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SELLERS; IF YOU WANT IT, ASK FOR IT!

SELLERS; IF YOU WANT IT, ASK FOR IT!

“Ask, and it shall be given unto you.”  –  Jesus Christ

There’s nothing more frustrating to a ready, willing, and seemingly able buyer than to lose an offer to another buyer — especially since the seller was not specific (down to the letter) about what he expected to receive.

Sure, there’s the list price; but in today’s fast-paced market, a buyer/ prospect may offer thousands more than the list price and STILL not be the lucky buyer who gets the property!

That’s why sellers should be as specific as possible with buyers in what they want to receive and achieve in a successful offer.

Let’s tackle the major elements the seller should be prepared to address with serious buyers. I suggest that sellers (or their real estate agent) prepare a “Suggested Contract Requirement” sheet to give to buyers, outlining what they expect in the following:

Loan pre-approval
By now, it should go without saying that buyers without loan pre-approval shouldn’t be competing in the current market; but sadly, some are. That’s why it’s important for the seller to specify that buyers be pre-approved for loans ample enough to fund the purchase price, AND detail the type of loan and respective costs (if any) the seller would cover.

For example, a buyer might claim to be pre-approved for a mortgage of “x” amount. What she fails to disclose, however, is that it’s Veteran’s Administration (VA) financing and she expects the seller to cover her two discount points. On a $140,000 sales price (with zero down) that’s a hefty $2,800 for the seller.
Or what about the buyer who claims to have “cash” coming to him to fund the purchase (often coming from proceeds of an estate or settlement of a law suit.) The buyer’s funds are delayed. In order to close the sale, he must borrow the money, causing the seller a three-week delay in accessing his proceeds. Verifying the buyer’s funding (which is tougher to do in a “cash” sale) is vital for sidestepping potential delays for the seller.

Earnest Money
In the old, slower school of home buying a decade or more ago, buyers would offer a meager amount of earnest money or even a post-dated check with the idea that they could always up the ante if need be. In today’s market, more (rather than less) earnest money is advised in most situations. Not only does it subtly signify to the seller how financially motivated a buyer is, but can serve as a buyer’s first (and often only) shot at a strong first impression to the seller.
By letting prospective buyers know (in writing on the “Suggested Contract Requirement” sheet) the minimum amount of earnest money the seller is seeking, it places a strong buyer on equal footing with competitors. It also gives a heads-up that if you want a stronger foothold with the seller in this area, exceeding the suggested minimum amount is certainly in order! If a buyer structures an offer to include minimal contingencies like obtaining financing in a certain amount and the property appraising for at least the sales price, etc., earnest money would be at little risk of loss.

And what about contingencies? Should a seller require that buyers make all offers free of positively all contingencies if they’re serious about the property? Hardly. But keeping contingencies to a minimum (as we’ll see in Part II of this article) definitely gives buyers an added advantage over their competition and results in a smoother sale for you as a seller.

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THE TROUBLE WITH MORTGAGE CALCULATORS

THE TROUBLE WITH MORTGAGE CALCULATORS

“How we think shows through in how we act. Attitudes are mirrors of the mind. They reflect thinking.” –  David Joseph Schwartz

Years ago, people used charts and simple multiplication to calculate the time value of money. Then, Hewlett-Packard introduced its ubiquitous hand-held financial calculators, and those “time value of $1” charts faded from memory. The latest incarnation is the Web-based mortgage calculator, provided online by real estate brokerages and agents, lenders and mortgage brokers and such companies as Bankrate Monitor and Nolo Press, among others. Calculators pose intriguing questions: How much can you afford to borrow to buy a home? How much will your monthly mortgage payment be? Should you refinance your mortgage? And so on.

Do mortgage calculators work? Yes and no. Calculators plug user-entered data into complex equations that would be daunting for the average not mathematically inclined person to solve by hand. However, the results lack real-world reliability and can vary from one calculator to the next. Some calculators are so suspect, in fact, that they’re accompanied by small-print disclaimers warning consumers not to rely on the results. If you want to use online mortgage calculators, keep these caveats in mind:

Mortgage calculators rarely reveal their behind-the-scenes assumptions.
Few mortgage calculators are accompanied by any explanation of how they work or what assumptions are used. Does the monthly payment include mortgage insurance, if required? Does it include an impound account for property taxes and casualty insurance? Is the equation adjusted to reflect a higher interest rate on a jumbo loan or a non-owner-occupied property? The more questions you’re asked before you click “calculate,” the more reliable the outcome is likely to be, but that’s assuming the information you enter is correct.

Mortgage calculators can’t predict payments on hybrid or adjustable-rate mortgages (ARMs) beyond the initial fixed-rate period.

The interest rate on a traditional 30-year mortgage is a fixed constant that can be plugged into an equation, but the interest rate on a hybrid or ARM is unknown beyond the first adjustment, which might occur in one month, six months, a year, three years, five years or 10 years, depending on the mortgage. There’s no way for a calculator to account for this unknowable factor. Some calculators tackle the worst-case scenario. That’s useful up to a point, but again, the reliability of the results still depends on secret internal assumptions and formulas and the accuracy of user-entered data.

Refinance calculators usually ignore the longer term on the new mortgage.
Many people refinance their existing mortgage with the goal of lowering their monthly payments. However, if you’ve been making payments on your existing mortgage for some time and the new mortgage will be amortized over a full 30 years, refinancing can cost more over the lifespan of the loan even if the monthly payments are lower. Mortgage calculators that purport to show whether you should refinance tend to focus on the monthly payment and the payback period for the refinancing costs, while ignoring the longer term of the new mortgage. This flaw is fatal.

Mortgage calculators can be fun and possibly educational.

The positive side to mortgage calculators is the ability to make rough comparisons among various scenarios. Plugging different numbers into one calculator can give novice borrowers good insights into the interplay between the cost of the home, the interest rate, the downpayment percentage and the monthly payment. But again, it’s important not to make real-world decisions solely on the basis of these numbers

‘BIG 6’ FACTORS THAT SELL A HOME

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‘BIG 6’ FACTORS THAT SELL A HOME

“A turtle cannot move forward unless it sticks its head out”  – anonymous

Posted 8/5/11

Although they can be stated in different ways, there are only six factors that affect the sale of a home, according to blogger Karen Kruschka.

The Sales Associate with RE/MAX Olympic Realty in Manassas, Va., wrote an Active Rain blog post detailing the “Big 6,” as she calls them. These factors are controlled by three main entities: the seller, the agent and the market.

Sharing the blog with your own clients and educating them on their role in the process gives you a perfect entry point to demonstrate your value as a trusted advisor – especially when they’re deciding on listing price and terms.

Here’s an edited excerpt of Kruschka’s post:

SELLERS Control

1. Price – You determine list price for your home. However, a list price above the market for homes similar to yours will negatively impact buyer interest in making an offer. Your Realtor will review price history with you to assist you in making a list price determination.

2. Terms – Buyers have requirements just as sellers do. Your willingness to respect them and be willing to negotiate which terms will be acceptable to both parties can have a very positive impact. Price and terms will usually be negotiated at the same time.

3. Condition – How well you have maintained the home will influence both your price and the length of time it will take to sell. The pool of buyers who are willing to make major repairs is much smaller than the pool of buyers who want a home that has been well maintained.

THE MARKET Controls

4. Timing – Economic conditions operate independently of price, terms and property condition. Similarly, seasons and weather factors can affect the time it takes to sell a home.

5. Competition – The number of homes on the market most certainly bears heavily on your ability to sell your home on a timely basis.

REALTORS Control

6. Promotion – From entry into the Multiple Listing Service to Internet marketing and any other programs, your agent will have an impact on your home sale.

RE/MAX Affiliates may share this article, provided they do not charge for it and this notice is included. All other rights reserved.

Copyright © 2011, RE/MAX, LLC. All rights reserved.

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