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About our next videobook project

When Stefan and I wrote the Swanepoel Social Media Report 2010: A Field Guide for Real Estate Professionals, one of the things we originally envisioned was to include tutorials for each of the social media platforms we mention in the book.  Some of these were the usual suspects: LinkedIn, Facebook, Twitter, YouTube and blogging.  But, additional honorable mentions also include:  twellow.com, hashtags, tagalus, hashtags.org, alerts, RSS and a slew of others.  

Given all the number of tools, platforms and quick-start activities we mention in the book, we saw early on the potential there was for it to quickly turn into a heavy user's manual by including tutorials.  We felt that if we indulged that itch, the details of "how to" would drown out the bigger picture for real estate professionals trying to wrap their heads around this medium.  And, while we both still agree about the soundness of the direction we ended up taking, I think there's still a piece of us that wishes we could have fit those tutorials in somehow.  

So, that's what got us thinking: why not use the medium of social media to extend the book into the virtual space?  They make audiobooks to go with hardbacks and paperbacks, right?  Why not a video book (vbook)?  

So here we are.  Below is an excerpt from Chapter 1 of the vbook project I'm working on to complement the text of our book.  The idea is to make the complete vbook available for free (when it's completed next month) to all of you who purchased the hardcopy.  In that sense, we hope it will complement the paperback with additional graphics, visual references and online sources while also supplementing it with many of the "how tos" that didn't make it on paper.  We're toying with the idea of making it also downloadable, but the jury's still out on that.

Anyway, let me know what you think.  Is it a bust before it starts?  Dumb idea?  The coolest thing since Swiffer? I'd really value your (constructive) feedback.  

In the meantime, I'm on track now to get the complete vbook rolled out on MindBridj.com by the end of next month.  I'll keep ya'll posted.

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What's the difference between a mortgage and a home equity loan?

When you buy a home, the loan that you get will be the "first" mortgage.  After you've built some equity, you may decide to tap into it by taking out a loan using the equity as collateral.  This is called a home equity loan.  This loan is generally talked about as the "second" mortgage and it's separate from the original, first mortgage.  If you decide later to refinance, then any mortgages that you have on your home -- the first and second mortgages -- are paid off at that time.  The outstanding balances are typically rolled into the new loan which then becomes a new first mortgage.

Can I, as a seller, be present at showings?

Can you? Yes. Should you? No...

Buyers feel more comfortable looking at homes when sellers aren't haning around. They feel more relaxed, can take their time to look around, and feel free to discuss the home amongst themselves and with their agent. Speaking of agents, they are more in tune with what a particular buyer is looking for than the seller is. You may be really proud of your newly remodeled kitchen and feel compelled to focus on that when talking to the buyer, when what the buyer may really be impressed with is your home's three-car garage.

When a showing is scheduled, hop over to the neighborhood coffee shop for a few minutes and let your agent do the work you've hired her or him to do.

A Simple Way to Avoid a Common Problem

It's been several months since you sold your old home.  You were pleased that the buyer was easy to work with and that the transaction went smoothly.  You are enjoying your new digs, until one day the phone rings...  It's the buyer.  He says the water heater quit, and the air conditioning isn't working, and, and, and... you should pay for it all.  What?!  It's not my problem, you say, but the buyer is adamant.  He says you knew about this.  You say you didn't.  Now what? ...

Are Prices of New Homes Negotiable?

In real estate anything is negotiable, but home builders can be a little tough.  The reason is that their profit margins are often not very high, and therefore they don't have much room for deep discounts.

Should you rush to sell your home after a spouse dies?

Here's one from Bob Bruss with insight about tax considerations of a surviving widow or widower after her/his spouse passes.

Internal Revenue Code 121 says a surviving spouse has until the end of the year of the other spouse's death to sell the principal residence and claim up to $500,000 tax-free profits. The tax reason is the year of a spouse's death is the last year a surviving spouse can file a joint-income tax return with the deceased spouse.

However, IRC 121 doesn't mention the stepped-up basis benefit for a surviving spouse who inherits the deceased spouse's half of the principal residence.

Suppose you and your wife are both on the title to your home. You die. You and your wife owned your home in joint tenancy with right of survivorship, in your joint living trust, or in your will you leave your half of the house to your surviving widow.

The result is your widow will receive a new stepped-up basis to market value for the half of the residence inherited from you. In a community-property state, the entire value of the house will be stepped-up to market value on the date of your death.

As you can see, after one spouse dies, there is no reason the surviving spouse should rush to sell the home. It's true the IRC 121 tax exemption declines from $500,000 to $250,000 after the year of the co-owner spouse's death. But that disadvantage is far outweighed by the stepped-up basis for the surviving spouse. Please ask your tax adviser for full details.

Source:  http://www.inman.com/hstory.aspx?ID=45625

Should I pay points?

Link: Should I pay points? Does a zero-point/zero-fee loan really exist?.

The best way to decide whether you should pay points or not is to perform a break-even analysis. This is done as follows:

1. Calculate the cost of the points. Example: 2 points on a $100,000 loan is $2,000.

2. Calculate the savings in monthly payments on the loan as a result of obtaining a lower interest rate. Example: Assume $50 per month.

3. Divide the cost of the points by the monthly savings to come up with the number of months to break even. In the above example, this number is 40 months. If you plan to keep the house for longer than the break-even number of months, then it makes sense to pay points; otherwise it does not.

Note: The above calculation does not take into account the tax advantages of points. When you are buying a house the points you pay are tax-deductible, so you realize some savings immediately. On the other hand, when you get a lower payment, your tax deduction reduces! This makes it a little difficult to calculate the break-even time taking taxes into account. In the case of a purchase, taxes definitely reduce the break-even time. However, in the case of a refinance, the points are NOT tax-deductible, but have to be amortized over the life of the loan. This results in few tax benefits or none at all, so there is little or no effect on the time to break even.

If none of the above makes sense, use this simple rule of thumb: If you plan to stay in the house for less than 3 years, don't pay points. If you plan to stay in the house for more than 5 years, pay 1 to 2 points. If you plan to stay in the house for between 3 and 5 years, it doesn't make a significant difference whether you pay points or not!

What drives mortgage rate changes?

Like prices on other commodities, adjustments to interest rates -- the price for credit (i.e., loans) -- are based on the rule of supply and demand, generally speaking. (Other factors influencing expectations about future prices also come into play. More from the source article...)

Generally, if the demand for credit increases, so would be the upward pressure on interest rates. This is because there are more buyers of credit (i.e., those of us seeking loans), so "sellers" (lenders, in this case) can command a better price, i.e. higher rates.

Similarly, if the demand for credit reduces, then pressure will be applied for interest rate reductions. In this case, there are more "sellers" than "buyers" (picture you and me having the luxury of time --unlike the last few years in this market -- to properly cater to the selection of our home loan while fending off lenders seeking enticements to get us to sign). In this environment buyers can command a lower better price, i.e. lower rates...

But wait, Mel. That doesn't square with the frenzy of the last year where interest rates remained low anyway...

And for that observation, you'd go to the front of the class. All other things being equal, the basic supply/demand rationale applies. But, as I said earlier, there are other factors that feed in to the final price set on loans.

Some of these include expectations of lenders about inflation, as well as expectations also about regulatory action designed to support the Fed's desired economic agendas. These expectations would actually go more to explaining the low rates we saw throughout last year despite a strong economy. Though supply and demand was still at play, all things weren't equal. In that world, despite the strong productivity, expectations about various economic drivers -- inflation being one of them -- remained low...

There's alot more that can be said about this. But, for basic details, the attached is a good primer.

Mortgage-Net : Why do mortgage rates change?

- mel

What is the difference between pre-qualifying and pre-approval?

A pre-qualification is normally issued by a loan officer, who, after interviewing you, determines the dollar value of a loan you can be approved for. However, loan officers do not make the final approval, so a pre-qualification is not a commitment to lend. After the loan officer determines that you pre-qualify, he/she then issues you a pre-qualification letter. This pre-qualification letter is used when you are making an offer on a property. The pre-qualification letter indicates to the seller that you are qualified to purchase the house you are making an offer on.

Pre-approval, on the other hand, is a (significant) step above pre-qualification. Pre-approval involves verifying your credit, down payment, employment history, etc. Your loan application is submitted to an underwriter and a decision is made regarding your loan application. If your loan is pre-approved, you are then issued a pre-approval certificate. Getting your loan pre-approved allows you to close very quickly when you do find a house. A pre-approval can help you negotiate a better price with the seller, since being pre-approved is very close to having cash in the bank to pay for the house!

Source: Myers

- mel

What is a FICO score?

What is a FICO score?

A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Fair, Isaac began its pioneering work with credit scoring in the late 1950s and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrowers credit history into a single number. Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission has ruled this to be acceptable...

- mel