How pound wise may be penny foolish!

The current economy has everyone looking for ways to cut cost.  This means that your buyers may be looking for ways to save money at closing.  One of the few “optional” items on the settlement statement is the owner’s title insurance premium.

Most buyers understand that title insurance protects them from a loss caused by a title defect.  Buyers may not always realize the shortcomings of the title examination.  Title exams are performed by human beings who are capable of error.  The title exam is a review of documents filed and indexed by human beings, also capable of inaccuracy.

Even in the absence of a mistake, a title examination cannot insure that title is clear as of the time of closing.  It is a look back in time of 4 – 6 weeks, depending upon the county involved.  The time period between the effective date of the records and the time that it is examined is called “the gap.”

No one knows what may come up in that period of time.  The following are some examples: (1) equity lines taken out by the seller who needs cash, (2) materialman liens for recent work for which the payment was not made, (3) a lien resulting from a lawsuit by credit card companies or other companies for unpaid debts, (4) federal tax liens, (5) Georgia Department of Revenue liens, (6) lis pendens filed by disgruntled spouses/ex-spouses.

Buyers are cost sensitive but that has to be balanced against the risks of loss.  Owner’s title insurance is always important.  In a time when sellers are under financial stress, it is absolutely vital.  Make sure your buyers protect themselves.

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To search for homes, visit – www.AtlantaHousingSource.com. You can search for free and even get the newest listings that match your criteria via e-mail.

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In this video, Mark Lackey shares with you about down payment assistance and how you may be able to qualify.

Has the credit made a difference?  Yes.  Would those individuals have purchased anyway, most likely.  What the credit has done was created a since of urgency and lowered the inventory levels quickly.

I have had a few buyers that have not gotten under contract to qualify for the credit and the clock is ticking.  Most of them early on made the choice to find a home that they love no matter how long it takes to find it rather than rush just to get the $8,000 credit.  These are the wise buyers.

The buyers trying to get under contract have been involved in multiple offer deals where there has been intense competition.  Banks and individuals have been holding firm on their offer price.  The ones that have won the bids have offered full list price or more.

Think about it, just months ago you could get a bank or individual to negotiate, and now they are holding strong.  I think this will continue until April 30, when demand will drop off.  At that point, then they will be more agreeable to negotiate.

Is the $8,000 credit held prices artificially high? I believe that sellers felt that could get $8,000 more for their home with the credit. Those who didn’t sell will see the reduced demand equate into price reductions.

I am glad that the credit was not considered for another extension so the market can get around to self correcting.  Selfishly I want a normal market, not artificially stimulated.   Myself and many of my colleagues agree that letting the free market find its balance will be the quickest way to get back to normal.

New buyers after April 30 will be in short supply, but we will be busy getting all the homes to closing by June 30.  During this time we will have to work hard since any issues found during inspections that could kill the deal may cost the buyer $8,000. Expect sellers to be tough about making repairs or concessions since they know every issue after April 30 is a $8,000 issue.

Keep focused on keeping the relationship of protecting your clients during the next two challenging months.  Remember, our partners are getting ready to get real busy. Our inspectors, lender, appraisers and closing attorneys all need our support and patience.

Its almost the first of March and if you write an offer on a short sale home tomorrow, March 1 and it takes the four to five months to get  closed as we just experienced, if you are lucky, you are closing on the last allowable day, June 30, to get the $8,000 first time homebuyer credit from the federal government.  Miss that by one day and you miss the $8,000.

Now I’m not a gambling man and don’t know if you are, but, I wouldn’t risk the chance of losing $8,000 waiting on the bank.  There are thousands of homes out there for sale that only need the owner, Mr. and Mrs. Homeowner to sign and then you can close in less than 45 days from offer to move-in.

I am advising my first time home buyer clients to beware of short sales if they want to get to the finish line and collect $8,000.  While I know this news disturbs all the agents with short sale listings, the main reason is many agents don’t understand the short sale process and have not done the work to get the front end work done to speed up the process.

Likewise I have a couple of buyers looking to secure the $6,500 second home buyers credit and I am advising them likewise to beware of writing a contract for a new home that has not been started, up out of the ground.  With all the rain we have been experiencing there is a good chance of delays when digging a foundation, pouring concrete slabs and framing up a home.

Bottom line, there are risks with short sales where you can’t control the banks and new construction where you can’t control the weather.  To be sure to qualify for the first time homebuyer $8,000 and second home $6,500 write a contract that has a great chance of closing in time and don’t ride a deal down to the end only to run past June 30.

Mark helps clients in Gwinnett, North Fulton, Forsyth & Cobb County. Click here to register for a Free Home Buying Guide.

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