Every time we sell a property, whether we are the listing agent or the buyer's agent, at the end of the transaction, we sent out a survey with a return envelope and ask our clients to be brutally honest!
As these surveys come in during the year, we read and discuss each one in an effort to continually improve our service to our clients. If you are an agent and you do not do this - YOU SHOULD. If you are a buyer or seller, you might find the questions interesting - they should provide the basis of the type of questions you would ask an agent you are considering using or the type of questions you can ask the references they provide! So here we go.....
The first group of questions ask the respondent to answer with a checkmark under "Excellent", "Very Good", "Good", or "Fair" -
*Ease of getting an appointment
*Timeliness of return phone calls
*Helpfulness to your needs
*Courtesy and friendliness
*Knowledge of real estate
*Overall performance
The second group of questions are merely yes or no answers:
*Do you feel we adequately explained the real estate process and what you could expect during each phase of the process?
*Do you feel we really cared about you and your real estate needs?
*Do you feel we earned our commission?
*Would you use our group to buy or sell a home again?
*Would you feel comfortable recommending our services to your friends and family?
*Can we use you as a reference?
*Are you interested in investment property now or in the future?
We have one rating question that asks "in comparison to other realtors you have worked with, the quality of our group's real estate service is:
Substantially Lower
Moderately Lower
About the same
Moderately higher
Substantially higher
Excellent
We then ask questions with several blank lines following for clients to write comments:
*Why did you choose to work with our group?
*When you think about yoru real estate experience, what stands out most in your mind?
*What could we do to improve our service and provide a more positive real estate experience?
*We like to acknowledge our tem members for a job well done. Please let us know if any member of our team was especially helpful, and how they were helpful.
*Who do you know who could benefit from our service?
So.... how did WE fare this year?
100% of our respondents felt we earned our commission!!!!!
That's really what we strive for - no matter how anyone may answer any of the other questions, if your clients feel you have earned your commission you're doing a great job!
100% of our respondents felt we adequately explained the process during each phase!
100% of our respondents said they would feel comfortable recommending our services to their friends and family!
99% of our respondents said they would use us to buy or sell a home again
99% of our respondents said they felt we really cared about them and their needs
87% of our respondents rated our overall performance at the very highest level and not one survey came back marked less than very good! (just one notch lower).
So, we're doing a great job in a difficult market - survey your clients to keep yourself and your team at the top of their game and for you buyers and sellers, don't feel shy about asking these questions of current clients of any agent you are interviewing!
Thats it for today, as always:
BE INFORMED and CHECK BACK HERE OFTEN
Thursday, January 31, 2008
Wednesday, January 30, 2008
Rate Drops - Mortgages Rise
On speaking today to several mortgage lenders, the 30 year fixed rate mortgage actually went up today after the Fed announced another 50 point rate cut. As I had previously explained, although the average listener hears an interest rate drop and automatically assumes that mortgage rates will fall as well. As an educated consumer, it is important that you understand how these changes might affect you or a client of yours. The following is a great explanation of how this works by Amy Swaney, past president of the Arizona Mortgage Lenders Association.
Many consumers have misconceptions about the FED, and its affect on the long term interest rates. I thought I would give you a crash-course on the truth behind the Fed’s meeting and the affect it has on long-term rates. This may be a refresher course for many, but always good information to review.
The Federal Open Market Committee (FOMC) is a twelve-member committee made up of the seven members of the Board of Governors and five Federal Reserve Bank presidents. It meets eight times per year to determine the near-term direction of monetary policy, such as setting guidelines for the purchase and sale of government securities and setting policy relating to System operations in the foreign exchange markets. The Fed determines interest rate policy at FOMC meetings. The interest rate set by the Fed, the federal funds rate, is the lending rate banks charge each other for the use of overnight funds and it serves as a benchmark for all other rates. A change in the fed funds rate also changes the dynamics of competition for investor dollars: when bonds yield 10 percent, they will attract more money away from stocks then when they only yield 5 percent. Again, the level of interest rates affects the economy for a higher rate tend to slow activity; and lower rates stimulate activity, a ripple effect that expands into all sectors of the economy.
These changes in monetary policy are now announced immediately after FOMC meetings so many assume that a drop in the discount rate or the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility–the discount window or the Fed Funds Rate, will automatically translate into a corollary drop in the long term rate. This is inaccurate.
Is a Fed rate cut really good news for long term mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change from one day to another.
How does a change in the monetary policy directly affect consumers? Consumers will see fairly immediate changes in short-term or consumer type loans such as credit cards and Home Equity Line of Credits (HELOCs) as the rate has ties to the Prime Rate. But then how are long-term mortgage rates based?
As it turns out the answer is mortgage-backed bonds known as Mortgage Backed Securities (MBS). Bonds issued by Fannie Mae and Freddie Mac (MBS) and the trading performance of those bonds will determine the direction of mortgage rates. Finding the catalyst that causes mortgage bonds to move will give you the keys to finding out what makes mortgage rates rise or fall.
That catalyst could be any type of economic, political or global data. Something to consider is that as bond prices rise, interest rates fall. As bond prices fall, interest rates rise including large movements in the Stock Market. This concept is simple if you think in terms of where money comes from. Investors have basically 2 places to put their money; in the stock market or the bond market. Since money is a finite resource, if people are buying stocks, they typically have to pull that money out of the bond market and vice versa, thus they typically move opposite of each other.
As the Nasdaq (Bond Based) moves higher, bond prices move lower causing interest rates to rise. As the Nasdaq declines, mortgage bonds benefit, causing mortgage rates to fall. Additionally, and unlike common opinion, Fed rate cuts have had virtually no direct effect on mortgage rates. In actuality, it appears that since Fed rate cuts act to stimulate the Nasdaq, they have a negative effect on mortgage rates.
The reality is that market participants weeks before the meeting announcement speculate about the possibility of an interest rate change at these meetings, and if the outcome is different from expectations, that is truly the only time the rate hike or cut will have a direct impact on the markets, but it usually tends to be short-term and volatility based.
Hope this was informative and helpful.
As Always BE INFORMED and CHECK BACK HERE OFTEN
Many consumers have misconceptions about the FED, and its affect on the long term interest rates. I thought I would give you a crash-course on the truth behind the Fed’s meeting and the affect it has on long-term rates. This may be a refresher course for many, but always good information to review.
The Federal Open Market Committee (FOMC) is a twelve-member committee made up of the seven members of the Board of Governors and five Federal Reserve Bank presidents. It meets eight times per year to determine the near-term direction of monetary policy, such as setting guidelines for the purchase and sale of government securities and setting policy relating to System operations in the foreign exchange markets. The Fed determines interest rate policy at FOMC meetings. The interest rate set by the Fed, the federal funds rate, is the lending rate banks charge each other for the use of overnight funds and it serves as a benchmark for all other rates. A change in the fed funds rate also changes the dynamics of competition for investor dollars: when bonds yield 10 percent, they will attract more money away from stocks then when they only yield 5 percent. Again, the level of interest rates affects the economy for a higher rate tend to slow activity; and lower rates stimulate activity, a ripple effect that expands into all sectors of the economy.
These changes in monetary policy are now announced immediately after FOMC meetings so many assume that a drop in the discount rate or the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility–the discount window or the Fed Funds Rate, will automatically translate into a corollary drop in the long term rate. This is inaccurate.
Is a Fed rate cut really good news for long term mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change from one day to another.
How does a change in the monetary policy directly affect consumers? Consumers will see fairly immediate changes in short-term or consumer type loans such as credit cards and Home Equity Line of Credits (HELOCs) as the rate has ties to the Prime Rate. But then how are long-term mortgage rates based?
As it turns out the answer is mortgage-backed bonds known as Mortgage Backed Securities (MBS). Bonds issued by Fannie Mae and Freddie Mac (MBS) and the trading performance of those bonds will determine the direction of mortgage rates. Finding the catalyst that causes mortgage bonds to move will give you the keys to finding out what makes mortgage rates rise or fall.
That catalyst could be any type of economic, political or global data. Something to consider is that as bond prices rise, interest rates fall. As bond prices fall, interest rates rise including large movements in the Stock Market. This concept is simple if you think in terms of where money comes from. Investors have basically 2 places to put their money; in the stock market or the bond market. Since money is a finite resource, if people are buying stocks, they typically have to pull that money out of the bond market and vice versa, thus they typically move opposite of each other.
As the Nasdaq (Bond Based) moves higher, bond prices move lower causing interest rates to rise. As the Nasdaq declines, mortgage bonds benefit, causing mortgage rates to fall. Additionally, and unlike common opinion, Fed rate cuts have had virtually no direct effect on mortgage rates. In actuality, it appears that since Fed rate cuts act to stimulate the Nasdaq, they have a negative effect on mortgage rates.
The reality is that market participants weeks before the meeting announcement speculate about the possibility of an interest rate change at these meetings, and if the outcome is different from expectations, that is truly the only time the rate hike or cut will have a direct impact on the markets, but it usually tends to be short-term and volatility based.
Hope this was informative and helpful.
As Always BE INFORMED and CHECK BACK HERE OFTEN
Tuesday, January 29, 2008
You can't win them all - buyers be ready to move!
Unfortunately, we did not get the house our buyers were bidding on even though we were willing to pay $77,500 over the asking price - an almost 10% premium! There wound up being a total of NINE contracts offered on the property that had been on the market only three days! Although our buyer is disappointed, he understands that we did everything within reason to win the contract and to pay and offer more might not have been in his best interest. So be it. We'll keep looking for another gem in the rough.
After doing yet another evaluation of the property, it appears that the house actually sold for slightly more than it's true value. Having said that, it's true value is really what someone is willing to pay for it so in some regards that IS it's true value. It was very difficult to justify that price when doing comparables, but again, pricing is always somewhat suggestive. On speaking to the listing agent who we happen to know quite well, I asked how they came up with the selling number and her answer was that quite frankly she was somewhat affraid of all the negative news she had been hearing and it was important for the seller to realize a quick sale. It wasn't a brilliant marketing move, it was an effort to realize a quick sale on a good property. Yes, the property was priced slightly under market for the size, condition and neighborhhood, but not THAT much under market - lucky seller!
Again, pricing is everything - but you can't predict the response either - if you price a property on the low end of the scale hoping for a quick sale (and maybe even a bidding war as we had here), you also need to be prepared to accept the low price if only one offer comes in! A tough call on a seller's part.
So in just two days we have had multiple contracts on several properties and we have seen quite an increase in showings on our listings - and it's only January - hopefully the brisk spring market will prove the "nay-sayers" wrong.
As always BE INFORMED and CHECK BACK HERE OFTEN
After doing yet another evaluation of the property, it appears that the house actually sold for slightly more than it's true value. Having said that, it's true value is really what someone is willing to pay for it so in some regards that IS it's true value. It was very difficult to justify that price when doing comparables, but again, pricing is always somewhat suggestive. On speaking to the listing agent who we happen to know quite well, I asked how they came up with the selling number and her answer was that quite frankly she was somewhat affraid of all the negative news she had been hearing and it was important for the seller to realize a quick sale. It wasn't a brilliant marketing move, it was an effort to realize a quick sale on a good property. Yes, the property was priced slightly under market for the size, condition and neighborhhood, but not THAT much under market - lucky seller!
Again, pricing is everything - but you can't predict the response either - if you price a property on the low end of the scale hoping for a quick sale (and maybe even a bidding war as we had here), you also need to be prepared to accept the low price if only one offer comes in! A tough call on a seller's part.
So in just two days we have had multiple contracts on several properties and we have seen quite an increase in showings on our listings - and it's only January - hopefully the brisk spring market will prove the "nay-sayers" wrong.
As always BE INFORMED and CHECK BACK HERE OFTEN
Monday, January 28, 2008
What a Day - Weekend Madness Continues
Well, as promised, the results are in..... we received a second contract on the home before signing off on the contract we had been negotiating since Thursday! The second contract was far from ideal but afforded us the opportunity to let both offering agents know they had competition and that they needed to come up with their "best and final" offer. The result was that the net to the seller increased by almost $18,000 and closing will happen quickly. The first contract was the eventual winner, the buyers really were committed to buying the house - but it was a close call! Again, even in a down market, when you find the house you really want make that offer and get it done quickly!
A second interesting happening today which truly shows how crazy the market can be. We made an offer on a home for a client. The home had been on the market only three days and there were four registered offers as of this afternoon when we made our offer. We offered full price with an escallation of $50,000 more if any other offer was higher. The $50,000 wasn't enough to be the high contract and so we raised our offer another $27,500 - we don't know if that will be enough but that is really the highest we are willing to go on this property. Oh, and the asking price of the house was $825,000 - this property will sell at over $900,000. The agent took a gamble and it has obviously paid off.
This goes to pricing your home - while there are homes on the market for months and months, there are homes still selling in a few days with multiple offers and going over the asking price. This house is probably worth the $900,000, but the gamble came in on generating the interest by offering the home at $825K - about $50,000 under where other agents may have priced the property. They will never know, but in reality had the house been priced at the $900,000 to start I don't believe they would have gotten a full price offer right out of the gate - certainly wouldn't have gotten four offers with escallation clauses!
In making our offer, we compared selling prices of similar homes and felt that $875,000 was a good price for the property. We'll know what happens tomorrow as the seller is out of the country and we won't know the outcome before then. I intend to go back and do a more in-depth analysis of the property and the comparables as well as speaking to several appraisers we know that do extensive work in the neighborhood early in the morning. It will be another interesting experience seeing where this ends up! Again, you'll have to tune in tomorrow to find out the outcome!
As always BE INFORMED and CHECK BACK HERE OFTEN!
A second interesting happening today which truly shows how crazy the market can be. We made an offer on a home for a client. The home had been on the market only three days and there were four registered offers as of this afternoon when we made our offer. We offered full price with an escallation of $50,000 more if any other offer was higher. The $50,000 wasn't enough to be the high contract and so we raised our offer another $27,500 - we don't know if that will be enough but that is really the highest we are willing to go on this property. Oh, and the asking price of the house was $825,000 - this property will sell at over $900,000. The agent took a gamble and it has obviously paid off.
This goes to pricing your home - while there are homes on the market for months and months, there are homes still selling in a few days with multiple offers and going over the asking price. This house is probably worth the $900,000, but the gamble came in on generating the interest by offering the home at $825K - about $50,000 under where other agents may have priced the property. They will never know, but in reality had the house been priced at the $900,000 to start I don't believe they would have gotten a full price offer right out of the gate - certainly wouldn't have gotten four offers with escallation clauses!
In making our offer, we compared selling prices of similar homes and felt that $875,000 was a good price for the property. We'll know what happens tomorrow as the seller is out of the country and we won't know the outcome before then. I intend to go back and do a more in-depth analysis of the property and the comparables as well as speaking to several appraisers we know that do extensive work in the neighborhood early in the morning. It will be another interesting experience seeing where this ends up! Again, you'll have to tune in tomorrow to find out the outcome!
As always BE INFORMED and CHECK BACK HERE OFTEN!
Sunday, January 27, 2008
Weekend Madness - It's Not Over Until It's In Writing!
Since Thursday we have been trying to reach an agreement on a proposed contract. The property has been on the market less than three weeks and although several agents were "hovering" with clients, this was the first written contract we received. What started out as a large difference in asking price and contract price has narrowed to an acceptable level and what was an unacceptable long period of time between contract and settlement has also narrowed to an acceptable level - we have reached a verbal agreement and the seller is meeting in our office tomorrow morning to sign the contract - but it's not over yet.
There have been numerous showings of the property over the weekend and several agents have requested disclosures (the property condition, lead paint and other disclosure forms) necessary to prepare a contract!
Do we have another offer at this time? No. Are we locked in to the contract we have verbally agreed to? No. If there were another offer sitting on our fax or in our email tomorrow morning when the seller arrives is it ethical to then reject the contract the seller verbally accepted?
The ethical question really relates only to our group, the listing agent. We work for the seller and if another, better offer comes in before physically signing the "bird in the hand" we are ethically bound to present the offer to the seller for their consideration.
The ultimate decision rests with the seller, but we are bound by our obligation as the seller's agent to review all the information and advise in their best interest. Obviously if a better offer were received, it would be in the seller's best interest to sign the new contract.
So, we'll see if another offer comes in before signing - and we'll see if they are any better than the offer we have negotiated in good faith. It's a tough situation for a buyer's agent who has worked so hard to put the deal together and it's a tough situation for the first buyer if they lose a house they really wanted at the 11th hour - but it has happened to all of us.
The lesson here is if you find a home you truly want to buy, make a fair and reasonable offer, require a timely response, negotiate in good faith, but don't procrastinate and when a deal is struck get it in writing! It isn't over till it's over - agents may seem pushy by asking for a quick decision, but they are acting in your best interest - we all know what can happen.
We'll all know tomorrow how this shakes out - and I will post it here. This also goes to several of my previous postings, even in a "down" market, when a house is priced properly and shows well, it sells - sometimes even with multiple offers and quite quickly.
As always BE INFORMED and CHECK BACK HERE OFTEN
There have been numerous showings of the property over the weekend and several agents have requested disclosures (the property condition, lead paint and other disclosure forms) necessary to prepare a contract!
Do we have another offer at this time? No. Are we locked in to the contract we have verbally agreed to? No. If there were another offer sitting on our fax or in our email tomorrow morning when the seller arrives is it ethical to then reject the contract the seller verbally accepted?
The ethical question really relates only to our group, the listing agent. We work for the seller and if another, better offer comes in before physically signing the "bird in the hand" we are ethically bound to present the offer to the seller for their consideration.
The ultimate decision rests with the seller, but we are bound by our obligation as the seller's agent to review all the information and advise in their best interest. Obviously if a better offer were received, it would be in the seller's best interest to sign the new contract.
So, we'll see if another offer comes in before signing - and we'll see if they are any better than the offer we have negotiated in good faith. It's a tough situation for a buyer's agent who has worked so hard to put the deal together and it's a tough situation for the first buyer if they lose a house they really wanted at the 11th hour - but it has happened to all of us.
The lesson here is if you find a home you truly want to buy, make a fair and reasonable offer, require a timely response, negotiate in good faith, but don't procrastinate and when a deal is struck get it in writing! It isn't over till it's over - agents may seem pushy by asking for a quick decision, but they are acting in your best interest - we all know what can happen.
We'll all know tomorrow how this shakes out - and I will post it here. This also goes to several of my previous postings, even in a "down" market, when a house is priced properly and shows well, it sells - sometimes even with multiple offers and quite quickly.
As always BE INFORMED and CHECK BACK HERE OFTEN
Saturday, January 26, 2008
So, Andy, You want to be a Real Estate Agent!
I had a conversation with a young man yesterday who has been contemplating getting a real estate salesperson license and jumping into the business. He asked for my advice and so I gave it to him - both barrels. It's not an easy job and it doesn't pay well - at least for a while. It really is starting your own business and as such should be approached the same way you would start any other business - you need information and you need a plan. You also need enough money - there the "start up" expenses of taking required classes, obtaining a license, joining the associations, errors & omissions insurance to name a few. You need money to live on until you start seeing returns on your efforts.
I suggested that he market himself to a successful group as a buyer's agent. By doing this he can be fed leads that he might otherwise not get, and if nothing else, he will gain valuable experience from successful agents.
I know several agents who work part time. One of these agents is an airline pilot with lots of free time to work his second job in real estate. After six months, he had spent approximately $5,000 on expenses that I mentioned above and marketing materials and marketing campains. His first sale came shortly thereafter (the end of his first six months) and he netted $9,000 after his split with the broker. So, six months of effort for $4,000 in income. Now, on the other hand, he also purchased a property at an extremely good price that was headed to foreclosure in partnership with a friend. There was expense in fixing up and marketing, but the sale of the property within the year netted them $40,000 in profit - $20,000 each. He is a dedicated, intelligent individual, he works hard and looks for opportunities!
We have a new buyer's agent with our group. After seven months he has completed one sale, assisted on a second and just wrote his second contract - that translates to about $20,000 in income, give or take a bit. As we head into the spring and sales historically increase (even in a down market), he has the opportunity to do well in his first full year as an agent!
As you can see just from the two examples above (and believe me, they truly are representative samples) it isn't easy to get into real estate sales, and it truly is the lucky agent that can be associated with a top producing team.
Of course, I continued to explain that we all need to pay our dues in this industry - we need to take floor duty (answering incoming calls into the main office hoping for leads) - we need to take as many "fast start" classes we can find - we need to ask more experienced agents for help when necessary - we need to market ourselves to anyone who will listen - we need to be sponges and read, read, read, we need to see every house that comes on the market in the area we want to work, we need to hold open houses for other agents (not a good place to make a sale, but a great place to meet prospective buyers) and we need to get our name out there and recognized. In other words, we need to make a super human effort if we want to become a top producing agent - and we need the personality and stick-to-it mentality it takes to be a successful business owner.
I don't mean to be discouraging - real estate has been good to me. The rewards at the goal line are great - both monetarily and emotionally. I have made great friends, I have had the satisfying experience of helping families into the home of their dreams, I truly enjoy what I do. A good agent will prevail in any type of market - I sometimes think that down markets are nature's way of weeding out the weaker agents!
So, that's my rambling for today - I'm looking for suggestions on topics you would like me to address - so please feel free to comment - I will respond.
As always BE INFORMED and CHECK BACK HERE OFTEN
I suggested that he market himself to a successful group as a buyer's agent. By doing this he can be fed leads that he might otherwise not get, and if nothing else, he will gain valuable experience from successful agents.
I know several agents who work part time. One of these agents is an airline pilot with lots of free time to work his second job in real estate. After six months, he had spent approximately $5,000 on expenses that I mentioned above and marketing materials and marketing campains. His first sale came shortly thereafter (the end of his first six months) and he netted $9,000 after his split with the broker. So, six months of effort for $4,000 in income. Now, on the other hand, he also purchased a property at an extremely good price that was headed to foreclosure in partnership with a friend. There was expense in fixing up and marketing, but the sale of the property within the year netted them $40,000 in profit - $20,000 each. He is a dedicated, intelligent individual, he works hard and looks for opportunities!
We have a new buyer's agent with our group. After seven months he has completed one sale, assisted on a second and just wrote his second contract - that translates to about $20,000 in income, give or take a bit. As we head into the spring and sales historically increase (even in a down market), he has the opportunity to do well in his first full year as an agent!
As you can see just from the two examples above (and believe me, they truly are representative samples) it isn't easy to get into real estate sales, and it truly is the lucky agent that can be associated with a top producing team.
Of course, I continued to explain that we all need to pay our dues in this industry - we need to take floor duty (answering incoming calls into the main office hoping for leads) - we need to take as many "fast start" classes we can find - we need to ask more experienced agents for help when necessary - we need to market ourselves to anyone who will listen - we need to be sponges and read, read, read, we need to see every house that comes on the market in the area we want to work, we need to hold open houses for other agents (not a good place to make a sale, but a great place to meet prospective buyers) and we need to get our name out there and recognized. In other words, we need to make a super human effort if we want to become a top producing agent - and we need the personality and stick-to-it mentality it takes to be a successful business owner.
I don't mean to be discouraging - real estate has been good to me. The rewards at the goal line are great - both monetarily and emotionally. I have made great friends, I have had the satisfying experience of helping families into the home of their dreams, I truly enjoy what I do. A good agent will prevail in any type of market - I sometimes think that down markets are nature's way of weeding out the weaker agents!
So, that's my rambling for today - I'm looking for suggestions on topics you would like me to address - so please feel free to comment - I will respond.
As always BE INFORMED and CHECK BACK HERE OFTEN
Friday, January 25, 2008
Help May Be On The Way - Increase for Conforming Loans
If you are one of many people (especially in our area) that are thinking of buying or if you are one of the owners with a jumbo mortgage that would like to refinance, but jumbo rates are still too high, help may just be on the way.
The following information was just received from a lender we work with quite often (I'll explain in more simple terms following his statement:
"As part of the economic stimulus package, an increase in the conforming limit could now be a reality, at least for a brief period. Congress and President Bush agreed, but have not voted yet, on a 1-yr increase in the conforming loan limit to $730K. There is not a lot of detail yet (there is confusion as to whether the $730K, or $725, is for high cost housing areas, or everywhere, and just what high cost areas are?). Just when mortgage originators everywhere were breaking out the Cold Duck, OFHEO’s director James Lockhart (Office of Federal Housing Enterprise Oversight, who oversees FNMA & FHLMC) issued a statement saying “We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform. To restore confidence in the markets we must ensure that the GSEs’ regulator has all the necessary safety and soundness tools. Yesterday Chairman Dodd talked about moving a GSE reform bill early this year. We are ready to work with him and the Senate Banking Committee. We will also be working with Fannie Mae and Freddie Mac to ensure that any increase in the conforming loan limit moves through their rigorous new product approval process quickly and has appropriate risk management policies and capital in place.”
Now what? Frankly, analysts feel that enactment is possible by mid-February but looks more likely by early March. No large investors will make any policy changes or announcements until the issues are less confusing, or even voted into law. Apparently, the bill would temporarily increase the limit on mortgages Fannie Mae and Freddie Mac may securitize from $417k to up to $730k. In addition, the bill would increase the limit on loans the Federal Housing Administration (FHA) may insure from $362k to $625k. This should help to reduce spreads in the jumbo mortgage market! One estimate mentioned that as many as $400-500 billion in loans could qualify for refinancing. As these loans refinance, it could ease pressure on capital-constrained bank balance sheets. And “temporary” items like this are difficult to rescind after a year, which would also be good news for originators."
So what does this really mean? If this change is made, particularly in high priced areas, loans would be conforming up to $730 - today's rate quoted from Wells Fargo Bank was 5.75% on a conforming loan (loan amount up to $417,000) and 6.876% on a non-conforming loan (jumbo loan) - 1.126% more! That's a big difference! That will enable home buyers to afford a slightly higher priced home, that will enable anyone who currently has a jumbo mortgage at a higher interest rate to refinance!
This is just another encouraging sign that the powers that be are taking steps to ease the home buying and mortgage crunch! If this becomes available as expected, the market just might take that turn we've been waiting for!
Remember BE INFORMED and CHECK BACK HERE OFTEN
The following information was just received from a lender we work with quite often (I'll explain in more simple terms following his statement:
"As part of the economic stimulus package, an increase in the conforming limit could now be a reality, at least for a brief period. Congress and President Bush agreed, but have not voted yet, on a 1-yr increase in the conforming loan limit to $730K. There is not a lot of detail yet (there is confusion as to whether the $730K, or $725, is for high cost housing areas, or everywhere, and just what high cost areas are?). Just when mortgage originators everywhere were breaking out the Cold Duck, OFHEO’s director James Lockhart (Office of Federal Housing Enterprise Oversight, who oversees FNMA & FHLMC) issued a statement saying “We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform. To restore confidence in the markets we must ensure that the GSEs’ regulator has all the necessary safety and soundness tools. Yesterday Chairman Dodd talked about moving a GSE reform bill early this year. We are ready to work with him and the Senate Banking Committee. We will also be working with Fannie Mae and Freddie Mac to ensure that any increase in the conforming loan limit moves through their rigorous new product approval process quickly and has appropriate risk management policies and capital in place.”
Now what? Frankly, analysts feel that enactment is possible by mid-February but looks more likely by early March. No large investors will make any policy changes or announcements until the issues are less confusing, or even voted into law. Apparently, the bill would temporarily increase the limit on mortgages Fannie Mae and Freddie Mac may securitize from $417k to up to $730k. In addition, the bill would increase the limit on loans the Federal Housing Administration (FHA) may insure from $362k to $625k. This should help to reduce spreads in the jumbo mortgage market! One estimate mentioned that as many as $400-500 billion in loans could qualify for refinancing. As these loans refinance, it could ease pressure on capital-constrained bank balance sheets. And “temporary” items like this are difficult to rescind after a year, which would also be good news for originators."
So what does this really mean? If this change is made, particularly in high priced areas, loans would be conforming up to $730 - today's rate quoted from Wells Fargo Bank was 5.75% on a conforming loan (loan amount up to $417,000) and 6.876% on a non-conforming loan (jumbo loan) - 1.126% more! That's a big difference! That will enable home buyers to afford a slightly higher priced home, that will enable anyone who currently has a jumbo mortgage at a higher interest rate to refinance!
This is just another encouraging sign that the powers that be are taking steps to ease the home buying and mortgage crunch! If this becomes available as expected, the market just might take that turn we've been waiting for!
Remember BE INFORMED and CHECK BACK HERE OFTEN
Thursday, January 24, 2008
How Much will $600 or $1200 Mean To You
I read with interest the breaking news today that to stimulate the economy, there is a proposal to rebate $600 to every single taxpayer and $1200 to every married taxpayer filing a joint return. There is talk also of $300 for each dependent child in the household. According to the news report, these checks could be in your mailbox by June of this year. People who did not pay federal income taxes but who had earned income of more than $3,000 would get checks of $300 per individual or $600 per couple. Those who earn up to $75,000 individually or up to $150,000 as a couple will be eligible for the payments according to the report.
So, as a single taxpayer, I would receive a check for $600 and thought about what I would do with this "windfall". Unfortunately, it's not going to pay for a new car, or my dream vacation, so I would probably just deposit the amount into my checking account and it would disappear into the world of bill paying and normal living expenses as do most checks I deposit here. I might just deposit this amount into my savings, after all I hadn't planned on having it and I probably don't make as many deposits into this account as I should.
But what about the rest of my fellow taxpayers who receive this payment? I am sure that to many, this will come as a blessing and pay for something they sorely need and for that I am all in favor.
I do wonder how this will affect the budget deficit and the amount of taxes I will be paying down the road to make up for any shortfalls - this was not mentioned in any of the articles I have so far read. That will be interesting. For now, however, we'll see how this plays out, how the "short term fix" as well as any long term fixes that are yet to come, will be reflected in the economy in general and the hard-hit housing market in specific.
So, my loyal readers, I'd love to hear just how you would spend this unexpected "gift" from Uncle Sam - or if you think it is a good idea or not, too much, too little - whatever, email me!
Remember BE INFORMED and CHECK BACK HERE OFTEN
So, as a single taxpayer, I would receive a check for $600 and thought about what I would do with this "windfall". Unfortunately, it's not going to pay for a new car, or my dream vacation, so I would probably just deposit the amount into my checking account and it would disappear into the world of bill paying and normal living expenses as do most checks I deposit here. I might just deposit this amount into my savings, after all I hadn't planned on having it and I probably don't make as many deposits into this account as I should.
But what about the rest of my fellow taxpayers who receive this payment? I am sure that to many, this will come as a blessing and pay for something they sorely need and for that I am all in favor.
I do wonder how this will affect the budget deficit and the amount of taxes I will be paying down the road to make up for any shortfalls - this was not mentioned in any of the articles I have so far read. That will be interesting. For now, however, we'll see how this plays out, how the "short term fix" as well as any long term fixes that are yet to come, will be reflected in the economy in general and the hard-hit housing market in specific.
So, my loyal readers, I'd love to hear just how you would spend this unexpected "gift" from Uncle Sam - or if you think it is a good idea or not, too much, too little - whatever, email me!
Remember BE INFORMED and CHECK BACK HERE OFTEN
Wednesday, January 23, 2008
Statistics today on How The Market is Changing!
As we normally do in the beginning of each year, we compile the statistics of the business we have done the year before and we prepare a business plan and list of goals for the coming year. Comparing 2007 to 2006, our production was up 26% in the number of homes we sold! Although there has been very little positive media attention to home sales, 2007 was one of the best three years we have had out of the last ten!
Now, 2008 is going to be an interesting year in the housing market. If we take the first three weeks of the year, the numbers so far have been quite dismal. In Washington, DC in the first three weeks of 2007 there were 305 sales of residential properties. Let's compare that to the first three weeks of 2008 where only 165 sales have been completed. There is a very large inventory in Washington of Condo and Co-Op properties so we can wonder if this isn't skewing the numbers slightly - so we move outside of Washington to Montgomery County, Maryland. In 2007 there were 398 Sales compared to 2008 which records only 191 for the same period. The makeup of Montgomery County goes from very high end (inside the beltway in communities such as Chevy Chase and Bethesda) to high density, further out communities of townhouses and condominiums. Keeping that in mind, I looked at Bethesda only to find that 2007 yielded 46 sales in 2007 and 25 sales in 2008.
What does this mean? It means that as slow as home sales were in 2007, right now they have slowed to almost half the numbers in the same period of time! What those numbers do not show, however, is that although sales are down, the number of inquiries from potential buyers has been increasing at an extremely rapid pace. The buyer's agents in our office are swamped with calls and are booked solid with appointments for showings for the entire near term.
So, we're going to keep close watch on these numbers - instead of a monthly basis, we're moving to a weekly basis. We need to keep our buyers ahead of the curve if possible and if the number of sales picks up as quickly as we believe it will in the coming months, the best buys may start disappearing fast (as I mentioned in my post yesterday).
I will post statistics each weekend - number of listings, number of sales, number of contract, days on market, etc., for the Washington, DC metro region - Hope you'll find this helpful!
As always BE PREPARED and CHECK BACK HERE OFTEN
Now, 2008 is going to be an interesting year in the housing market. If we take the first three weeks of the year, the numbers so far have been quite dismal. In Washington, DC in the first three weeks of 2007 there were 305 sales of residential properties. Let's compare that to the first three weeks of 2008 where only 165 sales have been completed. There is a very large inventory in Washington of Condo and Co-Op properties so we can wonder if this isn't skewing the numbers slightly - so we move outside of Washington to Montgomery County, Maryland. In 2007 there were 398 Sales compared to 2008 which records only 191 for the same period. The makeup of Montgomery County goes from very high end (inside the beltway in communities such as Chevy Chase and Bethesda) to high density, further out communities of townhouses and condominiums. Keeping that in mind, I looked at Bethesda only to find that 2007 yielded 46 sales in 2007 and 25 sales in 2008.
What does this mean? It means that as slow as home sales were in 2007, right now they have slowed to almost half the numbers in the same period of time! What those numbers do not show, however, is that although sales are down, the number of inquiries from potential buyers has been increasing at an extremely rapid pace. The buyer's agents in our office are swamped with calls and are booked solid with appointments for showings for the entire near term.
So, we're going to keep close watch on these numbers - instead of a monthly basis, we're moving to a weekly basis. We need to keep our buyers ahead of the curve if possible and if the number of sales picks up as quickly as we believe it will in the coming months, the best buys may start disappearing fast (as I mentioned in my post yesterday).
I will post statistics each weekend - number of listings, number of sales, number of contract, days on market, etc., for the Washington, DC metro region - Hope you'll find this helpful!
As always BE PREPARED and CHECK BACK HERE OFTEN
Tuesday, January 22, 2008
Signs the Market Is Changing - Know When It's Time to Buy!
Lots of potential buyers are out there waiting for the market to "bottom out" - but there really isn't a magic formula, nor will there be news articles that are timely enough for most buyers to take advantage. There are some signs you can watch for and information you can track to identify a turn in the market.
First things first, don't pay attention to the national news! It seems that fear is rampant and fueled by negative press. This tends to keep buyers on the back burner and often times they will miss a great opportunity because of negative press that may not even be relevant to their area of interest!
Next, be ready to buy when you see the home you want! The chance may not come around again so soon!
The signs we, as realtors, look for that a market is turning are:
The number of active listings start to decline. The best homes in the best conditions are selling! And keep in mind that the most desirable homes will leave the market first.
The number of days on market starts going down. This certainly marks a turn in the market, and in a seller's market the prices are going up and the number of choices are going down! At the very least, sellers will stop dropping the prices.
Sold homes go for closer to the listing price. In 2007, home prices dipped for the first time in four decades. With a 1.9 percent decline, homes still sold within 97 percent of listing price. When they get to 98 percent, you need to be ready.
Prices remain firm or rise. Prices are a product of demand. To attract buyers, sellers reduce their prices and offer more incentives. If homes are selling reasonably well, prices won't move downward -- they'll go up.
Incentives disappear. When a market begins to favor sellers, they don't have to do as much to sell homes. Watch new homes and see if builders are still giving away upgrades such as granite kitchens, hardwood floors and closing assistance. If they aren't, times have changed.
You can track many of these numbers yourself. For instance, once a month, at www.gcaar.com (the Greater Capital Area Association of Realtors) publishes all of the statistics for the areas around Washington DC (Maryland & Northern Virginia as well as DC) - this is available to the public at their site. For those of you out of this area, a call to a local real estate office will get you the local association or just google it. Most all area associations make information available to the public. Each month you will see the month over month statistics for number of listings, number of sales, days on market, etc., all the same information we, as realtors, rely on.
Remember, any change in condition will change others, so again -- be ready. Now's the time to buy a better house while prices are low, interest rates are low and inventory is still high.
BE PREPARED and CHECK BACK HERE OFTEN!
First things first, don't pay attention to the national news! It seems that fear is rampant and fueled by negative press. This tends to keep buyers on the back burner and often times they will miss a great opportunity because of negative press that may not even be relevant to their area of interest!
Next, be ready to buy when you see the home you want! The chance may not come around again so soon!
The signs we, as realtors, look for that a market is turning are:
The number of active listings start to decline. The best homes in the best conditions are selling! And keep in mind that the most desirable homes will leave the market first.
The number of days on market starts going down. This certainly marks a turn in the market, and in a seller's market the prices are going up and the number of choices are going down! At the very least, sellers will stop dropping the prices.
Sold homes go for closer to the listing price. In 2007, home prices dipped for the first time in four decades. With a 1.9 percent decline, homes still sold within 97 percent of listing price. When they get to 98 percent, you need to be ready.
Prices remain firm or rise. Prices are a product of demand. To attract buyers, sellers reduce their prices and offer more incentives. If homes are selling reasonably well, prices won't move downward -- they'll go up.
Incentives disappear. When a market begins to favor sellers, they don't have to do as much to sell homes. Watch new homes and see if builders are still giving away upgrades such as granite kitchens, hardwood floors and closing assistance. If they aren't, times have changed.
You can track many of these numbers yourself. For instance, once a month, at www.gcaar.com (the Greater Capital Area Association of Realtors) publishes all of the statistics for the areas around Washington DC (Maryland & Northern Virginia as well as DC) - this is available to the public at their site. For those of you out of this area, a call to a local real estate office will get you the local association or just google it. Most all area associations make information available to the public. Each month you will see the month over month statistics for number of listings, number of sales, days on market, etc., all the same information we, as realtors, rely on.
Remember, any change in condition will change others, so again -- be ready. Now's the time to buy a better house while prices are low, interest rates are low and inventory is still high.
BE PREPARED and CHECK BACK HERE OFTEN!
Monday, January 21, 2008
Costly Mistakes in Marketing Your Property
Once you've done all your homework and listed your house for sale, you are doing yourself harm by not taking an active part in the marketing. Agents should give all copy to the sellers for their review before printing materials or placing ads, and that includes the listing itself in the MLS (multiple listing service) in your area. You know the best features of your home better than anyone and although an experienced agent knows the type of ads that work, the "buzz" words that grab the interest of prospective buyers, there is no-one better than you to know the details of your property.
Let me give you an example of a very costly mistake. Recently a house was listed that was total new construction, built on the original footprint and foundation of a house that was built in the '50s. In the MLS, the year built was automatically added from the tax records and came up as 1950. No amount of description in the remarks and descriptions that the house was built in 2007 can overcome the fact that agents searching for new construction for their prospective buyers will not see your home in the search results! It would have been easy to change the date, but it was overlooked by both the agent and the seller. The items that are automatically filled in when inputting a listing are often overlooked for accuracy and sellers most often focus on the number of bedrooms and baths, upgrades and the written descriptions.
Ask your agent to email you a copy of the listing BEFORE it goes active so that you can go over it carefully. Similarly, your agent should provide you drafts of brochures and print ads before they are actually printed or submitted. Get a list of all websites on which your home will appear and check those as well. It is not unusual when submitting properties to multiple websites that a virtual tour is omitted, a wrong picture is posted, or the copy gets cut off.
Just as you should be extremely particular in how your house shows, you should be extremely particular about the accuracy of all marketing materials. Some websites (such as realtor.com) pick up the information directly from the MLS, however, most others require individual input - and the more times you input information, the more times there is potential for error.
Small mistakes can cost showings - keep in mind that homes are marketed more to agents than to buyers and agents are going to search by very particular criteria - number of bedrooms and bathrooms upstairs, year built, size of lot, school district, proximity of public transportation - so it is important that these be correct!
Hope this was helpful - as always, BE INFORMED and CHECK BACK HERE OFTEN
Let me give you an example of a very costly mistake. Recently a house was listed that was total new construction, built on the original footprint and foundation of a house that was built in the '50s. In the MLS, the year built was automatically added from the tax records and came up as 1950. No amount of description in the remarks and descriptions that the house was built in 2007 can overcome the fact that agents searching for new construction for their prospective buyers will not see your home in the search results! It would have been easy to change the date, but it was overlooked by both the agent and the seller. The items that are automatically filled in when inputting a listing are often overlooked for accuracy and sellers most often focus on the number of bedrooms and baths, upgrades and the written descriptions.
Ask your agent to email you a copy of the listing BEFORE it goes active so that you can go over it carefully. Similarly, your agent should provide you drafts of brochures and print ads before they are actually printed or submitted. Get a list of all websites on which your home will appear and check those as well. It is not unusual when submitting properties to multiple websites that a virtual tour is omitted, a wrong picture is posted, or the copy gets cut off.
Just as you should be extremely particular in how your house shows, you should be extremely particular about the accuracy of all marketing materials. Some websites (such as realtor.com) pick up the information directly from the MLS, however, most others require individual input - and the more times you input information, the more times there is potential for error.
Small mistakes can cost showings - keep in mind that homes are marketed more to agents than to buyers and agents are going to search by very particular criteria - number of bedrooms and bathrooms upstairs, year built, size of lot, school district, proximity of public transportation - so it is important that these be correct!
Hope this was helpful - as always, BE INFORMED and CHECK BACK HERE OFTEN
Saturday, January 19, 2008
SHOPPING FOR A MORTGAGE ON LINE - EVERYTHING YOU NEED TO KNOW!
One of the best articles I have read explaining shopping for a mortgage online was written by Jack Guttentag (you can see more information about Professor Guttentag at the end of the article) and reproduced here with his gracious permission, I'm sure you will find this information of great interest. Although the article was last updated in 2006, the information still applies and should explain everything you need to know to shop for that mortgage online!
This article is on the why, which, and how of shopping for a mortgage on-line: why seek a mortgage this way, which sites are the best, and how do you shop effectively?
Why Shop For a Mortgage On-Line?
Shopping for a mortgage on-line involves finding the best price among the different single-lender web sites that price your mortgage. On-line mortgage shopping offers numerous advantages.
On-Line Prices Are Easier to Find and to Shop
If your loan is priced on a web site, it will be easy to find, and to compare to the quotes on other sites. In contrast, price quotes in the hard copy media are never provided in the detail required by most shoppers and are always out of date. Telephone and email quotes by brokers and loan officers cannot be relied on unless the borrower knows the source and has good reason to believe it is trustworthy.
On-Line Pricing Is Often Better
Lenders acquiring loans through their web sites avoid the costs of maintaining retail lending facilities, including the commissions paid to loan officers. Because of competition among on-line lenders, the cost savings are generally passed on to borrowers. Some sites warn users to expect higher prices if they go off-line.
Price Volatility Is Easier to Manage
The mortgage market is highly volatile. Lenders reset their prices every morning, and sometimes during the day. Unless price quotations from different loan providers are obtained at about the same point in time, they are not comparable.
This is a major problem in off-line shopping because it takes so long to obtain reliable price data. It is not a problem in on-line shopping because on-line price quotations can be quickly refreshed.
You Avoid Price "Low-Balling"
Low-ballers are loan providers who ensnare customers by quoting low prices they have no intention of delivering. The client is informed that the price will be locked at the “market price” prevailing at the time of the lock, but the market price is what the low-baller says it is. Invariably, the lock price is higher than the price quoted to a shopper for the identical loan at the same time.
On-line shoppers are not vulnerable to price low-balling because they can check their price on-line on the lock day. An on-line lender cannot quote different prices to shoppers and lockers.
You Avoid Third Party Settlement Cost Low-Balling
Some loan providers low-ball third party settlement costs, which they can’t be held to because they are “estimates”. Sometimes they do the opposite, marking them up in order to pocket the difference.
These practices usually work off-line, because information on third party costs typically is not provided until the shopper receives the Good Faith Estimate (GFE), which under the rules need not be given them until 3 business days after the lender has received the loan application. The only way to obtain more than one GFE as a check on the estimates is to apply to more than one lender, which is tedious and time-consuming.
In contrast, on-line shoppers can easily collect settlement cost information from multiple lenders at the same time they are shopping lender prices. Having multiple estimates is an excellent defense against low-balling or markups.
You Avoid Lender Fee Low-Balling
Some lenders low-ball their own fees, which under the rules are also considered “estimates”. While points, which are charges expressed as a percent of the loan amount, are included in a price lock, fees specified in dollars are not included. Some lenders deliberately inflate these fees as the borrower moves closer to closing. Home purchasers are the most vulnerable because they can lose the home if they don’t close on time.
This is not a hazard to on-line shoppers, however, because the shopping sites clearly identify their fees and many of them guarantee them. While others don’t explicitly guarantee their fees, displaying them on-line is almost as good, since the lender would have difficulty defending a different number at the closing table.
You Avoid Being Scammed When You Change Your Mind
Shoppers often change their mind about the deal. For example, they decide to switch from a 30-year FRM to a 5-1 ARM, pay points to lower the rate, make a larger down payment, waive escrows, etc. If an off-line loan provider figures that a customer is committed, the price of the new deal may be higher than the price that would be quoted to a new shopper. This cannot be done to an on-line shopper who can check the price of the new loan on-line.
On-Line Shopping Versus Use of Lead Generators
It is instructive to compare on-line shopping with getting a loan through a lead generation site (LGS), such as Lending Tree. LGSs collect information about you, and match it to up to 4 lenders who contact you to make offers. An advantage over shopping single-lender sites is that you only have to enter your financial information once. When you shop on-line, you must enter the information for each site you shop. That is the only advantage of LGSs.
One problem with LGSs is that they do not provide any way to deal with price volatility. If the lenders contact you on different days, their prices are not comparable. Similarly, LGSs do not protect you against low-balling of prices or lender-fees, markups on third party settlement services, or over-charges when you change your mind about the deal.
Yes, the lenders who come to you through a LGS do compete for your loans, but that doesn’t mean that you will win. They may be competing to see who gets the opportunity to scam you.
Caveat: The Weakness of On-Line Shopping
All the advantages of on-line shopping cited above assume the shopper can price his particular deal on the sites being compared. A shopper with a FICO score of 500 who needs stated income documentation and cannot make a down payment, cannot price his loan on-line. If he goes to any of the good sites, he will be routed to a loan officer and has to face all the hazards discussed above that on-line shopping avoids.
But there is one exception. Any shopper who goes to Amerisave.com through my site is guaranteed the same markup off-line as on-line. Both the wholesale price and the markup are shown and guaranteed by Amerisave and by me. This is the first on-line site that reveals the wholesale price to the lender and is monitored for compliance with a fixed-markup rule.
Which Single-Lender Web Sites Are Worth Shopping?
Borrowers who shop for a mortgage on-line, for any of the reasons noted above, should only spend time on sites that price their loan. If a site doesn’t price the type of loan you want, with the features you require, don’t bother with it. You are on-line to shop, not to be seduced into making a phone call.
To help, I recently scored 20 sites for the depth and comprehensiveness of the information provided to shoppers. Of these, I considered 18 worth listing because they had some price functionality and showed all settlement costs.
The two highest ranked sites, http://www.amerisave.com/ and http://www.eloan.com/, meet all my requirements for the designation of Upfront Mortgage Lenders (UML). Among other things, UMLs provide a summary of all the market niches priced by the site, and disclose all the major features of their adjustable rate mortgages (ARMs). The two runners-up, http://www.mortgage.com/ (the site of ABN Amro), and http://www.indymac.com/, did neither, but they did cover many loan types and market niches.
Here is the complete list by score:
Amerisave.com (47)
Eloan.com (46)
Mortgage.com (42)
Indymac.com (37)
Greenpointmortgage.com (32)
Chasehomefinance.com (30)
Mortgage.etrade.com (29)
Charteronedirect.com (29)
Wamuhomeloans.com (26)
Bankofamerica.com (25)
Citimortgage.com (24)
Ditech.com (20)
Wachovia.com (19)
WellsFargo.com\mortgage (19)
Gmacmortgage.com (14)
Homeloancenter.com (14)
Infoloan.com (12)
INGdirect.com (12).
The Scoring System
A site with a higher score is one that prices a larger number of potential transactions, and provides shoppers with the information needed to make decisions. Here are some examples of the scoring system I used:
Mortgage Types and Features Priced by the Site
For every program they price beyond 15 and 30-year fixed-rate conventional loans, a site receives 1 point. This includes different types of ARMs, balloon loans, and FHA/VA loans. They also receive a point for disclosing each important ARM feature.
Down Payment Pricing
A site that allows the user to enter the down payment receives 2 points, and an additional point if the down payment can be less than 5%. If the site uses one down payment in all its pricing, but tells the user what that assumption is, it receives 1 point.
Settlement Cost Disclosures
A site that shows all settlement costs receives 1 point, another point if lender fees are segregated, another point if lender fees are guaranteed, another point if the guarantee includes the appraisal, another point if the guarantee includes the credit report, and 2 additional points if it covers all third party fees.
Rate-Point Options
A site receives 1 point if some of the mortgages are priced with multiple combinations of interest rate and points, an additional point if rates are shown for negative points (rebates), and a point if it explicitly prices no-cost loans.
Strengths in Coverage
11 of the 18 listed sites priced loans on second homes, loans on investment properties, and cash-out refinances. Most sites also priced loans on 2, 3 and 4-unit properties, as well as on condos. There were even 5 sites that priced loans on co-ops, and 3 that priced loans on manufactured homes.
15 of 18 sites priced loans with down payments specified by the shopper (rather than assumed by the site), and in 9 cases down payments could be less than 5%. Most of the 9 allowed zero down on at least some transactions.
17 of 18 sites provided different combinations of interest rate and points on at least some programs, and 14 included negative points (rebates).
All 18 sites showed total settlement costs, 12 segregated lender fees, and 9 explicitly guaranteed lender fees.
Weaknesses in Coverage
While shoppers can find every type of ARM offered on multiple sites, only Amerisave, ELoan and Chase Mortgage (ranked number 5) disclose the index and its current value, the margin, and all rate caps – information needed to make intelligent decisions. If you price an ARM on any other site, you will have to contact them to fill in the blanks.
Except for Amerisave, ELoan and Indy Mac, the sites assume your credit is excellent. Shoppers with scores below 620 cannot yet shop effectively on-line.
On-line shoppers also do best if they can fully document their income and assets. Only 5 sites have a “stated income” option, and none offer “no docs”.
While a lower-ranked site has less coverage, there is always the possibility that it prices your loan and a higher-ranked site does not.
How Do You Shop On-Line?
Here are the steps in using these sites effectively.
1. Decide Whether You Are a Shopper
On-line shopping is not for those who are computer-phobic or mortgage-allergic. If you feel overwhelmed by the complexity of mortgages, and don’t have the time, energy or desire to educate yourself about them, internet shopping is not for you. Select an Upfront Mortgage Broker (UMB) to shop for you.
2. Determine Whether You Qualify For on-Line Shopping
You can’t shop on-line unless your particular deal is priced on-line by at least some lenders. For the most part, this excludes borrowers with poor credit. If you have a credit score below 620, most of the sites will deal with you, but off-line – “Bad credit? Call us”.
Single lender sites vary greatly in the extent of their niche adjustments. The trick is to determine whether the questions posed by a site have captured your particular niche adjustments. If you are buying a two-family house, for example, and you are asked about “Type of Property” with “Two-family house” one possible answer, then you know that they adjust for that.
On-line shoppers also do best if they can fully document their income and assets. Only 5 of the 18 sites have a “stated income” option under which the lender verifies the source but not the amount of income. None price “no-doc” loans.
3. Decide the Mortgage Features You Want
You can’t compare prices of different loan providers accurately unless you can specify exactly what you are shopping for. When you shop for an automobile, you decide beforehand that you want, e.g., a 4-door Toyota Corolla with Bose speaker system 102, red trim, etc. Similarly, when you shop for a mortgage, you should know the type of mortgage you want – whether fixed-rate (FRM) or adjustable rate (ARM), and if the latter, what kind. You should also know your preferred term, points, down payment, lock period, and options including interest-only, prepayment penalty and waiver of escrows.
4. Identify Sites That Price Loans With the Features You Want
I have done most of the spadework for you by developing tables that show the loan coverage of the 18 sites.
For example, you want a 10-year FRM with zero down. The tables show that lenders 1, 2, 3, 7, 9, 10 and 13 offer 10-year FRMs, but of this group, only 1, 2, 3 and 13 also price loans with down payments of less than 5%. Hence, you can concentrate on these four sites.
5. Compare Multiple-Price Quotes From Different Sites
If you are selecting an FRM, you must consider both rate and total lender costs, which includes points and all other lender fees. Assuming you are seeking the best deal on the 10-year FRM from lenders 1, 2, 3 and 13:
a. At lender 2’s site, find the rate that is closest to the number of points you previously decided you wanted to pay.
b. Calculate the dollar value of these points and add it to the lender’s fixed-dollar fees to get the total lender fee for that rate.
c. Now go to lenders 1, 3 and 13 and repeat the process for the same rate. Since lenders usually quote rates in increments of 1/8%, you should be able to find the exact same rate.
d. Holding the rate constant at the 4 sites, the best deal is the one with the lowest total lender fees.
6. Comparing Prices of ARMs
On ARMs with initial rate periods of 3, 5, 7 or 10-years, follow the same procedure. If you are 99% confident you will be out of the house before the end of the initial rate period, take the ARM with the lowest total fees at the same rate.
If you are not sure that you will be out before the end of the initial rate period, you should consider what might happen to the rate at that time. That will depend on the rate index, margin, and rate caps, which may differ between lenders.
It could turn out, for example, that the 5-year ARM with the lowest cost over 5 years leaves you more exposed to higher interest rates after 5 years. In that event, you need to decide whether the cost saving is worth the added risk.
Borrowers who opt for an ARM with an initial rate period of 12 months or less can use much the same technique, but instead of comparing the initial rate, they should compare the index plus margin. At the end of the short initial rate period, the rate is reset at index plus margin, subject to any caps.
If two ARMs are identical but you had to call one lender to obtain information on the margin or caps, select the other.
Copyright Jack Guttentag 2006
The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at http://www.mtgprofessor.com/
If you find this or any of my posts useful or helpful, please leave comments and suggestions!
As Always - BE INFORMED and CHECK BACK HERE OFTEN
This article is on the why, which, and how of shopping for a mortgage on-line: why seek a mortgage this way, which sites are the best, and how do you shop effectively?
Why Shop For a Mortgage On-Line?
Shopping for a mortgage on-line involves finding the best price among the different single-lender web sites that price your mortgage. On-line mortgage shopping offers numerous advantages.
On-Line Prices Are Easier to Find and to Shop
If your loan is priced on a web site, it will be easy to find, and to compare to the quotes on other sites. In contrast, price quotes in the hard copy media are never provided in the detail required by most shoppers and are always out of date. Telephone and email quotes by brokers and loan officers cannot be relied on unless the borrower knows the source and has good reason to believe it is trustworthy.
On-Line Pricing Is Often Better
Lenders acquiring loans through their web sites avoid the costs of maintaining retail lending facilities, including the commissions paid to loan officers. Because of competition among on-line lenders, the cost savings are generally passed on to borrowers. Some sites warn users to expect higher prices if they go off-line.
Price Volatility Is Easier to Manage
The mortgage market is highly volatile. Lenders reset their prices every morning, and sometimes during the day. Unless price quotations from different loan providers are obtained at about the same point in time, they are not comparable.
This is a major problem in off-line shopping because it takes so long to obtain reliable price data. It is not a problem in on-line shopping because on-line price quotations can be quickly refreshed.
You Avoid Price "Low-Balling"
Low-ballers are loan providers who ensnare customers by quoting low prices they have no intention of delivering. The client is informed that the price will be locked at the “market price” prevailing at the time of the lock, but the market price is what the low-baller says it is. Invariably, the lock price is higher than the price quoted to a shopper for the identical loan at the same time.
On-line shoppers are not vulnerable to price low-balling because they can check their price on-line on the lock day. An on-line lender cannot quote different prices to shoppers and lockers.
You Avoid Third Party Settlement Cost Low-Balling
Some loan providers low-ball third party settlement costs, which they can’t be held to because they are “estimates”. Sometimes they do the opposite, marking them up in order to pocket the difference.
These practices usually work off-line, because information on third party costs typically is not provided until the shopper receives the Good Faith Estimate (GFE), which under the rules need not be given them until 3 business days after the lender has received the loan application. The only way to obtain more than one GFE as a check on the estimates is to apply to more than one lender, which is tedious and time-consuming.
In contrast, on-line shoppers can easily collect settlement cost information from multiple lenders at the same time they are shopping lender prices. Having multiple estimates is an excellent defense against low-balling or markups.
You Avoid Lender Fee Low-Balling
Some lenders low-ball their own fees, which under the rules are also considered “estimates”. While points, which are charges expressed as a percent of the loan amount, are included in a price lock, fees specified in dollars are not included. Some lenders deliberately inflate these fees as the borrower moves closer to closing. Home purchasers are the most vulnerable because they can lose the home if they don’t close on time.
This is not a hazard to on-line shoppers, however, because the shopping sites clearly identify their fees and many of them guarantee them. While others don’t explicitly guarantee their fees, displaying them on-line is almost as good, since the lender would have difficulty defending a different number at the closing table.
You Avoid Being Scammed When You Change Your Mind
Shoppers often change their mind about the deal. For example, they decide to switch from a 30-year FRM to a 5-1 ARM, pay points to lower the rate, make a larger down payment, waive escrows, etc. If an off-line loan provider figures that a customer is committed, the price of the new deal may be higher than the price that would be quoted to a new shopper. This cannot be done to an on-line shopper who can check the price of the new loan on-line.
On-Line Shopping Versus Use of Lead Generators
It is instructive to compare on-line shopping with getting a loan through a lead generation site (LGS), such as Lending Tree. LGSs collect information about you, and match it to up to 4 lenders who contact you to make offers. An advantage over shopping single-lender sites is that you only have to enter your financial information once. When you shop on-line, you must enter the information for each site you shop. That is the only advantage of LGSs.
One problem with LGSs is that they do not provide any way to deal with price volatility. If the lenders contact you on different days, their prices are not comparable. Similarly, LGSs do not protect you against low-balling of prices or lender-fees, markups on third party settlement services, or over-charges when you change your mind about the deal.
Yes, the lenders who come to you through a LGS do compete for your loans, but that doesn’t mean that you will win. They may be competing to see who gets the opportunity to scam you.
Caveat: The Weakness of On-Line Shopping
All the advantages of on-line shopping cited above assume the shopper can price his particular deal on the sites being compared. A shopper with a FICO score of 500 who needs stated income documentation and cannot make a down payment, cannot price his loan on-line. If he goes to any of the good sites, he will be routed to a loan officer and has to face all the hazards discussed above that on-line shopping avoids.
But there is one exception. Any shopper who goes to Amerisave.com through my site is guaranteed the same markup off-line as on-line. Both the wholesale price and the markup are shown and guaranteed by Amerisave and by me. This is the first on-line site that reveals the wholesale price to the lender and is monitored for compliance with a fixed-markup rule.
Which Single-Lender Web Sites Are Worth Shopping?
Borrowers who shop for a mortgage on-line, for any of the reasons noted above, should only spend time on sites that price their loan. If a site doesn’t price the type of loan you want, with the features you require, don’t bother with it. You are on-line to shop, not to be seduced into making a phone call.
To help, I recently scored 20 sites for the depth and comprehensiveness of the information provided to shoppers. Of these, I considered 18 worth listing because they had some price functionality and showed all settlement costs.
The two highest ranked sites, http://www.amerisave.com/ and http://www.eloan.com/, meet all my requirements for the designation of Upfront Mortgage Lenders (UML). Among other things, UMLs provide a summary of all the market niches priced by the site, and disclose all the major features of their adjustable rate mortgages (ARMs). The two runners-up, http://www.mortgage.com/ (the site of ABN Amro), and http://www.indymac.com/, did neither, but they did cover many loan types and market niches.
Here is the complete list by score:
Amerisave.com (47)
Eloan.com (46)
Mortgage.com (42)
Indymac.com (37)
Greenpointmortgage.com (32)
Chasehomefinance.com (30)
Mortgage.etrade.com (29)
Charteronedirect.com (29)
Wamuhomeloans.com (26)
Bankofamerica.com (25)
Citimortgage.com (24)
Ditech.com (20)
Wachovia.com (19)
WellsFargo.com\mortgage (19)
Gmacmortgage.com (14)
Homeloancenter.com (14)
Infoloan.com (12)
INGdirect.com (12).
The Scoring System
A site with a higher score is one that prices a larger number of potential transactions, and provides shoppers with the information needed to make decisions. Here are some examples of the scoring system I used:
Mortgage Types and Features Priced by the Site
For every program they price beyond 15 and 30-year fixed-rate conventional loans, a site receives 1 point. This includes different types of ARMs, balloon loans, and FHA/VA loans. They also receive a point for disclosing each important ARM feature.
Down Payment Pricing
A site that allows the user to enter the down payment receives 2 points, and an additional point if the down payment can be less than 5%. If the site uses one down payment in all its pricing, but tells the user what that assumption is, it receives 1 point.
Settlement Cost Disclosures
A site that shows all settlement costs receives 1 point, another point if lender fees are segregated, another point if lender fees are guaranteed, another point if the guarantee includes the appraisal, another point if the guarantee includes the credit report, and 2 additional points if it covers all third party fees.
Rate-Point Options
A site receives 1 point if some of the mortgages are priced with multiple combinations of interest rate and points, an additional point if rates are shown for negative points (rebates), and a point if it explicitly prices no-cost loans.
Strengths in Coverage
11 of the 18 listed sites priced loans on second homes, loans on investment properties, and cash-out refinances. Most sites also priced loans on 2, 3 and 4-unit properties, as well as on condos. There were even 5 sites that priced loans on co-ops, and 3 that priced loans on manufactured homes.
15 of 18 sites priced loans with down payments specified by the shopper (rather than assumed by the site), and in 9 cases down payments could be less than 5%. Most of the 9 allowed zero down on at least some transactions.
17 of 18 sites provided different combinations of interest rate and points on at least some programs, and 14 included negative points (rebates).
All 18 sites showed total settlement costs, 12 segregated lender fees, and 9 explicitly guaranteed lender fees.
Weaknesses in Coverage
While shoppers can find every type of ARM offered on multiple sites, only Amerisave, ELoan and Chase Mortgage (ranked number 5) disclose the index and its current value, the margin, and all rate caps – information needed to make intelligent decisions. If you price an ARM on any other site, you will have to contact them to fill in the blanks.
Except for Amerisave, ELoan and Indy Mac, the sites assume your credit is excellent. Shoppers with scores below 620 cannot yet shop effectively on-line.
On-line shoppers also do best if they can fully document their income and assets. Only 5 sites have a “stated income” option, and none offer “no docs”.
While a lower-ranked site has less coverage, there is always the possibility that it prices your loan and a higher-ranked site does not.
How Do You Shop On-Line?
Here are the steps in using these sites effectively.
1. Decide Whether You Are a Shopper
On-line shopping is not for those who are computer-phobic or mortgage-allergic. If you feel overwhelmed by the complexity of mortgages, and don’t have the time, energy or desire to educate yourself about them, internet shopping is not for you. Select an Upfront Mortgage Broker (UMB) to shop for you.
2. Determine Whether You Qualify For on-Line Shopping
You can’t shop on-line unless your particular deal is priced on-line by at least some lenders. For the most part, this excludes borrowers with poor credit. If you have a credit score below 620, most of the sites will deal with you, but off-line – “Bad credit? Call us”.
Single lender sites vary greatly in the extent of their niche adjustments. The trick is to determine whether the questions posed by a site have captured your particular niche adjustments. If you are buying a two-family house, for example, and you are asked about “Type of Property” with “Two-family house” one possible answer, then you know that they adjust for that.
On-line shoppers also do best if they can fully document their income and assets. Only 5 of the 18 sites have a “stated income” option under which the lender verifies the source but not the amount of income. None price “no-doc” loans.
3. Decide the Mortgage Features You Want
You can’t compare prices of different loan providers accurately unless you can specify exactly what you are shopping for. When you shop for an automobile, you decide beforehand that you want, e.g., a 4-door Toyota Corolla with Bose speaker system 102, red trim, etc. Similarly, when you shop for a mortgage, you should know the type of mortgage you want – whether fixed-rate (FRM) or adjustable rate (ARM), and if the latter, what kind. You should also know your preferred term, points, down payment, lock period, and options including interest-only, prepayment penalty and waiver of escrows.
4. Identify Sites That Price Loans With the Features You Want
I have done most of the spadework for you by developing tables that show the loan coverage of the 18 sites.
For example, you want a 10-year FRM with zero down. The tables show that lenders 1, 2, 3, 7, 9, 10 and 13 offer 10-year FRMs, but of this group, only 1, 2, 3 and 13 also price loans with down payments of less than 5%. Hence, you can concentrate on these four sites.
5. Compare Multiple-Price Quotes From Different Sites
If you are selecting an FRM, you must consider both rate and total lender costs, which includes points and all other lender fees. Assuming you are seeking the best deal on the 10-year FRM from lenders 1, 2, 3 and 13:
a. At lender 2’s site, find the rate that is closest to the number of points you previously decided you wanted to pay.
b. Calculate the dollar value of these points and add it to the lender’s fixed-dollar fees to get the total lender fee for that rate.
c. Now go to lenders 1, 3 and 13 and repeat the process for the same rate. Since lenders usually quote rates in increments of 1/8%, you should be able to find the exact same rate.
d. Holding the rate constant at the 4 sites, the best deal is the one with the lowest total lender fees.
6. Comparing Prices of ARMs
On ARMs with initial rate periods of 3, 5, 7 or 10-years, follow the same procedure. If you are 99% confident you will be out of the house before the end of the initial rate period, take the ARM with the lowest total fees at the same rate.
If you are not sure that you will be out before the end of the initial rate period, you should consider what might happen to the rate at that time. That will depend on the rate index, margin, and rate caps, which may differ between lenders.
It could turn out, for example, that the 5-year ARM with the lowest cost over 5 years leaves you more exposed to higher interest rates after 5 years. In that event, you need to decide whether the cost saving is worth the added risk.
Borrowers who opt for an ARM with an initial rate period of 12 months or less can use much the same technique, but instead of comparing the initial rate, they should compare the index plus margin. At the end of the short initial rate period, the rate is reset at index plus margin, subject to any caps.
If two ARMs are identical but you had to call one lender to obtain information on the margin or caps, select the other.
Copyright Jack Guttentag 2006
The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at http://www.mtgprofessor.com/
If you find this or any of my posts useful or helpful, please leave comments and suggestions!
As Always - BE INFORMED and CHECK BACK HERE OFTEN
Taking Apart the Inspection Report
On Friday I received two inspection reports on homes that are getting ready to go on the market. Both are older homes, one has been totally renovated and is vacant, one is occupied. Both inspection reports came in with some items that need action and items that should be left "as is" - but how do you decide what to do and what not to do? Your agent should go through the report with you carefully - remember, electrical, mechanical and plumbing issues need to be taken care of.
On both reports there were notations by the inspector that there were no GFCI (Ground Fault Circuit Interrupt) plugs - these are the plugs that are now required anywhere near water sources like bathrooms and kitchens and trip to avoid electrical shock. In the home that had been renovated in the new bathrooms and the new kitchen these plugs must be installed, in the older home, there is no requirement for the owner to change them. The reason is simple, to change the plugs in the older home is an upgrade - there were no GFCI plugs originally, the old plugs are fine (even the ones that are two pronged!). In the renovated house, when a renovation is done, these plugs must be upgraded - it's comparable to a new build where these are required.
Both inspection reports noted that the grading around the house may not be sloped properly away from the house. Very rarely do we see a report any more that does not mention grading - I'm beginning to believe that more and more inspectors are doing this as a precaution. Both reports also stated that downspouts needed to be routed away from the house. In this item, if there have been water problems in the basement that certainly could be the cause - if water doesn't flow away from the house, it will seep through the foundation and cause these water stains. If there has never been water, grading is not an issue. Routing the downspouts away from the house is as simple as going to your local hardware store and buying some flexible hose extensions, and clamping them on to the end of the downspouts - cheap and easy fix.
Recently, we sold a home that did show water encroachment in the crawl space (there was no basement) and it was definately from grading. At that point, the buyer's agent wanted to call a water remediation company like Sta-Dry to Be-Dry but that would have been a disaster. Most waterproofing companies will not only recommend re-grading but will recommend fixes like French Drains and sump pumps which are extremely expensive to install. We called a landscaping company that also does regrading and got an estimate of $700 to regrade close to the house and an additional $1,100 to remove railroad ties around the flower beds that were starting to deteriorate and replacing them with new treated wood borders. We offered to pay 1/2 of the re-grade ($350) and none of the additional $1,100 as this was an upgrade! Disaster averted and a credit of only $350 to the buyer at closing.
Back to the home inspections. The older house has a slate roof, great roof that lasts up to 50 years, but VERY expensive to replace. The pack portion of the home's roof had been replaced but the front had not. There are missing tiles and the roof is at the end of it's life. We called a roof repair company (they repair only, they do not replace so we don't worry about a roofer telling us the roof needs replacement when in fact it could be repaired). In this case, the roof cannot be repaired. We called a roofer and asked for an estimate of putting an architectural shingle on the front of the roof - the cost $7,500. When the home goes on the market and we have a potential buyer, we will produce the estimates and offer a credit of 1/2 or $3,750. This will become extremely important as if a potential buyer gets estimates for a new slate roof, the cost could go as high as $15-25,000. The roof is not leaking and the buyer will have the option of doing the repair now or waiting until it becomes necessary.
One window was cracked, we leave windows "as is"
One exhaust fan in a bathroom rattles, we leave exhaust fans "as is"
Additional items we leave "as is" are washers and dryers, screens, retaining walls, driveways and sidewalks.
There were "double taps" in the older home - two circuits on one circuit breaker and one electrical plug that did not function. Both of these items must be repaired.
There was one element in the oven that did not work properly, this needs repair as well.
Termite damage was found in the basement of the older home on the bottom of the paneling. The home is being treated for termites and it has been determined that the damage is cosmetic. Luckily this can be "fixed" by the addition of a 6" baseboard around the perimeter. Of course, this too should be done before showing the home. Rather than plant the "seed" in the buyer's mind that the damage could be extensive behind the walls, the treatment is done, the guarantee is written by the termite company and the cosmetic damage is repaired.
When either of these homes get an offer to purchase, we have already protected the seller from the buyer's asking for a long laundry list of repairs. When the contract is signed and the "as is" items are included on the disclosures, no matter what the purchaser's inspector finds, they cannot ask for any of the items we have listed as "as is"
So, again, this goes toward pre-inspection of a property. We continually find that spending a few hundred dollars to have the house pre-inspected invariably saves the seller thousands of dollars down the road. One other point I made in previous postings but will reiterate here is that if the owner is "handy" he/she can do many of these repairs themselves. Once a contract is in place and a buyer requests items be repaired, they will require that the repairs be done by licensed contractors!
Hope this helps, I would be more than happy to answer questions, and welcome your comments.
BE PREPARED and CHECK BACK HERE OFTEN
On both reports there were notations by the inspector that there were no GFCI (Ground Fault Circuit Interrupt) plugs - these are the plugs that are now required anywhere near water sources like bathrooms and kitchens and trip to avoid electrical shock. In the home that had been renovated in the new bathrooms and the new kitchen these plugs must be installed, in the older home, there is no requirement for the owner to change them. The reason is simple, to change the plugs in the older home is an upgrade - there were no GFCI plugs originally, the old plugs are fine (even the ones that are two pronged!). In the renovated house, when a renovation is done, these plugs must be upgraded - it's comparable to a new build where these are required.
Both inspection reports noted that the grading around the house may not be sloped properly away from the house. Very rarely do we see a report any more that does not mention grading - I'm beginning to believe that more and more inspectors are doing this as a precaution. Both reports also stated that downspouts needed to be routed away from the house. In this item, if there have been water problems in the basement that certainly could be the cause - if water doesn't flow away from the house, it will seep through the foundation and cause these water stains. If there has never been water, grading is not an issue. Routing the downspouts away from the house is as simple as going to your local hardware store and buying some flexible hose extensions, and clamping them on to the end of the downspouts - cheap and easy fix.
Recently, we sold a home that did show water encroachment in the crawl space (there was no basement) and it was definately from grading. At that point, the buyer's agent wanted to call a water remediation company like Sta-Dry to Be-Dry but that would have been a disaster. Most waterproofing companies will not only recommend re-grading but will recommend fixes like French Drains and sump pumps which are extremely expensive to install. We called a landscaping company that also does regrading and got an estimate of $700 to regrade close to the house and an additional $1,100 to remove railroad ties around the flower beds that were starting to deteriorate and replacing them with new treated wood borders. We offered to pay 1/2 of the re-grade ($350) and none of the additional $1,100 as this was an upgrade! Disaster averted and a credit of only $350 to the buyer at closing.
Back to the home inspections. The older house has a slate roof, great roof that lasts up to 50 years, but VERY expensive to replace. The pack portion of the home's roof had been replaced but the front had not. There are missing tiles and the roof is at the end of it's life. We called a roof repair company (they repair only, they do not replace so we don't worry about a roofer telling us the roof needs replacement when in fact it could be repaired). In this case, the roof cannot be repaired. We called a roofer and asked for an estimate of putting an architectural shingle on the front of the roof - the cost $7,500. When the home goes on the market and we have a potential buyer, we will produce the estimates and offer a credit of 1/2 or $3,750. This will become extremely important as if a potential buyer gets estimates for a new slate roof, the cost could go as high as $15-25,000. The roof is not leaking and the buyer will have the option of doing the repair now or waiting until it becomes necessary.
One window was cracked, we leave windows "as is"
One exhaust fan in a bathroom rattles, we leave exhaust fans "as is"
Additional items we leave "as is" are washers and dryers, screens, retaining walls, driveways and sidewalks.
There were "double taps" in the older home - two circuits on one circuit breaker and one electrical plug that did not function. Both of these items must be repaired.
There was one element in the oven that did not work properly, this needs repair as well.
Termite damage was found in the basement of the older home on the bottom of the paneling. The home is being treated for termites and it has been determined that the damage is cosmetic. Luckily this can be "fixed" by the addition of a 6" baseboard around the perimeter. Of course, this too should be done before showing the home. Rather than plant the "seed" in the buyer's mind that the damage could be extensive behind the walls, the treatment is done, the guarantee is written by the termite company and the cosmetic damage is repaired.
When either of these homes get an offer to purchase, we have already protected the seller from the buyer's asking for a long laundry list of repairs. When the contract is signed and the "as is" items are included on the disclosures, no matter what the purchaser's inspector finds, they cannot ask for any of the items we have listed as "as is"
So, again, this goes toward pre-inspection of a property. We continually find that spending a few hundred dollars to have the house pre-inspected invariably saves the seller thousands of dollars down the road. One other point I made in previous postings but will reiterate here is that if the owner is "handy" he/she can do many of these repairs themselves. Once a contract is in place and a buyer requests items be repaired, they will require that the repairs be done by licensed contractors!
Hope this helps, I would be more than happy to answer questions, and welcome your comments.
BE PREPARED and CHECK BACK HERE OFTEN
Friday, January 18, 2008
Great Web Sites to Visit
Yesterday I wrote that I would list some of what I consider to be some of the top web sites - some we use ourselves quite often and others we send buyers and sellers to - all are chock full of interesting information! So, in no particular order, here we go:
http://www.bestplaces.com/ - A great place for some great information. Type in a city and state and you can get most any information about that city - The cost of living, schools, crime, climate, homes, even compare it statistically to where you are currently living or where you are considering moving - or just for the fun of it, find out some interesting facts you may not know!
http://www.terrafly.com/ - There are lots of places to go these days for aerial views of neighborhoods, terrafly seems to take this a little further and connects you not only to a zoomable aerial view, but gives lots of information on the area you are looking at, too.
http://www.zillow.com/ - It seems like everyone has seen or heard of Zillow - it's a quick way to get a ballpark on the suggested selling price of the home. I'm sure you'll find this interesting as well, but keep in mind, there are way too many variables for zillow to really nail a price!
http://www.bestplaces.com/ - A great place for some great information. Type in a city and state and you can get most any information about that city - The cost of living, schools, crime, climate, homes, even compare it statistically to where you are currently living or where you are considering moving - or just for the fun of it, find out some interesting facts you may not know!
http://www.terrafly.com/ - There are lots of places to go these days for aerial views of neighborhoods, terrafly seems to take this a little further and connects you not only to a zoomable aerial view, but gives lots of information on the area you are looking at, too.
http://www.zillow.com/ - It seems like everyone has seen or heard of Zillow - it's a quick way to get a ballpark on the suggested selling price of the home. I'm sure you'll find this interesting as well, but keep in mind, there are way too many variables for zillow to really nail a price!
http://factfinder.census.gov/ Billed as "Your source for population, housing, economic, and geographic data" this is a great place to find lots of interesting information!
http://www.mtgprofessor.com This is the most spot-on, easy to follow information anyone considering a mortgage or buying a home should check out!
http://www.reuters.com/ - Don't know where you get your news - there are lots of good sites, but this is a good one for fast breaking and short, concise news reports!
http://www.mapmyrun.com/ - What a great way to find running paths, walking or jogging paths and map them out live on the web!
http://www.kayak.com/ - Lots of places on the web these days to book travel - Travelocity, Priceline, etc., but if you'd like to find the absolute best prices on flights try Kayaking!
And when you're really ready to take off and rest from all the work you've been doing all year long, check out http://www.vacationstogo.com/ for last minute (90 days out) deal on cruises - at the very least, it gives you an idea what the best prices are that you'll find on all the other sites!
So, these are a few of the sites we find helpful and interesting, we've got lots more and I'll add a list each week! If you'd got any you'd like to recommend, please let me know, I'd be happy to share them.
As Always - BE INFORMED and CHECK BACK HERE OFTEN
Thursday, January 17, 2008
Websites We Use All The Time - You'll Like These!
I am compiling a list of websites that we use constantly - sites that are a wealth of information to agents, buyers & sellers - I will start posting my list tomorrow - if you know of any sites that you would like included, please leave me a comment - I'll check the site out and let you know. Thanks.
Be Informed and CHECK BACK HERE OFTEN
Be Informed and CHECK BACK HERE OFTEN
The Hard Facts About Pricing Your Home To Sell
Unfortunately, especially in a slow market, sellers will tend to ask higher prices for their homes, expecting to get lower offers - or want to build in a "cushion" into their asking price so they have room to lower the price if it becomes necessary. This is truly a mistake and very rarely works to the seller's advantage. Here's a good example. Two similar properties in the same neighborhood listed for sale within several months of each other - both homes should have been priced at $700,000 or slightly lower. One seller listed at $700,000 and the home was sold very quickly at full price. The second seller decided to list the house at $739,000 - the house sat with no offers, the price was reduced to $725,000, still no offers and still sat - when the price was reduced to $700,000 (where it should have been in the first place) the house had already been on the market for several months, with several price reductions, and sold for $675,000!
In essence, a home that is listed higher than comparable properties will just help to sell the other homes!
Here are the facts:
A buyer who is seriously looking will soon become very knowledgeable in his or her price range. An unreasonable asking price only discourages the buyer from looking at and considering your property.
Buyers purchase by comparison and a property that is priced above the competition does not compare favorably. Inviting a buyer to make an offer can indicate that a fair price has not been established and the seller is willing to take a lower price.
It is very difficult to obtain a reasonable offer on an overpriced property. The buyer feels he/she should be just as unreasonable as the seller, and so a very low offer, if any, will be written.
Serious buyers look in the price range determined by their down payment and monthly payment ability. Unless your property is priced correctly, the down payment and monthly payment requirements will not be competitive.
If you plan to adjust your price at the time of sale, it is better to adjust the price now and attract serious buyers from the beginning. This often places you in the favorable position of having more than one buyer interested in your property.
By contrast, reasonable offers are much easier to obtain on a reasonably priced property.
It is a mistake to believe that you will get more for a property by asking more. You usually get less because fewer buyers will consider it when it is placed on the market. The right buyers will not see it. The property usually stays on the market so long that it tends to become shopworn.
To obtain proper market exposure, it is an absolute necessity to be competitive in price, terms, and condition with similar properties so yours will sell faster.
You will also have greater peace of mind and less frustration with selling your property.
Price it RIGHT the first time and you can get on with your life!
Anyhow, that's all the time I have right now, I will be happy to address questions, comments, experiences - just leave a comment!
As Always BE PREPARED and CHECK BACK HERE OFTEN
In essence, a home that is listed higher than comparable properties will just help to sell the other homes!
Here are the facts:
A buyer who is seriously looking will soon become very knowledgeable in his or her price range. An unreasonable asking price only discourages the buyer from looking at and considering your property.
Buyers purchase by comparison and a property that is priced above the competition does not compare favorably. Inviting a buyer to make an offer can indicate that a fair price has not been established and the seller is willing to take a lower price.
It is very difficult to obtain a reasonable offer on an overpriced property. The buyer feels he/she should be just as unreasonable as the seller, and so a very low offer, if any, will be written.
Serious buyers look in the price range determined by their down payment and monthly payment ability. Unless your property is priced correctly, the down payment and monthly payment requirements will not be competitive.
If you plan to adjust your price at the time of sale, it is better to adjust the price now and attract serious buyers from the beginning. This often places you in the favorable position of having more than one buyer interested in your property.
By contrast, reasonable offers are much easier to obtain on a reasonably priced property.
It is a mistake to believe that you will get more for a property by asking more. You usually get less because fewer buyers will consider it when it is placed on the market. The right buyers will not see it. The property usually stays on the market so long that it tends to become shopworn.
To obtain proper market exposure, it is an absolute necessity to be competitive in price, terms, and condition with similar properties so yours will sell faster.
You will also have greater peace of mind and less frustration with selling your property.
Price it RIGHT the first time and you can get on with your life!
Anyhow, that's all the time I have right now, I will be happy to address questions, comments, experiences - just leave a comment!
As Always BE PREPARED and CHECK BACK HERE OFTEN
Wednesday, January 16, 2008
Staging to Sell - Design Thinking!
I will admit that Design Thinking was not coined by me - it is a phrase I recently heard that stuck with me. In a slow market buyers are looking for the sun, the moon and the stars in their purchases but are looking for rock bottom prices as well. So often we are asked to walk through a property and make suggestions on what should be done, where "fix up" money is best spent, what would be the best way to "stage" the home.
You, along with your agent, must assume that the potential buyer will not have the imagination to think of a particular area of your home as anything other than how it is currently portrayed. So, you're going to need to help them with their thought process. You're going to need to stage the home to suggest possibilities, not lock the buyer in to how you currently utilize the space.
Of course, de-cluttering is top on the list - make the space look as open and large as possible. De-personalize, too - personal family photos psychologically ties you to the house, and does not allow for the potential buyer to picture his own family there! Clean out closets and cabinets - if they're stuffed full, it's hard to imagine having enough room for their own stuff.
All of these things are sort of "no-brainers" - where the thinking comes in is how to push the imagination of the buyer. If you have a sitting room in the master but it is currently used as a "nursery" it might be a good idea to make some changes there - move the crib into a different room, place some "comfy" reading chairs, maybe a throw, a small book stand - let the potential buyer imagine the little "getaway" in the master suite! If you've got any of those odd sized rooms or rooms that just don't flow easily, a few well-placed items, small tables, chairs, etc - anything that might suggest just how that little oddball space might be used. We use a professional "stager" on some of our listings - she goes through the house and arranges what is already there to suggest uses and show the space to it's fullest. The cost of this service ranges from $200-$500. The $500 cost comes in if she "lends" some small accent pieces to the owner of the property. This is a small price to pay when quite often the result is offers and quite often a higher selling price.
Of course, this also points up the need in this market to hire an experienced agent, and also helps make the point that discount commissions are not going to spend the money that a top agent will spent in marketing a property. It's not all just websites and mailings, it's sometimes the little things people don't even think of at first that makes the difference, like professional staging!
I'll write more in a separate post about photography, virtual tours, etc., and the best use of these tools!
As always
BE INFORMED and CHECK BACK HERE OFTEN
Comments, questions, cudos are always welcome!
You, along with your agent, must assume that the potential buyer will not have the imagination to think of a particular area of your home as anything other than how it is currently portrayed. So, you're going to need to help them with their thought process. You're going to need to stage the home to suggest possibilities, not lock the buyer in to how you currently utilize the space.
Of course, de-cluttering is top on the list - make the space look as open and large as possible. De-personalize, too - personal family photos psychologically ties you to the house, and does not allow for the potential buyer to picture his own family there! Clean out closets and cabinets - if they're stuffed full, it's hard to imagine having enough room for their own stuff.
All of these things are sort of "no-brainers" - where the thinking comes in is how to push the imagination of the buyer. If you have a sitting room in the master but it is currently used as a "nursery" it might be a good idea to make some changes there - move the crib into a different room, place some "comfy" reading chairs, maybe a throw, a small book stand - let the potential buyer imagine the little "getaway" in the master suite! If you've got any of those odd sized rooms or rooms that just don't flow easily, a few well-placed items, small tables, chairs, etc - anything that might suggest just how that little oddball space might be used. We use a professional "stager" on some of our listings - she goes through the house and arranges what is already there to suggest uses and show the space to it's fullest. The cost of this service ranges from $200-$500. The $500 cost comes in if she "lends" some small accent pieces to the owner of the property. This is a small price to pay when quite often the result is offers and quite often a higher selling price.
Of course, this also points up the need in this market to hire an experienced agent, and also helps make the point that discount commissions are not going to spend the money that a top agent will spent in marketing a property. It's not all just websites and mailings, it's sometimes the little things people don't even think of at first that makes the difference, like professional staging!
I'll write more in a separate post about photography, virtual tours, etc., and the best use of these tools!
As always
BE INFORMED and CHECK BACK HERE OFTEN
Comments, questions, cudos are always welcome!
Tuesday, January 15, 2008
Fair Housing - Find Out for Yourself!
We, as agents, are sometimes asked questions that we are prohibited from answering under fair housing and ethics. We have been asked if there are any black families in the neighborhood (by a black family), are there a lot of children in the neighborhood, questions about crime statistics, religions, elderly, etc., etc., etc., just about every question in the book that a potential buyer may ask about a property and/or neighborhood. On the seller's side, we have been asked questions about potential buyers - their age, marital status, children, etc.
Since the Fair Housing Act of 1968, discrimination is no longer allowed in the realm of housing. It is illegal to discriminate against race, color, national origin, sex, family status, or disability. Agents are prohibited from "steering" clients into particular neighborhoods or situations. It is a harsh reality, however, that people discriminate on a regular basis in their own lives - a family with young children may want to live in a neighborhood with other young families with children - an elderly couple may not want to live in a neighborhood with a lot of young children - a family of a particular religion may not want to live in a neighborhood that is predominantly a different religion - same goes for race, same goes for gay couples, same goes for every different type of individual situation you can imagine.
As an ethical agent as well as an agent who wants their clients to buy the home they want, where they want it - we will explain the laws to the potential buyer (and as stated above, sellers as well). What we are not prohibited in doing is to suggest to the buyer to take the time to do their own homework - drive around the neighborhood during the day, the evening and on weekends - see if they feel comfortable with the makeup and the daily activities of the neighborhood themselves. There is nothing to stop a potential buyer from knocking on the neighbor's doors and introducing themselves as a potential buyer - asking whatever questions they would like, there's no restrictions on that!
You're going to make a large investment for a considerable period of time - it is in your best interest, if you are not familiar with the neighborhood to spend the time learning about it!
Don't rely on what an agent may or may not tell you - there are so many restrictions in that area you probably won't get much information anyway - Go find out for yourself, go identify that area you will settle into comfortably for a long time to come!
Since the Fair Housing Act of 1968, discrimination is no longer allowed in the realm of housing. It is illegal to discriminate against race, color, national origin, sex, family status, or disability. Agents are prohibited from "steering" clients into particular neighborhoods or situations. It is a harsh reality, however, that people discriminate on a regular basis in their own lives - a family with young children may want to live in a neighborhood with other young families with children - an elderly couple may not want to live in a neighborhood with a lot of young children - a family of a particular religion may not want to live in a neighborhood that is predominantly a different religion - same goes for race, same goes for gay couples, same goes for every different type of individual situation you can imagine.
As an ethical agent as well as an agent who wants their clients to buy the home they want, where they want it - we will explain the laws to the potential buyer (and as stated above, sellers as well). What we are not prohibited in doing is to suggest to the buyer to take the time to do their own homework - drive around the neighborhood during the day, the evening and on weekends - see if they feel comfortable with the makeup and the daily activities of the neighborhood themselves. There is nothing to stop a potential buyer from knocking on the neighbor's doors and introducing themselves as a potential buyer - asking whatever questions they would like, there's no restrictions on that!
You're going to make a large investment for a considerable period of time - it is in your best interest, if you are not familiar with the neighborhood to spend the time learning about it!
Don't rely on what an agent may or may not tell you - there are so many restrictions in that area you probably won't get much information anyway - Go find out for yourself, go identify that area you will settle into comfortably for a long time to come!
Monday, January 14, 2008
Save A Bundle on Your Mortgage!
Many people do not understand how mortgages work as far as pre-paying. If you can increase your payment during the first few years of your loan, you can save an awful lot of interest and pay your mortgage off early! To understand how this works, you need to ask your lender for an amortization schedule (this is a schedule of how much of your payment goes to principal and how much to interest on a monthly basis) or go out on the web and look for one of the many amortization calculators that are available for free. Let's take a look at how this works:
Although your monthly principal and interest payment stays the same over the 30 years, every time you make a payment the amount you owe is decreased slightly
On a loan of $100,000 at 8% for 30 years, the monthly principal & Interest payment is $733.76 per month. The breakdown of the first five payments is:
Principal Interest Loan Balance
1 67.09 666.67 99932.91
2 67.54 666.22 99865.37
3 67.99 665.77 99797.38
4 68.44 665.32 99728.94
5 68.90 664.86 99660.04
If you pay your $733.76 per months as scheduled, after five payments you will owe $99,660.04. If you pay an additional $67.54 with your first payment, you save $666.22 in interest and your balance is now $99,865.37 - it's like making two payment for the cost of the principal only! If you paid an additional $272.87 (the amount of the principal for payments 2-5) you would save $2,662.17 in interest and you will pay your mortgage off four months earlier than scheduled.
For every additional principal payment you can make, you eliminate one month of payments off the end of the loan and you save 30 years worth of interest on that additional payment amount!
By pre-paying an amount equal to a month's principal does NOT allow you to skip the next scheduled payment - the extra payment is applied directly to the principal and reduces the number of payments at the end of the loan.
As you can imagine - since the amount of principal goes up slightly each month and the amount of interest goes down slightly, paying extra principal at the beginning of the loan reduces your loan the fastest, saves you the most interest, and can be done for a lesser amount than later in the loan when the principal payments are higher!
So, get yourself an amortization schedule - and each time you pay that little bit of extra principal and scratch off the payment due for that extra amount - think kindly of this advice!
I know this may sound a little confusing to some, if you have any questions, please feel free to ask!
As always BE INFORMED and CHECK BACK HERE OFTEN!
Although your monthly principal and interest payment stays the same over the 30 years, every time you make a payment the amount you owe is decreased slightly
On a loan of $100,000 at 8% for 30 years, the monthly principal & Interest payment is $733.76 per month. The breakdown of the first five payments is:
Principal Interest Loan Balance
1 67.09 666.67 99932.91
2 67.54 666.22 99865.37
3 67.99 665.77 99797.38
4 68.44 665.32 99728.94
5 68.90 664.86 99660.04
If you pay your $733.76 per months as scheduled, after five payments you will owe $99,660.04. If you pay an additional $67.54 with your first payment, you save $666.22 in interest and your balance is now $99,865.37 - it's like making two payment for the cost of the principal only! If you paid an additional $272.87 (the amount of the principal for payments 2-5) you would save $2,662.17 in interest and you will pay your mortgage off four months earlier than scheduled.
For every additional principal payment you can make, you eliminate one month of payments off the end of the loan and you save 30 years worth of interest on that additional payment amount!
By pre-paying an amount equal to a month's principal does NOT allow you to skip the next scheduled payment - the extra payment is applied directly to the principal and reduces the number of payments at the end of the loan.
As you can imagine - since the amount of principal goes up slightly each month and the amount of interest goes down slightly, paying extra principal at the beginning of the loan reduces your loan the fastest, saves you the most interest, and can be done for a lesser amount than later in the loan when the principal payments are higher!
So, get yourself an amortization schedule - and each time you pay that little bit of extra principal and scratch off the payment due for that extra amount - think kindly of this advice!
I know this may sound a little confusing to some, if you have any questions, please feel free to ask!
As always BE INFORMED and CHECK BACK HERE OFTEN!
Sunday, January 13, 2008
DISCLOSE, DISCLOSE, DISCLOSE!
When we meet with prospective sellers to go over paperwork, we are often asked what items need to be disclosed to potential buyers. A very good rule of thumb would be "when in doubt, disclose"! Often times, sellers will fix a problem - a leak, a small fire, faulty electric, mold, a "quirky" heating or air conditioning system - and decide they do not need to disclose that there has been a problem. This is actually not a very good idea!
If for any reason a problem re-occurs after closing - and this has actually happened more than a year after taking possession - and the original problem was not disclosed, the seller could still be held liable! In this case, the new owner had water leak into a fairly substantial part of the basement and ruin the new carpeting that had been put in before they purchased. When they called a carpet company to have the carpet looked at and the carpet was taken up, it was obvious that there had been previous water damage to the underlying wood and baseboard! No wonder there had been new carpet put in. Right now, this is in the hands of the attorney - and it is possible that the seller will be liable for a lot more than just fixing the problem!
If the seller had disclosed that there had been a previous water problem in that area, that they had taken steps to have it fixed (sealing an area, re-grading, fixing pipes, whatever), and it has not re-occurred, they would be in the clear - the buyer has been warned of a previous problem.
That did not happen, and this is certainly coming back to haunt them.
Take another example - on the final walkthrough of a home, when the carpets had been taken up, directly under a skylight area there was a large spot of discoloration that was obviously water damage. When the seller was asked about this, he insisted that there was no problem, that the skylights needed to be caulked and he had done that. It was my suggestion at closing that the seller be responsible "at least" for the refinishing of the portion of the floor and that an escrow should be held until the skylights could be examined by a roofer. As all the floors were being refinished, the buyer chose to let it go and not make an issue of it at closing. SO..... the first heavy rain about a month after closing and guess what? Yes, the skylight leaked! The buyer called us immediately to ask what they should do! There had been no disclosure of water leaking, at the settlement table the seller insisted there was no problem. It was my suggestion to have a roofer look at the problem, get an estimate to repair, then speak to the closing attorney about possible recourse. This is currently on-going - I'll let you know what happens!
In any case, this should be a word to the wise - when you are filling out those disclosures, think carefully - disclosing a previous problem that has been fixed isn't going to turn off a buyer - not disclosing could be very costly!
As always - BE INFORMED and CHECK BACK HERE OFTEN!
I have asked on previous posts for questions and/or comments - I know SOMEONE out there is reading this (and I hope it's more than one!), please take a moment and let me know if you have found this helpful, if there is anything you would like discussed, or just say hi - it get's lonely out here in cyberspace :)
If for any reason a problem re-occurs after closing - and this has actually happened more than a year after taking possession - and the original problem was not disclosed, the seller could still be held liable! In this case, the new owner had water leak into a fairly substantial part of the basement and ruin the new carpeting that had been put in before they purchased. When they called a carpet company to have the carpet looked at and the carpet was taken up, it was obvious that there had been previous water damage to the underlying wood and baseboard! No wonder there had been new carpet put in. Right now, this is in the hands of the attorney - and it is possible that the seller will be liable for a lot more than just fixing the problem!
If the seller had disclosed that there had been a previous water problem in that area, that they had taken steps to have it fixed (sealing an area, re-grading, fixing pipes, whatever), and it has not re-occurred, they would be in the clear - the buyer has been warned of a previous problem.
That did not happen, and this is certainly coming back to haunt them.
Take another example - on the final walkthrough of a home, when the carpets had been taken up, directly under a skylight area there was a large spot of discoloration that was obviously water damage. When the seller was asked about this, he insisted that there was no problem, that the skylights needed to be caulked and he had done that. It was my suggestion at closing that the seller be responsible "at least" for the refinishing of the portion of the floor and that an escrow should be held until the skylights could be examined by a roofer. As all the floors were being refinished, the buyer chose to let it go and not make an issue of it at closing. SO..... the first heavy rain about a month after closing and guess what? Yes, the skylight leaked! The buyer called us immediately to ask what they should do! There had been no disclosure of water leaking, at the settlement table the seller insisted there was no problem. It was my suggestion to have a roofer look at the problem, get an estimate to repair, then speak to the closing attorney about possible recourse. This is currently on-going - I'll let you know what happens!
In any case, this should be a word to the wise - when you are filling out those disclosures, think carefully - disclosing a previous problem that has been fixed isn't going to turn off a buyer - not disclosing could be very costly!
As always - BE INFORMED and CHECK BACK HERE OFTEN!
I have asked on previous posts for questions and/or comments - I know SOMEONE out there is reading this (and I hope it's more than one!), please take a moment and let me know if you have found this helpful, if there is anything you would like discussed, or just say hi - it get's lonely out here in cyberspace :)
Saturday, January 12, 2008
Pre-Inspections Before Selling
One of the things we recommend to sellers is to do a pre-inspection. Especially in a slower market, a pre-inspection can do a lot for a sale. If the inspection is clean with only a few small items, the seller should fix those few small items and advertise the fact that the property has been pre-inspected. The inspection should obviously be shared with any serious potential buyers! Psychologically, the buyers feel that the owners are proud and meticulous homeowners who want to make sure that everything is perfect and the home will have been well cared for. In some cases, if the offer comes in quickly, the buyers will sometimes forego spending their own money on an inspection and accept the inspection that was done.
If the inspection turns up a laundry list of items, the seller can then fix the "must do" items on the list (electrical, mechanical and plumbing) and mark the balance of the items "as is". This will inevitably reduce the amount of items the potential buyer will ask to have done and dramatically reduce the cost to the seller.
At the very least, you know as a seller what is in store and you have more of a bargaining position in the sale. If there are too many things on the home inspection to contemplate doing, the price should be set below comps and listed "as is". The potential upside here is that because the home is listed below comps, there is a better chance of getting offers as well as getting closer to asking price. If the house is listed at "market" value and the buyer does his own inspection - you run the risk of the buyer walking away or asking for a very large concession in price as well as a list of items that must be repaired.
It has proven time and again to save the seller an average of $5,000 in price and repairs by doing the home inspection prior to listing and gives the agent another tool for negotiations - it makes good sense to save money in this market, if you're agent doesn't suggest it, you should bring it up to them!
As always BE INFORMED and CHECK BACK HERE OFTEN!
If the inspection turns up a laundry list of items, the seller can then fix the "must do" items on the list (electrical, mechanical and plumbing) and mark the balance of the items "as is". This will inevitably reduce the amount of items the potential buyer will ask to have done and dramatically reduce the cost to the seller.
At the very least, you know as a seller what is in store and you have more of a bargaining position in the sale. If there are too many things on the home inspection to contemplate doing, the price should be set below comps and listed "as is". The potential upside here is that because the home is listed below comps, there is a better chance of getting offers as well as getting closer to asking price. If the house is listed at "market" value and the buyer does his own inspection - you run the risk of the buyer walking away or asking for a very large concession in price as well as a list of items that must be repaired.
It has proven time and again to save the seller an average of $5,000 in price and repairs by doing the home inspection prior to listing and gives the agent another tool for negotiations - it makes good sense to save money in this market, if you're agent doesn't suggest it, you should bring it up to them!
As always BE INFORMED and CHECK BACK HERE OFTEN!
Friday, January 11, 2008
Costly Mold Problems and Mold Information!
Mold is a growing concern among home buyers and sellers - and rightfully so! On a recent sale of one of our properties, the buyer had a "mold inspection contingency" in his contract - the opportunity to have the home tested for mold. The inspection company took air samples and analyzed them as having large numbers of mold spores - the buyer then insisted under the contingency that further testing be done to identify the source of the mold and the cost to remediate. Now, the seller is again caught between a rock and a hard place - if they refuse to do anything and the buyer walks, they must disclose the presence of mold to the next potential purchaser as well as having the problem mitigated beforehand - the house is back on the market with the clock ticking - and who knows the effect this will have on new potential buyers.
So an independent testing facility is brought in to identify the type and source of the mold - cost $395. They identified mold from an old leak under the kitchen sink, way back in a corner which had permeated downward into the ceiling of the finished basement. A second source of mold was identified in the utility room around the furnace. Of course, the buyer wanted the mold mitigated by a licensed company and all the air ducts cleaned. Three estimates were obtained with the LOWEST being $6,500 and ranging all the way to $12,000. Although we managed to get the price reduced to $5,000 - that's STILL $5,000 more than the seller was prepared to "cough up" after everything else - unfortunately there was no choice!
Here again, we have a "word to the wise" - educate yourself about mold - have it cleaned up and taken care of in advance!
The following is some helpful information about mold - this information was taken from the public information portion of the EPA website and there is even more extensive information there - I have tried to break this down to the most important information to homeowners, and have added some additional comments of my own.
WHAT IS MOLD?
According to the EPA: "Molds are part of the natural environment. Outdoors, molds play a part in nature by breaking down dead organic matter such as fallen leaves and dead trees, but indoors, mold growth should be avoided. Molds reproduce by means of tiny spores; the spores are invisible to the naked eye and float through outdoor and indoor air. Mold may begin growing indoors when mold spores land on surfaces that are wet. There are many types of mold, and none of them will grow without water or moisture." -
CHECK FOR LEAKS FROM PIPES, HEATING AND COOLING, WINDOWS, ETC. Another source of moisture is downspouts that do not drain away from the house with extensions, poorly fastened or clogged gutters that overflow down the side of a house, landscaping that does not allow water to flow away from the foundation. All of these things should be looked out to prevent possible mold problems.
How to get rid of mold:
Again, according to the EPA: "It is impossible to get rid of all mold and mold spores indoors; some mold spores will be found floating through the air and in house dust. The mold spores will not grow if moisture is not present. Indoor mold growth can and should be prevented or controlled by controlling moisture indoors. If there is mold growth in your home, you must clean up the mold and fix the water problem. If you clean up the mold, but don't fix the water problem, then, most likely, the mold problem will come back."
Who should do the cleanup depends on a number of factors. One consideration is the size of the mold problem. If the moldy area is less than about 10 square feet (less than roughly a 3 ft. by 3 ft. patch), in most cases, you can handle the job yourself, following the EPA guidelines:
Fix plumbing leaks and other water problems as soon as possible. Dry all items completely.
Scrub mold off hard surfaces with detergent and water, and dry completely.
Absorbent or porous materials, such as ceiling tiles and carpet, may have to be thrown away if they become moldy. Mold can grow on or fill in the empty spaces and crevices of porous materials, so the mold may be difficult or impossible to remove completely.
Avoid exposing yourself or others to mold -
Avoid breathing in mold or mold spores. In order to limit your exposure to airborne mold, you may want to wear an N-95 respirator, available at many hardware stores and from companies that advertise on the Internet. (They cost about $12 to $25.) Some N-95 respirators resemble a paper dust mask with a nozzle on the front, others are made primarily of plastic or rubber and have removable cartridges that trap most of the mold spores from entering. In order to be effective, the respirator or mask must fit properly, so carefully follow the instructions supplied with the respirator.
Wear gloves. Long gloves that extend to the middle of the forearm are recommended. When working with water and a mild detergent, ordinary household rubber gloves may be used. If you are using a disinfectant, a biocide such as chlorine bleach, or a strong cleaning solution, you should select gloves made from natural rubber, neoprene, nitrile, polyurethane, or PVC. Avoid touching mold or moldy items with your bare hands.
Cleaning while wearing N-95 respirator, gloves and goggles. Wear goggles. Goggles that do not have ventilation holes are recommended. Avoid getting mold or mold spores in your eyes.
Do not paint or caulk moldy surfaces.
Clean up the mold and dry the surfaces before painting. Paint applied over moldy surfaces is likely to peel.
If you are unsure about how to clean an item, or if the item is expensive or of sentimental value, you may wish to consult a specialist. Specialists in furniture repair, restoration, painting, art restoration and conservation, carpet and rug cleaning, water damage, and fire or water restoration are commonly listed in phone books. Be sure to ask for and check references. Look for specialists who are affiliated with professional organizations.
HOW DO YOU KNOW WHEN MOLD IS GONE?
It is difficult to know when all mold has been removed - you need to check the area to be sure the source of the moisture has been resolved, don't forget, if there is no moisture, there will be no mold! Visual inspection is you best bet, but remember, there are places that will not be easily visible. There should be no remaining signs of moisture and no musty odor.
Even the EPA says with regard to whether or not your mold is gone:
"Ultimately, this is a judgment call; there is no easy answer. If you have concerns or questions call the EPA Indoor Air Quality Information Clearinghouse IAQ INFO at (800) 438-4318"
HOPE YOU HAVE FOUND THE INFORMATION USEFUL AND INFORMATIVE - REMEMBER
BE INFORMED AND CHECK BACK HERE OFTEN
So an independent testing facility is brought in to identify the type and source of the mold - cost $395. They identified mold from an old leak under the kitchen sink, way back in a corner which had permeated downward into the ceiling of the finished basement. A second source of mold was identified in the utility room around the furnace. Of course, the buyer wanted the mold mitigated by a licensed company and all the air ducts cleaned. Three estimates were obtained with the LOWEST being $6,500 and ranging all the way to $12,000. Although we managed to get the price reduced to $5,000 - that's STILL $5,000 more than the seller was prepared to "cough up" after everything else - unfortunately there was no choice!
Here again, we have a "word to the wise" - educate yourself about mold - have it cleaned up and taken care of in advance!
The following is some helpful information about mold - this information was taken from the public information portion of the EPA website and there is even more extensive information there - I have tried to break this down to the most important information to homeowners, and have added some additional comments of my own.
WHAT IS MOLD?
According to the EPA: "Molds are part of the natural environment. Outdoors, molds play a part in nature by breaking down dead organic matter such as fallen leaves and dead trees, but indoors, mold growth should be avoided. Molds reproduce by means of tiny spores; the spores are invisible to the naked eye and float through outdoor and indoor air. Mold may begin growing indoors when mold spores land on surfaces that are wet. There are many types of mold, and none of them will grow without water or moisture." -
CHECK FOR LEAKS FROM PIPES, HEATING AND COOLING, WINDOWS, ETC. Another source of moisture is downspouts that do not drain away from the house with extensions, poorly fastened or clogged gutters that overflow down the side of a house, landscaping that does not allow water to flow away from the foundation. All of these things should be looked out to prevent possible mold problems.
How to get rid of mold:
Again, according to the EPA: "It is impossible to get rid of all mold and mold spores indoors; some mold spores will be found floating through the air and in house dust. The mold spores will not grow if moisture is not present. Indoor mold growth can and should be prevented or controlled by controlling moisture indoors. If there is mold growth in your home, you must clean up the mold and fix the water problem. If you clean up the mold, but don't fix the water problem, then, most likely, the mold problem will come back."
Who should do the cleanup depends on a number of factors. One consideration is the size of the mold problem. If the moldy area is less than about 10 square feet (less than roughly a 3 ft. by 3 ft. patch), in most cases, you can handle the job yourself, following the EPA guidelines:
Fix plumbing leaks and other water problems as soon as possible. Dry all items completely.
Scrub mold off hard surfaces with detergent and water, and dry completely.
Absorbent or porous materials, such as ceiling tiles and carpet, may have to be thrown away if they become moldy. Mold can grow on or fill in the empty spaces and crevices of porous materials, so the mold may be difficult or impossible to remove completely.
Avoid exposing yourself or others to mold -
Avoid breathing in mold or mold spores. In order to limit your exposure to airborne mold, you may want to wear an N-95 respirator, available at many hardware stores and from companies that advertise on the Internet. (They cost about $12 to $25.) Some N-95 respirators resemble a paper dust mask with a nozzle on the front, others are made primarily of plastic or rubber and have removable cartridges that trap most of the mold spores from entering. In order to be effective, the respirator or mask must fit properly, so carefully follow the instructions supplied with the respirator.
Wear gloves. Long gloves that extend to the middle of the forearm are recommended. When working with water and a mild detergent, ordinary household rubber gloves may be used. If you are using a disinfectant, a biocide such as chlorine bleach, or a strong cleaning solution, you should select gloves made from natural rubber, neoprene, nitrile, polyurethane, or PVC. Avoid touching mold or moldy items with your bare hands.
Cleaning while wearing N-95 respirator, gloves and goggles. Wear goggles. Goggles that do not have ventilation holes are recommended. Avoid getting mold or mold spores in your eyes.
Do not paint or caulk moldy surfaces.
Clean up the mold and dry the surfaces before painting. Paint applied over moldy surfaces is likely to peel.
If you are unsure about how to clean an item, or if the item is expensive or of sentimental value, you may wish to consult a specialist. Specialists in furniture repair, restoration, painting, art restoration and conservation, carpet and rug cleaning, water damage, and fire or water restoration are commonly listed in phone books. Be sure to ask for and check references. Look for specialists who are affiliated with professional organizations.
HOW DO YOU KNOW WHEN MOLD IS GONE?
It is difficult to know when all mold has been removed - you need to check the area to be sure the source of the moisture has been resolved, don't forget, if there is no moisture, there will be no mold! Visual inspection is you best bet, but remember, there are places that will not be easily visible. There should be no remaining signs of moisture and no musty odor.
Even the EPA says with regard to whether or not your mold is gone:
"Ultimately, this is a judgment call; there is no easy answer. If you have concerns or questions call the EPA Indoor Air Quality Information Clearinghouse IAQ INFO at (800) 438-4318"
HOPE YOU HAVE FOUND THE INFORMATION USEFUL AND INFORMATIVE - REMEMBER
BE INFORMED AND CHECK BACK HERE OFTEN
Thursday, January 10, 2008
RADON - What EVERYONE Should Know!
Not many people really understand what Radon is, they just hear about radon testing, mostly in conjunction with buying or selling a home. Most don't know that not only is Radon colorless, odorless and undetectable by your average human, it is the second leading cause of lung cancer in the United States!
What is Radon Gas? Radon gas is created when uranium in the soil decays. The gas then seeps through any access point into a home. The most common entry points are cracks in the foundation, poorly sealed pipes, drainage or any other crack or split. Once in the home, the gas can collect in certain areas - especially basements and other low-lying, closed areas - and build up over time to dangerous levels. The Environmental Protection Agency of the US Government has set a threshold of 4 pico curies per liter as the safe level. Exposure to the gas over a period of years can cause significant and detrimental effects on humans.
Could there be Radon in my home or the home I am considering purchasing? Yes, there could be - Radon has been found in homes in all 50 states. Certain areas seem to have higher concentrations of Radon and homes in those locations are more susceptible to build up - check for yourself by clicing on this link, it's the government's zone map for Radon concentration: http://www.epa.gov/radon/zonemap.html - but do not forget that no location is immune. The only way to tell for sure is to have a home tested.
There are two different types of tests for Radon, active and passive. Active tests constantly monitor the air and display the readings while Passive tests collect samples over a period of time and then are sent away and analyzed. Either method can tell you if you have Radon, you can even purchase do-it-youself kits in most hardware stores. These do-it-yourself tests are placed in the lowest spot occupied in your home (usually basement), left for several days undisturbed and then sent away for analysis by a professioinal. Crawl Spaces should not be used for testing, but the basement is fine whether finished or unfinished.
You can have the test done by a professional, again, the epa website is a great place to find information on resources and testing devices: http://www.epa.gov/radon/radontest.html
So, you've had tests done - now what? If concentrations of Radon gas are present, often times just improving the ventilation is all it takes - sometimes it takes more - sealing off the suspected source or sources, installing Radon mitigation devices. In any case, you should always consult a professional before you make any decisions to treat this potentially danagerous situation yourself.
Radon Mitigation typically cost between $750-$2500.
So, do yourself a favor - if you are considering buying or selling a home, have it tested! If you live in a home that has never been tested, do it - Getting rid of the second leading source of Lung Cancer from you home is not a bad idea!
Hope this has proven to be informative and of interest - again, questions, comments or suggestions are appreciated!
BE INFORMED and CHECK BACK HERE OFTEN
What is Radon Gas? Radon gas is created when uranium in the soil decays. The gas then seeps through any access point into a home. The most common entry points are cracks in the foundation, poorly sealed pipes, drainage or any other crack or split. Once in the home, the gas can collect in certain areas - especially basements and other low-lying, closed areas - and build up over time to dangerous levels. The Environmental Protection Agency of the US Government has set a threshold of 4 pico curies per liter as the safe level. Exposure to the gas over a period of years can cause significant and detrimental effects on humans.
Could there be Radon in my home or the home I am considering purchasing? Yes, there could be - Radon has been found in homes in all 50 states. Certain areas seem to have higher concentrations of Radon and homes in those locations are more susceptible to build up - check for yourself by clicing on this link, it's the government's zone map for Radon concentration: http://www.epa.gov/radon/zonemap.html - but do not forget that no location is immune. The only way to tell for sure is to have a home tested.
There are two different types of tests for Radon, active and passive. Active tests constantly monitor the air and display the readings while Passive tests collect samples over a period of time and then are sent away and analyzed. Either method can tell you if you have Radon, you can even purchase do-it-youself kits in most hardware stores. These do-it-yourself tests are placed in the lowest spot occupied in your home (usually basement), left for several days undisturbed and then sent away for analysis by a professioinal. Crawl Spaces should not be used for testing, but the basement is fine whether finished or unfinished.
You can have the test done by a professional, again, the epa website is a great place to find information on resources and testing devices: http://www.epa.gov/radon/radontest.html
So, you've had tests done - now what? If concentrations of Radon gas are present, often times just improving the ventilation is all it takes - sometimes it takes more - sealing off the suspected source or sources, installing Radon mitigation devices. In any case, you should always consult a professional before you make any decisions to treat this potentially danagerous situation yourself.
Radon Mitigation typically cost between $750-$2500.
So, do yourself a favor - if you are considering buying or selling a home, have it tested! If you live in a home that has never been tested, do it - Getting rid of the second leading source of Lung Cancer from you home is not a bad idea!
Hope this has proven to be informative and of interest - again, questions, comments or suggestions are appreciated!
BE INFORMED and CHECK BACK HERE OFTEN
Wednesday, January 9, 2008
Pricing Your House To Sell
Appraisals are subjective to some extent, so are the prices suggested by real estate agents. They are a "best effort" to nail down the appropriate price based on recent past sales in your area - comparing these sales to your particular home and making adjustments for the differences. Often times, sellers request that their home be listed at the high end of the range or even higher than the agent suggests, just "to give it a try".
Even difficult markets produce sales - the homes that have the most to offer, look the best and are priced properly will sell. So, how do you know if the price is right or how do you make adjustments?
The object of pricing your home is to select a price that is right on target and generates offers, but if there are no offers coming in, how do you adjust?
There are general rules of thumb that have evolved over many years of home sales - pretty simple and straightforward, so here they are:
If you are getting showings, but no offers, you pricing is historically off by 4% - 6%
If you get drive-ups only, low showings = 6%-12%
Drive-byes and no showings = 12+%
These numbers may sound high, but again, this is based on many years of sales analysis by experts in the field. Speak to your agent about timing of price reductions, this will vary by area, but speaking for sales in Metro DC area, the longer we wait to make a price reduction, the harder the seller is hit!
For buyers, doing your homework on how long a house has been on the market, how the pricing compares to others in the neighborhood and how much of a price reduction has already been made combined with the information above should help in determining the offering price you make on that home you've had your eye on!
As always, BE INFORMED and CHECK BACK HERE OFTEN!
If you are reading these posts - someone out there is - I sure would appreciate your feedback, questions and suggestions for future posts! Thanks
Agent Angel
Even difficult markets produce sales - the homes that have the most to offer, look the best and are priced properly will sell. So, how do you know if the price is right or how do you make adjustments?
The object of pricing your home is to select a price that is right on target and generates offers, but if there are no offers coming in, how do you adjust?
There are general rules of thumb that have evolved over many years of home sales - pretty simple and straightforward, so here they are:
If you are getting showings, but no offers, you pricing is historically off by 4% - 6%
If you get drive-ups only, low showings = 6%-12%
Drive-byes and no showings = 12+%
These numbers may sound high, but again, this is based on many years of sales analysis by experts in the field. Speak to your agent about timing of price reductions, this will vary by area, but speaking for sales in Metro DC area, the longer we wait to make a price reduction, the harder the seller is hit!
For buyers, doing your homework on how long a house has been on the market, how the pricing compares to others in the neighborhood and how much of a price reduction has already been made combined with the information above should help in determining the offering price you make on that home you've had your eye on!
As always, BE INFORMED and CHECK BACK HERE OFTEN!
If you are reading these posts - someone out there is - I sure would appreciate your feedback, questions and suggestions for future posts! Thanks
Agent Angel
Tuesday, January 8, 2008
Be Prepared - Closing Delays!
Again today we have been informed that a closing scheduled for tomorrow is being delayed for one day. Why at the 11th hour? There are all kinds of reasons that closings are delayed - this particular one is that title work was not sent to the lender on a timely basis by the settlement company. Although we continually contact both the lender and the title company to be sure we are on track for a timely closing, these delays are not uncommon.
It is our standard procedure to let sellers know that these delays are possible and that even in a timely settlement, funds are sometimes delayed for up to 48 hours - BE PREPARED. It's not ideal for the seller to find out one day prior to closing, but it's better than as they are getting in their car ready to leave. As this closing was to be late in the day, had we not once again contacted the settlement company and the lender several times in the past few days, we would not have been informed of the delay until the morning of settlement!
I read once a quote "Lenders Lie and Buyers Die" - pretty grim but it happens! Whether you are a buyer or a seller - make sure your agent confirms that all paperwork from the lender has been received by the title company - and if not, they should be in contact with the lender immediately and find out why and when. A vague "we're in good shape" or "shouldn't be any problem" isn't a good enough answer - make sure you get specifics - ask for the date the lender's docs will be at the settlement attorney's office and don't ever assume it will happen - CHECK!
As Always BE INFORMED and CHECK BACK HERE OFTEN!
Your comments and questions are welcome
It is our standard procedure to let sellers know that these delays are possible and that even in a timely settlement, funds are sometimes delayed for up to 48 hours - BE PREPARED. It's not ideal for the seller to find out one day prior to closing, but it's better than as they are getting in their car ready to leave. As this closing was to be late in the day, had we not once again contacted the settlement company and the lender several times in the past few days, we would not have been informed of the delay until the morning of settlement!
I read once a quote "Lenders Lie and Buyers Die" - pretty grim but it happens! Whether you are a buyer or a seller - make sure your agent confirms that all paperwork from the lender has been received by the title company - and if not, they should be in contact with the lender immediately and find out why and when. A vague "we're in good shape" or "shouldn't be any problem" isn't a good enough answer - make sure you get specifics - ask for the date the lender's docs will be at the settlement attorney's office and don't ever assume it will happen - CHECK!
As Always BE INFORMED and CHECK BACK HERE OFTEN!
Your comments and questions are welcome
Ending of Appraisal Shortfall
After many conversations and backup data sent to the Lender, although we were initially informed that the appraisal must stand as is, it has been agreed that the appraiser could re-evaluate the property based on this information. The lender has conceded that it does appeared the appraisal was in error. After careful consideration, based on the data provided by us, the new appraisal came in at $785,000 - $35,000 higher than the original! This is a more realistic appraisal and makes everyone happy. Don't forget, the selling price was $795,000 but the seller was giving back $15,000 towards closing, so the net selling price was $780,000!
What seemed liked an impossible situation has been resolved. It took a lot of work and perserverence, but that's what an agent gets paid for!
There may be a good lesson here - not only do you need to carefully choose an agent to represent you in the sale of your property, but the same holds true on your purchase. Had the homework not been done prior to making the offer and the price well substantiated, the outcome could have been much different - I can't imagine a buyer feeling very warm and fuzzy thinking he's overpaid for his purchase or that his agent didn't represent his best interest or worse yet, he was left with a shortfall or had to forfeit earnest money deposits!
What seemed liked an impossible situation has been resolved. It took a lot of work and perserverence, but that's what an agent gets paid for!
There may be a good lesson here - not only do you need to carefully choose an agent to represent you in the sale of your property, but the same holds true on your purchase. Had the homework not been done prior to making the offer and the price well substantiated, the outcome could have been much different - I can't imagine a buyer feeling very warm and fuzzy thinking he's overpaid for his purchase or that his agent didn't represent his best interest or worse yet, he was left with a shortfall or had to forfeit earnest money deposits!
Sunday, January 6, 2008
HOW TO CHOOSE AN AGENT
Thought I'd take some time to address the question of how to choose an agent - too often an agent is chosen because they are willing to cut their commission or even worse yet, make unfounded claims about getting some inflated price for your property.
First things first: ASK FOR RECOMMENDATIONS - ask to speak to several past clients as well as current sellers of the agent you are interviewing. You would be best served to do this prior to your actual face to face appointment.
During the interview: ASK THE AGENT QUESTIONS - in addition to the standard qualification questions, a few pertinent questions might be:
What is the agent's production (sales) in the past 12 months?
Where is the agent's market concentration, have they sold recently in your neighborhood?
What price range do they work in - the price ranges of their past 6 months or so sales
What services does the agent provide for their fee - Agents with higher fees may offer more selling experience and exposure and could result in a higher selling price!
How would the agent establish the price for your home
How would the agent promote your home - do NOT be shy in asking for a comprehensive marketing plan - all good agents have them!
Is the agent a direct member of the MLS
How many websites doe they have and do they target market?
Does the agent have a staff to handle the many clerical items during the selling process
How often will you be speaking directly with the agent - will there be a regular schedule of "check in and discuss progress calls?"
Now, did the agent ask you to compile an information sheet featuring your home's strongest selling points? Top agents will, it creates the basis for writing eye-catching, attractive listing descriptions that will aid in the sale of your home!
After the agent has visited your home, visit his or her office! Is the office professional, attractive and well-organized? Does his/her office offer accessibility and make you comfortable?
Now ask yourself - Do you trust this individual? Could you have a solid working relationship? Did the agent make you feel comfortable and secure with their knowledge?
If you are unsatisfied with the agent's plan or personality, thank the agent for their time and repeat the process with another agent. If you are happy with the agent, make the commitment to yourself to stick with him or her - it can be time-consuming to switch agents and the passage of time during a listing can certainly be a negative on the sale of your home!
REMEMBER - BE INFORMED AND CHECK BACK HERE OFTEN!
First things first: ASK FOR RECOMMENDATIONS - ask to speak to several past clients as well as current sellers of the agent you are interviewing. You would be best served to do this prior to your actual face to face appointment.
During the interview: ASK THE AGENT QUESTIONS - in addition to the standard qualification questions, a few pertinent questions might be:
What is the agent's production (sales) in the past 12 months?
Where is the agent's market concentration, have they sold recently in your neighborhood?
What price range do they work in - the price ranges of their past 6 months or so sales
What services does the agent provide for their fee - Agents with higher fees may offer more selling experience and exposure and could result in a higher selling price!
How would the agent establish the price for your home
How would the agent promote your home - do NOT be shy in asking for a comprehensive marketing plan - all good agents have them!
Is the agent a direct member of the MLS
How many websites doe they have and do they target market?
Does the agent have a staff to handle the many clerical items during the selling process
How often will you be speaking directly with the agent - will there be a regular schedule of "check in and discuss progress calls?"
Now, did the agent ask you to compile an information sheet featuring your home's strongest selling points? Top agents will, it creates the basis for writing eye-catching, attractive listing descriptions that will aid in the sale of your home!
After the agent has visited your home, visit his or her office! Is the office professional, attractive and well-organized? Does his/her office offer accessibility and make you comfortable?
Now ask yourself - Do you trust this individual? Could you have a solid working relationship? Did the agent make you feel comfortable and secure with their knowledge?
If you are unsatisfied with the agent's plan or personality, thank the agent for their time and repeat the process with another agent. If you are happy with the agent, make the commitment to yourself to stick with him or her - it can be time-consuming to switch agents and the passage of time during a listing can certainly be a negative on the sale of your home!
REMEMBER - BE INFORMED AND CHECK BACK HERE OFTEN!
Saturday, January 5, 2008
Discussion on Rent to Own for Sellers in a Down Market
Hopefully you have had the chance to read yesterday's posting. If you are having trouble selling your home in a down market, this could offer a wonderful opportunity. The hammering of the sub-prime market and the drying up of loans to underqualified buyers obviously has added to the current conditions. This does, however, open up more of a market for the Rent to Own buyer who needs time to save money or improve their credit scores to qualify for a better loan.
We have had a number of sellers who have stated that if they did not sell the home in a reasonable amount of time for a reasonable sale price they would just rent the house for a year or two and see where the market goes. That's a very iffy proposition. The rental market is also soft and that means lower rents received. Add that to the expense of renting - real estate commissions, maintenance, insurance, depreciation and worst of all the condition of the property at the end of the lease term. You could be lucky and get a tenant who takes care of the property and who pays their rent on time, or you could get the opposite and it could get costly. There's also no guarantee that after the lease term the market will have improved or appreciated.
If you could sign an option for full asking price (that in itself is a bonus), get a 1% to 5% option fee and rent the property for several hundred dollars over the going rate, that could be a pretty good deal! It's a good deal for the buyer, too - rental payments are generally less than mortgage payments, they have time to get a "feel" for the home and neighborhood, they build equity (remember, the option fee and the premium on the rent would apply to the purchase price if the option is exercised), and chances are they will respect the house as if it were already their own.
We do a rent versus sell analysis (spreadsheets we have developed ourselves) that is truly an eye-opener to homeowners. You can do this analysis yourself, but you might be better served in seeking the help of an unbiased professional. I know many realtors will do this for you and they have the knowledge of the market and know the costs and pitfalls as well.
So, just some other options and opinions for your informatioin!
BE INFORMED AND CHECK BACK HERE OFTEN
We have had a number of sellers who have stated that if they did not sell the home in a reasonable amount of time for a reasonable sale price they would just rent the house for a year or two and see where the market goes. That's a very iffy proposition. The rental market is also soft and that means lower rents received. Add that to the expense of renting - real estate commissions, maintenance, insurance, depreciation and worst of all the condition of the property at the end of the lease term. You could be lucky and get a tenant who takes care of the property and who pays their rent on time, or you could get the opposite and it could get costly. There's also no guarantee that after the lease term the market will have improved or appreciated.
If you could sign an option for full asking price (that in itself is a bonus), get a 1% to 5% option fee and rent the property for several hundred dollars over the going rate, that could be a pretty good deal! It's a good deal for the buyer, too - rental payments are generally less than mortgage payments, they have time to get a "feel" for the home and neighborhood, they build equity (remember, the option fee and the premium on the rent would apply to the purchase price if the option is exercised), and chances are they will respect the house as if it were already their own.
We do a rent versus sell analysis (spreadsheets we have developed ourselves) that is truly an eye-opener to homeowners. You can do this analysis yourself, but you might be better served in seeking the help of an unbiased professional. I know many realtors will do this for you and they have the knowledge of the market and know the costs and pitfalls as well.
So, just some other options and opinions for your informatioin!
BE INFORMED AND CHECK BACK HERE OFTEN
Friday, January 4, 2008
AS PROMISED: RENT TO OWN INFORMATION
As I started compiling my "Rent to Own" information for this blog, I came across the following explanation which, I believe, is not only chock full of great information, but well written and easy to understand. Written by Jack Guttentag (you can see more information about Professor Guttentag at the end of the article) and reproduced here with his gracious permission, I'm sure you will find this information of great interest..... Here Goes.....
What Is a Lease-to-Own Purchase?
A lease-to-own house purchase (also "rent-to-own purchase" or "lease purchase") is a lease combined with an option to purchase the property within a specified period, usually 3 years or less, at an agreed-upon price. The borrower pays an option fee, 1% to 5% of the price, which is credited to the purchase price. The borrower pays rent, and an additional rent premium that is also credited to the purchase price. If the purchase option is not exercised, the buyer loses both the option fee and the rent premium.
As with any kind of financial contract, lease-purchase deals can be structured in such a way that all the benefits flow to one of the parties and none to the other. Buyers especially need to be careful. But lease-purchase plans have a solid economic rationale, which means that they can be structured so that both parties benefit.
Contract Features of a Lease-Purchase
A lease-purchase has 5 major provisions. The sale price of the house and the rent are market-determined, yet subject to negotiation just as in a straight purchase or rental transaction. Buyers often know less about the market than sellers, which places buyers at a disadvantage unless they do some homework, which is advisable.
Buyers generally prefer a long option period because it provides more time to build equity and repair credit. A long period can boomerang on them, however, if they are never able to exercise the option, since they lose the rent premium they have been paying all the while, in addition to the option fee. Sellers generally prefer a short option period, but if it is too short, the house won’t be sold.
The option fee and rent premium are viewed differently by buyers and sellers. To the buyer, they are part of the equity in the house they will soon own. Fully anticipating that they will exercise the option, the only cost is the interest they would otherwise have earned. To sellers, however, these payments are the best guarantee that their houses will sell; if they don’t sell, the payments are retained as income. That the benefit to the seller generally exceeds the cost to the buyer makes the lease-to-own deal a possible win-win.
Using a Lease-Purchase to Buy
The lease-purchase offers homeownership opportunities to consumers with little cash and/or poor credit, who are prepared to bet on themselves. The bet is that before the option period expires, they will qualify for the mortgage they need to exercise the purchase option. During the option period, they have the opportunity to rebuild their credit and accumulate equity while living in the house.
The development of the sub-prime market, in which consumers with poor credit or no cash can obtain loans, does not seem to have lessened interest in lease-purchase. It is very likely that those who succeed in exercising their option under a lease-purchase do better than if they had financed a conventional purchase in the sub-prime market. The savings in finance costs will more than offset a higher price on the house. But those who can’t exercise their option will lose their bets.
Consumers who need to rebuild their credit rating during the option period should understand that paying their rent on time won’t do it. Rent payment information is not used in compiling credit scores. While Fair Isaac, the company that developed credit scoring, has recently unveiled an “expansion” score based on “non-traditional credit data,” it does not yet include rent payment information from individual home owners. Lease-purchase buyers who need a higher credit score must focus on their credit cards and loans.
Even though it is costly, the right not to exercise the option is of value to buyers. If there is something seriously wrong with the house, neighborhood, or neighbors, the money left behind on a lease-purchase is much smaller than the cost of an outright purchase followed by a sale.
Dangers to Buyers
On October 2, 2005, Bob Mahlburg, an investigative reporter for the Sarasota Herald-Tribune, published an article on a substantial lease-to-own program in Florida that had generated numerous complaints. Over a 5-year period hundreds of deals were executed under this program but only a handful of purchases. In fact, there were more evictions than purchases.
The contract used in this program made it all too easy for the seller to avoid having to sell when it was more profitable to evict the tenant and do another deal with another hopeful buyer. The moral: read the contract very carefully to make sure you are confident you can live up to all the terms, such as paying your rent on time, every time.
Using a Lease-Purchase to Sell
Most home sellers want a cash sale, but for those prepared to hang on to the property awhile longer, the benefits can be compelling. Bob Bruss, an expert’s expert on lease-purchases, says that in this market, there are always more buyers than sellers – he has been both. As a result, buyers generally pay top dollar, perhaps including some assumed future appreciation.
To be sure, the deal may fall through, but in that case the seller gets to pocket the option fee and rent premium. The seller also enjoys the tax deduction on his mortgage interest payments during the option period.
The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at http://www.mtgprofessor.com/
AS ALWAYS, BE INFORMED AND CHECK BACK HERE OFTEN.... YOUR COMMENTS, QUESTIONS AND SUGGESTIONS WOULD BE APPRECIATED!
What Is a Lease-to-Own Purchase?
A lease-to-own house purchase (also "rent-to-own purchase" or "lease purchase") is a lease combined with an option to purchase the property within a specified period, usually 3 years or less, at an agreed-upon price. The borrower pays an option fee, 1% to 5% of the price, which is credited to the purchase price. The borrower pays rent, and an additional rent premium that is also credited to the purchase price. If the purchase option is not exercised, the buyer loses both the option fee and the rent premium.
As with any kind of financial contract, lease-purchase deals can be structured in such a way that all the benefits flow to one of the parties and none to the other. Buyers especially need to be careful. But lease-purchase plans have a solid economic rationale, which means that they can be structured so that both parties benefit.
Contract Features of a Lease-Purchase
A lease-purchase has 5 major provisions. The sale price of the house and the rent are market-determined, yet subject to negotiation just as in a straight purchase or rental transaction. Buyers often know less about the market than sellers, which places buyers at a disadvantage unless they do some homework, which is advisable.
Buyers generally prefer a long option period because it provides more time to build equity and repair credit. A long period can boomerang on them, however, if they are never able to exercise the option, since they lose the rent premium they have been paying all the while, in addition to the option fee. Sellers generally prefer a short option period, but if it is too short, the house won’t be sold.
The option fee and rent premium are viewed differently by buyers and sellers. To the buyer, they are part of the equity in the house they will soon own. Fully anticipating that they will exercise the option, the only cost is the interest they would otherwise have earned. To sellers, however, these payments are the best guarantee that their houses will sell; if they don’t sell, the payments are retained as income. That the benefit to the seller generally exceeds the cost to the buyer makes the lease-to-own deal a possible win-win.
Using a Lease-Purchase to Buy
The lease-purchase offers homeownership opportunities to consumers with little cash and/or poor credit, who are prepared to bet on themselves. The bet is that before the option period expires, they will qualify for the mortgage they need to exercise the purchase option. During the option period, they have the opportunity to rebuild their credit and accumulate equity while living in the house.
The development of the sub-prime market, in which consumers with poor credit or no cash can obtain loans, does not seem to have lessened interest in lease-purchase. It is very likely that those who succeed in exercising their option under a lease-purchase do better than if they had financed a conventional purchase in the sub-prime market. The savings in finance costs will more than offset a higher price on the house. But those who can’t exercise their option will lose their bets.
Consumers who need to rebuild their credit rating during the option period should understand that paying their rent on time won’t do it. Rent payment information is not used in compiling credit scores. While Fair Isaac, the company that developed credit scoring, has recently unveiled an “expansion” score based on “non-traditional credit data,” it does not yet include rent payment information from individual home owners. Lease-purchase buyers who need a higher credit score must focus on their credit cards and loans.
Even though it is costly, the right not to exercise the option is of value to buyers. If there is something seriously wrong with the house, neighborhood, or neighbors, the money left behind on a lease-purchase is much smaller than the cost of an outright purchase followed by a sale.
Dangers to Buyers
On October 2, 2005, Bob Mahlburg, an investigative reporter for the Sarasota Herald-Tribune, published an article on a substantial lease-to-own program in Florida that had generated numerous complaints. Over a 5-year period hundreds of deals were executed under this program but only a handful of purchases. In fact, there were more evictions than purchases.
The contract used in this program made it all too easy for the seller to avoid having to sell when it was more profitable to evict the tenant and do another deal with another hopeful buyer. The moral: read the contract very carefully to make sure you are confident you can live up to all the terms, such as paying your rent on time, every time.
Using a Lease-Purchase to Sell
Most home sellers want a cash sale, but for those prepared to hang on to the property awhile longer, the benefits can be compelling. Bob Bruss, an expert’s expert on lease-purchases, says that in this market, there are always more buyers than sellers – he has been both. As a result, buyers generally pay top dollar, perhaps including some assumed future appreciation.
To be sure, the deal may fall through, but in that case the seller gets to pocket the option fee and rent premium. The seller also enjoys the tax deduction on his mortgage interest payments during the option period.
The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at http://www.mtgprofessor.com/
AS ALWAYS, BE INFORMED AND CHECK BACK HERE OFTEN.... YOUR COMMENTS, QUESTIONS AND SUGGESTIONS WOULD BE APPRECIATED!
Subscribe to:
Posts (Atom)