Last month, I refinanced my home in Charlotte, NC for the second time in three years. The last time around the financing requirements were as easy as buying a movie theatre ticket. Not so anymore.
My refinancing experience harkened me back to the days of old. First, the bank had to complete an appraisal and credit check before they would even talk firm rates and the loan-to-value (LTV) had to be less than 80%. Then, I had to give a complete financial package, with tax returns, bank accounts, etc. As I own several companies, I had to provide tax returns for them as well. I passed the test and was able to refinance at a lower rate.
Gone are the days when a new "up-and-coming" millionaire would walk into a $2 million dollar home and buy it for little or no money down. Trust me, this is a good thing for America since we have seen the repercussions of this reckless loan model. But the pendulum always swings too far in either direction and while I praise proper lending standards, some banks have gone overboard. This is clearly evident in the luxury home market, where some banks are requiring as much as 40% down in equity. This is a shock to the luxury home market and it will take some time for the shock to wear off.
On the other hand, the entry level and first time buyer seems to be fairing much better, as rates are at historic lows, deals are abundant and the government has pushed to help this home buying segment with such actions as the $8,000 first time home buyer credit.Let's take a look at how we can take advantage of this disparity in these two home buying segments.
Get Creative If You CanMy wife came home the other day with the recent edition of Charlotte's Estates & Homes magazine. The center spread was taken by Charlotte luxury home seller, Peters & Associates, Inc. (luxury homes are those selling for more than $750,000.) There were 10 homes, starting from $1,299,000 and going up to $7,890,000. What set this agency apart was that in each sale, the buyer was being offered a luxury car if they bought the house. In one case, the car was valued at "up to $1,000,000," and the seller threw in a country club membership as well. Was the seller merely just padding the price of the home up and then giving the difference away in the form of the car or the country club membership? And, with today's new tough lending guidelines, wouldn't the banks' appraiser catch this slight-of-hand? So I called Peters & Associates and spoke with Nickolas Peters. To give me some idea of how hard the luxury home market in Charlotte had fallen, Peter's said his firm's luxury homes sales were down well over 70% in 2008. This explains why Peters encouraged his clients to get creative. But Peters stressed that his auto giveaway plan was anything but a slight of hand, rather a well thought-out "incentive" that it had taken him months to develop and get approved by the local realtor association and his attorneys.
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