As the banking world has changed dramatically over the last 6 years, certain processes have become far more difficult than they were in the past. Appraisals, underwriting, review appraisers, flood certifications, good funds regulations  and other various documentations have added mountains of paperwork and days (or weeks) to the home loan experience. But one formerly simple practice, that of getting a gift letter, may be the most convoluted process of the bunch now.

In years past, buyers who were purchasing with an FHA mortgage or even a conventional mortgage were allowed to get a “gift letter” from relatives for all or part of the down payment. The process use to require the “giver” to sign a “gift letter” form, then give the money to the buyer who had to deposit the money in their account, and get a copy of the deposit ticket that showed the deposited funds matched the “gift letter amount”. It was assumed that if the donor gave the money to the buyer, they must have had the money to give. All common sense in this process has now changed apparently.

In a recent transaction where the buyer was putting down 15% and needed to get 5% from a relative to secure an 80% loan, the process required the following:

1) Gift Letter filled out by donor. 2) Donor getting the money wired from their bank account to the buyer’s bank account. 3) Donor writing a letter saying the money they transferred to the buyer was theirs to give. 4)Donor’s bank signing a letter saying the donor had the money in their account to wire the amount they transferred. 5)Copy of the wire transfer document showing the money was transferred from the donor’s account to the buyer’s account. 6) Buyer’s bank confirming the funds were successfully transferred into the buyer’s bank account. 7) Buyer’s bank giving a new bank statement showing the new balance in the buyer’s account after the transfer. 8 ) Mortgage company calling the donor to confirm the gift was really a gift and not a side loan. This phone call includes grilling the donor with multiple questions to see if they can be tricked into admitting it is truly a loan and not really a gift which would disqualify the buyer from getting the loan. 9) Assuming all those steps go ok, the money then needs wired from the buyer’s account to the closing institution for closing.

Is it possible to get through all these steps without hitting a land mine? Sure. And chances are most “gift letters” will be successfully completed to help the buyer obtain their loan. But the process can take weeks. Especially if the donor has to pull money from a retirement account or stock sale and needs time to provide documentation of where that money is coming from. So if you are thinking of buying a home and may need a gift letter it is wise to get all the steps in writing from your lender early in the game. If you just go get a check from a relative and deposit it in your account to secure the funds needed to buy the home and you don’t follow the exact steps required then you will not be able to use that money for the purchase. Large sums of money just appearing in your account without exact documentation are a red flag to lenders that some illegal activity may be going on and the loan will not close.

When it comes to “gift letters” you are guilty until proven innocent so make sure you follow all the steps necessary for your lender to approve your “gift letter” and give you the green light to secure the home of your dreams.

New statistics out from the Fort Wayne Area Association Of Realtors (UPSTAR) indicate the inventory of homes for sale is now the lowest we have seen in 8 years. Lets take a look at a few reasons why.

1) Home building has been slowed greatly over the last 5 years and with fewer new homes out there, the growing population is swallowing up the existing housing.

2) Rental rates are rising as landlords are trying to protect their interest against consumer credit issues. With buyers now being able to own cheaper than rent, the housing market is depleting.

3) Low interest and lower than usual house prices have stimulated buyer interest in the last couple of years and now with the fear that rates and home prices may start to climb soon, many buyers are buying up property at a bargain while they still can.

It is obvious that there are a lot of buyers out there and many of them are bidding on the same properties which is good for sellers as they see sale prices going up and the days it takes to sell going down. Now is a great time to list your quality home while the buyers are swarming.

Spring has sprung in the Midwest. The real estate market in the Fort Wayne, Indiana area is really taking off as nicer weather is descending upon us. And in the last couple of weeks a familiar friend is tagging along side the improved weather. That friend is the “multiple offer” situation. Let me explain.

When the market heats up, buyers often get into bidding wars over property. Since it is unethical for agents to share their offer amounts, buyers do not know what other bids are. So when a nice home comes on the market, or a well priced foreclosed home, we often see the “multiple offer” situation occur. When we do have this happen, it is good for buyers to keep a couple things in mind:

1) There is no guarantee you will get a counteroffer. Very possibly the seller or lending institution (in the case of foreclosures) will decide on an offer without ever countering. So …make your best offer up front and don’t be afraid to offer full price or even over full price if the home is worth it.

2) It does not necessarily matter if your offer comes in before another offer. If you like a home it is always best to get in your offer as soon as possible so you at least get your offer considered but if multiple offers are being submitted it is likely the seller will wait until all offers are on the table before making a selection.

3) It is possible that if you are bidding on a foreclosed home that receives multiple offers , the company will come back to all offering parties with what is called a “highest and best” form meaning they want all people to be aware that there are multiple offers so give us your best offer before we make a final decision.

While it can be frustrating to be a buyer dealing with a multiple offer situation there is a bright side. The market is improving or there would likely not be many of these situations occur. The more it happens the better our real estate economy thrives and that is good news for everybody.

The Indiana Regional Multiple Listing Service is now up and running and will gradually, over the next two years, grow to include a large part of the state of Indiana. What is this new MLS, how will it work and what benefits will it offer the public? Read on….

As of February 25, 2013, members of the Fort Wayne Upstar Multiple Listing Service joined forces with several other MLS groups to form the IRMLS. This new MLS will eventually include: Elkhart MLS, Kosciusko MLS, Northeastern MLS (Including Noble County), St. Joseph County MLS, Southwest IN MLS (Evansville), RACI (Kokomo) MLS, North Central MLS, Lafayette MLS, Bloomington MLS, Mideastern MLS and Bedford & White County MLS! A large contingent that will pool together information to provide better service to the public. Everyone should be incorporated by the Summer of 2014.

So what advantage  will the public see from this larger multiple listing service? Well the big one is that agents will be able to cover a much larger territory and provide more and better information to clients. For instance in Whitley County, IN, Orizon Real Estate, Inc has been a part of the Fort Wayne Upstar MLS but have not belonged  to the Kosciusko MLS on our western border. Therefore when clients wanted to look west it has been more difficult to pull up all the home information. Agents have had to rely on public sources like Realtor.com to find properties. Now with the expanded MLS, we will all be part of the same MLS and all information will be at our fingertips.

Another big bonus to the public will be that Orizon’s web site will soon include listings from twelve regions so house hunting will become easier and provide many more home choices. Our site will continue to look the same for a while but in the next few months, a lot more homes will available on our site so please enjoy the expanded options as they roll in!

For several years now,  we in the real estate industry have been operating in the midst of what we call a “buyer’s market.” A “buyer’s market” simply means that market conditions are more favorable to a buyer than to a seller. Interest rates have been low. Prices have been low. Numerous foreclosures have flooded the market with extra inventory being sold at discount prices.  All these conditions have caused sellers to recoil in fear that they would have to sell their home way under fair market value if they wanted to move. Well that all appears to be changing now.

Over the last six months the inventory has begun to shrink drastically. While interest rates are still low and very favorable to buyers, the shrinking inventory means there are now more buyers than quality homes in many areas and that creates a good environment for sellers to market their homes and expect good results. When buyers outnumber quality listings, the time to sell a home shrinks and the price of the home goes up by the law of supply and demand. That is exactly what we are starting to experience.

So what does this mean to consumers? Well, if you are a buyer take heart. Interest rates are excellent, foreclosed properties are still coming available and buying a home is still the American Dream so you should have a good year ahead. If you are a seller, it is a good time to put your home on the market. Buyers may be outbidding each other for your home and you should not have to wait near as long to sell it as you would have two years ago. So if sellers re-enter the market bringing their quality listings with them, and buyers are numerous and taking advantage of the great rates, the summer of 2013 should be a great one in the real estate market!

So far this year the Midwest real estate market has been hopping. Lots of buyers. Inventory is shrinking. Now when that happens it usually infers a shift in the market from buyer friendly to seller friendly. Let me explain.

When the economy is not strong, fewer people buy homes. When that happens you usually see a lot of listed houses just sitting on the market  and few buyers showing interest. For a seller to get an edge they have to lower their price. This drives down the price of homes and is favorable to buyers who want a good deal.

When rates are low and consumer confidence improves then usually buyers increase and the listed homes get bought up. At some point there are more buyers than quality homes listed. That favors the seller because now they have something that is in short supply (a nice listing) and the buyers are falling over themselves to buy it. That usually leads to sellers raising their prices due to the law of supply and demand. The market shifts in the seller’s favor and prices go up.

But in our current home buying and bank lending environment where tons of regulations have been placed on appraisers and lenders, the institutions are not keeping up with the markets. Appraisers are still cutting appraisals instead of allowing normal appreciation to happen. Banks are still holding a tight grip on loans and closings are taking 30 or 40 days longer to occur than a decade ago. much of this is due to tighter government regulations being placed on lending.   Some of it is good but too much of it kills economic growth and limits the normal market improvement.

In short…the private sector is trying to bounce back. The economy wants to get better. Housing is striving to get America back on its feet. But in order to do so the government and banking institutions must ease restrictions and let appreciation and growth happen!

2013 is being labeled the “Year of the House” as experts are preparing for a banner year in home sales. Will they be correct? We will see but there are a few interesting signs.

1) Last year we saw a much better year in the real estate industry than we have for the previous 3-4 so hopefully it continues this year.

2) 2013 is already starting out well in the mid-west and with another mild winter in our forecast it is very possible we will top last year’s early “spring fever” housing rush!

3) New agents are starting to get into the real estate industry again after several years of many agents leaving the business. Expectations are rising.

4) Rates are good and so are prices so that bodes well for buyers wanting to find a home this year.

5) With all the upbeat news mentioned above it seems home prices are starting to take an upward swing recently which should please sellers who are thinking about marketing their home this year!

With all this positive news on the “Home Front”, it is no wonder 2013 is being labeled “Year of the house!” Lets hope that proves accurate!

There are certain truths about the economics of a country that will never change. Regardless of the person or political party in power, the cost of food or the unemployment rates, some things transcend momentary situations. One of those truths is this: People will always need a place to live!

As a young real estate agent back in the 1980s it was an exciting time to enter the industry. Interest rates had been 18% just a couple years earlier and when I entered the fray they were down to about 12% and buyers were thrilled. Perspective is always important and while buyers today would shudder to think or 7 or 8% interest rates, 12% looked great back then. Buyers and even investors were coming out of the woodwork to buy real estate. New agencies were springing up all over and getting a real estate license was in vogue!  But still concerns lingered.

The thought of the day was that cycles usually lasted about 5 years so we would see an upswing for a few years and then another slowdown in real estate sales. I questioned our older agents often to see what their forecast for the future would be and the best advice I received was this: “Don’t worry about it, just do your job right because in good markets or bad, people will always need a place to live.” Hmm? That was smart and something I had not really thought about. Since then I have used that reply often when dealing with my agents. They get concerned that a client is really difficult to get along with…”Thats ok, difficult people need a place to live too.” People are losing jobs…”Yes but they will still need a place to live!” People cannot afford the higher cost of living…”yes but somehow they still have to have a place to live.”

You see the job of a real estate professional is to adjust to the market in order to provide the consumer with a place to live that fits their means and circumstances. 100% of the people always need a place to live in good times or bad so our job is to figure what loans will work, what homes will work, what remedies will work to overcome their obstacles to getting a home. The problem is never that things will get so bad that people will no longer want a place to live. They always need a place to live. The problem is adjusting to the needs so we can still provide the product!

No one knows what will happen in our economy in the near future. But we do know we will adjust and carry on because people always need a place to live!

As we gather in our homes with friends and loved ones this Christmas season we should be reminded to count the many blessings we   have and the freedoms we still enjoy. We also should remember those who won’t be home for Christmas this year!

1) Our military heroes who are stationed abroad, many in harms way who will not be able to plop down in front of the cozy fireplace this holiday season for eggnog and punch! They are spending their holiday protecting the rest of us from the many threats and evils that endanger our world today! To them we say thank you!

2) The heroes who lost their lives to protect our freedom! Thank you!

3) The homeless who have suffered greatly in the recent recession and have lost everything including the roof over their head!

4) Our many homeless animal friends who must endure the harsh winter months with no shelter and sparse food while struggling to survive!

As we reflect on the many blessings God has given us this season, let us take time to reflect on all those less fortunate and sacrifice what we can to help those without homes for Christmas. Contribute to your homeless shelter and  animal shelter. Remember a spouse of a military veteran and bless them with a gift or thought this Christmas. Put scraps out for the starving critters in your neighborhood that have no food to eat. Remember your blessings and bless those without a home this holiday season!

So now that Barack Obama has been re-elected what is the outlook for the real estate market in the foreseeable future? Lets take a look at a few signs.

1. When the incumbent stays in office it is likely that the policies in place will continue along the same path so what we have been getting is likely to be what we keep getting.  For those of us in areas where USDA loans have become prominent,  they will likely stay that way. Had Mitt Romney won office, it is unknown what would have happened to the USDA programs. Especially the subsidized program. For the short run anyway, we may see more continuity in our industry.

2. There is no defined path to recovery currently in place since unemployment continues to grow, foreclosures continue to climb and tax hikes loom on the horizon. Because of this, we cannot be sure what will happen to consumer confidence. In spite of those conditions, the past year has seen a surge in home sales indicating the populace has grown use to the economic times and are back in the business of buying homes. If they feel comfortable that conditions are now stabilized, we should continue to see home sales rise. However if the President’s re-election has a negative impact on the stock markets and negative economic news effects the attitudes of consumers, the housing surge could take a downturn.

3. If, as promised, the President raises taxes on the top income earners in the country, it will likely have an impact on unemployment. Job providers that see an increase in their taxes are likely to cut workers in order to maintain profit. That could cause unemployment to grow and foreclosures to rise.  Sadly, while that would be bad for the overall economy, it could continue to be a strong source of home inventory for buyers and investors looking to purchase.

4. While the economy drags along, interest rates remain low and until there are more signs of an economic upturn, it is likely rates will stay low. That continues to be good news for buyers as they enjoy the lowest interest rates in decades.

5. Finally, the government’s current propensity to over-reach it’s preferred boundaries through bureaucratic interference on seemingly all mortgage loans   will continue to mean the home selling process will be bogged down by weeks and months. While it was necessary to regulate dishonest banking practices that arose in the 1990s, the government’s over-reaction has now caused a three week process to become a three month process in most cases and when the leadership of the country has a “big government” philosophy it is unlikely that the processes will improve until some of the regulations are loosened.

Summary: We have seen a surging real estate market in the last year which is good. We have a re-elected president which should mean the current market will remain as-is which could be good. The interest rates are excellent for buyers. On the flip side, the loan processes are taking a long time and will likely continue to do so and the potential tax hikes could have a negative impact on jobs and consumer confidence which may halt progress. That would not be good but until something major happens, all we can do is stay the course and see what transpires!