“You can make all the excuses you want, but if you are not mentally tough, and you’re not prepared to play every night, you’re not going to win. “ ~ Larry Bird
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Copyright 2013 NATIONAL ASSOCIATION OF REALTORS®
“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:
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.
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.
“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
“Hold yourself responsible for a higher standard than anybody expects of you. Never excuse yourself.” – Henry Ward Beecher
The kids are warring over bedroom space — even the dog wants more room! So one Saturday you innocently load everyone into the car, in search of a larger home. Emotionally, it makes sense.
But financially, are you prepared to part with some of your hard-earned equity (not to mention a bit more of your paycheck) in order to purchase a larger home? It’s going to cost you money to move up.
Simply explained, equity is the difference between what you owe on your home (all its mortgages, liens, etc.) and what you could obtain on the open market LESS YOUR COSTS OF SALE. (And the last part of that sentence is often overlooked by over-zealous move-up buyers!) But looking before you leap can make the difference between a financially prudent new purchase and a haunting economic disaster! Let’s evaluate the costs.
1) Some increased costs of purchase are obvious: You’ll be paying a larger mortgage payment monthly to own a larger home (depending on your down payment) your taxes will increase, and yes, even your home owner’s insurance will be more. And if your down payment isn’t at least twenty percent of the purchase price, you may even have private mortgage insurance to pay. It all adds up; but
2) Some increased costs of purchase aren’t so obvious: What about upkeep and maintenance? Utilities? Even the extended period of time it takes to clean the home on the weekend, taking time away from your family and other “fun” things—are you prepared for that?
3) One category most of us overlook when taking the “move up” plunge is to evaluate the chunk of equity it will cost us to sell our existing home, pay our buying costs, and move into another. Since 80% of all sellers hire a broker to sell their existing home (often saving money overall in doing so), you’ll no doubt benefit by that cost. You’ll add to it the additional sales costs of title insurance, transfer taxes, deed preparation, tax pro-ration—-basically all the costs paid by the seller when you purchased the home.
So should you move up? The answer depends on what you’re trying to achieve. If you’re purchasing a home that will appreciate faster than your current one, gives you more space, is in a better neighborhood, and/or will make you psychologically happier, it may make sense to move. It’s true that happiness becomes the over-riding factor to the move-up buyer. Yes, you may want different features than you have in your current home; but you also know that housing is housing— but being happy where you live is paramount!
The bottom line is that homebuyers purchase with their “gut” and justify the purchase with their wallet. Long after you’ve crunched the sales cost numbers and consulted with an expert to evaluate a new neighborhood, you’re still likely to follow your gut instincts and purchase the home that tugs hardest on your heart-strings. After all, it’s what living the American Dream is all about.
“Always bear in mind that your own resolution to succeed is more important than any other. ” – Abraham Lincoln
Consumer credit information is obtained and stored in the United States by three major credit bureaus, Experian, formerly known as TRW, Trans Union Corporation and Equifax.
Credit reports contain significant information on more than 190 million Americans, about the entire adult population of the United States. These reports include your name, date of birth and social security number.
Offered in the reports for lenders to see are your lists of credit card accounts, including credit limits, your outstanding balances, payment history (late payments) for each account, your current loans, and any bankruptcies, civil judgments or liens against you. The credit report should also state the name of any company who has requested a copy of your report.
The biggest complaint that most people have about these credit reporting services is that they are often inaccurate, and getting the problem corrected is time-consuming and often difficult. An astonishing two out of five people are reported to have one or more errors on their consumer credit reports, so the odds of your having an error are high. When credit reporting companies make a mistake, they don’t incur any penalty, but you well might.
Although these credit reporting services include instructions and contact information so that you can correct mistakes on your reports, the damage could already be done. An inaccurate report that cannot be quickly cleared up can cause you to miss getting a loan on time to get your dream house. You may have to wait as long as 30 days to hear that a complaint has been corrected. And you will have to supply the corroboration that the account is in fact paid in full, or paid on time, etc. A canceled, dated check will do nicely.
Not anticipating that there might be a problem, people often wait to check their credit reports until they apply for a loan. Then they find out from the lender that there is a problem. If you are able to show proof that the report is in error, the lender will usually proceed with the loan, but s/he will insist that the credit reporting service post the correction before the loan goes through. If the lender is not satisfied that this has been done before closing, s/he may opt to close the loan at a higher rate or put off closing until the information has been posted.
As you can see, either way, it will be a nightmare for you if there is a problem. That’s why you should review your credit report before you go to a lender.
You will have to see the reports from each of the credit reporting services. One report isn’t enough. Again, you will be surprised at how often they are out of date, or inaccurate. And they don’t accept information from each other. If you call Experian and say that Trans Union’s report is correct but Experian’s isn’t, they will still make you prove the error.
So you have a choice – contact each of the credit reporting companies separately or use a new service which offers access to all three from one convenient site. QSpace, makers of iCreditReport.com, is the first service to deliver credit reports in real time over the Internet. iCreditReport.com gives Internet users the ability to access their credit files at any time, determine if their report contains information or inquiries that they do not recognize, and challenge inaccuracies more rapidly. iCreditReport.com allows users to instantly receive their personal credit reports over the Internet for $8 a report.
iCreditReport.com offers users a quick and secure method which includes the highest encryption protocols for securing transmissions, for users to monitor their personal credit records online. The proprietary system authenticates your I.D., then will release credit information to you in a secured environment.
In order to ensure privacy on the user’s side, the service does not use unsecured connections such as email, nor doe it store credit reports on its servers once the transmission is complete.
Watch Out for Credit Scoring
Lenders also get more than the credit report when they access credit rep orting company records – they get a score or a credit rating on the borrower. The score indicates a statistical probability that the borrower will default on the loan.
According to real estate columnist, Robert Lee, innocent maneuvers to consolidate your debts can inadvertently cause your score to go up. Lee advises caution when canceling many cards with small balances and then shifting the debt to a single or fewer cards.
“The maneuver will effectively raise the ratio of your unpaid balances to the maximum credit lines available on fewer cards. To the software (used by the online lenders,) it appears as if your financial situation has tightened,” says Lee.
So not only do you have to worry about your balances but the score they produce.
Lee explains that quick fixes won’t help you get the loan, but that there are some strategies you can follow to raise your score. One of them is paying a visit to Fair, Isaac and Co. Inc., a company which developed credit scoring for mortgage applications. The site includes consumer information on credit scoring. Used by both the site offers information on how credit scores are developed and used and how they can be improved.
Once you obtain a credit report, even if it is all in order and your credit is good, you will not be able to use the report to get a loan. Your lender will still want to run his/her own credit check, but at least the report will be a step in the right direction toward getting you pre-qualified and prepared to buy.
A word of caution. The reason lender fees are so high for credit report checks is that they typically will run your credit report a second time, right before closing. So when you hear that your loan has been approved, don’t do anything foolish like go out and run up a lot of bills. Every action will show up on the credit report.
Many closings have been delayed or canceled because the lender has found out something new that changes the dynamics of the loan. Don’t allow your closing to be one of them.
“A turtle cannot move forward unless it sticks its head out” – anonymous
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:
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.
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.
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Copyright © 2011, RE/MAX, LLC. All rights reserved.