Dean Wong Financial Blog

DEAN WONG’S ANALYSIS, SNAPSHOT AND TOP 10 SELLING TIPS TO HANDLE THE CURRENT ENVIRONMENT:

Below you will find some technical information about what happened yesterday and some tips on how to handle the current environment.

1. Yesterday was a wild day in the banking system.  We received 4 mid day rate changes for the worse.  The 10-yr bond yield which has been holding steady at around 3% or so for the past few months steeply climbed yesterday to 3.69% today.  This effectively means an increase in rate of approximately .75% in rate.  Yesterday morning, I was locking loans at 4.75%.  By end of the day I was locking at 5.50%!
2. This could potentially shift someone from a pre-approval status to a decline status so if you have someone looking it may be a good idea to have them get a revised estimate from their lender and a new pre-approval letter.
3. If you have a buyer who’s in escrow and the current lender claims they are LOCKED, I’d ask for a LOCK CONFIRMATION IN WRITING.  The reason is because many lenders who have been used to the low rate environment may actually be trying to time the market and may not have actually LOCKED them in until closer to closing!  This is dangerous if your client is in FLOAT status thinking he was LOCKED at X rate!!
4. Buyers look mainly at the monthly payment so the strategy to keep the same purchase price and monthly payment would be to buy-down the rate as much as possible via points (hopefully credited by the seller).  Conventional financing allows seller to credit buyer up to 3% towards closing costs and FHA financing allows up to 6% credit towards closing costs!  Maximize the credit for your buyer to minimize the rate!!
5. If you’re a listing agent, I’d highly advise speaking to the potential buyers and request an updated Pre-Approval letter from their lenders to make sure they can still qualify for the offer price they made.  If you’re in escrow as a listing agent w/ a buyer, I’d highly advise reaching out to the buyer’s agent to make sure the buyer is LOCKED and is moving fwd with the approval process in a timely manner.
6. For your buyers if you have a pre-approval letter more than a couple of hours old go back to the drawing board and get re-approved so expectations of payments/costs are properly reset.  There’s nothing worse than entering escrow and facing buyer’s remorse.  Better know now right?
7. For buyers who are in escrow and LOCKED and may be on the fence of backing out due to minor repairs or cold feet, I’d advise them how lucky they are w/ the rate they have and to cancel and find another property, they’re doing it at the peril of a higher rate.  Hopefully, this keeps deals in escrow from canceling as well.

8. I advise working with a mortgage broker vs. a direct lender as we have the ability to “Float Down” and reposition the loan to numerous banks for a lower interest rate if the market yields a lower rate.  Why have all your eggs in 1 basket? 

9. Keep everything in perspective guys.  We’ve been very spoiled for the last couple of months with 30-yr Fix rates in the historically low mid 4’s.  With the current rates in the mid 5’s, even though it is higher than what the market has been seeing for the past few months, this is still an EXTREMELY low rate for a 30-yr Fix loan in the grand scheme of things if you look at a historic chart!  And prices are still LOW.  Still a great time to buy NOW!!!!!!    

10. Final tip – make sure your serious and qualified buyers are in constant contact with their lender so they are updated about what’s happening and again that their expectations are realistic for the price point in which they are searching. 

I hope this helps and I will continually keep you all updated on my end as always.  Happy Selling and have a great week.

This entry was posted on Thursday, May 28th, 2009 at 11:11 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.