Real Clues

[RealClues] #288: When the Lender Says No (part 2)

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This week at www.LuxuryClues.com: Good News for Good Real Estate
Agents; A Tropical Storm, Earthquake, and Major Car Wreck--What a
trip! Don't Call Them Wealthy--A Look at What Luxury Real Estate
Clients Really Want; Custom Building Series: Travertine and Shiny
Granite Is Out--Limestone and Other Natural Stones Are In.

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Table of Contents
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1. CoachingClues: When the Lender Says "No" (Part 2 of 2)
2. Welcome Notes: Don't Be a Victim of Today's Market
3. Reprise: Bump the Slumps
4. Create a Better Life: Making Time When There Isn't Any (Part 1 of
4)
5. Featured Products:
*Back to School Sale
*Free Open House Conversion Script
*SNEAK PREVIEW of our new "Listen and Learn" program launching the
week of August 27, 2007: Get the Listing Every Time Teleclass
6. Increase Your Production with Personal Coaching
7. Give Us Your Feedback on this Newsletter
8. How to Subscribe/Unsubscribe

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1. CoachingClues: When the Lender Says "No" (Part 2 of 2)
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A slowing real estate market, a credit crunch, and an increase in
foreclosures means that mortgages may be harder to obtain. What can
you do when the lender turns down your qualified borrower?

Last week's article looked at how to handle a situation where the
appraisal comes in low on property. This week we look at additional
strategies to assist you in closing a transaction when the lender
says "No."

Second and Third Mortgages Bridge the Gap
If the appraisal comes in low and the buyer still wants the property,
one option is for the buyer to seek secondary financing. This could
involve having the sellers and/or the agents carrying a second or
third mortgage. Another alternative is to seek a home equity line
from a credit union or business bank. For example, if the buyers
planned to make any renovations or to replace major items such as the
air conditioning, carpets, or appliances after the closing of the
transaction, they may be able to obtain a home equity loan for the
amount, thus freeing up additional funds to put towards the down
payment. A different approach would be to seek financing from a
private lender who does "hard money" loans. These loans are typically
much more expensive. In a severe crunch, private financing may be
your only alternative.

The Buyer Doesn't Qualify
Your buyers may be pre-approved for a loan at 6.5 percent and the
rates go to 7 percent. If the buyers' original ratios were tight,
your pre-approved buyers may no longer qualify for their loan. This
creates an exceedingly difficult situation for all parties. One
solution, provided that the seller is desperate enough to do so and
has sufficient equity, is for the seller to buy down the buyer's
interest rate to the original 6.5 percent.

Many lenders also offer buy-down programs to help borrowers qualify
as well. The most common buy-down is known as "2-1." Assume that the
rates are at 8 percent. A typical buy down would be for 6 percent for
year 1 and then 7 percent for year 2. At the beginning of the third
year through year 30, the rate would go back to 8 percent. At
closing, the borrower or the seller prepays the difference in
interest for the first two years.

For example, if the borrower is taking a loan of $300,000, the buy
down amount would be two percentage points or $6,000 the first year
and $3,000 the second year, for a total of $9,000. The $9,000 may be
added to the purchase price, provided the comparable sales are high
enough to support the higher valuation. In the example above where
the buy down is only a half percent, the buy down amount on a
$300,000 mortgage for the first year would be approximately $1500.

A slightly different approach is to keep the loan fees the same, but
to raise the overall interest rate once the buy down period has
passed. For example, if the borrower above was unable to prepay the
buy-down amount, the lender could help out with the equivalent of an
adjustable rate mortgage. Assume the interest rate is 7.5 percent
with 1.0 point. To keep the points at 1.0, the borrower could qualify
at a rate of 6.25 percent. The second year the interest rate would be
at 7.25 percent and years 3 through 30 would be at 8.25 percent.
There are multiple variations on this theme. The simplest solution
may be for the borrower to take a traditional adjustable rate
mortgage rather than working with the buy-down.

No W-2, No Loan
In a credit crunch, lenders tighten the standards for self-employed
individuals or people who may be between jobs. Since most
self-employed individuals are aggressive in taking business
deductions, they may find it particularly difficult to obtain a loan,
even if they have 20 percent down and excellent credit. Lenders are
nervous that the borrower's business may decline and that the
property may come back to them as a foreclosure.

If you're representing someone who is self-employed, expect to have
your client's tax returns reviewed as carefully as an IRS audit.
Also, many underwriters don't understand the subtleties of corporate
or partnership tax returns. The underwriter on our loan disallowed a
distribution from our company as income even though we paid taxes on
it.

Job history will once again become an important issue as well. One
agent was representing a surgeon who was starting a new job at a
local hospital. The surgeon wanted to purchase a home prior to
beginning his new job. He had several million dollars in liquid
assets. Even with "A" credit, the lender turned him down because he
couldn't demonstrate two years of income with his new employer.

"The good old days" of 20 percent down, fully documented loans with
careful scrutiny of all borrowers are upon us again. Given that there
are many more listings than buyers in most places in the country, the
tightening of credit may hasten a deeper slowdown. Foreclosures,
bankruptcies, and over extended borrowers are bad for everyone in our
business. In the long term, however, tougher standards will be better
for just about everyone.

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2. Welcome Notes
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Welcome to our new subscribers this week. Each week RealClues
provides you with great strategies to improve both your business and
your life. If you find this issue of RealClues helpful, take a moment
to hit the "forward" button and send it to another friend in the
business.

At Coldwell Banker's Retreat, I had a chance to speak with a large
number of agents from all over the country. They're all having a
great year, despite mortgage difficulties and in some cases, price
declines. As my good friend Nancy Sanborn of Prudential Beverly Hills
said, "The market shifted about three weeks ago. We just changed
strategies. We have plenty of clients. We're focusing on getting
better Google placement by blogging." Notice Nancy's approach. No
panic, no gloom or doom--just time to shift gears--nothing more.

It's so easy to become a victim in this market. If you listen to all
the doom and gloom, it can ruin your motivation. Get away from those
who are negative. The top agents see this as nothing more than a
market shift. They're still doing business because they have the
skills to cope with mortgage difficulties as well as the motivation
to keep prospecting for new clients. If you need help with the
scripts and dialogues for this market, order our List & Sell Real
Estate Like Crazy. The Rate of Absorption Dialogue and the Holding
Cost Dialogue will help you cope with overpriced sellers, unrealistic
buyers, short sales, and other difficult situations. (For a complete
list of the topics covered, click on this link:
http://www.realestatecoach.com/training/listandsell.html#list)

If we have no computer or technology glitches (always a Big IF), we
should launch Listen and Learn next week. This is the one program you
will need to weather the market shifts that always happen. Real
estate is a dynamic and often difficult business. Listen and Learn
will help you be the best agent you can be. Look for details in a
special edition of RealClues when we launch.

Have a great week!

Warmly, Bernice Ross, MCC, and Byron Van Arsdale, MCC
www.RealEstateCoach.com, www.LuxuryClues.com, www.RossdalePress.com,
www.ConferenceCallTraining.com, and www.TeleconferenceLine.com

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3. Reprise: Bump the Slumps!
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This is a great article that I first wrote back in 2001. Best of all,
the seven strategies that show you how to "bump the slumps" represent
the best approaches from traditional real estate. Click here to read
more:

http://www.realestatecoach.com/articles_archive/art20020211.html

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4. Create a Better Life: Making Time When There Isn't Any
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Are you too busy? Would you like to be able to create more time for
fun in your schedule? If so, for the next four weeks, we'll be
running our series, "Making Time when There Isn't Any." Part 1 has a
quiz to help you determine where you are losing time that you could
recapture. Click here to take the quiz:

http://www.realestatecoach.com/articles_archive/art20050131.html

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5. Featured Products: Back to School Sale!
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**Save $66.00 on the Scripts You Need Today to Have a Great Business
Tomorrow
Our complete scripts library normally retails for $325.00. We are
running a Back to School Sale for only $259.00 plus S & H, for the
complete set. Here's what's included:

77 Market and Prospect for Real Estate Like Crazy scripts
61 List and Sell Real Estate Like Crazy scripts
82 Waging War on Real Estate's Discounters scripts

You can also purchase these separately. The Market and Prospect and
List and Sell Scripts are $149.00 each. The Waging War Scripts on
audio CD plus the script cards are $99.00.

Click on the link below to learn more about what's included:
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To order at the reduced price, click on the following link:
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Here's a sample of one of the open house scripts from List and Sell:

Converting Open House Leads

Script #32: Working with Open House Buyer Leads Who Are Not
Interested in the Property

Strategy: Use "switches" to motivate the buyer to work with you.

A "switch" is a good property that is not open during your open
house. Choose properties with different bed and bath counts from your
property as well as different price points. As a rule of thumb, open
house visitors look at properties priced about 30 to 40 percent
higher than they can afford. Be prepared to tell them about other
properties you could "switch" them to in their price range.

Prospect: Bernice, thanks for showing me this home, but it simply
isn't right for us.

Agent: Mr. Buyer, I have put together a list of some of the
best-priced properties in the marketplace. Some of them are
foreclosures and probates. Others are excellent properties that are
simply well-priced. Would you be interested in seeing a list of these
properties?

Prospect: Yes, I would.

Agent: Here's the list. To the best of my knowledge, none of these
properties is open today. However, if you're interested in seeing any
of them, I would be happy to set up an appointment.

Prospect: Several of these look interesting. Any chance I could see
some of them today?

Agent: Absolutely. I can meet you at my office on Fifth and Main at
5:15. Let me know the properties you want to see and I'll set up the
appointments. It would also be smart to spend a little bit of time
discussing exactly what type of property you would like to purchase
so I don't waste your valuable time showing you properties that are
not a good fit.

Prospect: I'll see you at 5:15.

Before you spend a lot of time showing someone property, it's smart
to have them pre-qualified with a lender. Also, be sure to conduct a
Buyer's Interview to determine their exact needs.

SNEAK PREVIEW of our NEW Listen and Learn program:
Sign up today for our sneak preview "Get the Listing Every Time." You
can listen to this at any time by first clicking on the link, filling
out the simple form, and open the link. This one hour class will show
you how to get more listings at the right price. What are you waiting
for--there's no obligation. Check it out for yourself and watch for
details about our new Listen and Learn Program starting soon!

http://www.profcs.com/app/netcart.asp?MerchantID=35347&ProductID=3508879

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6. Increase Your Production with Personal Coaching
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Looking for a well-trained coach who knows the real estate business?
Our coaching team can help you increase your production and make your
dreams come true! Send an e-mail to Shane@RealEstateCoach.com and
we'll help find the right coach for you.

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7. Give Us Your Feedback On This Newsletter
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

We want your feedback-to share your thoughts and suggestions, please
e-mail us at Shane@RealEstateCoach.com.

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8. How to Subscribe/Unsubscribe
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Visit our Web site, http://www.RealEstateCoach.com to
subscribe/unsubscribe to RealClues.

Copyright (c) 1996-2007, RealEstateCoach.com and Teleclass4U.com,
LLC. All rights reserved. Permission is granted to reproduce, copy or
distribute RealClues as long as this copyright notice and full
information about contacting the contributors to this newsletter is
attached.

Contributors to this newsletter:
Bernice Ross, MCC, and Byron Van Arsdale, MCC, Owners,
www.RealEstateCoach.com, www.LuxuryClues.com,
www.ConferenceCallTraining.com; www.RossdalePress.com; and
www.TeleconferenceLine.com
Shane Bowlin, REC General Manager

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