An Open Letter To Buyers

My Go-To mortgage broker Tina Rebello and I are working on a new form letter for our shared website, explaining how we will work with the client once they sign in for information. I like the draft so much I’m going to post it here for the world to see, and then add some extra comments at the end.

Dear Client,

It is with great pride and pleasure that Realty Executives and Conficasa Mortgage International of Los Cabos extend to you the real estate and financing services available for your potential Mexico dream home! In addition to providing you the programs and benefits we offer, we would like to take the time to inform you on a few important parts of the transaction.

Part 1: When requesting real estate of financing information through lovecabo.net, you will not be bombarded with phone calls, emails or campaigns. Your information is not shared with anyone other than Realty Executives and Conficasa Mortgage of which both companies take the highest level of professionalism. Realty Executives will initially contact you with an email or phone call depending on the preference you’ve indicated and will proceed according to your wishes. If selected in your set up on lovecabo.net, Conficasa Mortgage will initially contact you with either a phone call or email to get you introduced and determine level of needs and information. Further, you will set the tone for further communication.

Part 2: When looking at properties in Mexico, there are important things to consider such as expected down payment when financing as well as closing costs associated with cash or financing transactions. Such closing costs are different than what you may be used to in your previous home buying experiences. Therefore, it will be important to discuss this information in the early stages of your communication as both Realty Executives and Conficasa Mortgage want your experience with Mexico home buying to be delightful as well as informed from start to finish.

Part 3: There are 4 parts to the home buying process. The first part is determining your interest, needs and expectations. Once a level of expectation has been established, if you are considering financing – pre-qualification is highly recommended whereas the programs in Mexico are designed for highly qualified individuals. If financing is of interest, based on pre-qualification, a pre-approval letter will be issued. Part 2 of the process will be finding your property. Part 3 of the process will be formalizing a purchase contract as well as (if applicable) initiating the complete file process for financing. Part 4 of the process will be the closing process which is also commonly different that your previous experiences in home buying. The closing process in Mexico takes between 45-60 days as there are various entities involved in granting title in Mexico.

On behalf of Realty Executives and Conficasa Mortgage International, we appreciate your interest and look forward to working closely with you throughout your possible transaction. We understand that purchasing a dream home is one of the most important decisions you will make in your lifetime.

Yours Truly,

Notice: we put ‘finding the home’ down on the list of priorities. Getting yourself educated, and getting your resources lined up in advance are the top priorities. I’d much rather spend an hour or more with a prospective buyer in the office explaining the procedures and costs before we ever get into the car to view properties. That way we can all relax and enjoy the process rather than experiencing a series of surprises once they are committed to a deal.

The closing costs are especially important to understand in advance, as they are very different from those at home. The buyer is responsible for paying the closing costs, including the cost of setting up a trust and paying the acquisition tax (sales tax). It’s important to budget those into your decision process. If you will be using financing it’s especially important to work with the mortgage broker in advance, they can usually give you a preliminary ‘go or no go’ answer quickly.

We’re not trying to wrap you up in red tape, in fact we’re trying to get you into your dream home with a minimum of fuss!

Carol Billups is Broker/Owner of REALTY EXECUTIVES Los Cabos. A Certified Home Marketing Specialist, she has enjoyed working with both buyers and sellers for nine years and still thinks hers is the best job on earth. She is also the real estate columnist for Los Cabos Magazine. You can read more of her articles on http://www.reloscabos.com. You can reach her from the U.S. or Canada at 1-760-481-7694, or in Cabo at 044-624-147-7541.

Search more than 2000 listings on the new http://www.lovecabo.net

© 2009 Carol S. Billups

But We Have To Sell It Twice!! (Putting a Price on Your Home)

Here’s the thing: these days we’re selling homes not once, but twice. And it’s not an easy sale.

It’s no secret our market is ‘challenged’. This is the worst downturn I’ve experienced. Period. There are very few buyers, and many of them are looking to finance their property. We have great cross-border mortgage companies and the interest rates are the lowest ever. So you’d think that would be good news, right? But it isn’t.

About 95% or even more of the properties in Los Cabos are owned out-right. And our carrying costs are very affordable. So, in prior downturns no one lowered their prices, they just hung onto the property until the market turned back in their favor. Many of our sellers are treating the market this way again: refusing to lower prices or lowering them only a percentage point or two. It’s just my opinion, but I think this time that strategy is fatal.

It’s really too soon to say what the recovery will bring, but already I’m seeing signs that financing will play a larger roll than in the past. Not only is it available, and affordable, but many buyers will be reluctant to tie up so much of their portfolio in a single asset. By financing the Los Cabos property they can use only a fraction of their cash for real estate and invest the balance elsewhere. Which is all great news; except that it also means that now we have the sell the property not once but twice. Once to the prospective buyer and after that to the loan appraiser.

If you will be financing your home here it’s critical to tell your real estate agent and get yourself pre-qualified for several reasons:
1. Only a pre-qualified buyer can really negotiate. These days any contingency for the buyer to obtain financing weakens the offer.
2. Only by being pre-qualified are you sure of your price range.
3. Your agent will select homes to show you based on their ability to get them closed. The harsh fact of the matter is that it’s immaterial what you are willing to pay for a home: the more important factor is how it will stand up to the appraiser.

Even with pre-qualification, if the banker can’t be convinced that this home is a good value and worth the price they won’t complete the loan. Therefore, when deciding which of many homes on the market to show my buyer I need to focus in on those I think are priced well enough to make it through the appraisal process.

So far the movement we’re seeing is on smaller, more affordable properties whose price has been reduced significantly. Of course the first buyers are going to go for the true bargains, that’s the nature of the beast. Or you could make a case that the actual property values have dropped to the point that those are the new, real values. Homes selling today are selling for 2005 prices: about 30% less than they would have fetched in 2007. Of course there are so few transactions that it’s hard to say for sure, but that’s my gut feeling.

So here’s the dilemma of a listing agent in Los Cabos in the fall of 2009: so many sellers are either in denial that our real estate has gone down in value, or counting on doing the old fashioned wait-them-out tactic. No matter how many statistics I have to support my pricing suggestion they put a higher than realistic price on their home and all I can do is hope the buyer, if we’re lucky enough to find one, is paying cash. Which is unlikely considering most of our ‘cash’ buyers in the past were really self-financing (pulling equity out of their U.S. property) because of tighter restrictions on loans in the U.S.

So here’s a tough love appeal to sellers: get real with your pricing or take your home OFF the market until conditions change. And be ready for a long wait, we’re not going to recover from this mess over night.

Carol Billups is Broker/Owner of REALTY EXECUTIVES Los Cabos. A Certified Home Marketing Specialist, she has enjoyed working with both buyers and sellers for nine years and still thinks hers is the best job on earth. She is also the real estate columnist for Los Cabos Magazine. You can read more of her articles on http://www.reloscabos.com. You can reach her from the U.S. or Canada at 1-760-481-7694, or in Cabo at 044-624-147-7541.

Search more than 2000 listings on the new http://www.lovecabo.net

© 2009 Carol S. Billups

The Next Time Around…

It’s no secret that the real estate market in Mexico is, ahem, troubled. That’s kind of like describing having compound fractures of both legs ‘inconvenient.’ Not many people are buying vacation homes these days. Or investment/rental homes for that matter. And although a lot of people are starting to get the idea that their retirement funds (decimated no doubt) will go further on this side of the border very few have acted on that thought. Yet.

“It’ll come back.” That’s what real estate agents here are telling their peers, themselves, and their sellers. The real old timers add “It always does.” True enough, I’ve been through my share of downturns in my time selling real estate in Los Cabos. And yes, the market always comes back. This time, though, I think many of us are going to be surprised at what the market looks like when it does come back to life. I don’t have a crystal ball, but I believe those who are just patiently waiting to go back to doing what they’ve always done are going to be in for a rude awakening. Two points in particular I believe will change dramatically.

The first is how the buyer comes up with the funds for the purchase. In the past so many agents here would sniff at the idea of doing business with someone who had to qualify for a mortgage. “My clients always pay cash,” they’d say with a slightly superior tone. In fact, some listing agents present offers involving third-party funding as weak, and therefore suspect.

Horse hockey! Even their ‘cash’ clients got the money somewhere… it wasn’t sitting in a checking account. They just self-financed, taking money from self-directed IRAs, or taking a home equity loan on their primary residence, or leveraging/liquidating some other asset. Here’s the difference I believe we’re going to see: a swing from nearly 95% self-financing to just the other way around. Having survived one of the most severe economic downturns in history our future buyers are going to be wary of putting so much of their own personal wealth into a not-terribly-liquid asset. They’re going to turn to a bank to take on much of the risk. I would not be surprised if, by the end of next year, it looks more like 95% third party financing with ‘cash’ deals being the exception rather than the rule. We’re just going to have to get used to dealing with it. Hopefully our buyers will get into the habit of pre-approval, as that makes their offers so much stronger.

Another huge change is going to be how those buyers find their way to Los Cabos. More and more of my prospective clients come through the internet. Even if they are referred to me by a past client they at least use the internet to check me, and the area, out before getting on the phone. Oh sure, because we’re a resort town we’re still going to have our share of clients who find themselves here on vacation, fall in love with Los Cabos, and start searching for a home immediately. Hey, that’s how Bob and I ended up here. So, at least for now, I’m still doing print advertising locally. But print is becoming a very small part of my marketing plans.

It also means the selling cycle will become longer: we have to work with the client before they’re even in-country. Which is fine with me, it should just about eliminate tours with non-qualified vacationers posing as buyers. However, internet leads are very time consuming. Just this morning I saw a statistic that of every 100 individuals who contact a real estate agent through the internet, only one buys. Wow! No wonder it feels like I’m glued to a computer most of the day.

Think of it logically. If you’re in Chicago, in January, thinking you’re just about ready to be down-sized or offered early retirement and you really don’t want to spend your retirement shoveling snow you’re going to get on the internet and start exploring options. You’re going to want to know if this is feasible, maybe chat with someone who’s already done it. Figure out what problems you’ll face. And hopefully get your third-party financing at least pre-approved. All before you get on a plane and start house-hunting in person.

I’m already working with a number of people who are investigating retiring in Mexico, and specifically Los Cabos. And this is exactly how it’s been going so far. I welcome that change. Yes, it has changed the type of properties we look at and the way we look at them. There are different considerations for a retiree versus someone buying a vacation or rental home.

Do I think the market is coming back? Of course I do or I would have closed my doors a long time ago. I just don’t think it’s every going to be the same as in the ‘good old days.’ Maybe that’s a good thing.

Carol Billups is Broker/Owner of REALTY EXECUTIVES Los Cabos. You can read more of her articles on http://www.reloscabos.com.

Search more than 2000 listings on the new http://www.lovecabo.net

© 2009 Carol S. Billups

Maybe your retirement will be running this B&B in Cabo!

Financing For Entrepreneurs! An Update

If you’re one of the many who thought Mexico financing had all but dried up: Good News! You can get financing for a home in Mexico, even if you’re an entrepreneur who might require ‘Alt Doc’ or Alternative Document loans.

 

The reason Mexico (and Canada) haven’t seen the mortgage meltdown that occurred in the U.S. is that our loans were always subject to tighter qualifications and higher down payments. Candidates for these mortgages had to be much stronger financially than for similar loans in the United States. No sub-prime or 100% financing here! That has paid off for Mexico’s economy.

 

There were always only a few lenders here, and for a long time they all offered pretty much the same product. And for some time that product has not included Alt Doc loans.

 

The exception is the Premier 6 loan program exclusively offered by Conficasa Mortgage International. This in-house lender will still look at Alt Doc and Stated Income applications on a case by case basis. This is critical for self-employed persons and entrepreneurs who may be very stable financially but have a low reported income. It is also essential for individuals who draw income from multiple sources. In short, anyone who does not fit the 9-to-5, only one job profile.

 

Mexico financing has, and is still, getting a bad rap. Even from some agents and brokers! I believe that is because financing is so new to Mexico (realistically only in the past 3 or so years). Yes, closing costs are higher when you choose to finance. I look at it this way: last night we ate out. I could have fed us at home for less than the bill at the restaurant. BUT, I wanted the convenience of not having to cook and having someone bring the food to me in a picturesque setting with live music and all the other trimmings.

 

I’ve said it before: if you want to be sure your Mexico investment is really, really safe finance it. These bankers are risk-averse at best. Some of the closing costs you’ll pay when financing are title insurance, hazard insurance, third party escrow account and more. These are all very important safeguards I want my clients to have whether or not they’re financing, and strongly recommend. But they are optional. When you look at two closing cost estimates, one for cash and the other for financing, be sure you’re comparing apples to apples. Does the cash quote include title insurance? Most I’ve seen do not, or tuck it down on the bottom in small print after the ‘total closing cost’ row.

 

So just like my dinner, the higher cost includes optional but nice features. Features you don’t want to do without.

 

The other chief complaint I hear is that our rates are higher. Yes, they probably are higher than the rate you’re paying on your PRIMARY residence at home. And you also probably didn’t put 20% down on your primary residence. But! If you tried to finance a second home in the U.S. you’d probably find the rates, down-payment and terms very, very similar to those for Mexico financing. Second homes are treated differently than primary residence no matter where in the world they’re located. The lenders want to be sure the buyer can really afford what is, in fact, a luxury property. Tina Rebello of Conficasa has put together a head-to-head comparison, you can contact her at trebello@conficasamortgage.com for a copy.

To get the facts about what your mortgage payments would actually be you can visit our website www.reloscabos.com and search the listings. They all have a mortgage calculator powered by Mexico Mortgage Finder that will show the payments for a variety of lenders and programs.

 

I haven’t tried for a mortgage in the States in a long time, but I’d almost wager it’s easier for you to finally get that vacation/retirement home you’ve been dreaming of here!

 

Carol Billups is Broker/Owner of REALTY EXECUTIVES Los Cabos. You can read more of her articles on www.reloscabos.com.

© 2009 Carol S. Billups