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This issue is common in many market places today.  Mortgage lenders will only close/fund up to a specific percentage of the appraised value for refinance and for purchase.  When properties don’t appraise for the value necessary to refinance or the agreed upon purchase price most transactions fall out or cancel.  In the case of a purchase a home buyer could increase their cash down payment or the buyer and seller could renegotiate the purchase price AND your agent could take the five steps listed below.

1. Read the appraisal and look for errors.  Sometimes appraisers undervalue properties because they mistakenly use comps that are not neighborhood comps, sometimes the bedroom or bathroom count is wrong, sometimes the square footage is wrong.  On occasion, other neighborhood information is wrong, such as schools.  All of this data impacts the final appraised value.  If you find errors then dispute the appraisal immediately.
2. If the lender or appraiser refuse to correct the appraisal then ask for a second opinion.  Request that the lender consider a second appraisal.
3.  Once a true appraised value is decided and the value is still lower than the previously negotiated price then renegotiate.  In today’s market your Buyer pool may be primarily FHA buyers who lack cash to make up the difference or the buyer simply does not want to make up the difference.  Work with your agent to renegotiate the purchase price.  While most Sellers want to avoid this tactic the reality is that once you start over again you may face the same appraisal results with a new buyer and by then you may have lost considerable time.
4. Buyers should consider splitting the difference with the seller.  How long have you been shopping for your home?  What will you lose by waiting?  If you have been looking for a year and think the solution is to wait think again – when interest rates that are so begin to increase a waiting buyer could experience a payment increase of up to $200/month on a purchase price of $300,000.  Buyers making a home purchase where they will raise their children will reside in their homes for upwards of ten years which equates to a possible savings of $24,000 in monthly mortgage payments based on today’s lower rates.  So if your appraisal came in $20,000 below your negotiated price work on splitting the difference with the seller.
5. If all else fails, extend contingencies and change lenders.  A new lender, mortgage banker or broker will have their own appraisal process and approved appraisers that could have very different results.
Stay tuned for more tips on completing successful closings in today’s market!
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3 considerations before abandoning underwater home

REThink Real Estate

By Tara-Nicholle Nelson Inman News®

Editor’s note: This is  the second of a two-part series. Read Part 1: “When it makes sense to keep an underwater home.”

Q: At the top of the  market, I owned three properties: my first home (in a marginal neighborhood, now  about 100 percent upside down), my own residence (a big fixer in a great  neighborhood), and a triplex I bought as an investment (an OK neighborhood,  needed some work, fully rented, but now upside down by about 30 percent).

When the market  turned, I had a couple of bad tenants in my first home and the triplex that set  me way back financially, and I was unable to borrow the money I needed to fix  the house I lived in. I did a short sale on the fixer and got temporary loan  mods on the other two, and moved back into my first home.

The problem is, they’re  both so upside-down and don’t seem likely to come back up anything soon … should  I just sell everything and start over?

A: Last week, we covered the preliminary step I want you to  take with respect to your personal residence, of examining whether the home  still works for you, for the most part, as a personal residence,  notwithstanding the fact that it’s upside-down.

Many a homeowner makes the wise decision of staying put in  an underwater home on the grounds that the home is functioning well as a home  for their family, is affordable and looks like it will remain functional on  those counts for the foreseeable future.

I’m aware, though, that your situation is complicated by  your perception of both of the properties at issue, at least in part, as  investments that now seem likely to have outlived the purpose for which you  bought them.

I can’t give you a black or white answer in terms of whether  you should sell or hold either or both of your properties. But I can give you a  set of considerations to factor into your decision. After you evaluate the  life-property fit of the home you currently live in, consider these three  things:

1. Your options.  One of the biggest, most stressful mistakes we make, as humans, is to agonize  over decisions without a complete understanding of the full spectrum of options  that are available to us. So, educate yourself!

Get online and do your reading,  talk with your own lenders to see what options they might have available, and  then also talk with local professionals you trust — at the very least, include  a real estate broker, a mortgage pro, an attorney and a tax expert on this  list. They might know of options you don’t, and they might be able to help you  understand the timelines and feasibility associated with each option.

For example, banks seem to be granting short sales at higher  rates than before, but they still take a long time, and the exemption from  federal income taxation on the debt forgiven via a short sale is currently set to  expire at the end of 2012. That might suggest you should list your properties  for sale and apply for short-sale approval, stat.

On the other hand, there have been a number of governmental  foreclosure relief program developments that might offer help for you, some of  which are available only in the hardest-hit states.

The pros can also help you get a deep understanding for all  of the tax, credit, financial and even legal implications of all the options  available to you. Get the information and professional input you need to fuel a  clear, complete understanding of your options before you move forward with your  decision-making process.

2. Your values. The  decision whether to hold or sell your properties is a hybrid business/personal  decision that will impact the overall “after” picture of your life.  While you can and should factor in input from professionals and even personal  advisers whom you trust are knowledgeable and have your best interests at  heart, only you can decide what’s really important to you in a way that drives  the ultimate decisions you make.

(And decision really should be decisions, plural, because you could  very well create an action plan that involves putting the place on the market  as a short-sale listing while you apply for a loan modification, or some other  set or sequence of actions.)

So, when I say to factor in your values, I’m simply  encouraging you to get clear on what is important to you. Owning the place you  live? Tax advantages? Reducing your expenses? Saving up to secure your  retirement?

This phase of the process will help you get out of the very  common real estate decision trap of doing things for their own sake: owning  because ownership is good, or getting out of the market because that’s the  supposedly smart thing to do.

Whether you decide to hold, sell, or try to make  some other changes to your situation then sell as a backup plan, it’s important  that each action step you build into your plan be set in service of some higher  life aim, goal or value.

3. Your priorities.  Once you do a deep dive into your values and even list them out in writing, one  essential truth will quickly become very evident: You can’t (likely) have them  all. Early on in this decision process, you’ll need to rank your values and  objectives in order of importance, and communicate that to the professionals  you look to for advice.

There are trade-offs involved in virtually every real estate  decision. For example, you might have to give up some tax benefits of property  ownership to cut your costs and save your financial acorns for the winter of  retirement.

You might have to sacrifice free time and get a side job to  make your real estate obligations if you decide to keep the triplex after the  mortgage adjusts (if you’re currently paying only interest, a mortgage  adjustment that happens in January might involve a decrease in interest rate but still increase the overall payment if you have to begin paying toward  principal).

Only you can know what’s important to you, in your finances  and your life, to make the critical decisions you now face. So get clear on  your full range of options and the implications thereof, build out a strong  sense of your own values and life vision, then prioritize and rank the  things that are important to you. Once you have these inputs, your action plan  should soon become clear.

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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Remodeling and repair questions? Energy Saver and Green questions?
Email Tanya at
ShapingSpacesGroup@gmail.com
Shaping Spaces

Fogged-up glass a red flag
By Paul Bianchina
Inman News®

It’s winter, and the temperatures are dropping outside. One day you’re warming up your home and suddenly you notice something that you hadn’t seen during the summer. That perfectly clear window in the living room or the kitchen or somewhere else in the house suddenly looks foggy. You wipe it down from the inside — and from the outside — but the fog won’t go away. The next day, it warms up again outside, and to your surprise, the fog disappears again. So what’s going on?

That intermittent fogging during cold temperatures is an indication that you have what’s known as a “blown seal” in your insulated glass window. Here’s what happens:

Insulated glass windows, also known as double-pane windows, have two panes of glass that are held apart by a metal strip. The strip, usually somewhere between 1/4 and 3/4 of an inch wide, is adhered to the two glass panes with a flexible sealant material.

During the manufacturing process, moisture is evacuated from between the glass panes as they’re sealed together, forming a dead air space. It’s the combination of the two glass panes and the dead air that gives the window panes their additional insulating value, and helps keep the window warmer than one with a single pane of glass.

Depending on the type and design of the window, sometimes inert argon gas is used between the panes to increase the insulating value even further. Some windows also have decorative grids trapped between the panes as a design feature. The sealed, insulated glass units are then placed into the frame and held in place with molding strips, making up a complete window unit.

What happens when damage occurs

The sealed, insulated glass unit is designed to have quite a long life span; in theory, it should last as long as the window unit itself. However, sometimes there are flaws in the manufacturing process or, more likely, some type of impact damage occurs to the window. That can cause a small opening to appear in the seal between the glass and the spacer bar. It’s something you won’t see, but it’s enough to allow air to enter the space between the panes of glass.

You might be thinking that that’s no big deal, since that’s just an air space anyway, right? But the difference is that it’s designed to be a dead, dry air space. Now, with the broken seal, air that has moisture in it has been introduced.

During the summer, when the air temperatures outside are warm and the glass is also warm, that’s OK. But now, with the colder temperatures of winter, the outer pane of glass gets cold. The warm air inside your house is trying harder than ever to escape, and it carries moist air into the window cavity, where it hits that cold glass and condenses back into a liquid. The result is that fogging you see. And because it’s inside the window, you can’t do anything to get rid of it.

Replacement is the only option

Once you discover a window with a blown seal, your only option is to replace the insulated glass unit. You need to do that as soon as you discover the problem, as the window has lost its insulating value, and the trapped moisture can potentially lead to other problems. Not to mention the fact that you can’t see through the window!

The good news is that you must replace only the sealed glass unit, not the entire window. This is something that you need to leave to the pros. Contact a glass company in your area and have them make a site visit. They’ll examine the window, measure the insulated glass unit, including the size of the air space, and have a new one made up that matches. When the new one is ready, they’ll come back out, remove the moldings and the old unit, and install and seal the new unit in place.

If the window is relatively new and the glass unit fails, contact the company or the contractor where you purchased it. Home centers such as Lowe’s and Home Depot will typically replace insulated glass units that fail, as will many other retailers.

If you have windows that are damaged in an insurance-related claim, such as a fire, wind storm, or some type of impact such as a tree limb that falls, you may not be aware of the fact that a seal has been damaged until winter comes around and the fogging becomes obvious. For that reason, if you suspect any type of potential window damage, always make your insurance adjuster aware that you’ll be holding the claim open for possible future supplemental damage claims.

Remodeling and repair questions?
Email Tanya at
ShapingSpacesGroup@gmail.com
Shaping Spaces
Email Paul at paulbianchina@inman.com. All product reviews are based on the author’s actual testing of free review samples provided by the manufacturers.

Copyright 2012 Paul Bianchina

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