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. 

The value of a home inspection

Why you should get an Inspection Whether you are buying or selling a home, you should have a professional home inspection performed. A home inspection will look at the systems that make up the building such as: Structural elements, foundation, framing etc Plumbing systems Roofing Electrical systems Cosmetic condition, paint, siding etc If you are buying a home, you need to know exactly what you are getting. A home inspection, performed by a professional home inspector, will reveal any hidden problems with the home so that they may be addressed BEFORE the deal is closed. You should require an inspection at the time you make a formal offer. Make sure the contract has an inspection contingency. Then, hire your own inspector and pay close attention to the inspection report. If you arent comfortable with what he finds, you should kill the deal. Likewise, if you are selling a home, you want to know about such potential hidden problems before your house goes on the market. Almost all contracts include the condition that the contract is contingent upon completion of a satisfactory inspection. And most buyers are going to insist that the inspection be a professional home inspection, usually by an inspector they hire. If the buyers inspector finds a problem, it can cause the buyer to get cold feet and the deal can often fall through. At best, surprise problems uncovered by the buyers inspector will cause delays in closing, and usually you will have to pay for repairs at the last minute, or take a lower price on your home. It's better to pay for your own inspection before putting your home on the market. Find out about any hidden problems and correct them in advance. Otherwise, you can count on the buyers inspector finding them, at the worst possible time.

Setting the RIGHT list price

Setting the Sales Price Before we set the sales price of your house, I'll run a Comparative Market Analysis (CMA) that will show the listing price of similar houses in the area as well as the prices at which the houses actually sold. Additionally, the analysis will give us information about houses currently on the market and about houses that were on the market but never sold. Next, I'll ask you about your goals in selling the house. Everyone who sells a house has different goals that need to be factored in when calculating the selling price. Is your goal to get the maximum sales price for your house? If so, are you willing to have your house on the market for many months? Is your goal to sell your house quickly? If so, are you willing to sacrifice some of your potential profits to sell more quickly? Would you like to establish a balance between selling your house quickly and selling at the top end of market value? Market conditions will play a role in setting the sales price of your house. I'll factor in how quickly houses are selling in your area, interest rates, the strength of the school system, and finally whether it is a buyer's or seller's market. I'll then recommend a price at which to list your house to meet your goals in the local market.

Are You A Property Virgin?

First-Time Homebuyers   I will . . . > Work at no cost to you! > Provide detailed listing information not available to the general public. > Negotiate the deal to save you money. > Guide you through the avalanche of paperwork. > Commit my time and energy to finding you the right home. Your decision to buy a home is both a sound financial decision and a commendable achievement. As your real estate agent... I will lead you through every single step of the exciting home buying process. I will help you define your "wish list" of features you want in your home, your neighborhood and your ideal school district. I will walk you through the mind-boggling financial details associated with buying a home, including the various mortgages and home buying programs available to you. I will monitor all new listings and alert you to new houses as soon as they are put on the market. I will eliminate the stress involved with buying a home by putting my years of real estate experience to work for you. Finding the perfect home is my business. Contact me today! Jeffrey H. Carter, ABR (978) 717.9015 jeffreyhcarter@kw.com www.jeffreyhcarter.com

4 Things You Must Know When You Are A Buyer & Seller

Once upon a home, buying a home was as simple as saving some dough, spending a couple of weekends visiting Open Houses and writing up a contract. The time frame from house hunt to move-in was a couple of months, max. These days, super-tight mortgage guidelines, market concerns, distressed sales and appraisal dramas complicate and prolong both buying and selling.  

If you need to pull both buying and selling off at the same time, it can seem like you're signing up for these complications, squared. On top of that, the very real prospect of spending some time homeless takes the stress of home buying and selling to an entirely new dimension.

Fortunately, getting yourself educated about what to expect on today's market and knowing all your options empowers you to obliterate panic with a strategic approach, an amazing logistics plan (and backup plan) and comprehensive preparedness for all possible outcomes.  In that vein, here are four need-to-knows for those who want or need to sell their current home and buy a new one, at the same time.

1. Meet with a local agent who actively sells homes in your neighborhood, far in advance of listing or house hunting.  You need them to brief you on items like how long you should expect your home to take to sell on today's market, what (if anything) you can do to move it faster, and whether listing after doing some improvements to your home, at a different time of year or at a different price point than you had planned can realistically be expected to make an impact on your time frame. 

You also need their professional opinion as to what price you can expect to get for your home. This will impact whether you need to consider a short sale (if your home's value is less than you owe on it, for example) which, in turn may affect your ability to qualify for a home loan in the short-term. (Short sales often make it difficult to qualify for a new home loan for a couple of years.)  If you need to buy in the near-term, but your home is unlikely to sell except as a short sale, you'll need to discuss the legalities and logistics with your mortgage pro, attorney and/or a CPA, as well.  

Actually, the information about how long your home will take to sell, how much you can expect to sell it for and whether you're expecting to have to unload it at a short sale is all information you'll need to provide to your mortgage pro, so definitely collect it as early as possible in the process. A year before you need to move is not too soon to have your first meet up with your agent.

2.  Meet with your mortgage broker before your start looking for homes or put your own home on the market. Of course, this is something you would have done eventually in preparation for your purchase, but it's essential that you have them walk with you through both your sell and your plans to buy, before you do either. 

Why?

Well, a good local mortgage broker can work with you and your agent to help you:

• do the math on what you'll net from your home sale;
• help you know how much you (a) can qualify to buy, and (b) will need to come up with for your purchase;
• understand whether the sale will impact your credit at all all and by how much, if so; and 
• time your sale vis-a-vis your purchase.

There are dozens of ways the sequence might need to play out, to be successful at both buying and selling, and you'll need your mortgage pro to be a partner in the process of determining how to order things - before you actually do anything.  For example, you might be under the impression that you can't buy before you sell, because you can't qualify for both, when in fact your mortgage pro could suggest a solution like a low- or no-cost refi first, to bring your payment down so you can qualify to buy before you sell. Or maybe you ARE in a situation where you can't qualify to carry two loans, so you need to sell first and use your own cash to make up the difference between what you owe on your home and what it sells for to avoid a short sale so you can still qualify to buy your next property. 

In any event, you won't know what exactly your capabilities are, from a mortgage and timing perspective, until you hear it from the source.  So, get that meeting on the calendar, too, as early as possible.

3.  Know your options for staying in after closing - or moving in early.  Many homeowners try to buy and sell at precisely the simultaneous moment, with very little overlap, because they don't want to throw money away on rentals.  The reality of today's market is that very, very few sales close precisely when they are expected to, mostly for reasons entirely out of the control of either party.  The seller's bank takes months longer than expected to allow a short sale to close, or the buyer's bank takes eons to sign off on the appraised value of the home.  In any event, if you are selling your home, before your purchase will be complete, know that it's okay to ask for a "rent-back" where you can stay in the property for as long as a month or more after the sale closes by agreement with the buyer to pay them rent on the property in the amount of their mortgage payment, taxes and insurance for the time you remain in the home. 

On the other hand, if you are buying after your sale closes, some sellers will allow you to move in before closing on a similar arrangement - essentially a lease or early move-in arrangement.  They may ask you to sign a document waiving their liability for your belongings and anything else that goes wrong while you're there, before closing - you'll have to negotiate and decide what works for all involved.  Before you start to freak out at the thought that your 'buy' won't close when you need it to, know that this option might be available, and talk with your home's seller to see if they'll consider it. 

 

4.  Plan for gaps - and for overlaps. There is very little in this world we can be sure of, except the high probability of your escrow closing late.  Having a backup plan in place just in case you close one or both transactions off-schedule is essential to avoiding the surprise-induced panic attacks so frequently suffered by those intrepid housing consumers who try to buy and sell homes at the same time. And, frankly, sometimes the best defense against these surprises is simply to plan for gaps and/or overlaps.

So, if you want or need to buy before you sell, build a cash cushion that can cover double payments for a couple of a months - and just plan on that. If that's not in the budget, or if you'd like to try out your new neighborhood or town before you buy, close your home's sale, then plan on renting a place during your house hunt - if you just need a place for a month or two, you might want to consider a suite hotel or a short-term rental.

Source: Trulia.com

5 Questions To Ask Yourself Before You Buy

In most parts of the country, the housing market is good (or great!) for buyers right now - interest rates are bizarrely low, lots of inventory means lots to choose from, and the cost of renting has increased in a lot of markets. But just because the market’s good doesn’t mean it’s the right time for everyone to buy. The decision whether to buy a home is a very personal one; you need to carefully examine your own situation to determine whether it’s right for you.

 

So, what are the questions you need to answer in deciding whether you’re ready to buy? Here are some of the big ones:

1. Do I have enough money for a down payment?
And how much, exactly, is “enough?”  Today’s minimum down payment requirements range from 3.5 percent on an FHA loan to 10 or even 20 percent for conventional loans. That means coming up with anywhere from $7,000 to $40,000 on a typical $200,000 house. While there are still programs that can give you a down payment assist much of the heavy lifting here will need to come from you - in the form of saving up your hard earned cash. And keep in mind there are also closing costs you’ll probably have to pay in cash, which can run as high as 3-4% of your total purchase price.

Talk with a real estate pro and a mortgage broker in your areas to start wrapping your head around how much “cash to close” (i.e., down payment + closing costs) will run, approximately, on a local property that would meet your needs. Can your savings cover this? If not, where will you get the money - what’s your plan for coming up with it?   Putting down as much as you can a) makes you more attractive to lenders, so you might qualify you for better loan terms and b) gives you additional purchasing power, either decreasing your monthly mortgage payment or increasing your purchase price limit for a home.

2. Can I handle the not-so-glamorous aspects of home ownership?
If you can’t even fathom the prospect of having a home maintenance crisis without having a landlord to call to fix it, you might want to reconsider home ownership - or at the very least, buy a lower maintenance condo or town home in great condition, and make sure you get a home warranty!  As a home owner, after all, you essentially are your own landlord. Pipe bursts in the middle of the night? Guess who’ll be up fixing it or calling (and paying) the plumber? (Hint: you.)

There are also some less-than-glamorous bills you’ll have to deal with in your new role as a homeowner that you never laid eyes on as a renter: property taxes and hazard insurance, to name two. When you go from renter to owner, you also need to account for the cost of appliances and maintaining the property’s roof, windows, and landscaping, among other things.

3. How long do I intend to stay in the house?
If you think you might move out of the area next year, then you really shouldn’t be thinking about buying a house (unless of course, you want to play landlord and rent it out after you leave - a prospect which requires its own risk/rewards analysis). For your home purchase to pencil out as a good deal, financially, you’ll shouldn’t buy unless you’re comfortable staying in the house at least 5-7 years - even longer, if you’re buying a home in a foreclosure hot spot or an area with a sluggish job market.. This gives you some time to build up equity and make up for the costs of buying, selling and moving.

4. Are my job and finances stable?
Maybe you just went through a major career change and are in the process of working your way back up from the top. Or maybe you work in a field that has been hit really hard by layoffs and cutbacks. The worst case scenario is to find yourself in a spot with mortgage payment you have no way to make, when you could have avoided that by seeing the writing on the wall. If you feel like there’s a real chance you could lose your job or income tomorrow, you may want to hold off on buying a house - that has the added bonus of giving you the geographic freedom to move, if needed, to get a new job.

Is there really such a thing as 100 percent job security in today’s economy? Probably not. But the best practice is to be confident that your finances could handle a temporary loss of income and still make your mortgage payments, before you buy. One way to do this is to have enough money in the bank to cover 4-6 months’ worth of living expenses, calculating them to include your mortgage payment - before you deem yourself ready to buy. That way, even if you lose your job with no warning at all, you’ll at least have a reasonable window of time to find a new one without digging yourself into a hole - or worse, losing your home altogether.

5. What are my real reasons for buying?
Buying a home is a long-term commitment that will have massive impacts on your lifestyle, your family and your finances. In other words, don’t do it unless you’re really sure you want to and are ready for the lifestyle change - don’t let someone else talk you into it. Worthy reasons renters with home owning readiness give for their decision to buy include some or all of the following:

• You want to build equity instead of paying a landlord. Fact is, if you get a fixed rate mortgage and make the payments for the full term of the loan, you'll eventually pay it off. That's not possible when you're renting.
• You want a place to call your own, where you can paint a wall purple, add a pottery spinning studio or build your dogs an obstacle course (oops - that's my reason for home ownership!), because it's your prerogative.
• You want the tax advantages of home ownership.
• You want a stable place you and your family can live for as long as you'd like.

Ask yourself these questions, and be honest with your answers. If you really want to buy, but your answers to these questions today don’t weigh in that direction, it doesn’t mean you’ll never own a home. It’s usually just a matter of strategically timing your purchase out a year or two when your savings, your career and your lifestyle are in alignment with the implications of ownership - consider working closely with a real estate broker and a mortgage professional to get an action plan in place and start working that plan.

How rising interest rates will impact affordability

In a recent Forbes blog post, multimillionaire hedge fund manager John Paulson declared that today’s record-low interest rates made this the best time to buy homes in fifty years. “If you don’t own a home, buy one,” Paulson said. “If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.”  Why should we care what Paulson thinks? Well, he was among the few to accurately predict the subprime collapse and, while no one has a crystal ball, a closer look at the numbers supports his call to action.

Historically low interest rates are the key…and they aren’t likely to hang around for long.

As we wrote in SHIFT, buyers who “choose to wait until prices come down more” are gambling that interest rates will hold steady or drop. The truth is even a 10 percent drop in home prices is nullified by a 1 percent increase in interest rates. The figure below illustrates how this works for a $250,000 home purchase and the relative likelihood of each scenario.

To figure out which was a smarter bet–counting on home prices to fall further or interest rates to rise–our research department took the last ten years of monthly home price and mortgage interest rate data and ran the numbers to see which was more likely: an increase in mortgage rates or a further drop in home prices. Here’s what we found:

1. A one percent increase in mortgage rates is ten times more likely to happen than a ten percent drop in home prices.
2. A one percent rate increase more than offsets a ten percent reduction in home prices.
3. When interest rates fall by one percent, the total interest paid is almost three times more than the interest savings from a ten percent drop in home prices.
4. The probability of both happening at the same time is ridiculously small, and homeowners would still pay 15 percent more in interest over the life of the loan.

Interest rates have dominated the news in recent months as we’ve shattered record low after record low. Potential home buyers need to understand the positive financial impact low interest rates have on the cost of home ownership and the thousands of dollars that can be saved over the life of a typical mortgage loan. For those who can afford to buy, trade up, or invest, our current market presents a lifetime opportunity.

Source: KW