3 Questions for the Agent on Your Sofa

Real estate agents aren’t shy about defending their commissions. But even within the industry, agents debate questionable policies and practices that confuse consumers.

Have you run across any of these agent claims? Check out Tough Questions for Agents to sort truth from agent fiction.

• “I have a buyer who’s perfect for your house, but you’ll need to list with me before I bring them by.”  
• “I am happy to work with you to sell your house! Just sign this standard contract and we’ll get going.”  
• “You don’t want to be bothered with all those calls about your house. Let me sort them out and bring you only the serious buyers.”

Buyers Love to Walk This Way

This week’s blogs are chock-full of ways to translate what buyers love into strategies for selling your home this spring. And you can read more at ForSaleByOwner.com.

Walkable communities are a huge draw, but it’s almost as good to live in a location that minimizes the amount of time it takes to accomplish daily errands. According to a survey for CEO’s for Cities, buyers will pay more for houses within easy walking distance of neighborhood business districts and public transit. Easy driving access to daily amenities, schools, and work had a similar effect.

Create a map for your sales package that shows walking, public transit and easy driving routes from your house to schools, coffee houses, movie theaters, parks, grocery stores and dry cleaners. This encourages buyers to see for themselves that everyday living is easy in your house.

Check the WalkScore of your house, and include that description in your listing.

Image courtesy of Morguefile contributor Taliesin.

The Top 5 Things Buyers Love

This week’s blogs are chock-full of ways to translate what buyers love into strategies for selling your home this spring. And you can read more at ForSaleByOwner.com. 

Here are the top five things potential buyers want in a brand-new house, according to a recent survey by trade publisher Hanley Wood: 

• Everything is new
• Less maintenance
• More energy-efficient
• Opportunity to customize
• Contemporary floor plan

And here are the top five things potential buyers like about existing homes:

• More affordable 
• Established community 
• Opportunity to remodel 
• Character 
• Better neighborhood 

Now you know what to emphasize in your listing, whether you are selling a new house or an existing house. Visit ForSaleByOwner.com for more ideas on fine-tuning your marketing plan for today’s sellers.

Image courtesy of Morguefile contributor Taliesin.

“That’s what we’re looking for!”

Isn’t this the reaction you are hoping potential buyers will have when they see your listing? As you get ready for market, here’s how to prep for a positive reaction. This week’s blogs are chock-full of ways to translate what buyers love into strategies for selling your home this spring. And you can read more at ForSaleByOwner.com.

Here are the top five reasons why renters want to buy, according to a recent survey conducted by trade publisher Hanley Wood:

• 66% - would rather build equity than pay rent 
• 50% - homeowner is a better long term investment 
• 35% - want to own where they live 
• 34% - acquire an asset they can leave to their children 
• 32% - want the tax deduction 

Clearly, buyers who are currently renting are more interested in the long-term financial benefits of owning rather than the immediate tax gains. In fact, the same survey found that only 23% of buyers who are currently renting considered the future erosion of home values as a barrier to buying.

Selling tip:

Emphasize the long-term benefits of your house – recent improvements that will minimize expenses for the forseeable future, for example, or the stable home values in your neighborhood.

Image courtesy of Morguefile contributor Taliesin.

“Open House” to Closing: Set Up Your Sale for a Successful Close: Part 3

Getting ready to sell this spring? These days, as many as a third of all deals falling apart before closing. This week we’re reviewing the steps you can take to set up your home sale from the beginning for a successful closing. This is the final installment in this series; scroll back in the blog to read the prior entries.

Yesterday’s post was about setting an asking price that would hold up to scrutiny by the lender’s appraiser. But what if the problem is with the buyer?

Buyers may think they qualify for the mortgage they need to buy your house. They might even have a prequalification or preapproval (here’s the difference).

But if the buyer has been sloppy with managing his credit, or if his income has been erratic, that preapproval might not translate to a loan. A lot can happen between when a buyer starts househunting and when that buyer makes a firm offer.

Secondly, your buyer might have less equity than expected from the sale of her first house. If she bought within the last decade, and used a full-commission agent to sell her house, she might not have any equity at all. If so, she has to rely on savings for the down payment to buy your house. And if she comes up short, the lender will let the deal die.

Don’t waste time with a buyer who isn’t qualified.

• Insist on proof of current mortgage preapproval before you start negotiating. Don’t take the buyers’ agent’s word for it. Require written proof.  
• Insist on a substantial amount of earnest money – at least $5,000. If the buyer doesn’t have it, he may not have enough to support the loan, either.  
• Continue to market the house even while you are negotiating and under contract. Knowing that you have a backup offer in the works can motivate your first buyer to do anything it takes to get the deal over the line.

Image courtesy of Morguefile contributor dubois.

“Open House” to Closing: Set Up Your Sale for a Successful Close: Part 2

Getting ready to sell this spring? These days, as many as a third of all deals falling apart before closing. This week we’re reviewing the steps you can take to set up your home sale from the beginning for a successful closing.

Appraisers are not amused.

Real estate agents continue to blame them for deals that fall apart. Why’s that? Because the buyer and seller strike a deal, but then the selling price has to be supported by an appraisal from a licensed appraiser. And a licensed appraiser looks at all the sales for that neighborhood. Often included in the appraisal are properties sold as short sales or foreclosures – always at a lower price than non-distressed sales. So the average price goes down, and suddenly the house under contract looks overpriced. The lender won’t make a loan for the sale price, so the buyer’s offer is no good.

Agents like to blame appraisers, but it’s really up to the agents to set a reasonable asking price to begin with, based on a comprehensive survey of recently sold properties that are similar to the house about to be sold. But agents traditionally rely on a free ‘comparative market analysis” to win a listing. The CMA is usually based only on what the agent can quickly and easily pull from the local multiple listing service. And the local MLS doesn’t include many short sales and foreclosures because these days, banks are selling groups of such properties directly to investors. Ergo: the comparative market analysis isn’t a good pricing tool. But agents keep CMA’s, keep setting up their clients for disappointment by asking too much based on faulty research – and then blame appraisers.

If you are thinking about selling in this contradictory market, you must replicate the appraiser’s process and set your price accordingly. You have several options:

• Commission a formal appraisal. It’s about $400. But it could be the smartest $400 you’ll ever spend, because the price that comes back is the price that will likely be accepted by your buyer’s lender. And it’s hard to argue with a current appraisal in negotiations. An appraisal lets you set your price and stick with it.  
• Do your own research on your local home market. We show you how at ForSaleByOwner.com.  
• You can figure out which houses have recently sold as foreclosures or short sales by looking at who bought or sold the house in public records of recent sales. If a seller is a bank, chances are that the property was bank-owned, via foreclosure or short sale.  

Tune in tomorrow for Part 3 – how to mitigate two other common factors of deals that disintegrate.

Image courtesy of Morguefile contributor dubois.

“Open House” to Closing: Set Up Your Sale for a Successful Close: Part 1

Getting ready to sell this spring? These days, as many as a third of all deals falling apart before closing. This week we’re reviewing the steps you can take to set up your home sale from the beginning for a successful closing.

At the end of 2010, real estate agents reported that about 9% of their deals disintegrated before closing. Now, that is up to a third, according to the National Association of Realtors. Industry analysts point to a host of factors that converge to derail seemingly solid deals off the tracks.

• Appraisals often come in lower than expected – mainly because they count in foreclosures in the ‘comparables.’ This has set up a feud between real estate agents – who think that what a buyer is willing to pay is the only validation of market value that a lender should need – and appraisers, who maintain that their trustworthiness depends on doing a thorough job that mirrors market realities.  
• Buyers don’t qualify after all. Household debt is starting to edge up again. Unemployment is down, but employment isn’t necessarily up. A buyer might make an offer in good faith, then be hit with hard economic circumstances that make closing impossible.  
• Buyers don’t have the equity they need from their own homes. Anyone who bought in the past seven years doesn’t have much, if any, equity in their homes. They just don’t have enough to overcome financing hurdles that have cropped up since they purchased their homes.

The rules of the game have changed. Keep reading this week to learn how you can craft a selling plan that turns these circumstances to your advantage – and that keep your home sale on track from open house to closed deal.

Image courtesy of Morguefile contributor dubois.

Why a Flat Market Is Good for Buyers

Nationally, home prices dropped by not quite 1% last year.

Did we get that wrong?

Nope. That’s the figure for non-distressed sales – that is, ‘normal’ sales unaffected by foreclosures and short sales, according to mortgage number cruncher CoreLogic. Prices were down only by 0.9% for non-distressed sales, but dropped a scarier 4.7% for all properties, with distress sales factored in.

That the real estate market is scraping along is actually good news, reports Mary Umberger in the Chicago Tribune. She interviewed a prescient economist who predicted the housing bust. Now, he’s saying that things are looking up.

Here’s what Christopher Thornberg told her:

“A couple of years ago, I was saying that we were still in the bubble, don't buy. But now I've been saying, if you need a house — if you recognize that a house is a consumption good and not an investment opportunity, you should consider buying. With interest rates continuing to come down and with prices that have sagged, in some markets — particularly Florida, Arizona and Nevada — affordability is at record levels. But it has to be a long-term hold — you have to be in long term.”

His position: if you aren’t counting on your house to be an investment, but you simply want to recoup what you’ve put into it, today’s low prices combined with today’s low mortgage rates make today a pretty good time to buy.

Groundhog Day for Parents? How to Handle a Kid’s Request for a Down Payment

Parents supporting adult kids is a hot topic these days, even though it’s largely based on anecdotal evidence.

 

It’s certainly true that millennials and Gen Xer’s are stuck with more student debt than ever. And millennials have an uphill start to their careers, especially those who graduated during the recession. But there are plenty of caveats to consider before writing a check to help your adult child buy a house.  

• Put your retirement needs first. Your kids have time to save for what they want. You are closer to retirement than they are, and you don’t have as much time to save for that as they do for their house purchase. Don’t derail your retirement savings.  
• Asked to be a banker? Then think like a banker. That means reviewing your child’s credit history and ability to repay a loan. ForSaleByOwner.com’s credit articles show how to correct credit missteps and accelerate savings for a home purchase down payment.  
• Don’t co-sign. If your child defaults, you are on the hook for the entire debt. Don’t want two mortgages? Then don’t put your name on two sets of mortgage documents.  
• Get creative. How can you help your child achiever her homeownership goals without setting yourself back financially? Consider letting your child live with you, paying monthly rent directly into a savings account. Can you carry your child on your own health insurance policy, enabling your child to save that much more for the down payment? Can your child take on a part-time job to pay down debts and save up the down payment – and you assist by providing laundry and meals?  

 

Image courtesy of Morguefile contributor Penywise

 

Whose Side Is Your Agent On?

We've said it before, and we'll say it again: it's not always obvious who your real estate agent is working for.

As outlined in this Chicago Tribune article, 'dual agency' is what you call it when one agent represents both the buyer and the seller.

Wait! Isn't that a conflict of interest?

Why, yes, it is. Which is why many states require agents to 'splain themselves if they are trying to persuade a client to accept dual agency. But many agents don't explain it well or at all. Why bother? The fines for violating dual agency are way less than the double commission they collect, one from each side.

The Tribune column clearly outlines the types of pretzel-like relationships that agents can try to get you to agree to. The most important point: know exactly what you are getting into. And who's making money from your home equity.

What the NAR Doesn't Get About FSBO's

This week’s topic is the NAR data correction.

The NAR counts any agent involvement in a sale as an agent-assisted sale – even when a by-owner seller simply uses an agent to get a listing onto the local multiple listing service, and identifies as a by-owner seller.

In fact, the NAR's own 2011 Profile of Home Buyers & Sellers proves that alternative agencies are making significant inroads:

• 25% of sellers list with agents that "list the home on the MLS and perform few is any additional services" -- precisely the model offered by ForSaleByOwner.com

• 30% of sellers list with limited-service agents

• 24% of sellers list with full-service, traditional agents

With the proliferation of real estate services, it’s easy to see how even an expert like the National Association of Realtors could get confused. So here’s a quick rundown of the spectrum of real estate services offered by agents, from full-commission to by-owner.

Full commission – Usually, agents charge 5% to 6% to list a home. The listing agent (who represents the seller) collects half of that, splitting that half between the agent herself and her broker. That means that the agent who sold the house only nets 1.5% of the 6% commission. The same happens for the agent who represents the buyer in the sale. The home seller’s 6% fee pays both agents and their brokers. That’s why buyers don’t have to pay to have an agent represent them.

Discount fee – Smaller commission, smaller service. Discount agents sometimes offer a set basket of services for a reduced commission, or sometimes offer a pick-and-choose array of services. Either way, be sure you know what you are getting for the money.

Flat fee – Instead of a commission, a flat fee agent charges a single fee – usually from $1,000 to $4,000 – and expects you to do some of the work to offset the lower cost.

‘By owner,’ listed on Realtor.com and local multiple listing service. ForSaleByOwner.com works with cooperating agents around the country to publish its customers’ listings on local multiple listing services and at Realtor.com. Owners create their own listings with digital photos; market their houses; and by offering a 1.5% or 2% buyer’s commission, can win the interest of buyer’s agents. These homeowners count themselves as selling 'by owner,' even if the NAR doesn't.

5 Killer Sources for Figuring What Your House is Worth

This week we’re taking a look at the National Association of Realtors’ sweeping statistical correction. If you can’t trust the NAR’s statistics on home sales, who can you trust?

Plenty of folks.

• First, mortgage market giants Fannie Mae and Freddie Mac spin off bushels of statistics from their mortgage databases. They even offer a handy home-price calculator by metropolitan market (more than 300 of ‘em!) so you can see how your home value has changed. (This provides a useful tool for pricing your home and defending that price with appraisers and to buyers when negotiating.)  
• Second, mortgage-processing giant FNC also lists home-price data.  
• The Case-Shiller index tracks the monthly change in home values for 20 major metro areas.  
• Local property records – available through your county recorder of deeds or property records office – contain nuggest of data about what neighboring houses sold for, that provide context for the value of your own home. In fact, some real estate economists recommended that property records become the NAR’s ongoing source for its data.  
• It’s smart to take even local agent-generated results with a grain of salt. Last summer, an Illinois multiple listing service was caught with sloppy numbers.

Your best bet: rely on numbers from government and industry analyst sources. Key links are in the ForSaleByOwner.com Pricing Guide.