Deleaded Everett 3 Family with 3 bedrooms in each unit. Positive Cash Flow

INVESTORS DREAM - Large, Deleaded 3 Family with 3 bedrooms per unit and new rear decks off the kitchens. These units are spacious and have great lay-outs. There is off street parking for 3+ Cars. This property has been very well maintained. Separate Systems. Great basement with storage. Vinyl exterior. Rents have been at $1400/month plus utilities - first floor unit is currently rented - TAW. Close to public transit, schools and parks. Nice location on corner

Contact Jeffrey for more info and to schedule a private showing...

Jeffrey Carter, ABR
978.717.9015
www.jeffreyhcarter.com

Debt Coverage Ratio explained

The debt coverage ratio(DCR) measures your ability to pay the property's monthly mortgage payments from the cash generated from renting the property.  Bankers and lenders use this ratio as a guide to help them understand whether the property will generate enough cash to pay rental expenses and whether you will have enough left over to pay them back on the money you borrowed. 

The DCR is calculated by dividing the property's annual net operating income (NOI) by a property's annual debt service. Annual debt service is annual total of your mortgage payments (i.e. the principal and accrued interest, but not your escrow payments).

EXAMPLE:

Assume NOI of $20,000 and debt payments of $15,000.  The DCR is 1.33,  ($20,000/$15,000 = 1.33).

A debt coverage ratio of less than 1 (e.g. .75) indicates that there is not enough cash flow to pay the property's rental expenses and have enough left over to pay mortgage payments. Obviously, a lender will not be willing to loan you money to purchase a property not generating enough cash to pay him/her back..  In the above example, the DCR of 1.33 means that the property will generate 1.33 times more (or 33% more) in cash that is required to pay the mortgage payments. 

This ratio is widely used by investors and hard money lenders.  I provide the DCR in my cash flow analysis for all my investor clients.  

Want To Sell Fast-Be Accessable

Make sure your home is easy to show! To get your home sold quickly, it’s important that other agents in the area show it to as many potential buyers as possible. The first thing a good agent will do when working with buyers is talk to the buyer and learn what kind of home they are looking for. Then the agent will search all the available homes for those most closely matching what the buyer wants. Next, the agent puts together a list of the best matches to go show to the buyer. When a busy agent is compiling a list of homes to show a buyer, the agent will naturally tend to show those houses that are easiest to gain access to first. Many homes on the market have “lock boxes” on them. The lock box is a device which holds a key to the home, that only qualified local agents can access. Homes that are listed as being “lock box, no appointment needed” will get shown more often than homes listed as “agent has key, call for appointment”.  If at all possible, you should let your agent put a lock box on your home for easier showing.  If you can’t do a lock box, you need to be sure that you make it as convenient and easy as possible for other agents to show your home.  If they call, do whatever you have to do to accommodate letting them show your home to buyers on their schedule.  If you don’t, the agent will probably show the buyer other homes, and if that buyer makes an offer on one of them, you’ve just lost a great opportunity. It’s best if you can leave when the agent and buyer arrive to see your home.  Buyers won’t feel comfortable with you there, and it could sour an otherwise good impression.

Staging Your Home Checklist

Remove all clutter from the house. Are countertops free and clear? Have you removed unnecessary furniture throughout the house? Remove the art gallery and coupon collection from the refrigerator.

Check the bathrooms. Are the surfaces clean and clear? Are shower curtains and doors hung properly? Is the flooring clean and fresh? Are towels neatly hung?

Check the walls. Is paint and wallpaper fresh and clean? Are the walls free from holes? Are there any colors or objects on the walls that need to be removed?

Check the floors. Is the carpet clean and free from stains? Are hard surface floors clean and free from stains?

Check windows and window coverings. Are all the windows clean? Are draperies and blinds clean?

Pet check. Are there any signs that this is a pet's home? Be sure to clean and remove kitty litter, pet toys and bedding.

How's the aroma? Try to air out the home prior to showings. If air freshener is necessary, use well before showings as a consideration to those with allergies.

Set the mood prior to showings. Open draperies and blinds. Turn on the radio to a classical music station, set the volume on low. If you have time, cook a batch of cookies to have the warm, welcoming aroma permeating the home.

Lets talk Commissions

Listing Commissions Real estate brokers normally charge a commission for listing and selling your home. The rate varies, both by region and according to service level. In most areas the commission is calculated as a percentage of the sales price and rates of up to 7% are not uncommon.  Your listing contract will specify both the amount of the commission and the timing for when it will be paid.  Like everything else in real estate, commissions are negotiable. Discount commissions It wasn’t to long ago that commissions below the “going rate” for an area were all but unheard of.  These days though, there are many brokers and agents willing to list your home for considerably less than the 7% that might be typical for the area.  You need to be aware though, that lower commissions are nearly always tied to lower levels of service.  Most agents willing to list your home for a bargain commission rate aren’t going to do any advertising or marketing of your home.  They will probably just list it with the local MLS and put a sign in your yard, and that’s about it.  Meanwhile, a full service, full rate agent will probably spend considerable time and money to advertise and market your home – particularly to other agents in the area.  So, when considering a low commission, be sure you know exactly what you’ll be getting, and what you’ll be giving up. Often, lower commissions will be part of a package deal where you agree to use a particular mortgage broker or you agree to buy your next home through the same agent that sells your present one.  There are some good bargains to be had with these package deals.  But again, it pays to examine the details closely, and make sure the whole package fits your needs. Paying commissions It’s important to understand how commissions are earned, and when they are paid.  Your specific listing agreement will spell out the details.  In general, a broker is considered to have held up his end of the bargain when he brings you a “ready, willing and able” buyer.  If the broker finds such a buyer, and you change your mind and back out of the deal at the last minute, the broker is probably going to expect you to pay the commission anyway, since he did his job.

Getting the Best Price for Your Home

Effective marketing is the key to selling your home quickly and getting the highest price. Aggressive, effective marketing of my Client's homes by every available medium is how I've become a top Realtor in the Michigan area. It's my job to assure that you get as many qualified offers as possible, allowing you to extract the highest price the market will bear. One of the most important elements of marketing your home effectively is setting the price right. Set the price too high, and you won't get any offers and your home will take too long to sell. Set it too low and you cheat yourself by not getting your homes full, fair value. As an expert in Western Wayne and Oakland County area, I analyze the market and set area home prices every single day. I'll work closely with you to assure that everything possible is done to get the highest price, in the time frame you need. The condition and appearance of your home are also critical factors in getting the best price for your home. I'll personally walk through your home with you and advise you of what you can do to properly stage your home most effectively. Some areas are much more important and more likely to pay off than others! Often, the buyer is motivated by emotional responses as much or more than financial issues. There are usually things I can point out to you that are easy and inexpensive, yet go a long way towards triggering those "buy" emotions. As your agent, I'll negotiate furiously on your behalf throughout the entire process to ensure that your best interests are protected. Real estate negotiations and contracts can be intimidating in their complexity. Most people have almost no experience in these negotiations after all, how often do you buy or sell a new house? As a top real estate professional, getting you the best terms and prices in all negotiations is simply part of my job.

Reasons why homes don’t sell

If you have had your home on the market for several months and haven’t seen much activity or any offers, chances are that one or more of the reasons below are to blame. Your price is too high No doubt about it, the most common reason for a home not selling is that the asking price has been set too high. The reasons for setting your price too high to begin with are many. Ranging from over enthusiastic listing agents to unrealistic seller expectations. Regardless of the reason though, if you’ve priced your home too high, you’ve set yourself up for a number of obstacles to selling your home. Even if you do get an offer for the overly high asking price, the deal may fall apart before closing because the buyer may have problems financing at too high a price. Look at other homes for sale, ones as similar and as close to yours as possible. If they are going for less than you are asking, you may be priced too high.  The fact is, your home is competing against those other homes, and what buyers are willing to pay is what will determine final sales prices. The condition of your home There is a lot of competition out there to sell homes.  Your home has to compete against other similar homes for sale, as well as competing against shiny brand new homes.  The more you can do to make your home look appealing to a buyer, the better your chances for a quick sale.  Look at your home with a critical eye – put yourself in the buyers position.  A buyer doesn’t want to have to do anything except move in.  Your best “bang for the buck” in improving the condition of your home are paint and flooring.  Make sure that all of the paint is in great condition, both inside and out.  Repainting doesn’t cost too much, and will usually make the biggest impact on buyers.  Make sure all of the flooring looks good too.  You may want to consider putting in new carpet.  Again, it’s not that expensive but it sure does make an impact on buyers coming to look at your home. Location, location, location It’s the oldest cliché in the world, but it’s true.  When it comes to real estate, it’s all about location!  When it comes to homes, things like how good the schools are, crime rates, visual appeal of the neighborhood and noise or the smell of pollution can all effect how desirable the location is.  If you’re in a bad location, a good real estate agent may help to minimize some of the impact by suggesting improvements to the house.  But the only really reliable way to overcome a bad location is with a lower price.  Simply put, an identical home in a bad location won’t sell for as much as the same home in a better location. Your marketing campaign is out of steam The best listing agents all use an aggressive marketing plan to market their listings.  If your listing agent isn’t making sure your home can be found easily on the internet, isn’t actively touting his or her listings to other agents in the area, isn’t running ads in the local newspapers and real estate publications, then it might be time to change agents.  The best agents might even run radio or television ads for their listings.  If all your agent has done is put a sign in your front yard and add your home to the local MLS, then that agent isn’t coming close to doing all that can be done to effectively market your home. The market is slow You’ll hear it described as a slow market, or a buyers market, or maybe a cold market.  But it all means the same thing.  That home sales in the local area, or market, are slow.  That there are too many homes for sale and not enough active buyers.  There are several things you can do to combat a slow market.  The most effective strategy is to sell at a lower price.  Buyers are expecting to find bargains during a slow market.  You can also help yourself by offering to pay some concessions to help a buyer that might not have a lot of cash.  The ultimate way to beat a slow market is to simply wait it out.  But that’s not always an option for many sellers. Your home isn’t easily accessible To get your home sold quickly, it’s important that other agents in the area show it to as many potential buyers as possible.  When a busy agent is compiling a list of homes to show a buyer, the agent will naturally tend to show those houses that are easiest to gain access to first.  Many homes on the market have “lock boxes” on them.  The lock box is a device which holds a key to the home, that only qualified local agents can access.  Homes that are listed as being “lock box, no appointment needed” will get shown more often than homes listed as “agent has key, call for appointment”.  If at all possible, you should let your agent put a lock box on your home for easier showing.  If not, you should do anything else you can to make it as convenient as possible for agents to show your home.  You have an agent nobody likes Sounds almost silly, but it’s very true.  If your listing agent isn’t liked or respected by other agents in your area, it could slow down the sale of your home.  When an agent prepares to show properties to prospective buyers, the agent begins by talking to the buyer to find out what kind of home they are looking for.  Then the agent searches the local MLS and other sources for homes that fit the buyer.  If there are a number of good matches to choose from, and one of them has been listed by an agent that is hard to get along with, or arrogant, or has otherwise made himself unpopular, well…  It’s just human nature to tend to skip over someone you don’t like.

Curb Appeal on a Budget

Flowers for instant curb appeal The experts all agree that curb appeal is one of the most important aspects to consider when selling your home.When selling, it's the appearance from the street that will very often determine whether potential buyers come in to see the inside, or never get out of their cars. Flowers are one of the easiest and least expensive ways to make the front of your house look inviting and instantly increase the curb appeal of your home.  Without any real landscaping at all, flowers can transform a rather drab and dreary looking front yard into one that looks colorful and lush.  Especially during spring and summer, you should take advantage of the season by planting pots and flower boxes. You should choose colorful flowers that will be in bloom during the time you're selling your home.  Planting the flowers in planter boxes and pots is easier than planting them in the ground and lets you more easily place them where they can have the most visual impact.  You don't need to have a green thumb, or spend a lot of money to get great results either.  Visit your local home improvement center or nursery and they will be happy to advise you of the best flowers and plants for your purpose.  You can put together several very nice planter boxes and pots of flowers for well under $100.  And it's easy! One of the nice things about using flowers in this way is that you'll see the results immediately.  And so will buyers visiting your home!

Fixer-Upper 101

Fixer-uppers The oft heard phrase "Buyer Beware" is never more appropriate than when considering the purchase of a fixer-upper.You really need to know exactly what you’re getting into before buying. It’s commonly believed that fixer-upper properties represent easy money that is ripe for the taking - that you can buy it, do a little work on it in your spare time, and then resell quickly for a large profit.  Usually, this simply isn't the case. Although, with proper planning and foresight, good profits can be made by buying "distressed" properties at less than market value, making appropriate improvements and repairs, and then reselling.  And for many first time buyers who intend to live in the house while working on it, buying a fixer-upper can be the very best option. It’s less risky buying a fixer-upper when you can live in the house while fixing it. And of course, by living in the house for at least 24 months you should be able to avoid paying regular income taxes on the profits.   The most important thing to know before making a decision on such a purchase is what needs to be fixed. Any time you are spending money on improving a home with the notion of selling it later, strive to spend your money on things that buyers can easily see. Things like new paint and removing trash from the property cost little but have instant impact on curb appeal. Houses that have only cosmetic problems like peeling paint, a trashy yard, bad carpet or wallpaper are the best bet. This is especially true for the first time buyer looking to live in the house for a while before reselling. Fixing and cleaning cosmetic issues is fairly easy and inexpensive. It virtually always gives gives a good return on investment, particularly when you can do the work yourself. Kitchen and bathroom remodeling usually pays a nice return. Don’t be afraid of buying a fixer-upper in need of this kind of repair. Properties with structural damage, or a floor plan that requires major work to remedy, usually can’t be "fixed up" at a profit.    Always have an inspection for hidden damage performed by a home inspector or construction professional before buying a fixer-upper. Make sure that satisfactory completion of such inspections are a condition of purchase in any contract you sign. Then be sure to negotiate to try and get the seller to pay for all or part of the cost of needed repairs uncovered by the inspection. Often, sellers will be willing to lower the sales price to sell the home "as is" instead of paying for the repairs.   Be careful that you don’t over pay. Especially if you plan to resell quickly, paying too much up front can doom your plans for quick profit. Research the market for reselling and have an exit plan for selling the house in place before making an offer.

The Cost of Your Mortgage Loan

Money Isn't Everything When considering lenders, factor in the level of service they will provide throughout the loan process. I'll be glad to provide a list of lenders who have successfully helped clients in the past. I also suggest that you ask friends and family in the area for their recommendations.   The same care and consideration you give to finding the right house should be applied to your search for the right mortgage lender. For most home-buyers a major determining factor in selecting a lender is the cost of the mortgage loan. But how do you determine the cost of a mortgage loan? Shopping for a Mortgage Loan While most buyers concentrate on interest rates, it is best to look at all the costs associated with a mortgage loan. Mortgage loans include the quoted interest rate, points and closing costs. More than Just Interest A number of fees are associated with the mortgage loan, including: Appraisal - A carefully documented opinion of value by a licensed, professional appraiser. Credit Report - A detailed report of your credit, employment and residence history prepared by a credit bureau. Principal - The amount owed on a mortgage which does not include interest or other fees. Document Fees, Loan Fees and Processing Fees - Miscellaneous fees charged by the lender. Discount Points - Points paid in addition to the loan origination fee to get a lower interest rate. (1 point = 1 percent of loan amount) Origination Points - the total number of points paid by the borrower at closing. (1 point = 1 percent of loan amount) Interest Rate - A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds. Prepayment Penalty Mortgages (PPMs) These loans restrict your right to prepay part or all of the principal in the loans early years. A prepayment fee is charged by the lender to the borrower who wishes to pay part or all of the loan ahead of the regular schedule. The advantage of a PPM is that they often have a lower interest rate than other mortgages.   Using the Annual Percentage Rate (APR) to Compare Mortgage Loans The APR was designed to help borrowers understand the relative costs of a mortgage loan. The APR takes into account the various fees associated with the loan, which is why it is often higher than the interest rate. Understand that not all lenders calculate a loan's APR in the same way. That is why this should be only one of the factors used in selecting the best mortgage for you. Locking-in Interest Rates Another factor to consider when selecting a lender is whether the lender will lock-in the mortgage's interest rate and points. Click here to learn more about lock-in options.

Mold in the Home

The first thing to understand about mold is that there is a little mold everywhere indoors and outdoors. It's in the air and can be found on plants, foods, dry leaves, and other organic materials. It's very common to find molds in homes and buildings. After all, molds grow naturally indoors. And mold spores enter the home through doorways, windows, and heating and air conditioning systems. Spores also enter the home on animals, clothing, shoes, bags and people. When mold spores drop where there is excessive moisture in your home, they will grow. Common problem sites include humidifiers, leaky roofs and pipes, overflowing sinks, bath tubs and plant pots, steam from cooking, wet clothes drying indoors, dryers exhausting indoors, or where there has been flooding. Many of the building materials for homes provide suitable nutrients for mold, helping it to grow. Such materials include paper and paper products, cardboard, ceiling tiles, wood, and wood products, dust, paints, wallpaper, insulation materials, drywall, carpet, fabric, and upholstery.

Exposure to mold

Everyone is exposed to some amount of mold on a daily basis, most without any apparent reaction. Generally mold spores can cause problems when they are present in large numbers and a person inhales large quantities of them. This occurs primarily when there is active mold growth. For some people, a small exposure to mold spores can trigger an asthma attack or lead to other health problems. For others, symptoms may only occur when exposure levels are much higher.

Should I be concerned about mold in my home?

Yes. If indoor mold is extensive, those in your home can be exposed to very high and persistent airborne mold spores. It is possible to become sensitized to these mold spores and develop allergies or other health concerns, even if one is not normally sensitive to mold. Left unchecked, mold growth can cause structural damage to your home as well as permanent damage to furnishings and carpet. According to the Centers for Disease Control*, "It is not necessary, however, to determine what type of mold you may have. All molds should be treated the same with respect to potential health risks and removal."

Can my home be tested for mold?

Yes. An indoor air sample can be taken as well as an outdoor sample to determine whether the number of spores inside your home is significantly higher. If the indoor level is higher, it could mean that mold is growing inside your home. Reliable air sampling can be expensive, time consuming, and requires special equipment and a qualified technician. If you can see or smell mold, then you should take steps to clean-up the mold. Mold growth is likely to continue unless the source of moisture is removed and the contamination is cleaned-up.

How do I remove mold from my home?

First address the source of moisture that is allowing the mold to grow. Then take steps to clean-up the contamination. Here are helpful links to lean more about cleaning-up mold in your home. "A Brief Guide to Mold, Moisture, and Your Home," Environmental Protection Agency "Repairing Your Flooded Home," FEMA "Controlling Mold Growth in the Home," Kansas State University *Sources: California Department of Health Services Indoor Air Quality Info Sheet, "Mold in My Home: What Do I Do?" revised July 2001; Centers for Disease Control and Prevention, "Questions and Answers on Stachybotrys chartarum and other molds" last reviewed November 30, 2002.

Mortgage Programs for Homebuyers

Private Sector

Conventional Loans - The only security guarantee is the value of the property.

Conforming Loans
Conventional loans that follow the terms and conditions established by the guidelines of Fannie Mae and Freddie Mac.

• Fixed-Rate Mortgage
  The interest rate and the principal payments remain fixed throughout the loan. Keep in mind your monthly escrow account payment could vary from year-to-year as taxes and insurance rates change.
  
• Variable or Adjustable-Rate Mortgage
  The interest rate on the loan fluctuates over the period of the loan. Periodic adjustments to the interest rate are made based on changes to a defined index. The loan's interest rate is determined by adding a fixed number of points to the defined index.
  
• Balloon Loan
  Short term, fixed-rate mortgage that has monthly payments usually based on a 30-year amortization schedule and a lump sum payment due at the end of term, usually 3, 5 or 7 years. The interest rate on balloon loans is usually less than a 15- or 30-year fixed-rate mortgage.
  
• Piggyback Loan
  A second mortgage that closes with the first. Often the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. The home buyer covers the remaining 10% with their down payment. (Some lenders will write a second mortgage of 15% or even 20% of the purchase price.)
  
• Housing Finance Agencies
  These agencies offer special loan programs to low- and moderate-income buyers, buyers interested in rehabilitating a home in a targeted area, and other groups as defined by the agency. Working through a housing finance agency, you can receive a below market interest rate, down payment assistance and other incentives.
  
  
  

Jumbo and Non-Conforming Loans
Loans above the maximum amount established by the guidelines of Fannie Mae and Freddie Mac. Often the interest rate charged for a jumbo or non-conforming loan is higher than that of a conforming loan.

• B/C Loans
  Loans for borrowers who cannot meet the credit guidelines established by Fannie Mae and Freddie Mac. The purpose is to offer temporary financing to someone whose credit history disqualifies them for a conforming loan (including someone who has recently filed for bankruptcy, foreclosure or late payment on their credit report). Typically the interest rates run higher and vary depending upon the individual credit situation.
  

Government

FHA Loans
The Federal Housing Authority (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in helping low- to moderate-income families qualify for mortgages. FHA assists first-time buyers and others who would not qualify for a conventional loan, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are usually the going market rate, while the down payment requirements for an FHA loan are lower than conventional loans. The required down payment can be as low as 3 percent and the closing costs can be included in the mortgage amount.

VA Loans
VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA Loan, which usually offers a competitive fixed interest rate, no down payment and limited closing costs. While the VA does not issue the loans, it does issue a certificate of eligibility required to apply for a VA loan.

RHS Loan Programs
The Rural Housing Service (RHS), which is part of the U.S. Department of Agriculture, guarantees loans from private lenders to help low- to moderate income families qualify for mortgages.

For Sale by Owner(FSBO)

Before you consider selling your house yourself, ask yourself if you are going to have the time needed to sell your house - even if you just cover the basics.

The Basics

• Complete an extensive research of local market conditions, including:
  • the listing and selling price of all houses in your area for the last six months,
  • the listing price of houses currently on the market, and
  • the listing prices of houses that were on the market but did not sell.
    Tips: Begin your research on the Internet. Follow-up by visiting the county tax records office to determine the selling prices of houses.
• Put together a marketing plan.
  • How will you market your house to Realtors? Most buyers use a Realtor, so marketing to Realtors is essential. At a minimum, you'll want to send a letter and sales flyer to all Realtors within a 30 mile radius.
  • How much money can you afford to devote to advertising? Call the local newspapers to determine how much it will cost for advertisements. You'll want to run daily and Sunday ads in the newspapers.
  • Who will create your sales flyers? Buyers expect fact sheets to take with them when they drive-by or tour a house for sale.
  • Where will you place signage? In addition to your front yard, is there areas leading in to your neighborhood where signage would be appropriate?
  • How will potential buyers find information about your house on the Internet? You'll want potential buyers who begin their house shopping on the Internet to find your house. Be sure to build a website to help sell your house.
  • Who will take inquiry calls and schedule appointments? You'll want someone to be available to answer inquiry calls and schedule appointments. Be sure to schedule showings as quickly as possible - even the same day.
    Tips: Ask newspapers for a discounted advertising rate for multiple placements. Be sure to check with local officials to determine if there are any restrictions on where you place signs.
    " Pre-qualify buyers before showing your house.
• Confirm that the potential buyer has pre-qualified for a mortgage loan.
  • If the buyer is buying with cash, confirm that they have the necessary resources.
  • If the purchase is contingent on the buyer selling their own house, confirm that the buyer's house is on the market. (You may also want to determine how long the buyer's house has been on the market.)
• Negotiations, Contracts and Closings
  • Are you prepared to negotiate the contract?
  • Do you know what the legal responsibilities of the seller are in your area?
  • Who will write the contract? Will you need to hire an attorney? If so, what will be the attorney's fees?
    Tips: In addition to the sales contract, you'll need to complete a Seller's Disclosure and a Lead Based Paint Disclosure.

How to spruce up a listing by offering the right incentives..

In today’s market, it’s pretty easy for a seller to find themselves in a serious state of stuck: home stuck on the market with no bites from buyers, and family stuck in the home until the home sells. And that doesn’t even account for the feeling of stuck that comes from having gone just about as low as you can go on price without turning your transaction into a short sale. If you’re trying to sell, and you’ve lowered the price but still find your home struggling to compete against a bunch of other, similarly priced homes with similar features, selling can seem difficult at best, impossible at worst. The worst part of this particular flavor of stuck is the feeling that the whole situation is out of your control, that there’s nothing within your power that will move your home off the market.  You’ve already painted the place, replaced the carpet, tricked out the curb appeal and lowered the price as far as you can go.  So what else is a seller to do?

Offer incentives.

Incentives are perks - they can be big or little - that a seller offers to their home’s eventual buyer.  The most outlandish incentives are the ones that make the headlines, like the Ferrari one Malibu owner threw in with the sale of their condo last year, or the year’s worth of cookies that actor George Hamilton reportedly negotiated into the sale of his home from a bakery owner.  But the incentives with the most power to get your home sold tend to be much less exciting perks that actually fill a real need the average home buyer has.  

Here are four basic, incentives you should consider offering if you’re having a hard time getting your home sold:

1. Interest rate buy-down.  When you hear sellers say they will “pay points,” what they are doing is offering to award the buyer a certain number of percentage points of the sales price, which will, in turn, be paid to the buyer’s lender as discount points that bring the buyer’s interest rate down. For the buyer, this is a big deal, as it decreases the pressure they feel to guess the right day to lock in their interest rate (a common source of serious stress among buyers), and sends the message that if they buy your home, they’ll automatically beat the market rate.  And what buyer doesn’t want that?!

Seller-paid rate buy-downs also save buyers money on their monthly payment over the entire lifetime of their loan, and the seller-paid points are usually tax deductible, to the buyer, the next time they file taxes. You can see why these incentives are so powerful at attracting buyers!

2. Closing cost credit.  Many buyers trying to break into the market while prices are low are already scraping the bottom of their savings account barrels to come up with their down payment money.  With most home loans, the buyer will have to come with anywhere from 3 to 6 percent of the loan amount, in cash, on top of their down payment, to cover closing costs like loan fees, escrow services and title or mortgage insurance.  (And strangely enough, the buyers putting the 3.5 percent minimum down payment on an FHA loan are likely to have to come up with the higher end of the closing cost range, 6 percent, to cover their mortgage insurance.)

Some smart sellers (and their agents) include in their home’s listing and marketing materials the offer to pay a credit of 3, 4, 5 or even 6 percent of the home’s sale price at closing, to defray the buyer’s closing costs. A closing cost credit is a great financial help to buyers and a strong differentiator that can make your home much more attractive than nearby listings.  Your listing agent can help you run the numbers on how much of a credit you can afford to offer, and how to make an overall package - listing price and credit - that will be maximally magnetic to prospective buyers.

3. HOA dues credit.  If you are selling a home that is in a homeowners’ association (HOA) that charges monthly or even annual dues, then surely you recall buying that home and being overwhelmed at the prospect of going from rent being your sole monthly housing expense, to having a laundry list of expenses starting with your mortgage, including property taxes and insurance and then having HOA dues as the unpleasant cherry on top.  

One way to overcome that concern in the minds of buyers and to differentiate your unit from all the other, similar units for sale in your complex is to offer a credit at closing that covers the buyer’s HOA dues for 6 months, a year, or even longer.  Talk with your agent about how to do this strategically, in a way that will offer the maximum lure for buyers but will not run afoul of any guidelines for seller credits imposed by the buyer’s lender.

4. Broker incentives.  Some savvy sellers who can’t afford to offer buyers several percentage points’ worth of the proceeds of sale toward closing costs take a different route, offering to pay a bonus percentage point (or more) in incentives to the eventual buyer’s broker or agent - on top of the commission, rather than to the buyer themselves.  Over 90 percent of buyers who are ready, willing and able to buy a home on today’s market are represented by a broker.  And brokers have to sort through sometimes hundreds of pretty similar listings to decide which ones to show a buyer any given Sunday.