Traps all home buyers should avoid

At the beginning of a new year, it’s natural to make resolutions. For instance, you may have been putting off buying a home. Now you’ve resolved to buy before interest rates rise and you’re priced out of the market. Before forging ahead, consider the following tips and traps.

The first trap to avoid is buying a home because you think this is your last chance. It may be an excellent time for you to buy, but you shouldn’t base your decision on fear. Certainly, if interest rates go up significantly you may not be able to qualify for as big a mortgage. But, higher interest could also have an adverse effect on the home sale market, depress prices and create better buying opportunities for buyers.

Following this line of reasoning, you might decide to wait to buy until you see what the market will do in 2007. After all, if you buy now, you could end up paying too much if rates rise and the market softens. Herein lies the second trap: waiting for a better time to buy. You could wait to buy only to find out that home prices didn’t soften; they continued to rise.

One couple who had saved enough for a 10 percent down payment, waited one year to buy in order to save a 20 percent down. During that year, home prices in their area increased by so much that the additional money they saved still only enabled them to make a 10 percent down payment. They would have been better off buying earlier and earning home price appreciation for the year.

HOUSE HUNTING TIP: It’s impossible to time the real estate market, so it’s better to make your home buying decision on factors other than whether you think the market will peak or dip. You can’t know this with certainty except through hindsight.

The first question you should ask yourself before buying is if you’re ready for home ownership? Owning a home is a big commitment of time and money. In addition to mortgage and property tax payments, homes need to be maintained, which requires even more money. First-time buyers often overlook this fact, and are caught short of funds when the roof needs repairing or the water heater goes out.

Before you make a home purchase, make sure you’re in a position to buy for the long term. The real estate market fluctuates. You can insulate yourself from swings in the market as long as you’re not caught having to sell in a down market. Historically, residential real estate prices in this country have increased over time. But, if you had bought a home in the 1989 and were transferred and sold in 1991, you would have lost money in many areas of the country. If, on the other hand, you were able to stay put until 2000, you would have realized a significant profit. Ideally, you should have at least a 5 to 10 year time frame in mind when you buy a home.

Just as it’s risky to buy for the short-term, it is also risky to stretch to buy using an interest-only mortgage. These loans are popular because the initial payments are. This makes loan qualification easier. But, at some point, the loan is amortized over the remaining loan term. This can result in a significant jump in your monthly mortgage payments.

Some buyers figure they can always refinance for payment relief. But, if interest rates are much higher when the interest-only payment period expires, you might not be able to qualify for a refinance.

THE CLOSING: Buying a home using an interest-only mortgage may be worth the gamble if you’re sure that your income will be higher when your monthly payment increases.

Author: Dian Hymer for Inman News
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.

The Closing Process

What’s next? You have just worked with your agent to successfully submit your home offer and have it accepted by the seller. What do you have to do now? What does your agent have to do?

The following steps outline what happens during the closing process.

If you still have questions, please call me directly


1. Earnest Money The first step for the buyer after acceptance is to write a check for the “earnest money deposit” (the deposit that secures the buyer’s offer).

2. Title Check Depending on the state you are from, a title company, closing attorney, or closing agent will be selected to handle the closing process. Their primary purpose is to get a preliminary title report, which is used to confirm that the seller is the legal owner of record of the property and that there are no unsettled liens or other claims against the property, including all real estate taxes and special assessments. If you haven’t selected a title company, closing attorney, or closing agent yet, your agent can assist you in finding a reputable firm.

3. Homeowner’s Insurance is the buyer’s responsibility to obtain homeowner’s insurance. Lenders always require the buyer to have proof of homeowner’s insurance secured.

4. Disclosures, Inspections, and Contingencies it is the obligation of the seller to disclose any material facts about the property. Disclosure of material facts can include any property defects or any lawsuits regarding claim to ownership on the property. It is generally the obligation of the buyer to arrange any inspections on the property, including general property and pest

5. Appraisal of Property the lender will arrange for the property to be appraised. The appraiser’s report will describe the physical characteristics of the property and comparable property values will be used to determine the value of the property. There will be a thorough interior and exterior inspection. The inspections take about half an hour to one hour, depending on the size of the house.

6. Loan Approval once all of the necessary steps are completed, the buyer’s lender will notify the title company that the buyer’s loan request has been approved. The lender will send the buyer’s loan documents to the title company so that the documents can be signed at the closing appointment, which can also be called the “sign-off”. At this time, the title company will schedule a closing appointment with the buyer and seller (separate appointments).

7. Request to Payoff Seller’s Existing Mortgage the Title Company, closing attorney, or closing agent will issue an order to the seller’s existing lender requesting a demand for payment in full and all re-conveyance/release documents.

8. Cashier’s Check in preparation for the closing appointment, the buyer must obtain a cashier’s check for the amount of money due upon closing. To find out the exact amount due, ask your agent, who will work with the title company to ensure you have all of the appropriate information.

9. “Sign-off” and Closing Appointment the closing appointment usually takes about 1-2 hours and is where all of the necessary title and loan papers will be signed by the buyer. Depending on your state, the seller will have already signed all the necessary paperwork or will sign them during this appointment.

10. Final Steps once sign-off on all necessary documents is complete, the transaction needs to be recorded by the county and the formal change of possession must take place. Your agent will arrange for the transfer of the property keys with the other co-agent. The “For Sale” sign and property lockbox will also be removed by the seller’s listing agent so that your home will be ready

Buyer’s Resources

Buying a home is the largest purchase most people will ever make. Homeownership has great benefits. Homeownership also comes with certain responsibilities.

Are you ready for homeownership? Look at your current situation and determine if:

  • You have a continuing and reliable source of income prior to applying for the loan.
  • You have a credit history that shows you’re ready for homeownership.
  • Your total debt is manageable and you can afford to take on the costs associated with homeownership.
  • You have money saved for a down payment and closing costs.

Once you fully understand your current situation, it’s important to look at the pros and cons of homeownership to make the best decision for you and your family.


Benefits of Home Ownership

Homeownership has many advantages – both financial and personal. But buying a home is an important decision. Look at the benefits and the differences between homeownership and renting to better understand if owning a home is right for you.

What are the benefits of homeownership?

  • Tax savings.
    You may earn significant tax savings because you can deduct mortgage interest and property taxes from your federal income tax and many states’ income tax if you itemize your deductions.
  • A more stable monthly housing expense.
    Your monthly housing loan or mortgage expense can remain the same for the life of your mortgage, depending on the type of loan you choose.
  • Equity.
    You may build equity in your home over the life of your loan, which allows you to plan for future goals like your child’s education or your retirement.

Homeownership is not right for everyone. It may not be the right time in your life or you may not like the commitment associated with owning a home. Here are some differences between renting and homeownership:

  • Renters are typically free from maintenance obligations such as repairs or lawn care.
  • Homeowners often have more freedom in decorating, landscaping, etc.
  • Renters can move more easily and more quickly than homeowners and there are higher costs associated with buying and selling a home.
  • Homeowners have a financial investment and may build equity in their home.
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How Much Can You Afford?

To get a quick idea of what you can afford to spend, multiply your annual gross income (before taxes) by 2.5. For example, if your annual household income is $50,000, you might be able to qualify for a $125,000 home. This is just a rough estimate – the actual number will vary based on factors such as your debt and credit history.

Mortgage lenders typically use the housing expense and debt-to-income ratios to more accurately determine how much you can afford to spend on your mortgage.

  • Housing Expense Ratio
    Mortgage lenders recommend that your monthly mortgage payment should be less than or equal to a quarter of your monthly gross income. This percentage can change based on the type of mortgage you choose and sometimes the area in which you’re looking to buy.
  • Debt-to-Income Ratio
    You need to factor your other debts into determining an affordable monthly mortgage payment. Mortgage lenders look at whether your total debt is larger than 30-40% of your monthly gross income. Remember, debt is not just credit cards and student loans. It can also include alimony, child support, car loans, and housing expenses.

A mortgage lender, a housing counselor, or consumer credit counselor can help you better understand these guidelines. Before you talk to a financial professional, you can organize your financial picture by creating a budget [PDF 76K ]. Don’t forget that you also have to save for the down payment, closing costs, inspections costs, moving, and other related expenses.

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What Are the Risks?

Check For Properly Working Appliances/Fixtures:
  • Bathroom
    • Sinks
    • Showers/tubs
    • Toilets
    • Vent fan
    • Heating fan
  • Appliances
    • Dishwasher
    • Stove
    • Oven
    • Ice maker
    • Garbage disposal
    • Range hood
    • Refrigerator
    • Freezer
    • Microwave
    • Trash compactor
  • Kitchen
    • Kitchen cabinet doors
    • Drawers
    • Sinks
  • General
    • Lights (interior & exterior)
    • Windows
    • Heating system
    • Ceiling fans
    • Hot water system
    • Air conditioning system
    • Electrical outlets
    • Door bells
    • Doors
    • Water purifier
    • Fireplace damper
    • Garage door
Ensure House Is Well-Built & Systems Are In Working Condition:
  • Exterior
    • Brick bulging or cracking
    • Shingles missing or broken
    • Siding rotted or missing
    • Gutters damaged or need to be cleaned
    • Concrete cracked in sidewalks/driveway
  • Basement
    • Water seepage in basement
    • Cracks in foundation
    • Poor ventilation
  • Interior
    • Sub-flooring damaged or loose
    • Cracked walls or ceiling
    • Cracked tiles
    • Loose plaster
    • Flooring damaged
    • Soft, springy floors
    • Water stains near windows
    • Water stains on ceiling below bathroom
    • Water stains in attic
    • Pipe insulation missing
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Myths About Homeownership

Lenders evaluate mortgage applications a lot differently today than they did even 10 years ago. And even more has changed in the last 20 years. What used to close the door to homeownership may not be a factor today.

Here are some common homeownership myths:

Myth: You need great credit to become a homeowner.
Fact: You may still be able to buy a home with less-than-perfect credit. And remember, you can improve your credit over time.

Myth: You need to put 20% down to buy a home.
Fact: There are many types of mortgage products and programs that allow low and no down payments. But remember to factor in other costs such as closing costs, property taxes, moving expenses, and repairs.

Myth: You can’t buy a home in the U.S. if you’re not a citizen.
Fact: If you’re a legal resident, you can purchase a home in the U.S.

Myth: If you don’t have a bank account or credit cards, you can’t qualify for a mortgage.
Fact: Having a bank account is always a good idea and helps you establish credit. However, lenders can approve you for a mortgage even if you don’t have a bank account or credit cards. You’ll likely need to keep records showing a history of payments you’ve made for items such as rent, utilities, and car payments.

Myth: Lenders share your personal financial information with other companies.
Fact: By law, banks and other financial institutions are restricted in their uses and disclosures of information about you. In some situations, you may choose to restrict the disclosure of your information if you don’t want it to be shared.

Myth: If you’re late on your monthly mortgage payments, you’ll lose your house.
Fact: If you have a financial hardship, like the death of your spouse or a medical emergency and fall behind, it’s possible to keep your home and get back on track if you contact your lender early.

Myth: You can’t get a mortgage if you’ve changed jobs several times in the last few years.
Fact: Not true. You can change jobs several times and still get a loan to buy a home. Lenders understand that people change jobs. The important thing is to show that you’ve had a stable income.

Getting Your Finances in Order

A crucial step in starting your search for a new home is having a clear idea of your financial situation. By getting a handle on your income, expenses and debts, you’ll have a much better idea of what you can afford and how much you’ll need to borrow.

For lenders to verify this information, though, they’re going to need to look at your financial records. It is also important to remember that you should include records for each person who will be an owner of the house. So before you even visit the bank, make sure you’ll be able to provide copies of these important documents:

  • Paycheck Stubs
    Remember that lenders are most interested in your average income. Not only will they want to see this month’s paycheck, but also how much you’ve been making for the past two years. Steady employment is also more attractive to lenders, so if you’ve been hopping from job to job, be prepared to discuss the reasons why.
  • Bank Statements
    In order to qualify you for a loan, most lenders will also ask you for copies of your bank statements. Ideally, they’d like to see a steady history of savings–or at the very least, that you’re not bouncing checks every month.
  • Tax Records
    It’s always a good idea to save copies of your tax returns, especially if you’re self-employed. If you own your own business, it’s important to note that lenders generally consider your income as the amount you paid taxes on–not the gross income of the business.
  • Dividends & Investments
    Lenders will usually consider long-term investment dividends, as well as your investment portfolio, when evaluating your income.
  • Alimony/Child Support
    If you receive steady payments as part of a divorce settlement or for child support, you can also include this as part of your gross income. Just remember that lenders will want to see a copy of your divorce/court settlement verifying the amount of the payments.
  • Credit Report    Virtually every lender will want to see a copy of your credit report  as part of the loan application process. The report lists all of your long-term debts, as well as your payment history. In general, they will require you to pay for the credit report (approximately $50), but if you have a recent copy, they may accept that instead.

What is a Credit Score?

A credit score is a rating used by a lender to help determine whether you qualify for a mortgage loan. Based on information in your credit file, the credit reporting company analyzes your information using a complex mathematical model to yield your credit score. Below is you rate according to your score.

FICO Score Avg Rates
760- 850 6.531%
700- 759 6.753%
680- 699 6.930%
660- 679 7.144%
640- 659 7.574%
620- 639 8.120%
600- 619 8.182%
580- 599 8.647%
550- 579 9.149%
500- 549 9.558%

Most credit scores estimate the risk a company incurs by lending you money specifically, the likelihood that you’ll fail to make payments in the next two to three years. The higher the score, the less risk you represent. Your score is calculated by a mathematical equation that evaluates many types of information found in the credit file.

What Factors Affect a Score?

Many different formulas are used to calculate credit scores, but most are based on the following factors, which each scoring model weighs differently:

Payment history. A record of late payments on your current and past credit accounts will lower your score.

Public records. Matters of public record such as bankruptcies, judgments, and collection items may lower your score.

Amount owed. Owing too much will lower your score, especially if you’re approaching your total credit limit.

Length of credit history. In general, a longer credit history is better.

New accounts. Opening multiple new accounts in a short period of time may lower your score.

Inquiries. Whenever someone else gets your credit report — a lender, landlord, or insurer, for example — an inquiry is recorded on your credit report. A large number of recent inquiries may lower your score.

Accounts in use. The presence of too many open accounts can lower your score, whether you’re using the accounts or not.

Manage Your Credit Score
Looking for a higher credit score? There’s good reason to do so — a higher score can give you a greater array of financial options and more favorable credit offers. Even if you already have a good score, there’s always room for improvement by carefully managing your credit. Keep in mind, however, that your credit score is based on your history of borrowing and repaying money, so there’s no way to instantly change it. But here are some effective strategies that should help to strengthen your credit score over time.

Top 10 Ways to Manage Your Score

10. Learn what your current FICO� credit score is and what appears on your credit report.

9. Don’t open new credit cards that you don’t need just to increase your available credit. This approach could backfire and actually lower your score.

8. Try to keep your total account balances as low as possible. High outstanding debt may negatively affect your score, as you have a greater chance of missing payments.

7. Correct any incorrect information that might appear on your credit report. Visit Fixing Errors on Your Report for more information.

6. If your credit is severely damaged, or you have a very short credit history, there are still ways to improve your credit over time. Consider opening new accounts responsibly and paying them off on time.

5. If you fall behind on paying a bill because of illness, unemployment, or family issues, write a short explanation to the credit reporting agencies. They will add it to your credit report. Also, call your creditor to explain the circumstances and, if possible, work out a payment schedule you can meet.

4. If you need help managing your credit, contact a reliable nonprofit agency, such as:
Consumer Credit Counseling Service (CCCS)

3. To minimize the number of inquiries on your credit report, don’t apply for multiple credit cards over a short period of time, or for a card you’re not likely to get. Apply for new credit accounts only as needed.

2. Make all of your payments on time. If forced to miss a payment, be sure to pay the following month. Accounts more that are past due will be indicated on your credit report. If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score.

And the number one way…?

1. Continue to check your credit report regularly, charting your progress along the way.

Top 7 Reasons to Use a Buyer’s Agent When Purchasing Your Home

Purchasing a home is a big step, and a big decision. The average person spends around 1/3 of their income on their home. The home that you choose has a big impact on your life, and can have a big impact on your finances, as well. It always surprises me when Buyers attempt to “go at it alone” because of the possibility of mistakes. A good Buyer’s Agent is invaluable to a Buyer, and can be the difference between a wonderful transaction, and a nightmare.

1) Full Access to the MLS

The Multiple Listing Service (MLS) is a powerful tool that only Realtors have access to. When listing agents market a home for sale, they typically allow any Realtor to present the home to potential buyers, and to present contracts for purchase. The MLS is a database of all homes listed by Realtors, and represents roughly 99% of the homes for sale in any given market. As technology advances, so does the MLS. It has evolved into an extremely powerful search engine that allows your buyer’s agent to enter in search criteria, and returns only homes that match those specific parameters. Buyers can find a lot of this information online through IDX feeds available on many websites, but this information is a “watered down” version of the MLS because the IDX search engines aren’t quite as powerful, and don’t return as detailed profiles as the MLS.

2) Maximize Your Time

While driving neighborhoods is an excellent idea to help you decide which locations you prefer, it’s not a very efficient way to find your new home. Gas is expensive, and your time is valuable. Your Buyer’s Agent will listen to your needs, make fantastic suggestions based on your likes & dislikes, and provide you with a list of homes that ALL match your wants & needs. Your Buyer’s Agent has helped MANY new homebuyers through MANY purchases, and will help you better organize your search & decision making process � saving you valuable time.

3) Representation

Listing Agents enter into legally binding agreements that require them to ALWAYS act in the best interest of the seller. They are the seller’s “coach” and will make sure that their clients’ best interests are looked after. Luckily, your Buyer’s Agent is there to make sure YOUR best interests are accounted for. With your expert Buyer’s Agent in your corner, you can rest assured that you’re on, at least, even ground with the home seller. A football team would be at a pretty significant disadvantage without a coach � just as you would be without a Buyer’s Agent.

4) Negotiating Power

The MLS maintains a record of, not only all homes listed by Realtors in a given market, but also the sales price of those homes. Your Buyer’s Agent will run a Comparative Market Analysis (CMA) to determine a prospective home’s Fair Market Value (FMV).

In simpler terms, your Realtor will look at similar homes in the same neighborhood that have sold recently. This way, you will know whether or not the seller has their home priced fairly. If the home is priced over Fair Market Value, your Buyer’s Agent can present your “under asking price” offer with plenty of firepower � and a greater chance that the offer will be accepted.

5) Experience

The average person buys 3-5 homes in their lifetime. A good Buyer’s Agent will assist in 3-5 home purchases every month. What might seem complicated and intimidating to you is fairly common and familiar to your Realtor. Your Buyer’s Agent will know what to expect, and will know when to alert you if anything out of the ordinary occurs.

6) Industry Contacts

It takes a lot of people to close a real estate transaction � Buyer’s Agent, Listing Agent, Loan Officer, Inspector, Appraiser, Insurance Agent, General Contractors, and sometimes more! A good agent will come with a strong closing team that has performed in the past, and will continue to perform. A transaction is only as strong as its weakest link � with your strong Buyer’s Agent & their closing team, you can rest assured that you will have plenty of support.

7) Piece of Mind

If you are like most people, your home is the largest purchase you will ever make. The average person spends around 1/3 of their total monthly income on their home. This is a big decision and you don’t want to go at it alone. When you use a trusted Buyer’s Agent, you know that your best interests are accounted for, and that you can feel confident in your purchase.

Purchasing a home can be a fun and exciting process. However, the home buying process can be intimidating, and mistakes are possible. A Realtor who specializes in working with Buyers can help alleviate the fears & possibilities for mistakes. Make sure and use a Buyer’s Agent on any real estate transaction, and you will help ensure that you are making the right decisions.

Discounted Homes of Central Florida

Looking for a discounted homes in Central Florida is easy to find. You will not find these homes on newspaper ad but only thru the MLS database. MLS database website can only be accessed by a licensed real estate professional. Discounted Homes can be found under price changes tab of that website. Price changes result when sellers agree to discount their selling price for lots of reason. Discounts can vary from 5% up to 30% of the actual value. When price changes occur in a very short period of time , this could mean that seller is not capable of paying mortgage and can foreclose a home. Example: Mr Jones listed his home for $250,000 in January of 2007 and change it’s price to $235,000 within the same month of January 2007. What do you think he would do the next month? Sellers who discount their homes quickly in time is really an example of a TRUE pre-foreclosure.

Discounted Homes can also be homes that are inventories. Builders want  to get rid of these new homes out of their inventories in order for them to move on to their next phase of constructions or simply just to break-even. Professional agents who work for these builders will email inventories to realtors on their mailing database but not to all realtors. Only to professional realtors who know what they are doing.

UF study: The price is right, so buy now

GAINESVILLE, Fla. March 9, 2007 Hopeful homebuyers in Florida should act now: The price is right as the states single-family residential housing market bottoms out, according to a University of Florida study released today.

If youre thinking of buying a house, theres probably not much to be gained by holding out at this point, says Wayne Archer, director of UFs Bergstrom Center for Real Estate Studies. It doesnt look like prices are going to fall anymore.

The quarterly survey of experts in the real estate industry completed in January shows that the share of respondents observing a drop in single-family housing prices has dipped, while a growing number find prices staying even with inflation, Archer says.

We see that as a benchmark, he says. When prices maintain the same level as inflation, then were probably in some kind of equilibrium. It indicates the market is stabilizing.

The exception is condominiums, which are overbuilt and prone to speculative and nave investors, he says.

This is the first time in the UF surveys five-quarter history that the buyers investment outlook for residential development has brightened. It declined for the first three surveys and remained flat for the fourth survey at the end of October, starting to rise only in this latest survey.

Because of the dominance of single-family housing, the findings have far-reaching and potentially optimistic implications for the states real estate industry, Archer says.

You cant get away from the fact that the single-family housing market is the single largest driver of the real estate market, he says. Most brokers and real estate agents are dealing with single-family housing. Most lending is for single-family housing. And single-family housing drives home furnishings. So when it stabilizes, thats important.

One possible explanation for the housing market turning the corner is a restricted supply of land for residential development, Archer says. The shortage meant there was less overbuilding than there might otherwise have been, he says.

Condos did not have this land restraint, which is one reason they are overbuilt, Archer says. At the same time, condos are prone to strong speculative swings because they are considered a relatively easy commodity to exchange; its not difficult to acquire them in multiple units or to buy contracts on them, he says.

The stabilization of the single-family housing market came earlier than anticipated and is not expected to affect all parts of the state equally, Archer says. The quieter markets likely will take longer to rebound than those in Central and South Florida, where growth has been explosive.

Jacksonville typically has been a slower and steadier market than Orlando, Tampa-St. Petersburg, Miami and other cities in South Florida, but that is changing, Archer says. Recently, the Jacksonville housing market has picked up momentum.

Even with a turnaround, Archer says he does not believe Floridas real estate market is likely to reach the same level that it did at its peak in 2005-06. I dont think any thoughtful person would expect sales to go back to where they were a year or so ago, he says. That was probably an overheated condition and it was extraordinary.

On a positive note, nearly all other markets, including apartments and commercial rental markets, appear to be remaining steady or even experiencing robust growth. They did not experience a downturn in the same sense that the single-family development market did and theyre continuing to be strong, Archer says.

Optimism about Florida real estate seems to be particularly apparent among foreign investors. Many respondents commented that foreign investors and lenders are aggressively trying to invest more capital in the states rental markets.

They apparently have no fears about the future of these markets, despite what we perceive as our problems with hurricanes, taxes and other concerns, Archer says.

For the survey, UFs Survey Research Center asked a series of questions of 318 industry executives, real estate lawyers, market analysts, title insurers, financial advisers, market research economists, real estate scholars and other experts in the field, an increase over the 183 respondents in the last survey.

More information is available on the centers Web site,

Central Florida New Constructions

It is a buyer’s market. Developers posting for newly build homes and new constructions are ready to treat buyers royally with strong incentives and new lower pricing.

To gain access to a complete searchable database on new residences available in Central Florida including Celebration, Kissimmee, Orlando, Downtown Orlando, Winderemere, lakeland, Poinciana. St Cloud, Davenport, Lake Nona and Winter park area as well as vacation and resort property , please provide your contact information below.

It only makes sense to find and show these homes to you first and avoid the hassles over negotiations, repairs, and date of occupancy. Moreover, developers want to move their inventory fast so they are more realistic in their pricing. The market is moving rapidly to adjust to current conditions and the pricing shown on my website may not reflect the latest reductions and availability.