Deciding on a price

Figuring out the where to price your home can be more difficult than most sellers think. It is not a decision that you should take lightly. If you initially price you home to high it will stay on the market longer. Some sellers think that is fine because they are in no rush to sell their home. While that may be true, it is also true homes that sit on the market usually sell for less.

So they are putting themselves in a position to put themselves through more hassle and take less for their property. In today’s market, any buyer can easily see how many days a home has been on the market, and homes that sit are less attractive because there is a perception something is either wrong with it because no one else wants in or the sellers are being unrealistic.  Either way the longer it is on the market, the lower the chances of you getting a respectable offer. Buyer activity usually peaks in the first 45 days.

First you really should consult an agent to help you set a fair and objective price for your home. A good realtor will see your home through the eyes of a potential buyer. Remember a buyer does not have the same personal attachment to your home that you do. They will probably be indifferent to any sentimental value you place upon your house.

It is not going to matter to them that this house was the first place you owned or it was where your kids were raised. Listen to your agent. Contrary to what you might think most agents are trying to do there best and sell you home for top dollar. It is simply good business.

Also you need to base your price not on what comparable homes listed for but actually what they sold for. Consult with your agent on this one. Be wary of the more popular national real estate sites. The information they provide are often inaccurate. Many times the information is scraped from other sites and provide inaccurate price adjustment data and almost never include concessions.

You may want to consider a  home inspector to find out if your home needs any repairs beforehand. Almost all buyers are going to do this anyway, and these guys are scary through. So if something is going out, chances are they are going to find it. Even if you do not want to fix it, you can disclose it would be buyers. Trust me there is nothing worse than looking like you are trying to hide something. Plus this gives a buyer an easy out of the contract, and if they weren’t looking for one already they are considering it now.

Please contact us if you are interested in receiving a no cost comparative market analysis.

1031 Exchange

The 1031 exchange of the 1986 Internal Revenue Code provides investors a great opportunity to build wealth and save on taxes. The exchange allows investors to sell their investment property and use the proceeds on a replacement property to defer paying a capital gains tax. Capital gains tax is currently 15-20% depending on your income.

So instead of using proceeds to pay taxes, you can purchase a new and potentially different type of property. You can sell a residential property and use it to purchase land, a rental, or even commercial real estate. It also works the other way around. Now eventually, if you sell the new property and decide not to reinvest the profits you will have to pay the deferred taxes.

However, many investors just keep rolling it into another like kind property. Another thing to consider is this is a time sensitive exchange. Currently, the exchange is only good for properties reinvested with in six months. If you are interested in a doing a 1031, please consult with a qualified CPA or tax accountant.

Do I need to get prequalified

I suppose technically speaking you do not have to, but if you want your agent or a seller to take you seriously you should. In fact, most agents worth their salt probably aren’t going take you around looking at houses until you do. I know I sure wouldn’t.

But the truth is you need to do it for you. First, you need to be certain there are not any items on your credit report that you are unaware of. There could easily be some incorrect information or something little that needs to be addressed before you are able to obtain financing. It could be something that is easy to take care of provided you have the time.

And if you haven’t heard  nothing happens quickly in the mortgage industry. It could cost you the house of your dreams or a deal of a lifetime. I’ve seen it happen. Also, you might have a little time to improve your score. A good mortgage broker might be able to help you boost your score over a certain threshold. Often just a few points might save you thousands over the course of a loan.

Also, it keeps you from wasting your time. You may not want to hear this, but there is probably a limit to what you can afford. Alternatively, you could also be selling yourself short and looking at homes well under your budget. Likewise, you could be over or underestimating what your prospective payments might be.

What does a prequalified buyer mean?

A prequalification is a basic screening for a potential borrower. If you have mortgage, chances are you have went through this process yourself. It however is not a mortgage application. It can help rule out some people who want to buy your home but cannot because of their credit, income, or debt.

It is a good first step but not a fail safe. There is an old adage “buyers are lairs” that for the most part holds true. No offence, but many borrows tend to not give a full disclosure. Maybe they are ashamed, trying to hide something, don’t think it is important, unaware of something, or whatever. But it seems like often times there is something.

What prequalified means is a mortgage broker has reviewed a borrowers credit report for any red flags. They also have and run their stated income against the current debt listed on their report. Then come up with a prospective loan program, rate, and payment to come up with a loan ceiling.

As an agent for the seller, I would you not sign an agreement without one. It is no guarantee, but it is a good start and gauge for a borrowers ability to close the loan. If you are considering a cash deal, I would advise you obtain a verification of funds. Either way nothing stinks worse than waiting to the last minute to find out the buyer is having issues closing.

 

Should you buy points?

When shopping for a mortgage, I always recommends clients obtain a zero zero quote. This means zero points and zero origination fees. It is really the only way to compare which quote is better.

That is not to say you cannot compare quote that are not quoted this way, but when you are not comparing apples to apples it really makes it hard to decipher which is the lower quote. It can confuse even the best real estate agents as well. Mortgage originators know this, and they still do in an effort to make their offering seems better than it really is.

It stinks, but that is unfortunately just the way is. If they made it easy to tell what was what everyone would simply use the same company. But to the question should you buy points? And the answer is maybe…

Typically, points cost 1% of the mortgage to buy down the rate 1/8 of a percent on the rate. At face value that doesn’t sound all that great, right? It takes a while to make that up. But it is your forever home or you are payment sensitive it might make sense especially if you can get someone else to pay for it such as the seller or have it rolled into your mortgage. Obviously, you are actually still paying for because otherwise you would just ask for more off.

That said, you often can buy points for less. To me 1% isn’t all that great of a deal but maybe you can buy a point for 1/2% or you can purchase 2 points for 1.25%.

What is and how much is title insurance

You would think in this day in age that most if not all claims of title on had been resolved by now. I mean we are not living in the wild wild west anymore, but unfortunately that is not the case. Old claims and disputes on land still happen. Yes they are few and far between, but they still happen.

This is why in almost all real estate transactions these days require a title search and title insurance (99.9% that have a mortgage). A title search is just that. It is a search for old claims and the past transfers of title on a piece of property. Usually if there is an issue, it shows up here. But for the rare chance it does not, there is title insurance.

Now before you get all worried, the chances of you purchasing a home and later claim getting a judgement to move you off of your property are even more unheard of. It would probably be more of a lawsuit sort of thing. But this is what title insurance is for. It protects your and the lender against these sort of claims. If there were an issue, the insurance would kick in and pay for any damages much like insurance for anything else.

A title search and insurance cost vary somewhat from state to state, but to give you idea. A title search should be around $250 +/- and title insurance should between .05% to .07% of the purchase price ($500-$700 per $100,000).

Buying a Home with Zero Down

A zero down program allows buyers to purchase a home or with a minimal or even no down payment. This sort of program provides a way for buyers to break into the housing market or sometimes even purchase an investment property. Some buyers put off purchasing a home because they are waiting for a more substantial down payment or they do not feel comfortable using a large portion of their savings. If you this sounds familiar, why not at least see what sort of programs you might qualify for. Don’t keep letting opportunities to build your wealth pass you by, contact us to see what programs are currently available.

Home Buyer Cost

Perhaps one of the biggest sources of stress when making a move is unexpected cost.

  • Unless you are paying cash, your lending institution will require an appraisal. Sometimes if there has been a recent appraisal on the home you intend to purchase you maybe can use it, but I wouldn’t count on it. $400+
  • You will probably be required to pay for updated survey. Exceptions might be made on a new home or if you negotiated the seller pays this item. $750+
  • You will be required to have and probably pay for a homeowners insurance policy for one year in advance if you plan on having a mortgage. This may be credited back to you if lender allows you to roll in this cost. Exceptions might be made for land purchase. Cost depends on the value of the home.
  • Consider utilities and other hookup charges.
  • Lenders with also require title search and insurance to protect you and them against any future claims on your property. Depends on the purchase price.
  • If you are not putting at least 20% down you will probably have to pay mortgage insurance either upfront, monthly, or often both. Included in mortgage but important to consider.
  • Some mortgage brokers charge an origination fee, admin fees, or points. These fees are disclosed on the good faith estimate as required by law, but even still they can be easy to miss or misunderstand if not properly explained.
  • Consider storage and moving cost.
  • HOA monthly fees and sometimes initial contributions.
  • Local government may charge improvement taxes on to you.
  • Transfer Taxes which vary by county.
  • Luckily many of these costs are outlined specifically in the good faith estimate which is required by law to be provided to you by your lender. Also there are now specific tolerances for many of these items to which the lender cannot exceed once quoted.

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Top real estate sites

The most trafficked real estates websites are respectively Zillow.com, Realtor.com, and Trulia.com. Whether most agents agree or like it, these are the sites most buyers use and trust. It wasn’t always this way. Buyers used to get more of a local web experience from the top agents in their area.

But algorithm changes namely by Google now usually places these three sites above the locals. They say this is for the best user experience, but lets face it is more likely because of advertising dollars. Like with anything, there are pros and cons to this shift. These are my humble thoughts on these sites.

First lets talk about how they get their information. Zillow and Trulia scrape their information from other websites. Some of the time they have cooperation from the local real estate boards, but I wouldn’t count on that. Most realtors (unless they are buying leads from these) don’t particularly care for sites. One because they are taking traffic away from their website and two because they are always having to fight their misinformation.

The misconception about Realtor is it is brought to you by the National Association of Realtors. Unfortunately this is not true. It is owned by Move a subsidiary of a News company. It is however supposed licensed by NAR which should provide more accurate information.

So what does this mean for you the buyer? It means anytime you enter your information, it is being sold to which ever agent wants to buy it. Not the listing agent and there is little to no guarantee they are any good or honest. A more recent addition on Zillow shows which agents sell the most and have the best reviews.

Unfortunately the agents input how many they sell, and I can tell you from my past experience in my area there is a high probability that some of these agents are being less than truthful. As a former agent for a builder, we used do purchase matrix of actual figures for the top agents so we could market to them. The information was directly downloaded from the local board of realtors.

Unless these agents are selling a lot more than they used to, they are pulling your leg. In fact, I’ve seen agents posting they sell more than 100 homes per year when they work in a suburb that only sells 200 a year. The truth is you are only seeing the agents are paying for it, and most experienced agents don’t buy their leads because they usually are a pure waste of money or worse fake. Good agents don’t like wasting their time.

That said their is some upside to these sites. They are familiar and provide a very similar experience between them. The provide a good user experience for a specific city and a generalized search. However once you start drilling down to what you want or want to search several suburbs at one time these fall short.

If I am looking for general idea of a different market than I work in they work great, but once I get serious I switch to a local company’s site or the local board depending. For example, I use Trulia’s market trends and Zillow’s Zestimate quite a bit. They are good for getting a good idea, but they often use inaccurate or out of date information.