The One Client I Can't Help

I have always enjoyed and take great satisfaction in helping people buy their dream home or buy their first home. Especially with first time home buyers it often can be a long and deliberate process for the client and me. I have seen it take 2 years before. Thankfully, I am persistent and/or stubborn. I have always told my clients that I am willing to work as hard as they are.

But, there is one client or one type of client I can’t help sometimes. And that’s a client who does not listen to and act on my advice. I have one client I have been talking with for nearly a year.

In the spring of 2009 I ordered her credit report and she only had one credit score because she has so little credit in her name. At that time, I had 4 or 5 banks who would lend to her with just one credit score. I encouraged her several times to open an additional credit card or personal loan or to add her name as a co-borrower to a family member’s credit account to establish more credit and 2 or more credit scores so that she could be easily approved for a mortgage.

She recently called me about getting pre-approved again for a FHA loan as other mortgage lenders she talked to were not helpful and did not call her back ever. So, I ordered her credit report and guess what? She still only has 1 credit score and only 1 credit account. Ugh!

Now, I only have 1 bank that will potentially approve her loan IF we can document non-traditional credit. And this bank charges extra for her lack of credit scores and credit history. In fact, she will now be out of pocket an additional $2,000 because of this decision.

Why Can't I Find a Home?

If you are a first time home buyer you may be asking youself why is it so tough to find a home I/we can afford in Denver? You hear the news stories on the radio, TV, and internet about how bad the real estate market is nationally. However, it's a different story here in Denver for homes priced under $250,000.

Yesterday I attended a class taught by Your Castle Real Estate and they have the best local real estate data in my opinion and here is what I learned--
* For single family homes priced between $135,000-$215,000 there is less than 3 months of
inventory for sale. This is a sign of a Seller's Market.
* Inventory levels at this price point dropped last year.
* The average home price in this range increased 6% last year.
* In the Denver southwest area, prices increased an amazing 12% in 2009.

As a buyer you want inventory levels to be over 6 months and they are half of that. Plus, a huge majority of homes in this price range are short sales on top of it. This is why it is so tough to find a home you can afford.

So, what do you do? Here are a few ideas--
* Look every day on-line for new homes or have your Realtor do this.
* Tour the new listings that day as they will probably go fast.
* Look at your budget. Is it possible to squeeze another $100 a month towards a house
payment in your budget? That $100 will buy you close to another $20,000 of buying
power!
* Widening your search area can help too.
* If you don't have kids yet, good schools should not matter as much to you. In Aurora for
for example a $200k home in Cherry Creek Schools might have a monthly tax bill of
$150 a month; whereas, a $200k home in Aurora Public School might have a monthly tax
bill of just $75-$100 a month.
* ACT FAST! Mortgage rates will be rising in April or earlier as the Fed quits buying
mortgage bonds and this could cause your expected monthly payment on your home to
rise $75 to $100 a month.

Is Shadow Inventory Bad?

I have read several stories in the last month from organizations like RealtyTrac and others that they estimate that banks own another 3 million homes nationwide that are NOT on the market to be sold yet. This inventory is called shadow inventory and is widely considered to be bad news. Why? This further supply of homes will drop real estate prices lower is the expectation or it will cause the housing recovery to be slower.

But, let's look at the Denver market. Most "experts" think that banks own about 13,000 homes in shadow inventory currently in the Denver area. I would guess that half of those homes are worth $200,000 or less.

According to the local MLS data there is fewer than 3 months of unsold homes on the market priced under $200,000 here in Denver currently. And I would bet a large majority of those homes are short sales that most buyers don't have the patience to wait for.

In fact, over the last 6-8 months most of my clients buying homes under $200,000 have gotten into bidding wars on homes that are not short sales because there is so little inventory available.

Thus, it would be GREAT NEWS if the banks were to release to the market 1,000 or 2,000 of these homes every month in my opinion. What do you think?