent. Yes, we had a contract that I was her exclusive representative. We met a few weeks ago at an open house. She wanted to see different properties. I was willing to show her around and we spent a couple of afternoons looking at properties. It was then that I asked if she were willing to sign a contract. She seemed willing, took a couple of days to review it, and executed the contract.
Yes, we completed a transaction, and her last text to me was how excited she was about her new purchase.
Compare this with a situation a friend brought to me before I was licensed in Utah. He and his wife were looking at a home in North Salt Lake. They were moving here from the Midwest. He came to me with a buyer broker contract, wanting my opinion. The agent met them and pulled out an exclusive contract to represent them. They met the agent/broker by calling on a sign. The agent came and showed the home, he was a new agent and took the phone call at the office. (they call it floor time). There were a few issues that concerned my friend: they were unsure if they wanted to live in North Salt Lake. (They actually ended up buying in Pleasant Grove). They weren’t confident this was the right agent for them. They hadn’t seen the inside of other properties and were wanting to consider all options. It was clear that this agent didn’t know the other markets they were considering.
So what is the right conclusion about signing a contract with one agent? You could not sign anything, let that agent take a chance of having your sale. You could sign and take a chance all goes well.
It is important to know that these contracts are very binding. If you abort the contracted agent it’s probable that agent will be the one who gets paid, no matter who sells you the home. Neglect by that agent can put agents in a situation where the MLS has to arbitrate the result.
It is also important to understand the values to you the buyer when you contract with a good agent. 1- you become a high priority. So many people are willing to waste agents time, to have one offer such loyalty is highly valued and appreciated. That signed relationship will likely cause your agent to go far and beyond the normal service level to make sure you are taken care of. 2- Often, a trusted relaxed relationship that develops. You become trusted friends. The client I referenced has become an extremely important person in my wife’s and I lives. 3- The pressure is off of you when shopping on your own. You know you have an agent and if you are looking around, open houses or invites by friends to see their neighbors home for example, you take any pressure off from another agent by merely informing them that you have a contract with another agent.
Here are a couple of ways that might work for you. First be willing to sign a contract that names the homes you see with an agent, not sign for every home you consider in every market. This won’t limit you if you decide to move on to other considerations. Second, do as the example of my recent sale. Both of you invest some time together. If it is working, if you like and trust the agent, go ahead and sign the contract.
About Home Inspections. In a nutshell if you are purchasing a home, even a new construction, do it, do it, do it, have one, have one, have one. Even if you plan on having one, this might be an interesting read.
Since most of you are already convinced to have an inspection this article will name some options of home inspectors for you. Below is the list our company publishes. These, like those in the How We All Win concept only stay on the list as long as we find satisfactory performance. The way our office works is a good way: if there is a complaint by an agent or a customer we get involved to verify the issue and to help get it resolved. If it isn’t handled the way we feel it should have been the inspector is on probation. One more unsatisfactory conclusion and we remove them from the list.
- Criterium Bernhisel Engineers – Scott Bernhisel – 801-466-0931
- All Points Home Inspections – Westin Cross – 801-455-7697
- Homestead Engineers – Brian Glover – 801-254-2656
- Pillar to Post – Fred Larsen – 801-281-0484
- The Home Inspector – Dan Hess – 801-466-1874
- A Closer Look Home Inspection – Tom Rees – 801- 674-4994
- J-Pro Inspections – Dean 801-915-3633 or Carol 801-635-4764
- Veterans Home Inspectors -Ryan Johnson – 801-347-5505
If you are going to use one of these, please let me know, I will reinforce to them for you what we expect in service.
An example of new construction is when Kathleen and I were about to close on s new home and we did an inspection. The inspector noticed something neither one of us or the builder had noticed, the slope of the yard was such that rain would drain down to the basement. The grade needed to be redone. Where most builders contracts don’t obligate the builder to respond to an inspection, yet provide at least a year warranty, this builder responded properly and regarded the front yard so it sloped away from the home.
I have had cases where the furnace and/or roof needed replacing. These are so serious that the seller must deal with it. After all, if you found it the next buyer would too.
I had one transaction where the seller agreed to a 3 month pre purchase rental. Therefore the buyer waived the need for the inspection, after all he was going to live in it for a few months, why pay the extra money? The move in was in summer. The closing was just as the weather turned cold. Not too many days after closing the furnace needed to be used. The furnace started, blew up, and burned the home down. It was a poor decision to waive the inspection.
Larry Cragun – Windermere Real Estate
Yes two very different worlds, and both close to downtown Salt Lake City. Both with condo living or houses. Both with reasons to live there, yet as I say, very different.
We have several friends that have come like we did and decided to make this their home. Where they end up is interesting: Lehi and Pleasant Grove in Utah County, and all the commuter traffic, some in Bountiful, some downtown, some in the Riverton and South Jordan area, and some in North Salt Lake.
There are reasons for the different selections. Living in The Avenues has it’s own flavor. It is close to downtown and the U. It is truly a community. I invite you to attend the monthly community council meeting held by the Greater Avenues Community Council on the first Wednesday of each month. It truly is a community gathering that illustrates why many choose to live here.
I recently heard interesting feedback of someone looking for a home in The Avenues which made the selection dilemma interesting, even challenging. This buyer wants the location of the Avenues but the homes, mostly because of the ages and conditions, of the homes that can be found in the nearby Eaglewood community in North Salt Lake. It will be interesting to see the decision this family makes.
I like both neighborhoods. We live in downtown. The Avenues is so convenient. While touring homes in Eaglewood I found several I wanted to buy. That’s been my weakness, even our weakness. Our kids think we are crazy, for fun we go look at homes. I found one this week in Eaglewood, two stories with an elevator. I just had to have it. It was cool. Kathleen thought it over for a short time and nixed the idea.
The next photos are just a few I took this morning of homes on 1st Ave in The Avenues. This was a random selection with the only objective of illustrating this part of The Avenues.
To illustrate the difference in settings, note this shot. FORE!
Yes, this is a golf course in Eaglewood. And here are some pics of the neighborhood.
If you are interested in newer homes within a short drive to downtown North Salt Lake may be for you. The avenues homes are vintage which many people love. Some have been updated. These in North Salt Lake City as you can see are much newer, less likely for needing upgrades. I will say, I attend some of The Avenues Community Organization meetings. The residents here are extremely proud of their community. It is a strong community organization.
If you like vintage you might love The Avenues. Otherwise, take a look at North Salt Lake.
Zillow Zaps Buyers Brains, where is Zorro when you need him?
We have been riding the valley for the perfect home, not to be found. It’s been two years from listing to listing. Then it’s offer accepted then dang, it’s off the market, seller decides he’s not a seller. Buyer confounded, disappointed, and discouraged. A year later the seller still not willing and the buyer can’t find the perfect home.
Whoopee, we find it. Preparations being made to offer full price. Buyer is ready to tackle the world, oh joy. Then neighbor gets involved, says lets look at Zillow. Buyers brain becomes messed up, fried you might say. Help I say, where the heck is help, perhaps it’s time for Zorro to the rescue, I need some help. The price offered is $685,000 and Zillow Zestimate says its worth $459,000. Zap and damn. Buyers brain is zapped, but only for a few moments. I show them facts that we have from data in the MLS. The home is priced right.
Similar to Zorro can be facts not Zillow fiction. Zestimates are admitted fiction. Founder Rich Barton was on a Seattle television interview with writer and agent Larry Cragun. He admitted that the Zestimate is just an estimate. He stated it could be as much as 13% off. This in a State where County records record the sales price.
Utah is a non disclosure state. As such the sales prices are not recorded and published by the Counties. Therefore the Zesimate is zapping peoples brains when they publish values. This Zestimate was off by over double Barton’s admitted 13%.
The buyer came to me excited and confused. “This looks like a great home but it’s a bit overpriced”. “It is I say, how much overpriced”? “Well maybe a couple of hundred thousand dollars he says”.
Now my brain is fried.
There is a secondary Zillow issue. Zillow lets any agent become the expert in a zip code, expert or not. They only need to pay the price to buy that zip code. Experts aren’t always hungry to pay for leads. I don’t. So when someone searches on Zillow they may end up with just any old agent, even one quite hungry for business, even a new agent. That’s not the way to pick your agent. Doing so, you once again may need the help of Zorro.
Larry Cragun – Windermere Real Estate
over 25 years in the real estate and mortgage industry.
It’s Not Good, Being A Lead. Did you know that when you fill out a form that makes you a lead that the sales person on the other side of that computer looks like this? They pay for leads when they are hungry for business. Did you also know that some lead generators sell your name over and over and over and over. How would you like to encounter four of these blokes?
It’s much better to have a friend in the computer. One you get to know, no pressure. By watching and reading you get to know them. You like their style. You know them. You haven’t even met them, but you like them. They know their stuff. They come recommended. Go ahead, you pick them and you aren’t a lead.
This is the main purpose of this blog. It is for me to have a chance to become your friend in the computer. I have had several over my career and it’s a great experience. The first one came as we were helping a disabled neighbor move to a new home in Reno, Nevada. Kathleen and I were having breakfast at our hotel and I received this call. “Hi Larry, this is Teresa. I have just got to talk with you, you have been my friend in the computer for months”. Teresa and I became great friends, she became a client.
My goal is to post interesting enough content that we too become friends. I will try to mix it up yet be consistent. Kathleen is a great photographer. I will enlist her to add her touch to this blog. She is a great asset.
You are welcome to let me know if there are subjects you would like me to touch on. In the meantime, don’t be a lead, choose the route you have control over, pick a friend in the computer, one you got to know before you spoke with them. Hopefully with a few of you, I get to be your friend.
Not all condo projects are approved by FHA. This article addresses why FHA condo approval is important and I list condominium properties that are approved in Salt Lake City./
An FHA approval is valid for two years and must be renewed to remain valid. Some properties just let an approval lapse and don’t bother with the process to update that approval. Some submit an incomplete package to FHA.
FHA approval involves analyzing minutes of meetings, study of financials, determining the percentage of owner occupied vs rentals, understanding legal issues such as law suits, and a basic determination as to the safety in warranting a loan made on the property. Condominiums carry greater risk to a lender due to the community control rather than a single owner.
To me FHA approval is extremely important as the FHA review offers a more thorough review than done by a normal due diligence. I don’t claim non approved properties are to be rejected, I do suggest they require a deeper look into those important factors that FHA studies. I even suggest using an agent that is experienced in condominium sales and that is familiar with the risks each building offers.
Kathleen and I have lived in five condominiums during our marriage. We see the benefits. The older we became the more we loved the benefit of condo life. There are benefits beyond what I call “lock and leave” which is a benefit for sure.
One benefit some of our clients have taken advantage of is the FHA reverse mortgage. The FHA reverse mortgage allows someone age 62 to purchase with about 50% down and have no payments, ever. Another application is to own a condominium, having equity and use it to acquire a monthly income.
Another benefit is that an FHA guaranteed loan makes it easier to purchase with a lower (3.5% down payment and a more forgiving credit approval process)
As of this writing the following are Salt Lake City FHA approved condos. (remember it is a two year approval)
Angelina’s Corner – Application was rejected. Missing documents or incomplete package submission
American Towers, not approved. Application was rejected. Missing documents or incomplete package submission
Arlington Place – Approved -1/31/2018
Aztec – Approved 05/31/2017
Belvedere, not approved, Rejected: Missing documents or incomplete package submission
Belmont Downtown – Approved 6/12/2017
Belmont Plaza – Expired 2/5/2017
Bonneville Towers – Rejected 11/18/2016
Broadway Park Lofts – Approved 12/27/2017
Broadway Tower – Approved 9/2//2016
Canyon Road Towers – Approved/8/23/2018
City Crest – Expired 2011
Garden Grove West Jordan: rejected insufficient reserve funds.
Garden Park South Jordan – approved 3/8/2017
Garden Towers – Expired 1992
Governors Square: Rejected 2013
Library Square – Nearing expiration 4/7/2018
Market Street – Rejected
Northridge Heights – Expired
One and Nine – Expired
Panorama – request withdrawn 4/4/2017
Parc Gateway – Approved 6/28/2016
Pierpont Lofts – Expired 6/12/2105
Rockwell – Application rejected
Terrace Falls – Expired 2012
Trevi Towers – approved 12/1/2017 – Rejected Missing documents or incomplete package submission
Trolley Place – approved 2//8/2018
Trolley Regent – Expired 2011
To get to the FHA site with access to the complete up to date search CLICK HERE