For starters, the grass in our front yard has started to grow again. With a high of 52 degrees predicted for New Year’s Day, we may just skip winter all together this year. That may be bad news for snow boarders and ski hills, but it’s very good news for the State snowplow budget and home heating bills!

 Now that you’ve got the hang of it, here are my optimistic observations for Minnesota Real Estate Sales in 2012.

Put your jogging shoes on and get ready to run. With less inventory to choose from, and no snow to contend with, buyers gulped the last of their Christmas dinner and headed back out in full force on Monday. Since they all got cash cards for Christmas, they skipped the return lines at local retailers and went shopping for a house instead. The numbers would suggest that we have moved to a balanced market. Multiple offers are popping up on “the good stuff”. If you consider that part of the meager 5.7 months of inventory available is in rougher shape than a long tailed cat in a room full of rocking chairs, then the choice stuff is going to go faster and at a higher price. According to the Minneapolis Association of Realtors McSkinny report from 3 days ago, here are the stats:  

In the Twin Cities region, for the week ending December 17:

• New Listings decreased 16.9% to 799
• Pending Sales increased 50.1% to 749
• Inventory decreased 23.9% to 19,066
• In November, the Months Supply of Inventory decreased 30.0% to 5.7 months

According to the Joint Center of Housing at Harvard University,
“…low interest rates and weak prices have made homeownership more affordable than in decades.  Several strong months of private sector job growth in early 2011 provide encouraging signs of a housing market rebound.  With inventories of new homes at historic lows, a turnaround in demand could quickly result in tighter markets.  Over the longer term, the number of younger households is set to rise sharply, supporting growth in the population that fuels growth in both new renters and first-time buyers.”

The 1st time buyers I’m talking to are sounding a familiar theme.  “We don’t want to be enslaved to pay off a mortgage.”  They will buy on their terms.  They are very well qualified and likely to resist the urge to buy at capacity making for stronger transactions that make it all of the way to closing. 

They will account for the majority of home sales in the next 6 months and it is important to note that they don’t want to repeat the mistakes that got us to the ‘Meltdown’.  Their message is clear.  “Listen to us.  We are the change you want to see in the world.”

One of the key lessons for success in the New Year was written many years ago but bears repeating.  The Cluetrain Manifesto, written in 1999, said it best:
“A powerful global conversation has begun.  Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed.  As a direct result, markets are getting smarter–and getting smarter faster than most companies.

These markets are conversations.  Their members communicate in language that is natural, open, honest, direct, funny and often shocking.  Whether explaining or complaining, joking or serious, the human voice is unmistakably genuine.  It can’t be faked.

Most corporations, on the other hand, only know how to talk in the soothing, humorless monotone of the mission statement, marketing brochure, and your-call-is-important-to-us busy signal.  Same old tone, same old lies.  No wonder networked markets have no respect for companies unable or unwilling to speak as they do.

But learning to speak in a human voice is not  some trick, nor will corporations convince us they are human with lip service about “listening to customers.”  They will only sound human when they empower real human beings to speak on their behalf.”

http://www.cluetrain.com/book/introductions.html

Be yourself and be the advocate that your clients are looking for.  Here’s to a glass half full, genuinely prosperous New Year!

And that takes time, teamwork, and serious expertise.   The process of approving a loan these days is so complex that it has a lot of people in the industry questioning their choice of career. In the past, we made approval decisions based on RISK. If it made sense there was a way to get it done. That is no longer the case. While that is one component of today’s underwriting standard, it is exponentially more complex of a process today than even a year ago. We need your help! We have to prepare people for the new normal and that means everyone needs to understand the process and work together. 

 Every single aspect of our business is under a Nuclear Microscope of scrutiny. I keep telling people that we don’t just dot I’ s and cross T’ s anymore. We have to cross I’ s and dot the T’ s too! 

• We approve payment not price. Perhaps one of the most important and overlooked things is that we approve for a maximum payment amount, not a purchase price. While we can approximate a value range for you, it will be with an approximate amount for property taxes. They are the wild card in most pre-approvals today since they are all over the map depending on the assessor’s view of value. If rates start to fluctuate, that can also influence how much someone will be approved for so what is true at 4% won’t necessarily be true at 4.5%. If it’s going to be tight, get that rate locked in. 
• All cash has to come from an ‘acceptable’ source.  Generally, that means it can’t be borrowed from an unsecured source or a gift from a friend. Each type of loan has a different set of rules. We can’t use mattress money and we have to track any money we do use back to the source. Any deposits on a bank statement that are not clearly labeled payroll deposits must be explained and thoroughly documented (yes, we need a paper trail). It doesn’t matter if it was $100 you got from selling something on E-Bay, we have to prove it. 
• We need official bank statements, not computer generated transaction reports from a bank. All pages. With the advent of IPADS and Internet banking, it is common to get what the borrower thinks is a bank statement. However, we have to have the official ones so don’t throw away the paper! If your e-statement doesn’t look just like the paper statement, we can’t use it. 
• All income must be stable (have a 2 year history of continuity) and expected to continue for 3 years. Income is proved with 30 days of official paystubs, and tax returns for 2 years with all schedules and W-2’s. Anything out of the ordinary requires further documentation and that often requires additional time to obtain. Sounds easy right? Some people tell us they work full-time but give us paystubs that reflect anything but a 40 hour or consistent work week.  Or, a weird deduction shows up on their paycheck and we have to find out what it is.
• We get Federal tax returns upfront to check for business expenses and other things that change the underwriting outcome. Some lenders wait until the appraisal comes in and the loan gets submitted to underwriting to check IRS transcripts and then, whoops! A line shows up that derails the deal. A little prevention is worth a pound of cure, as they say.
• We have to get our own credit report and verify both current debt and  that there is no additional debt that is unaccounted for. That means that inquiries have to be documented.  Occasionally, we have to correct deficiencies and that can take 5-10 days. If someone is disputing an account and it shows up we have to stop and get the disputed item removed. Disputed items impact the credit score by artificially increasing it while the item is in dispute.
• We have to recheck everything 24-72 hours before closing. We have not one but two disclosures that cover this and yet, when we go to pull the credit refresh report just before closing, we find that borrowers have gone out and purchased furniture and appliances that they thought we wouldn’t find out about. We will and it will stop a closing in its tracks. We also have to re-verify with their employer, via a phone call, that they still work there. We see these folks once. You see them a lot more and talk to them while you’re showing them houses. Help us reinforce the importance of Not changing the Picture! 
• Give us time to do it right. It takes about 4 hours to set up and underwrite a file once we have all necessary documentation.   Stress the importance of the pre-approval process before you agree to show the borrower houses.  

The next time you accept a pre-approval letter from a lender ask them if Pre-approval means Proved!   When you do, everyone wins!

My e-mail is filled this morning with marketing pieces for Sales.  I saw one that said Happy Veteran’s Day.  (I struggled to connect the dots between Happy and Veteran’s Day.) Lacking a personal connection, for some today is just a day off; a federal holiday.   Others think of the date as pretty cool. It’s a palindrome; a number or word that reads backward and forward the same way. 

The significance of the number eleven for me is that it represents the number of tours of duty our sons have served in the Middle East. 

Operation Storm Arab Emirates   Barry

Operation Storm Kuwait   Joel

Operation Iraqi Freedom   Michael,  Barry, Glenn

Operation Iraqi Freedom 3 years later   Glenn,  Barry

Operation Enduring Freedom Afghanistan  Barry, Michael

Operation Enduring Freedom 2 years later  Barry

2011 NATO drawdown   Barry currently serving in Afghanistan

For millions of families, today is a day to count the personal cost of military service. 

We spent a year telling our 6 year old granddaughter that her dad was in Louisiana.  She was old enough to be aware of war.  She knew about Afghanistan.  She would have worried.   I try to be thankful for the sacrifices my sons have made but selfishly I sometimes wish that they would have chosen a different career.  But whose son or daughter would have served instead?  We are grateful that they have all returned safely.  

They follow a proud family tradition of service.  Veteran’s Day has always had a face for me.

Dad.  Marines  WWII.  Battle of New Britain. Pacific theatre. 

My Mom. Marine Corps Washington DC  WWII.  She’s still a tough old bird.

My Step Dad of 38 years, Retired Lt. Commander Navy.   WWII.  Korea.

My brother Chuck.   Army. Vietnam 1969.

My brother David.  Army.  Peacetime.  1976-1980.

My nephew Sam.  Currently Army.  Training for Afghanistan.

Rob Chrisman, The Stratmore Group, said it best, when he counted the cost.

It is the VETERAN, not the preacher, who has given us freedom of religion.
It is the VETERAN, not the reporter, who has given us freedom of the press.
It is the VETERAN, not the poet, who has given us freedom of speech.
It is the VETERAN, not the campus organizer, who has given us freedom to assemble.
It is the VETERAN, not the lawyer, who has given us the right to a fair trial.
It is the VETERAN, not the politician, who has given us the right to vote.
It is the VETERAN who salutes the Flag.
It is the VETERAN who serves under the Flag.                                                                     

“Dad… Mom… Chuck… David… John… Mike…Joel… Barry… Glenn …Sam…reluctantly, today I celebrate your sacrifice .”  -Kate Wilson

Here’s a short primer on using these loans.

What Kind Of Work Is Covered?

• Repair/Replacement of roofs, gutters and downspouts
• Repair/Replacement/upgrade of existing HVAC systems
• Repair/Replacement/upgrade of plumbing and electrical systems
• Repair/Replacement of flooring
• Minor remodeling, such as putting in new kitchen cabinets and counters, which does not involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors, insulation, weather stripping, etc.
• Purchase and installation of appliances, including free-standing ranges, refrigerators, washers, dryers, dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair/replace/add exterior decks, patios, porches
• Basement finishing and remodeling, which does not involve structural repairs (no walls built, no walls removed!)
• Basement waterproofing                                                        
• Window and door replacements and new exterior siding
• Septic system and/or well repair or replacement
• No landscaping is allowed

 The Process:

• Get a bid for all work from a licensed, bonded and insured General Contractor with a minimum of 5 years experience.  (Just one!) We’ll put them through a short approval process. (We can recommend some pre-approved contractors)
• The appraisal will be done on an “as improved” basis and up to 110% loan to value
• Up to $31,000 in actual repair costs (10% held back in case something unforeseen comes up)
• 50% of the contract paid at the closing of the purchase transaction to the contractor
• Prompt payment at the end of construction from escrowed funds
• $1000 minimum work required (not $5000 like others!)

How can we help?

• We’ll walk you and your buyers through our streamlined process step by step
• With 20 years of experience, these loans are routine for our processing staff
• Since we originate, process and close these loans in house, we’ll get the job done on time.  Fairway is no stranger to FHA product and currently ranks as the 15^th largest FHA lender in the country.

Most buyers today struggle to come up with the cash for the downpayment leaving them very little after closing to handle repairs or paint the walls the color they really want them to be.  By incorporating the remodeling into the purchase, they can paint the walls, put in the new carpet, update the furnace, or the roof and have it all with one low payment. It’s a great way to make their new home more affordable!   I was talking to a manager at Home Depot who said to me, “I wish I’d have known about this program when I bought a house.  I ended up putting a lot of things on credit cards after closing and this would have saved me a lot of money!”

Need a short one on one on how this all works?  We’re a phone call away!   -Mike Wright

This is an extension of the program known as the Home Affordable Refinance, and more information can be found at www.makinghomeaffordable.gov   Only conventional mortgages owned by Fanniemae and Freddiemac are eligible.   It’s easy to find out on the site whether one of these entities owns the loan. 

 According to the FHFA, the new program enhancements address several key aspects of HARP including:

• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers. (Up until now, a refinance for someone underwater has created so much additional risk that the rate had to be much higher in order to cover the adverse delivery fees tacked on by the GSE’s-Fanniemae and Freddiemac). 
• Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac. (We have not yet heard whether there is a no ceiling or no ceiling at all).
• Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac. (While I don’t know which reps and warrants they have focused in on, lenders are being asked to repurchase loans where the I’s aren’t dotted and the T’s aren’t crossed, and where the T’s aren’t dotted and the I’s aren’t crossed.  A loan that has a 150% LTV is a bit risky for a servicer.  If a borrower has to move for a job, there’s a strong possibility that’s going to result in a short sale or foreclosure.  The language most likely spells out just who is responsible for what in such circumstances.  Otherwise, this being a voluntary program, there is no incentive for an industry under siege by Mainstreet and the political powers that be, to participate.)
• Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises. (On the other hand, servicers are charged with handling the collection of payments, processing short sales and foreclosures and again, since the program is voluntary, will still have the option of requiring an appraisal.)
• Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009. (The original program was set to expire September 30^th of this year.  The loan must have been closed prior to May 31, 2009 to be eligible.) 

The Enterprises plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by November 15. Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.

With these low rates, and more flexible guidelines, we’re optimistic that this will turn into a real treat for credit worthy borrowers!  Stay tuned for more details.                               

While the actual details on the program will not be released until next month, here’s the buzz:

• It will only pertain to loans currently being serviced by Fannie Mae or Freddie Mac
• Because of the removal of the LTV cap, appraisals may not be required
• With the only qualifying criteria announced being that the last six payments be on time, it is possible that income documentation may be streamlined and credit scores might be more forgiving
• Fees allegedly will be reduced
• Incentives may be offered to people who shorten their repayment time
• It also sounds that the banks may be given some incentive by not holding them liable for the underwater portion of the new loan (a major incentive for sure).

The government is on the hook for these loans already. By lowering the payments (by offering lower rates), they will likely help these loans to continue to perform and make it less likely for the underwater homeowner to walk away.

The original HARP was expected to help 5 million families.  After two years, it has yet to reach 900,000; therefore, estimates ranging from 800,000 to 1.6 million borrowers who may benefit need to be taken with a grain of salt.

Whether the Administration is looking for purely political rhetoric points or not, my advice to underwater homeowners is too keep an eye out for the final guidelines because you just might be able to lower your payments.

Thanks to KCM Crew for this post on 27 Oct 2011

Websites need to provide authentically valuable information and tools because that’s what people are searching for on the Internet.  They don’t have to be overly complex, but the reason they call Google and Bing search engines is because that’s what they’re used for…searching.  For them to find you, you need to sit back and put yourself in the seeker’s place.  Paying someone a bazillion dollars to make sure you come up first in a search won’t net you a bazillion dollars if the seeker doesn’t find what they’re looking for when they get there.  They’ll just bounce right back out again and keep on clicking until they find the site with the most relevant information to their search.  That brings me to point number two.

You have to Feed the Bots!  It’s called SEO optimization.   Sounds like a mouthful of something doesn’t it?  Actually, there are these little ‘bots’ that search engines like Google and Bing send out on a 24/7 mission to crawl the Internet in constant search of data.  They go back and forth from one website to another, crawling through Blogs, news and billions of pages of websites to make sure that when you plug in some key search words they’ll help you find what you’re looking for in a millisecond.  Your goal is to please the bots so that you come up on the first page in the organic (translated you didn’t have to pay for this) search results.  To do this requires Focus on a few specific key word searches and you have to feed the bots information related to those key words.   I have 10.  I also have a very nice consultant who does not charge me an arm and a leg but who understands and advises me regularly on the dietary needs of Bots!

You can also create ads which you do have to pay for, through an account with the search engine; Google Adwords is an example.  The more relevant your ad is to your website content and the more the bots like you the more likely this type of advertising is to pay for itself and then some.  About half of our customers find us through our website and our budget for this is just under $500 a month.   

You need an authentic USP.  Focus on the seeker who will be your best match as your client and go deep in providing tools, information and an easy way to get additional information tailored to this client.   In his book written in the 1960’s called Reality in Advertising, Rosser Reeves made famous the concept of a Unique Selling Proposition.   Please read this next paragraph carefully as it holds the key to your success.

“Reeves pointed out that to work, advertising had to be honest. He insisted the product being sold actually be superior, and argued that no amount of advertising could move inferior goods. He also disagreed that advertising was able to create demand where it did not exist. Successful advertising for a flawed product would only increase the number of people who tried the product and became dissatisfied with it. If advertising is effective enough and a product flawed enough, the advertising will accelerate the destruction of the brand. Similarly, Reeves believed it was a waste of money to claim uniqueness that doesn’t exist, because consumers will soon find out, and they won’t come back to the brand. This is important because historically fortunes are made from repeat business. Money would be better spent building some kind of meaningful advantage into a product before launching a costly advertising campaign to promote it.”-Wikipedi

You can compete regardless of the size of your budget! Try to be David not Goliath.  David was great with a sling shot and a rock and took the mighty Goliath down with that one skill set.  It doesn’t take a fortune to compete successfully on the Internet so unless you have a fortune, find a unique and compelling niche. 

Last but not least, sales is and will remain, a contact sport.  While most people today search for information on the Internet before talking to a human being, they still want to talk to a human being.  Make it easy for them to find your phone number or e-mail address and to get in touch with you. 

I receive a great deal of satisfaction in helping others find out how to break down complex problems into manageable action steps.  So, if you need a little help getting started, don’t hesitate to contact me.  I’d be happy to help.  Really!

Our stated business goal is to exceed our customer’s expectations 100% of the time.  As my boss always says, “you can’t manage what you don’t measure.”At closing, we do a simple survey.  Circle a box.  Tell us about your experience with us:  there are 3 choices. 

• We did not meet your expectations
• We met your expectations
• We exceeded your expectations

Then there is a space to tell us something you’d like us to change or do for you in the future.  You can also use the space to just make a comment.  The survey is part of our closing package and it takes less than a minute to fill it out. 

In an environment that has Mortgage Bankers and Realtors under a great deal of scrutiny, building a business model to exceed customer’s expectations is more important than ever!

Over the past five years, 78% of our customers tell us that we’ve exceeded their expectations.  21.5% tell us we met them and .5% tell us we blew it. More telling is that since January of this year, 98% of our customers tell us we exceeded their expectations.  1% told us we met them and 1% told us we blew it. 

In his book, Hug Your Customers, Jack Mitchell reminds us that “only extremely satisfied customers are genuinely loyal.”  Years ago, we stopped trying to treat our customers from a “one size fits all perspective and moved in the direction of the One to One Future and of KISS(keep it simple silly).  We employ technology as a tool to help us manage our relationships.  Technology allows us to keep our relationships highly personal but we know that technology is a poor substitute for human interaction.

• We have a tool that we use to learn the customer’s “story” when we first start to work with someone.   Every customer has a story and they are all as unique as fingerprints.  If you gently probe, you can provide a customized solution that will make your clients go ‘Wow!’  We capture that information in a CRM(client relationship management system) and use it to record every interaction with our customers.  In less than 15 seconds, we can quickly click through a client’s record and understand both our current relationship with them, and all previous interactions with them.
• Keep all of your communications personal.  We have a receptionist because I hate voice mail.  While I understand that phone trees and voice mail are a cost saving device, it is my belief that people want answers now and phone tag is an annoying waste of time.  We also have a hotline so that if a customer calls in on my direct dial line and I’m on the phone, the call is rerouted instantly to another team member whose line is open.  Voice mail is a choice we offer but only if the client requests it.  We always try to get answers now.   
• 80% of our team members have been together for over 20 years and share a set of guiding principles.  We all understand intrinsically that we are in the personal relationship business and that we are merely the Sherpa guides to safe, sustainable and affordable home ownership.  Every day, our LO’s and processors huddle together for half an hour to insure that all of the lives we’ve been entrusted with are on that track. 
• You can’t manage what you can’t manage! We believe in 4 walls.  In the past, I worked for a company that moved all of the processing to a centralized facility.  It was impossible to control the customer service experience.  The people working with my customers were not my people and did not share in a set of common beliefs regarding customer service levels.  I didn’t last long in that environment.   Since then, we have kept all aspects of the client experience ‘in house’.  If we can’t control the experience, we don’t offer the product.  Origination, processing, underwriting and closing are managed within our 4 walls.  While some chose to go the route of broker, we chose to remain a Mortgage Banker.  We may have missed a commission check or two along the way but it all goes back to what Jack said, “only extremely satisfied customers are genuinely loyal.” 

 There will be “Oops!” moments

Last month was an extremely busy one for us.  One of our processors was out sick for 5 days and we hit a time crunch.  A very nice, well qualified client, didn’t receive his approval until 24 hours prior to closing.  Our marketing brochure promises 2 days minimum.  He was irate.  His survey was part of the 1%.  I called him and explained the situation and he understood and granted grace. Another client thought we’d be at his closing and we weren’t.  We missed that part of his story.  Those clients  provided us an opportunity to grow.  While it’s nice to hear the accolades, it’s important to debrief and learn from the ‘oops moments’.  Don’t be afraid to call, listen and learn.  Be grateful for teachable moments. In today’s Linked In world, news travels fast, good or bad.   Make it good, purposefully!

“This fall may be the best time in the next 10-18 months to sell a house and move” according to Steve Harney, KCM.

RealtyTrac reported in their September Foreclosure Report:

“Default notices were filed for the first time on a  total of 78,880 U.S. properties in August, a nine-month high and a 33 percent  increase from July — the biggest month-over-month increase since August 2007.”

Last winter and early spring, appraisal values were significantly impacted by a dramatic increase in the number of distressed property sales over the winter.  Appraisals are based on comparable sales that are 3-6 months old.  With less traditional sales occurring over the winter, and a huge increase in the number of distressed properties headed our way, the best comparables are most likely available right now.

James Saccacio, chief executive officer of RealtyTrac explained:

“The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by robo-signing and other documentation problems. It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process.”

According to the Minneapolis Association of Realtors weekly market activity report, there were 1,248 new homes listed last week. That now marks 14 consecutive weeks of year-over-year declines in new listings. Inventory levels were also down 21.2 percent to 23,481 active listings, marking 30 consecutive weeks of declines. Conversely, buyer activity was up 53.0 percent over the same week last year.  This is a formula that is leading to faster sales for traditional sellers. 

While we still have a market that is tilted in favor of buyers, as the glut of new distressed properties comes on the market, it will be tougher to sell at today’s prices.   With more to choose from, there will once again be downward pressure on values.    

*An important update on the VA Funding Fee:  As of this writing, the President has not yet signed off on the reduction in the VA Funding Fee.  VA sent out a circular announcing the reduction a bit prematurely.  Unless the President signs off on the reduction by today, the Funding Fees will revert back to the higher levels until after 11/18/2011.

by Dean Hartman KCM Crew on October 6, 2011

As underwriting guidelines for lenders become more stringent, we need to re-examine what a good mortgage application looks like. As home buyers begin their search for a home, there are a few items they should be aware of that they can do to help get their loans approved (with the best possible terms), and, at the same time, lessen some of the stress that goes along with the mortgage process.