Why Buy or Sell in this Market?

Even though the country is sitting still waiting for the recession to recede, homeowners and prospective homeowners are practically pacing back and forth during this nail-biting period when no one’s sure of anything. You might think that there is absolutely no good reason to sell right now – but then, again, you may think it’s a perfectly good time. No matter which side of the coin you’re on, there are valid arguments on both. Here, we’ve assembled a list of tips on both ends of the spectrum and hope it’ll help you come to some sort of consensus on your real estate marketplace.

Yes, there has been activity in the real estate marketplace in general. Don’t be surprised to hear that a good number of homeowners are opting to buy new properties, others are selling theirs and of course, others still are waiting it out, even if it means their property is currently suffering a loss. Even though some of the sales are taking a bit longer than average, the sales are definitely there.

Now, if you’re like most people, you are just plain not sure what to do next. So as you hang out with your friends and the conversation turns to real estate, you don’t know what to answer to the question that comes up, “Why would anyone sell at a time like this?” Well. We’ve got a few reasons to share with you.

1. Buyers have been shuffling money from their savings only to fund their properties – and they just don’t want to tap into their secondary resources like their retirement fund anymore. Add negative cash flow to inflated expenses versus rental income – and you have a recipe that calls for SELLING.

2. People with no mortgage and some equity want to get that cash out of the property FAST and put it somewhere safer. So the equation here is lower risk=lower return; they don’t want to take any chances and they’d rather sell to be on the safe side.

3. Homeowners feel they might as well cut their losses while they’re still ahead, instead of waiting 5-7-even 10 years for the market to turn around. They are simply of tired of paying the negative cash flow month after month after month.

4. With interest rates as low as they are, buyers have a TOTAL advantage in this market, so naturally if you want to sell – DO it. There’s a good chance it’d be a successful sale.

Of course, there are many people sitting tight with their pocketbooks clamped shut and their doors locked, just waiting for the right time. Here are a few things to know on why some people are NOT going to be selling anytime soon.

1. Some homeowners are banking on the fact that the market will make a speedy recovery, their equity will return and all will return back to normal soon enough. Who knows? It could happen.

2. Owners of multiple properties are getting great use of their vacation or second home – and figure that the enjoyment gained from the use of these places, far outweigh the negative cost to run those properties. So even though they are experiencing losses every month, the price is worth the enjoyment.

3. Properties that generate a decent amount of rental income only need a little extra to top off the negative expenses and owners are willing to take the chance and wait the time out till the market gets better.

The bottom line is, you have to decide what your situation is, what your priorities are and as you head toward a real estate goal, where you want to end up. There’s a misconception that the real estate market is practically stalled right now. This is so far from the truth. Contrary to popular belief, foreclosures are currently on the decline and not on the rise like most believe to be the truth. In fact, short sales are on the rise. When you factor in that aggressively priced properties are selling super fast and sellers are getting multiple offers on them, you can see that there definitely is activity in the real estate arena these days.

Obviously, the choice is yours and we hope we’ve effectively shared with you that you DO have choices in this market – and we’re here to help make sure you make the right ones for you.

FSBO - Your Advantages and Disadvantages - Why Shouldn't I Try to Sell My Home by Myself?

Many home owners think about selling their own home but relatively few attempt it. Why? Because it's an extremely time-consuming and often exhausting process, especially if you're working a full-time job! It's the Realtor who takes this burden off your back.

Nonetheless, I don't discourage you from putting your home on the market and attempting to sell it yourself.
But before you do it, I do encourage you to become extremely knowledgeable about the process and aware of the both advantages and disadvantages of it.

Below, I've provided information on the benefits and drawbacks of doing a "For Sale By Owner" (FSBO) sale. 

Read it carefully and then make your decision!

Advantages of Selling Your Own Home

Of course, the biggest advantage a FSBO is that there's no commission to be paid to a Realtor. You get all the proceeds from the sale, minus any marketing costs you incur.

A second advantage is that you have complete control of the transaction. You don't have to rely on anyone else. You're totally independent.

A third advantage concerns your equity. If it's low, you have the possibility of selling your home without having to write a check.

A fourth advantage is that you don't have to rely on a realtor to schedule showings, answer inquiries, etc.

Disadvantages of Selling Your Own Home

Perhaps the greatest disadvantage is the tremendous amount of time you have to put into the sale.

It's a time-consuming process to do all the paperwork, the marketing and advertising, the showings, etc. by yourself - not to mention the hours it takes to get acquainted with all the legal, financial, and other issues. You must be prepared for this.

A second disadvantage is the costs in terms of marketing and advertising. If you don't exactly what you're doing, this can be very expensive!

A third disadvantage is that you won't have access to the Multiple Listing Service (MLS) unless you pay a fee to have your listing included. If you don't pay that fee, then you'll end up hunting for buyers one at a time, a very inefficient, ineffective, and frustrating process.

The fourth disadvantage relates to your knowledge of the market. If you're not knowledgeable about it, you may not price your house correctly.

That is, you may underprice it or overprice it. If you underprice your home, you lose money. If you overprice it, you lose buyers. By the same token, if you do find a buyer and you're not experienced at negotiation, you could be taken advantage of.

A fifth disadvantage relates to a belief of some buyers. They believe that since you're selling the house by yourself and not paying a commission, then they're the ones who should get the savings instead of you!

My Advice: Do your homework before considering selling your home by yourself! And, if you do decide to go the FSBO route, be fully prepared in all aspects of home sales!

If you'd like more information and advice on selling your own home as well as my real estate services, contact me or check out these websites.

www.larrykoppie.info/fsbo-stats.pdf - This contains stats from the National Association of Realtors about the success and failure rate of for sale by owner sellers.

www.larrykoppie.info/SalesDisclosureChart1-1-08.pdf - Understand the laws about which disclosures apply to you. You might want to contact an attorney if you are planning on selling your home.

What is a Real Estate Short Sale? Here are My Frequently Asked Questions...

Who Qualifies for a Short Sale?

In order to qualify for a short sale, the seller must prove to the bank one or more of the following conditions:

- Loss of job, and difficulty in finding new suitable job
- Job Relocation, when equity is deficient
- High medical expenses due to disability, injury or illness in family
- Divorce
- Unable to afford the loan from the beginning
- House needs unexpected major repairs
- Overextended Credit
- Changing Economy
- Adjustment in mortgage payment due to interest rate or an unforeseen increase in living expenses
- Incidentally, these are also the most common reasons for a foreclosure.

Why Would a Lender Accept a Short Sale?

Why would a lender accept less than they are owed? Simply stated, the alternative is a foreclosure. Just as with the borrower, there are significant consequences to the lender if they foreclose.

- The legal costs of eviction and repossession,
- The loss of loan payments during the foreclosure process until it is re-sold
- A foreclosed house will need work before it can be resold
- After the foreclosure, the bank has two options: Sell it at the courthouse steps, or try to resell in the market.

If they resell in the market, they are penalized by the government by freezing 3-10 times the loan amount so that the lender cannot lend those funds to another borrower.

Will my lender consider a Short Sale if the mortgage is current?

Sometimes, some lenders will accept a Short Sale file for approval on loans that are not delinquent. Other lenders will not accept the file until the loan is delinquent.

What if a property needs work, can I still apply for a Short Sale?

Yes. In fact, lenders are more motivated to do a Short Sale on a property that needs work than on a property that doesn’t. The lender knows the risk of loss goes up when they foreclose on a property that needs lots of work. 

What is a Short Sale Packet and What Needs to be in it?

A short sale package it used to determine whether a homeowner can afford the property. Our team will work with you and your realtor to gather the information needed to meet the bank guidelines and streamline the process as efficiently as possible. Below are some of the standard items needed to complete a short sale proposal:

- The Listing Agreement
- Authorization to Release form (to allow agent to discuss with bank)
- Hardship Letter (see “How to Qualify” above)
- Financial Statement
- Seller Net Sheet (a copy of the HUD form with offer)
- Contract (when offer is accepted)
- Buyer’s Proof of Funds (with offer)

I have more than one mortgage on my property . Is that a problem?

No. Subordinate lenders are more flexible than 1st mortgage holders.

What if I have 2 mortgages held by different Lenders?

When you have 2 loans with the same lender, it is more beneficial to them, as there is no need to negotiate
with another lender. When the two loans are with different lenders, the process is a little longer, but the second lender is the one who has more to lose if they don’t reach a settlement. This is because if the property goes to foreclosure, the first loan is the first one to be paid and the second usually nets nothing.

Do I have to be past due on my mortgage to be able to get the benefit of a short sale?

No, but it is likely that the lenders’ guidelines will prevent them from formalizing a short sale if the loan is not past due. This means, for them, that the borrower has the means and can continue to pay on the loan each month. Please understand, however, I AM NOT RECOMMENDING THAT ANYONE STOP PAYING THEIR LOANS. In the current market conditions, it is possible that a bank would accept a short sale, even when the borrower is current.

What is a hardship letter?

This is a letter that explains the borrower’s current financial circumstances. Which circumstances have changed from when the house was purchased, and why the mortgage payments can no longer be made. These circumstances are what led to a borrower’s inability to make payments and to pay off the loan in full. This letter must be written by the borrower, and be sincere in demonstrating (with documentation) that it is the truth.

How long does it take to complete a short sale?

The time frame for the lender to receive and evaluate the short sale proposal is about 8 weeks from the time the offer and Short Sale Package are received. Buyers need to realize that this is a lengthy process. This is why it is very important to work with a Short Sale Specialist who knows how to manage the transaction. The other agent and the buyer may get cold feet at the end, and the transaction may fall through.

Why does the bank accept less than they are due?

They lose less on a short sale. On average, lenders lose tens of thousands of dollars less on a short sale versus a full foreclosure. It is simply in their best interest.

How to Be a Wise House-Shopper in a Great Buyer’s Market!

There’s no doubt about it – there are a great many bargains in the real estate market today if you’re a person looking for a new home. However, we highly recommend that you don’t get dazzled by all the opportunities and make a potentially expensive and poor decision. To that end, I’d like to offer you some common-sense guidelines to follow.

Guideline 1: Pay Attention to Your Budget
Before beginning your search for that new home, sit down and come up with a monthly payment you can handle with ease and then look for the house that fits that budget.

Guideline 2: Save Up for a Down Payment
Due to the “mortgage meltdown,” lenders are currently much more cautious about giving out money. Depending on the situation, they may insist on a minimum down payment of 10% or one that’s all the way up to 25%. So, start saving!

Guideline 3: Improve Your Credit Score
A good credit score is a great way to make the whole process easier when you apply for a loan. Today’s lenders scrutinize such scores more closely today than in the past. If you don’t have a good score, work hard to get it up into an acceptable range. It’ll save you money on interest charges and down payments in the long run!

Guideline 4: Get a Pre-Approved Mortgage Loan
If you’re a first-time home buyer or simply a buyer who wants to make sure you stay within your means, it’s a wise idea to get a pre-approved mortgage.This is simply the process of applying for a mortgage and getting approval for the loan prior to buying a home.

A “pre-approval” is an indication that the lender is ready to extend a mortgage to you once you’ve located the right property.  And it has several benefits. First of all, it saves time and energy. Once you have a pre-approved loan amount, you’re required to stay within the limits of that loan in terms of the price you’ll pay for a house.

First, when working with a realtor, ask him or her to limit the choices to those stated in the loan. This prevents the agent from showing you properties which are out of your range. By the way, they’ll really appreciate those parameters because it’ll help them zero in on properties with the best chance of sale! 

Second, you can spend more time looking at homes you really like and, simultaneously, not wasting time on houses that aren’t within your budget. This allows you to focus on the details of the homes you do like in order to make sure you select the right one; for example, kitchens, baths, garages, etc.

Third, you can bargain more effectively with sellers once they know you’re pre-approved. In the current market, that’s a great relief for many sellers because they realize they have a reasonable certainty of selling their property when working with a pre-approved buyer.

Fourth, you can close faster with a pre-approved loan because there’s no time lost in the usual processing period for loans. For example, an appraisal can be ordered right away, and you have the potential to cut a 30-day closing to two or three weeks.

Finally, the seller will prefer to deal with you, particularly if he or she needs to move quickly.

Now, you have some common-sense guidelines to follow when seeking a new home in today’s market! You can learn even more by contacting us today.

What Determines the Value of Your Home?

Basically, a home's worth is determined by its market value. How is "market value" determined? Most often, it's figured by a comparison ("comp") with homes similar to yours in the surrounding area. So, if the homes in your neighborhood average, say, $450,000, then it's likely that the value of your property will fall in the same range. But market value is also determined by a number of factors including the following: 

External Factors 

There can be several external factors influencing the value of your home. One is "curb appeal", or the first impression your property makes upon prospective buyers. A home that's in excellent condition on the outside will make a great first impression; a home in poor repair instantly loses its appeal to buyers. Other factors can include lot size, popularity of an architectural style of property, water/sewage systems, paved roads, sidewalks, etc. 

Internal Factors  

The condition of a home's interior also has a huge influence on prospective buyers. When you've demonstrated "pride of ownership" and kept up the maintenance (quality paint, trim, molding, etc.), a buyer's interest will immediately perk up for the simple reason that they know your care and concern will result in less cost and maintenance for them. Other internal factors include construction quality, condition of appliances, size and number of rooms, heating/cooling type, energy efficiency, etc. 

Supply and Demand 

"Supply and demand" simply refers to the number of homes for sale versus the number of buyers. When there are more homes than there are buyers, prices tend to be lower. When there are a lot of buyers chasing few homes, then prices tend to rise. In effect, supply and demand affects how quickly your home will sell. Location More than likely, you already know the old saying, "There are three main factors in real estate - location, location, location." While that's not the whole story, desirability is a big factor for home buyers. They may want to live in particular school district known for its education excellence…a great and safe neighborhood with rising property values…etc. 

But I Know My Home Is More Valuable Than a Lot of Comparable Homes in My Neighborhood  

Aren't Allowances Made for This? Definitely! Sometimes, it can be difficult to find homes exactly comparable to your own. So, dollar adjustments are made for the differences between your home and comparable properties. 

Where Do I Find Sales Comparison Information? 

The easiest source to access is your Realtor. After all, it's his or her business to know such information! But, there are also other sources you can tap into in order to get a complete picture of your home's value in comparison to others in your neighborhood. Here's an overview of them:

1. ) The Local Assessor's Office  

It's very likely that your local assessor will be able to provide the sales history of a particular house, neighborhood, or style of architecture. Many assessors also provide lists of recent sales which you can browse and compare to the assessment roll. Today, many municipalities provide local sales and assessment information online making it very easy to access. Check with your local government agency to find out if they provide this service. 

2.) Online Private Companies  

You can search for these companies using the Google search engine and the keywords "comparable home sales" or "comparable sales." Some companies offer free information; others charge a nominal fee. If you wish to get more specific, you can Google "real estate database" and type in the name of your particular state to get additional property information. 

3.) Your Local Newspaper  

It's likely that your local newspaper is a great source of specific real estate information. Look for quarterly sales reports in the real estate or business sections.

The Key to Getting the Price You Want (or Close To It) for Your Home 

The key to getting the best value is finding and matching the right buyer to your home. And that's the job of the Realtor! He or she should work hard to qualify those buyers upfront so the right people are viewing your property! In other words, the Realtor should weed out "lookers" and other unsuitable buyers as a first step in working with you. See how I do that for you by calling me today!