Making list not bad for Brevard.

Brevard County recently made another list, but was it a good list or a bad list?

It was reported last week that mortgage lenders in Brevard County will not lend more than 80 percent of some homes' value. In other words, a homebuyer would be required to come up with a down payment of at least 20 percent to purchase a home.

What does this mean? Let me explain.

Private mortgage insurance, known as PMI in the mortgage business, is issued on loans for more than 80 percent of the value or sale price of a property. This type of insurance is not "life" insurance to pay off the mortgage should you die but rather insurance for lenders who want to protect themselves in the event a borrower defaults on a loan. These loans are called "high-risk loans" with little or no equity from the buyer.

About a quarter of all home loans in Brevard County made between 2002 and 2006 required private mortgage insurance, according to the Federal Financial Institutions Examination Council.
Brevard County was cited as one area of the country in which restrictions have been placed on some kinds of loans of more than 80 percent. The restrictions are aimed at loans on properties that are not owner-occupied or are not primary residences.

I don't consider this a bad list. I think this is a good, safe list.

It will help put loans in the proper place. An investor who cannot afford to put down 20 percent on a property probably should not purchase the property. A person buying a second home who cannot put 20 percent down probably should reconsider buying.

However, a first-time homebuyer with good credit and a stable work history likely will be offered financing of more than 80 percent and likely will qualify for private mortgage insurance.
A buyer who has lost equity through the sale of their home in a market such as this deserves to be able to purchase a home without a 20 percent down payment. This will happen in the current mortgage market.

Not everyone is able to make a sizable down payment on a home, and the mortgage insurance system takes that into account. The headlines initially looked shocking, but the reality of the change in mortgage insurance will work for most homebuyers. Safety measures are placed on us to protect the properties and the people who purchase them and the lenders who finance them. Our market is in the "correction stage."

Conservative measures are not a bad thing. Such measures would have helped eliminate or reduce the number of home foreclosures in the market across the nation.

Lesson in supply, demand, scarcity...

What creates value in real estate?

The answers are simple and apply to practically every sales market: scarcity, supply and demand. If a property is limited and desirable, then the chances of market appreciation increase.

If you purchase property in a new development, and the new development is surrounded by vacant land, the vacant land continues the supply. Therefore, no matter how desirable, your home can only appreciate in the amount of replacement costs, because homes can continue to be built in a similar environment. In other words, buyers can simply build their own instead of buying your house.

Raising value-

If you purchase property that is scarce, -- that is, the area is completely developed and cannot be duplicated -- then the chances of market appreciation increase. For instance, there is a limited amount of land in Brevard County's beachside neighborhoods. Add that fact to many customers' desire to live beachside, and the result is greater value.

Similarly, the Lake Washington area is limited from developing to the west because there is an actual lake in the way.

Right now, in this current market, the supply of properties either beachside or in areas such as Lake Washington are plentiful, therefore, there is no market appreciation. For properties to appreciate, the demand must outweigh the supply.

Dwindling supply-

Now, as this market begins to change because of heavy influx of new employees and our special winter residents, we might begin to see our supply dwindle, thus creating a market that is appreciating.

In my professional opinion, this will not happen for several years down the road as we have an abundance of inventory in the home, townhome and condominium market. But as this market activity increases, buyers might find that their favorite property that they have been waiting to see the list price continue to drop has been purchased. There is a supply, but the very best values are being absorbed or purchased right now in this market.

Sellers. time to get ready.

Buyers have arrived. Make sure you, as a seller, are ready.

If you need to sell for one of the following reasons, be prepared:

• You are transferred and "must sell."
• You want to "scale down" to a smaller place or move up to a larger place because you know that if you "sell low," then you can "buy low."
• Illness or financial reasons are forcing you to sell.

If you are "testing the market," do not sell now. Only serious sellers should be in this market.
You have heard it before. We are in a buyers' market, and if you are the seller, unfortunately, you are not in control. A motivated seller must do several things to market his or her home.

Price it right: Most important is price.

This, very obviously, is a price-driven market. Sellers need to make sure that their home is competitively priced. One must keep abreast of all sales and all listings that are comparable.
Don't be fooled by "overpriced" listings. We all would like to believe that our home is worth much more than our neighbor's home. Of course, it is to us . . . but probably not to today's buyer.

Get a reality check if you want to sell.

Sales price determines value, unless list price is less than the most recent sales. If so, then the low-priced listing now has become your neighborhood "benchmark."

Make it look good: Now that you are priced right, how does your home look to the buyer?

First impressions: Your front yard -- is it manicured?

Freshly painted on both the exterior and interior of your home?

Sparkling-clean from the front door and throughout the entire house?

And what about that purple bedroom? Paint it beige.

If you answered "yes," and you have neutralized the coloring of your home, you could be one of the buyer's top three choices.

• Make it easy to show: We've established a competitive price, the home is freshly painted and sparkling clean, but we are inconvenienced by the showings from Realtors. If you make this home difficult to show, it will not sell. Sometimes, an agent shows 10 homes in one day, and proceeds to show the buyer (who wants to see everything out there) 10 more homes for the next five or seven days. Yes, the Realtor may run late or early, but he/she is trying to please the buyer, so this buyer will buy. And if you make your home too difficult to show, there are many others that will make it easy for the agent. Stay in the running. Make it easy to show.
• Getting the offer: When it comes to the offer, this is a stressful time. Buyers are making very low offers, but if they try the offers on the top three, and none negotiate to 25 percent off the list price, then the buyer comes back to his/her first choice, and gets the message that maybe the homes are "priced right."
• Don't get your hopes up. The buyer is not going to pay list price unless you are way below the market, or unless you have all of the features and exact taste of the buyer. That is, this buyer could move in and bring furniture that looks like it was made for your home.
  You, then, have found the perfect buyer. Most buyers are beginning to settle on 10 percent off of the list price if the home is priced correctly.
• Financing and inspections: Do not think your home is sold until after the buyer has had the home inspected and accepted the inspection results. Then, you are getting close. Financing is the most important part of this transaction. We would all like the cash buyer. There are some, but not that many.

The seller should ask for a pre-approval letter from a local lender. But it is still not a sure thing.
Lenders are getting very particular. A full-loan commitment is a must before closing can take place. Do not move out of your home until your agent has reported the good news. Monitoring the loan process is of the utmost importance. Even with a loan commitment, the deal can fall.

Some lenders, in this changing market, can come back and ask for more information or actually deny the loan or change the terms on the buyer. If the buyer is marginal, make sure you have a good, conservative agent to guide you in your move and closing of this very important transaction. Closing papers have been reviewed and approved then.

Next, the cashier's check is given to the closing agent, the wire transfer from the lender has been received. The closing agent hands you your check. Now, breathe easy. You are closed.