How Buyers Win as Jumbos Go Underwater

Owners of higher-priced homes are starting to succumb to the ongoing deterioration in real estate values. That’s an emerging opportunity for buyers and a pricing hot button for competing sellers.

According to HousingWire, homeowners who took out ‘jumbo’ loans – those too big to be purchased by government-backed mortgage financiers Fannie Mae and Freddie Mac – are defaulting at higher rates. By one measure, half of outstanding jumbo mortgage holders owe more than their houses are worth.  (Overall, 22% of mortgage holding homeowners owe more than their houses are worth.)

For buyers, this represents a chance to pay less for more.  In most markets, Fannie and Freddie will accept loans up to $417,000.  That’s the mortgage you’d take out if you are putting down about 21% on a house you want to buy for $500,000. Getting the mortgage amount at or below that $417,000 is a terrific negotiation tool: hey, it’s the government setting that arbitrary limit, not you!  (Usually you get better interest rates and fewer complications with a loan that complies with Fannie and Freddie rules.)  This is a tactic to use for a house with an asking price of $501,000 to $600,000, depending on local market conditions.

Photo credit: http2007

Hold the Champagne: The Foreclosure Figures Aren’t The Ones To Watch

That rushing sound you hear is the collective sigh of relief at the latest RealtyTrac numbers: foreclosures are easing…though keep that bottle corked, because there are plenty more distressed properties in the pipeline.

Still, as the housing market limps along, foreclosures are starting to change the context of homeownership valuation…and that means, how much your house is worth.

Here’s why.

Banks and investors are renting out millions of foreclosed houses. Rents deliver cash flow. And even if the investor or bank intends to eventually sell, renting out a house even for a minimal monthly charge, lets them postpone selling the house until home values are on the rise. With rentals so prevalent, and homes stuck in the sale pipeline, the new yardstick for measuring home value is linked to rent. Rents simply are a more accurate reflection of current market values.

That means that you can use current rental rates to estimate the market value of your house. Lucky for us, the feds have already done the heavy lifting on this one. The Consumer Price Index tracks rent trends; currently, rents are rising at a annual rate of 1.2% nationally. 

The CPI rent calculation is based on the “owners’ equivalent rent of primary residence.” That means, how much would it cost you to rent your own house? Track local rents via ads. When rents for homes equivalent to yours start to rise, you’ll know that home values in your neighborhood are stabilizing.

Image courtesy of Morguefile contributor gracey.

Seed Sales Now on Your Patio, Porch or Deck

As summer blazes on, you are well aware of how your outdoor living space is working for you. Minor changes that make decks, patios and porches more comfortable and convenient can translate to big selling points next spring.

• Consider the 'sitting skyline.' The most important view from your deck, patio or porch is the one you see from your favorite chair.  
• Would a screen or trellis shield you from an unpretty view? Adding one is an easy weekend project.  
• Experiment with clusters of planters, tables and chairs to determine the layout that lets you enjoy plants close up.  
• Can you arrange late-season planters for a pretty view from adjacent windows? Doing so helps you envision arrangements that will draw buyers' eyes to the patio, deck or porch from overlooking windows.  
• If railings, steps or thresholds are becoming wobbly, fix them immediately.

Built-in planters especially appeal to buyers who want handicapped-accessible outdoor space.  

• Built-ins enable people with limited mobility to garden, even if they can't navigate a yard.
• The vision-impaired can easily enjoy a sensory garden planted in built-ins adjacent to seating areas.

Built-in planters can simplify staging your deck or patio.
• It’s easy and quick to swap in blooming annuals so that your deck is always decorated with buyer-pleasing bouquets.
• With seasonal plants in the built-ins , you can clear away freestanding pots and accessories, making your deck or patio open and uncluttered.
• There won't be any confusion about which planters and accessories are included in the sale. Built-ins always stay.

Image courtesy of Morguefile contributor jade.

How To Help Buyers When Down is Up

Foreclosures grab the headlines, but they’re not the only reason why the housing market is stuttering. A recently released report from investment research outfit PIMCO outlined several often-overlooked factors hobbling the recovery of the real estate market:

• High and rising down payment requirements.  PIMCO calculates that the current 20% down payment threshold requires $39,667 for a median priced home. That $39,667 is twice the current national savings rate. Most buyers just don’t have enough for a down payment.
• First time buyers have too much debt. The average student debt for a bachelor’s degree is about $23,118…and starting salaries for recent college grads are down 10%, reports PIMCO, drawing from publicly available sources. The current generation of first-time buyers can’t save that 20% down payment because they’re earning less and already paying back a down payment’s worth of student loans.
• Retirees are likely to dramatically downsize their houses in sync with reduced retirement income.  Investment income is down and Social Security is threatened: many retirees can’t or won’t spend their golden years supporting a house. They’ll rent.

These trends are likely to reshape how Americans sell real estate. For the immediate, here are several  tactics for helping potential buyers. Align your interests with those of your buyer. Abandon the old ‘seller vs buyer’ mentality. Today, it’s about understanding the barriers that stand between your house becoming theirs.

• Throw in furnishings. Grills, patio furniture, lawn equipment, a snowblower,  kids’ play equipment, even area rugs, spell savings to cash-strapped buyers. Instead of reducing your price, bulk up the freebies, and estimate the amount of cash that won’t be coming out of your buyers’ pockets.
• Take your time. A buyer in hand is worth two in the web.  If an genuinely interested buyer needs time to assemble a down payment, can you wait? 
• Understand the complications of buying today, mortgage trends and the lending landscape in your area.

Photo courtesy of morguefile contributor mensatic

Dual Agency Forks Everyone

You know you’ve got a faulty business model when even your own industry thinks it’s exploitive, duplicitous and downright dishonest.

That’s what ‘dual agency’ does for (or against) home sellers, as outlined in trade publication Inman News.
‘Dual agency’ is the innocuous name for having your cake and eating it too: representing the listing homeowner and also representing the buyer.  Sweet for the agent, sour for the clients. The conflict of interest is clear and compelling. Listing agents know more about the house and the sellers’ motivations for selling than would any dedicated buyers’ agent, and the two-faced agent also has inside knowledge the buyers’ resources, motivation and determination. The whole point of dual agency is that one agent gets both sides of the transaction – the listing fee and the buyers’ fee. That’s why agents present dual agency as a mere technicality.

It’s not. With double commission in the offing, dual agency incents agents to pursue only buyers that they can represent.  If a buyer drops into their laps from an online listing – and 93% of buyers start househunting online – the dual-agency agent gets a double commission for practically no extra work.  And when cultivating potential buyers from the neighborhood and their networks, agents are much more motivated to primarily pursue buyers who agree to dual agency.

As noted in the Inman story, dual agency offers all upside for agents and all downside for clients. But what’s a little integrity when a commission is within reach?

Image courtesy of Morguefile contributor gracey.

Can You Sell On Your Own? Yes, If You Pass This Six-Point Test

Are you smart enough to hold on to your home equity?

That's what selling 'by owner' is all about. As outlined by Eddie Tyner, general manager of ForSaleByOwner.com, in an article just published by the Chicago Tribune columnist Mary Umberger, successful 'by owner' sellers have these characteristics:

• Enough Internet savvy for pricing and other research and marketing. 
• Realistic expectations about how long the process might take. 
• Works with a qualified appraiser to help determine an asking price and an attorney to cover the legal aspects. 
• Realistic view of changes and updates to the house that might be needed to make it appeal to the broadest pool of buyers and is willing to call in a professional stager if needed. 
• Maintains emotional distance from the house house. 
• Knows when problems have made the process too complex and it's time to call in a pro. 

Common sense?

  

Yes. That's the point. With all kinds of goods and services bought and sold every day via the web, most people already know how to sell their homes 'by owner.' When they pencil out what they get for their effort, it's worth it -- just like it is for millions of Ebay sellers, Etsy sellers, and Craigslist users. More complicated? Yes. Do-able? Yes. Worth it? Yes.

Oh, and just so you know: ForSaleByOwner.com is owned by Tribune Digital, which is owned by the same parent company of the Chicago Tribune.

From the Cheap Seats

Feeling frugal?

You’ve got plenty of company.

Fully half of Americans report that they have permanently changed their consumption habits, deliberately spending less across the board. That’s according to the First Command Financial Behaviors index, a consumer survey sponsored by First Command Financial Services.

Survey participants overwhelmingly predict a double-dip recession driven by high unemployment. About half also cited the weak housing market as a key factor to an impending economic slide. Families are counting on long-term frugality to weather the economic storm they see bearing down on them, according to the First Command researchers.

As frugality becomes ingrained, it is bound to blend with the rising popularity of doing it yourself, as reported in various remodeling and home improvement studies recently. It’s all converging to make DIY home selling and buying the common-sense route for real estate transactions. After all there’s nothing less frugal than a rich commission.

Image courtesy of Morguefile contributor cohdra.

Capitalist FSBO

Take it from the Capitalist Tool: Selling by owner is one of the smartest strategies in today’s real estate market.

The just-out issue of Forbes includes an extensive feature on the benefits of selling by owner.

Top advice from those who have successfully navigated this year’s market: say your good-byes and detach emotionally from your house. And, price it right.

"Fetching top dollar for your home requires you to do a lot of things well, and a big one is setting the right price. "Pricing is the one thing that people are most concerned about," says Tyner. "Get it right, and you can sell your house quickly and maximize what you get for it.""

We do disagree with one point in the Forbes story: that owners of very high end properties aren’t interested in selling direct. We’ve seen an increase in million-dollar-plus listings

Homeowners tell us that they’ve got property managers to show the houses and lawyers to negotiate for them. Why bother with an agent when they’ve already got staff ready and willing to handle the chores of selling? And, as Forbes well knows, many well off people get that way precisely because they closely manage their portfolios. They treat the sale of their house just as dispassionately and professionally as they do the sale of a business asset – and that means capturing a greater return by eliminating and unnecessary commission.

Shrinking Dollars for High End of Homes

House values continue to fall, so who cares if top loan limits drop accordingly?

Well, agents and homebuilders care. Right now, about $729,000 is the biggest mortgage that will ‘conform’ to the cookie-cutter standards for the secondary market (that’s be the Federal Housing Agency as well as the notorious Fannie Mae and Freddie Mac). The limit is scheduled to drop to $625,500 on October 1. It’s academic for most of the country, as the average value of houses is bumping along around $200,000 or so.

But agents and The National Association of Home Builders are upset on behalf  of homeowners in California, New York, Boston and other high-cost markets, because home values inevitably will drop along with the mortgage ceiling. As part of the lowered ceiling, FHA limits will erode a bit for about 20% of the country’s counties, which happen to include 59% of the owner-occupied houses. The NAHB figures that loan limits will set back about 14%, or, an average of $58,060 in those counties.

There’s no question that the mortgage market is in a shambles. Fallout for homeowners is ruthless and relentless. As loan limits start to realign with market realities, the silver lining could be that property valuations settle down, too. These days, it’s the process of getting a loan that’s likely to disintegrate, not the amount of the loan itself. Resetting the limits might shore up lenders’ perspectives long enough for them to approve loans instead of back away.

Image courtesy of Morguefile contributor alvimann.

Will Work for 2%

No, not milk: commission.

Last week, ForSaleByOwner.com's own general manager Eddie Tyner was on a panel about the relevance of the for-sale-by-owner business model, at the National Association of Real Estate Editors conference in San Antonio.

Also on the panel: Michael Crowley, representing the National Association of Exclusive Buyer Agents (NAEBA..sounds like 'neighbor,' get it?)

Inevitably, a question was raised by one of the journalists in the audience about whether or not agents shun by-owner listings. Tyner, of course, reiterated the point of view long espoused by ForSaleByOwner.com: that it's smart to offer a buyer's agent at least 2%, and only fair that buyers' agents be compensated for their work.

To which Crowley commented that buyers' agents actually had to do more work for their commission to get a by-owner listing over the finish line, as compared to getting a seller-represented listing to closing.

Really? With 93% of buyers culling online listings to zero in on the houses that fit their needs and budget? With agents confessing in other panels at the conference that online listings have all but wiped out the 'tour guide' aspect of their jobs? Really?

We recently heard from a ForSaleByOwner.com successful seller who offered a 2.5% buy-side commission. When buyers showed up, agent in tow, the agent thrust a document demanding a 3% commission at our customer even before the showing commenced. Wisely, our customer set the document aside and never signed it. And, even smarter, she read every line of the sale contract that the agent later presented, discovering that the agent again rewarded herself a 3% commission.

Guess what? That agent so bumbled the negotiations that her clients lost the house to a competing, full-price offer.

Lesson to buyers' agents: You'll get your commission. Make sure you actually earn it.

Hola, Housing Market!

The housing market is starting to take Hispanics’ preferences seriously. And that’s going to help millions of non-Hispanic American households, too, because it turns out that what Hispanics have wanted all along is converging with what non-Hispanics are starting to prefer.

Helped along by Hispanic priorities, municipal housing codes and builders’ assumptions are starting to consider the need for multigeneration housing. That can take the form of the traditional mother-in-law suite – a bed, bath, and sitting area, often with a tiny kitchen – carved out of a basement or added on. Hispanics have long preferred to accommodate grandparents in an adjacent suite that can also be used for a live-in nanny or household help. The same arrangement is perfect for adult children living with their parents.

But many municipal codes have banned such suites because the assumption has been for lower neighborhood density. Now, according to speakers at the annual conference of the National Association of Real Estate Editors, planners have reversed their position and are looking for ways to increase density, the better to support public services in established neighborhoods. In-law suites are the perfect solution, because they add little to the footprint, increase density incrementally, and enable households to expand their capacity with minimal impact on neighbors.

Other preferences of Hispanic households that are starting to be reflected in builders’ designs:

• Duplexes, which enable two generations to live side-by-side 
• Spacious front porches; Hispanics traditionally gather in the outdoor living space in front of the house, not on the back decks so beloved by traditional American suburbanites 
• Gas stoves, which are required for cooking tortillas  
• Open interior spaces – Hispanic demand will only strengthen this ongoing trend 

The country’s second-largest minority group is still acclimating to the American way of buying and selling real estate. As they become more of a force, their lifestyle will increasingly dictate the function of local housing policy and the form of those houses.

How You’d Spend a $1,000 Windfall….

There’s a little more time to enter the ForSaleByOwner.com ‘Is Your House Priced Right?” contest. We’ve extended the deadline until July 1 so you can tell us what you think your house is worth, and why.

So far, nearly 1200 folks have told us how they would spend a $1,000 home improvement gift card. (Tell us yourself!)

• 30.5% Maintenance – Fix the roof, clean the furnace, replace that sagging fence. If you’d spend a windfall $1,000 on maintenance, you’re in line with national norms; recent research indicates that most homeowners are keeping up with maintenance but postponing major remodels.
• 12.7% - Kitchen – The one room that can make a break a house sale. For $1,000, you can install a new sink and faucet or put in a new dishwasher.
• 11.9% - Bathroom – A grand gets you new lights, an upgraded medicine cabinet and some glass shelving. 11.2% - Energy efficiency – Whether you’re trying to keep cool air in or out, you don’t want drafts. You can get a lot of weatherstripping for $1,000 – or replace an exterior door.
• 7.6% - Patio furniture and grill – Not so many party animals among us, huh? With $1,000, you can get a decent quality gas grill, a sturdy picnic table and benches, and still have money left over for steak.
• 6.4% - Finishing an attic or basement. $1,000 will either get you started or give you a better-than-expected finish.
• 4.7% - Home office – Lighting and storage are the key elements here, and you get plenty of both for a grand.
• 4.3% - Paint and paper - $1,000 buys a LOT of paint. Like, enough for the whole house, inside or outside.
• 4.1% - Master bedroom – Closet organizing, decorating, rugs, accent pieces – it’s all good when it’s for your retreat.
• 2.3% - Play equipment for the kids – Aww! Only a few of you would splurge on a swingset!
• 1.9% - Crafting a creative studio – Patching together space for hobbies apparently isn’t a top priority for most ForSaleByOwner.com customers.

Top Five Questions About Selling Your House Now

Over 50 homeowners gathered at the Real Estate Realities seminar hosted by ForSaleByOwner.com in late May to find out how they can sell their houses and still keep their shirts. We figured that what they want to know, you might want to know, too, so here are the Top Five Audience Questions from the late May event.


ForSaleByOwner.com Business Manager Matt Brown fielded many of the questions, referring those requiring specialized expertise to the panel of financing, credit, staging and title professionals who comprised the panel. Got questions of your own? If you live in the Ft. Lauderdale area, you can bring yourself and your questions to the June 25 Real Estate Realities seminar.

1. What’s the best way to get exposure on the internet without paying a real estate agent?

It seems that pretty much everybody realizes that the best way to sell a house is to get it online – where it will be found by potential buyers. The fastest, simplest, cheapest way to sow a listing across the broad field of listing websites is through ForSaleByOwner.com’s Realtor.com listing service. Realtor.com listings are automatically sent to Zillow.com, Trulia, Yahoo! Real Estate and dozens of other websites. For $539, your listing can get onto Realtor.com through ForSaleByOwner.com.

2. Will my home renovations pay for themselves?

Maybe, maybe not, say appraisers. If your bathrooms and kitchen are badly outdated, a renovation might be necessary for you to sell the house. Today’s buyers simply don’t want to take on your postponed projects. You probably will not get back all the money you put in to a renovation, but you likely will shave weeks from the selling time, and your house will be chosen over unimproved neighbors.

3. If a buyer is going to get an appraisal, why should I pay for one, too?

An appraisal gives you the market value of the property so that you can set the price accordingly. Guessing at the market value is not a a strategy – it’s a stab in the dark. If you can’t back up your asking price with evidence of the worth of the house, then your buyer has the upper hand in negotiations. Arm yourself with an appraisal to set a reasonable, current, fact-based price that will be verified by the buyer’s appraisal.

4. Should I consult a stager before or after I get an appraisal?

While appraisers are trained to look past decorating to the core value of a house, the right staging can make it much easier for them to do so. Stage first so that your house is seen by the appraiser Just as it will be seen by buyers.

5. How do I get the attention of local buyers’ agents? Will they work with an owner?

For $689, you can get your house on the local multiple listing service, exactly where it will ‘be found’ by local buyers. Buyers’ agents can be wary of ‘by owner’ listings because they want to be reimbursed for working with their buyer. It’s fair – and smart – to offer a buyer’s commission. How much to offer depends on the strength of your market, explained Matt Brown, business manager for ForSaleByOwner.com. In a buyer’s market, you need to make sure buyer’s agents have enough incentive to bring your house to the attention of their buyers, so offer 2% to 3%. In a seller’s market, you can trim that back to 1% or 1.5%, because chances are that eager buyers will find your house regardless.

Got questions of your own? If you live in the Ft. Lauderdale area, you can bring yourself and your questions to the June 25 Real Estate Realities seminar.

Image courtesy of Morguefile contributor Alvimann.

Worse in Reverse

April home sale numbers were dismal.

The headliners were the 5% drop in median home values nationally (to $163,700) and that 37% of all home sales were either short sales or foreclosures. That’ll drag down prices.

Pricing misfires were equally responsible for driving down sales and values. According to the National Association of Realtors’ own numbers:

• 11% of agents had April sales canceled due to appraisals that did not support the negotiated price 
• An additional 10% of agents had sales delayed due to valuation headaches 
• 14% eventually renegotiated a lower sale price 

Now, wait a minute: Doesn’t this rather undermine agents’ constant claim to pricing expertise? Clearly, many of them are not setting asking prices that appraisers consider even in the ballpark. A seller might reasonably wonder exactly what expertise his commission covered.

Even if your agent seems to be in tune with local market trends, you still need to check her work. Use our new Pricing Guide.

As a back-up source of information to ensure that your agent is looking beyond the local multiple listing service to determine the correct pricing.

And if you’d put your home-value-estimating skills up against anybody else’s any time, prove it by entering our “Is Your Price Right?” contest.  You could be one of four winners of a $1,000 home improvement gift card and a free appraisal to see if you were able to outguess that local agent after all.

Image courtesy of Morguefile contributor jdurham.

Getting Unstuck from a Bad Mortgage

Relief might be in sight for those teetering on the edge of foreclosure. Regulators are closing in on a plan forcing lenders – and more importantly – their servicing arms – to adopt orderly and – dare we hope? – logical processes for working with folks who can’t afford their houses any more.

As reported by our sister publication, the Federal Housing Finance Agency announced last week that servicers will be required to contact homeowners earlier, more often and to actually make decisions…or else.

The hoped-for outcome: that homeowners won’t be stuck having two contradictory conversations at once with their lender – one conversation about walking away from the house and the other promising to work things out so the homeowner can keep the house.

Here’s the official quote:

"The updated guidelines ... address the so-called 'dual track' by requiring servicers to contact borrowers as soon as they become delinquent and focus solely on remediating that delinquency," the agency said. "The foreclosure process may not commence if the borrower and servicer are engaged in a good-faith effort to resolve the delinquency. The servicer must conduct a formal review of each case to ensure a borrower has been considered for foreclosure alternatives before the loan is referred for foreclosure. Even after foreclosure processing begins, financial incentives are provided to encourage servicers to continue to help borrowers pursue a foreclosure alternative."

What does this mean for you? If you have little to no equity, and you need to sell, it might be worthwhile to wait for a few weeks. Then, choose a low-transaction-cost sales channel (yes, like selling by owner!) and you might be able to squeak out with minimal additional financial damage.

Image courtesy of Morguefile contributor jdurham.

How to Snag A Buyer

It’s not pretty out there. And it’s not just us: A recent story in the Wall St. Journal outlined the woes facing buyers:

• Buyers factor in the slide in value they figure they’ll have to absorb in the next few months
• New houses just coming on the market are smaller and less fancy, priced to compete with existing houses – especially bigger, amenity-rich houses built in the last decade. That sets up sellers of existing houses for a no-win scenario competing with builders.
• Even well-qualified buyers can see deals crumble as lending standards change daily.

Of course, we at ForSaleByOwner take the position that trimming out the listing agent’s commission helps sellers price more competitively. But smart negotiating can help you catch and keep a deal, too.

Qualify potential buyers. Househunting is not a tourist activity. Don’t fall into the trap of showing the house to anybody who is interested. Ask up front if the buyer is prequalified for a loan…and when that prequalification occurred. Otherwise, you are wasting your time with folks who are just killing time. Don’t let them kill yours.

Prove that your house is not a money pit. Provide evidence of recent improvements and maintenance, right down to the new furnace filters. When buyers see that they won’t have to fork out cash for tedious home tasks, you have ammo for sticking to your guns.

Save personal property as a negotiating chip. The lawnmower, snowblower, hoses, garden equipment, hammock, picnic table, Christmas lights – all that stuff is probably not worth moving anyway. Award it to the buyer as a hard-won concession that preserves your sale price.

Be flexible on the move-out date. Even if you have to pull an all-nighter to pack, this is one of the easiest ways to support your asking price.

And of course, don’t forget to check the ForSaleByOwner.com Pricing Guide, which equips you with economic sources for tracking trends in your neighborhood. If your neighborhood has held its values, you can build your case using the Pricing Guide – and won’t your neighbors be glad you did!

What Is Your Neighbor's House Worth?

Worried about what your house is worth?

Your neighbors are too. The Rasmussen polling outfit just released the latest homeownership confidence stats: barely half of Americans – 52% -- are confident that they are above water on their mortgages. (That means, that the house is worth more than the loan.)

Two-thirds of those who bought during the bubble – three to five years ago – figure they are underwater. (That means that they owe more on the mortgage than the house is worth.)

Yikes.

As spring emerges and we finally get to stroll our neighborhoods, it’s too tempting to note which houses are for sale and how much those homeowners want. Then, we draw our own conclusions – good, bad and depressing.

Only an appraiser knows for sure what your house is worth. Wouldn’t it be great to read an appraiser’s mind?

You can! Well, vicariously. Check out  the latest article in our Education section, which walks through a house with an appraiser. Then review the tips from experienced appraiser Sharon Bagby. At the very least, you’ll get some perspective on the likely value of your house. And at the very best, you might – just might – be pleasantly surprised.

Image courtesy of Morguefile contributor Dave.

Taxing Matters

Feeling taxed?

Aren’t we all.  By the time those tax returns are done,  we’ve had more than enough of receipts, forms and math.

But don’t chuck all that paper into a boot box and throw it back into your file cabinet. While you’ve got the IRS on your mind,  take a step back and think about your real estate goals for the next 12 months.

• If you’ll be counting on the still-available mortgage interest deduction to get you into a new house or a vacation home, it’s essential to review the IRS guidelines for the deduction.
• Can you capture a thousand dollars or more by claiming the home office deduction? It’s a clear cut case if you are self-employed and have a dedicated space. You still might be able to get the deduction if you telecommute, but check the IRS guidelines first. The last thing you want do is convert precious space to an office only to find out that the IRS doesn’t think you do enough work in it to let you write off the cost of setting it up.
• If you are counting on the  mortgage deduction to make a home purchase affordable, be sure you understand some of the little-known tax implications. These days, seller financing is popular, but be sure the deal you strike squares with mortgage deduction fine print.

Image courtesy of Morguefile contributor Dr. Bob.

New Lending Policies Are Like Dandelions

The spring selling season is trying – really trying hard – to get going. But lending complications are sprouting already, rather like dandelions crowding out the first spring daffodils.

Did you know that you get socked with an interest penalty simply for paying off your FHA (Federal Housing Administration) loan when you sell?

And did you know that the Feds are moving rather rapidly to require a 20% down payment to get the best mortgage rates? The same proposal also caps the debt-to-income ratio at 28%, and totally monthly household debt of only 36%.

(We gleaned these showstopping developments from stories just published at the websites of the Los Angeles Times and the Hartford Courant, which are, like ForSaleByOwner.com, owned by Tribune Corp.)

Both policies will derail home sales this spring. With equity shrunk and shrinking, sellers need every scrap to roll over to their next home purchase. (See the new ForSaleByOwner.com pricing guide for more about home value trends.)  And what’s the point of the 20% down payment threshold to capture the best mortgage rate? Gauging your ability to pay back the loan is the entire point of credit scores. Sure, a higher downpayment means you have more skin in the game. But it’s downright punitive to link it to lower mortgage rates.

Image courtesy of Morguefile contributor haligi.

Why Inspections Can Ratchet Down Your Sale Price

You’re selling your house. You’ve got an offer. But here comes the inspector. Is your deal dead?

Probably not. But you’ll probably have to adjust your price.

Inspectors aren’t supposed to worry about the economic consequences of their decisions. They find what they find. But even if your buyer is not a bottom-feeder pushing for the absolute lowest price, you will probably end up offering a concession or two.

It’s not about the house. It’s not about the buyer’s attitude. It’s about the buyer’s economic realities. As we explain in our new Pricing Guide, buyers are being pushed by lenders to look at all their monthly financial obligations, not just the mortgage payment.

Commuting costs are now a consideration, especially with the volatile price of gas. Homeowners’ association dues aren’t the minor consideration they used to be – especially when some associations have to cover for delinquent members. Utility costs have been steadily rising.

And lenders want to see that the buyers have some emergency money in the bank. Nobody wants to the buyers to blow through their emergency fund fixing a longstanding problem.

We know it’s hard to sympathize with buyers, who seem to wander in a paradise of bargains. But, sellers, just know that when the inspector’s report takes $1,000 or more from your pocket, that the buyers aren’t the villains.

Image courtesy of Morguefile contributor alvimann.