Costs involved in Selling a Home

When you are ready to sell and talking with a REALTOR about listing the house, s/he should include the estimated cost involved in selling at the listing appointment. What I typically do is provide a breakdown at 3 or 4 different price points from projected sale price to worst case scenario. To date, my sellers have never been confronted with a worst case scenario net, but I believe it’s important to include that information up front since we should all work towards the best while being prepared for the worst.

Knowing these costs up front helps in preventing any surprises down the line. Real estate transactions are delicate matters. Scenarios can change from day to day based on inspection results, appraisal results, buyer financing, lender productivity and more. Eliminating surprises should be a priority for an experienced agent. Surprises in day to day life can be exciting and fun. Surprises in real estate transactions typically are not.

Educating a seller on the costs to sell up front is one of the steps I take to eliminate surprise. Imagine going through the process of selling and reviewing the settlement statement (HUD) 30-45 days after entering into a contract and learning you are walking away with less than you anticipated. That’s not a fun surprise by any means. That is why it is important to know these numbers at the time of listing.

Since I believe knowledge is power and in educating sellers and buyers, I am going to share these costs with you.

Cost to sell a home in Central Florida are as follows:

Real Estate Commission this is what you and your agent agree upon. The commission is typically shared evenly between the listing brokerage and the selling/buyer’s brokerage.

Documentary stamps on the deed. This seller cost is based on the sales price. It is calculated at 70 cents per one hundred dollars. Example: Sale price of $250,000 = $1750 in doc stamps on the deed. (250000 x .007)

Taxes are pro-rated. (If your taxes and insurance are escrowed into your mortgage, those escrows will be returned to you by your lender once the mortgage is paid (satisfied) – typically 45-60 days after closing.) In Florida, taxes are paid in arrears. Tax bills for the current year come due in November of that same year. At closing the taxes are pro-rated to reflect this; a seller will give the buyer a credit towards taxes for the number of days the seller had ownership in the house. Example – 2015 taxes total $1800. Property sells on May 1, 2015. Tax bill comes due on November 2015. Seller gives buyer a credit of $600 for January-April 2015. Buyer pays the entire tax bill when it comes due.

Owner Title Insurance and fees are also a cost in the transaction. In this region, the seller pays for and conveys clear title to the buyer. The cost of insurance is based on the sale price of the property. If a seller is selling a home that was owned for 3 years or less, a re-issuance credit may be available. The chart below shows title insurance fees without any credit being given.

Courtesy Metes & Bounds Title Co.
Courtesy Metes & Bounds Title Co.

Title fees vary from company to company and include costs for title search, lien search, recording fees, government fees and the settlement fee.  As a rule of thumb, I quote $725 for title fees.

Home Owner Association (HOA) dues is another item that is pro-rated. In order for the dues to be properly pro-rated, the title company must order an estoppel letter from the HOA. The estoppel letter shows what the seller has paid for HOA dues to date, any outstanding balance or fines, etc. HOA’s charge for this estoppel. These charges vary and generally run between $50-$500. I have seen them to be $150 on average.

And those are the standard costs of selling a home.

Simplified it is as follows:

$250,000 Sale Price
Commission                                                                       $X
Taxes $1800/yr (pro-rated: estimated closing 5/1/15)   $600
Doc stamps on deed (.70 per $100)                               $1750
Title Fees ($725) & Insurance ($1325)                           $2050
Cost to sell                                                             $4400 plus X***

***HOA estoppel fees (cost for payoff from HOA to title co.) generally run between $50-$500. I have seen them to be $150 on average. This cost has not been included in the cost to sell calculated above as the exact amount of the estoppel fee for your HOA is not known.

Calculating the cost to sell is not especially tricky. As I mentioned previously, any agent you interview should have these numbers available and should be providing these figures to you at the initial meeting. If s/he is not, then you are not getting the full picture. Hopefully, I have made these costs clear and easy to calculate. If you have any questions regarding the cost to sell, feel free to get in touch with me. I’d be glad to assist in any way I can.

Home Buyers: How to Win in a Multiple Offer Situation.

It’s a great time to buy real estate — really.  I know the real estate world was touting that line in their marketing campaigns a couple year back as prices were plummeting and tax credits were being offered to first time home buyers.  I didn’t really buy into it then.  I truly believe it is a great time to buy now.  I’m confident we have seen the bottom of the real estate market and are well into the beginning stage of recovery.

It’s ideal to buy as prices are going up, and with interest rates hanging in the 3s, now is a great time to grab a piece of the pie.market on fire

There are challenges in purchasing in today’s market.  With inventory low and demand high, multiple offers are common place – especially in the Orlando area market.  On top of that, cash is king and as of late nearly half of all real estate sales were cash deals

What does that mean for the average buyer, dependent on financing, and ready to buy?  It means be ready to act, swiftly and with precision.  It means stay positive and keep in mind that everything happens for a reason. It is possible for a first time buyer to beat out the hedge funds, investors and others with deep pockets.  It may take a little more time and the possibility of being out bid a couple of times before securing a home exist.  (This is where staying positive and knowing everything happens for a reason comes into play.  If the winning bid wasn’t yours, then there is a reason that house was not meant to be.  I am a strong believer in this and have seen this theory proven first hand time and again.)

I have had a number of buyers beat out cash offers – strong cash offers.  It is being done, and I am about to tell you how.

First and foremost, make your first offer your strongest offer.  Agents are not required to Lisa Jones Sale Pending Orlando-001disclose whether a property has multiple offers on it.  Don’t assume yours is the only offer, and don’t assume you will be given an opportunity to negotiate.  It’s quite possible you will not be given the chance.

Often times I have seen buyers disappointed that their offer was not the winning offer.  I have heard the phrases, “I should have gone up $5000” more times than I would like to count.  Honestly, $5000 in the grand scheme of things will not make a whole lot of difference in a mortgage payment (maybe $20- $30).  It could make the difference between an offer being accepted or rejected.  Knowing you gave your all should provide comfort if your bid is not the winning bid.  This was you know you gave your best and don’t keep yourself awake at night wondering “what if” or “would’ve should’ve could’ve.”

Strongest offers also include things like strong escrow.  Your good faith deposit needs to be attractive.  (1-2% of the purchase price is customary in the Orlando area market).  Putting $500 or $1000 down on a $100,000 purchase does not say “I am a serious buyer” to a seller.  Putting $3000-$5000 down speaks a little louder.  (Keep in mind this good faith deposit, your escrow, will be applied to your down payment and closing costs.  It is all going towards your cost to purchase anyway.)

Strongest offers also include things like reasonable closing times.  If the house is vacant, the seller will likely want to close as soon as possible.  If it is a short sale, you have a better chance of the offer being accepted if you agree to wait for short sale approval for an extended period of time, say 100-120 days instead of the customary 60-90.  If the house is occupied and it is a traditional sale, try to find out how much time the seller would like to close.  If you aren’t able but notice there is a lot of stuff in the house, giving 60 days to close 16019 arrowheadcould make the difference since the idea of packing up an entire household in 15-30 days could be a little nerve racking for a seller.  Not everyone likes the idea of a quick close.  Tailor your closing date accordingly.

Strongest offers also include few contingencies or short contingency time lines.  When writing an offer, the less you ask for, the more attractive your offer is.  Get inspections out of the way in 7-10 days.  Do not ask for a Home Warranty just because you can.  Do not ask for the seller to contribute to your closing costs if you don’t need the help.  If you do need the help, don’t ask for more than is necessary.   Keep it simple, keep it clean.

Another way for buyers needing financing to find success in today’s market is to seek out homes where owner-occupants have the first right to purchase.  Being able to cut a big chunk of the competition out of the game is definitely a plus.  Homes with First Look Initiatives and Neighborhood Stabilization Programs (NSP) give owner-occupants (not investors) the first right to purchase within a certain time frame – usually the first week or 2 the property is on the market.  Often times, these homes are in good shape and move in ready.  Granted there will likely still be competition; not nearly as much at there would be if investors were able to bid.

Lisa Jones Realtor at Keller Williams Sells HomesLastly, be prepared to pay a little more than market value.  I would never counsel a client to pay an outrageous amount over market value.  Sometimes the need arises to pay a couple/few thousand more than appraised value.  If you love the house and have the ability to do it, do it.  Often times paying a little more now is worth the time and expense of having to start all over again in the home search (including paying for home inspections and appraisal.)

Allow yourself some wiggle room as well.  If you are qualified up to $150,000, you may want to limit your search to properties up to $130,000 to start.  This could give you the cushion you need to have a little more offering power.

In conclusion, multiple offers can be challenging.  Patience is required.  Having the ability to act fast when the right home is found is crucial.   He who hesitates often times loses in this market.  Be ready to act.  Get qualified with a lender before you look at houses.  Know your budget, keep it in mind.  Do not stretch yourself beyond your limits but be prepared to stretch for the right house.

Forget Renting — It’s Cheaper to Buy, and you don’t have to have golden credit to do it.

ImageIt is still cheaper to own than rent in most of our markets right now.  According to Trulia, it is 51% cheaper to own than rent in the Orlando marketplace.  

Keep in mind, with an FHA mortgage buyers can purchase with as little as 3.5% down.  A 640 minimum credit score required…and folks that were foreclosed on may qualify to purchase FHA in as little as 2 years after the foreclosure date.

Sale prices are on the rise, and demand is steady….Although people can speculate and forecast all they want, there is no real knowing how long this will all last.  Been on the fence?  It truly is time to jump off and buy.  Like they say, get while the getting is good. 

 

 

 

Financial Reporting & Forecasting Firm Kiplinger says Housing Recovery is “firmly” Underway

The market sure is rebounding. We have seen steady and consistent growth in our Orlando marketplace for about 2 years now.  In the article, Kiplinger states “the turnaround will probably be slower in metro areas in Florida….”  I’m not quite sure the folks at Kiplinger hit the mark with that comment.  I first noticed the inventory beginning to dwindle in the Summer of 2011.  Since then prices have been increasing steadily and demand has grown exponentially.  Real estate is local.  In fact real estate is hyper local; so much so that improvement in values in the Orlando market varies from city to city – even neighborhood to neighborhood.  Because of this we have seen values improve at rates between 3-11% over last year (Again, depending on the area/marketplace.)

I do agree with the statement by Karen Mracek, a Kiplinger editor and real estate analyst, that “the rise in home values and decline in inventories won’t maintain their current pace.”  We are riding one of the waves of recovery (I am sure there will be several).  Sooner or later the currents will dwindle and we will find normalcy – which in our market is a growth rate of about 3% per year (pretty healthy.)

Read the full article here:

Kiplinger: Housing Recovery Firmly Underway

Selling Season in Florida.

Huffington Post posted an article about peak seasons for house hunters throughout the US.  Clermont, FL on a sunny day in JanuaryAccording to the article, buyers’ online search for homes in Florida peaks in January & February.  Makes sense since a lot of the country is tucked in their homes for the Winter and day dreaming of warmer climates.  Having lived in Rhode Island for 30 years, I remember the days well – sometimes even fondly. 

What I have found as a Realtor selling in the Orlando area is that the buying season in Florida never ends.  We do find more snowbirds (people who live in FL during the Fall & Winter and go back North for the Spring and Summer) purchasing in the Winter months, but ultimately the sales season in Florida never ends. 

Lake Minneola from Palisades Country Club in Clermont, FLThe climate and desire to relocate to the area assures us a steady selling season.  There is never a bad time to list in Florida.  Buyer traffic is steady and diverse.  Our markets include primary home owners, second home owners, investors – rental and flip, vacation homeowners, etc.  About 1/3 of all transactions are cash and we have a melting pot of domestic and foreign buyers; the bulk of which hailing from Canada, Brazil, the UK & China currently.

The Truth About Bargain Short Sale List Prices

great price riderI saw a short sale listing come on the market this morning for about 20% under market value.  It’s only the gazillionth time I’ve seen this happen.  Is this list price too good to be true?  Probably, especially since a call to the listing agent ended with him stating the property will probably sell for “way more than list price.”  So why did the agent list                                                                                        the house so low below market value?

The main reason some agents take this route is to to fetch an offer quickly so that it can be submitted to the sellers’ lender to find out what list price the bank would be more likely to accept.  Do I agree with this approach of taking and marketing a short sale listing (or any listing for that matter) with a list price that is grossly under value?  Absolutely, positively not.  Here’s why.

First and foremost, short sale lenders have learned some lessons since the real estate  bubble burst.  When the market first crashed, buyers could and did get fantastic deals on properties which contributed to the rapid decline in values.  Banks have since learned that they pretty much control the market.  Short sales where the sellers’ lender will take considerably lower than market value are few and far between.  Tell me, would you sell your house for less than market value if you didn’t have to?  Of course not.  Why would a bank  act any differently.  The won’t and they don’t – not anymore.  All sellers want the most money they can possibly get for a home.  Period.

As a seller, the short sale process can be tedious.  Tax returns, bank statements, pay stubs, and other financial filings will need to be reviewed by the seller.  The bank will want to know how much money is spent each month on everything from groceries, dining out, clothes shopping, car payments, utility bills and the like.  Banks dig deep, and they will know a seller’s budget and financial holdings inside and out.  This process can take some time since short sale processors are likely working on over 100 files at any one given time. This means delays in reviewing files and  requests to sellers for updated paperwork because the paperwork submitted 60 days previously has expired.  This can very frustrating and time consuming.

Once the bank has all of the paperwork required from the seller, the bank is going to send one of their representatives into the house to perform a valuation (BPO or appraisal) of the property.  At this point, the bank will be made aware that the house is under-valued and the offer they have in hand does not reflect current market value.

Listing a short sale too low will only lead to three things for a seller: a counter offer, additional unnecessary stress, and longer, drawn out negotiations.

When it comes to being a seller of a short sale, the best, most time efficient, least stress-filled approach to take is a straight-forward one.  There is no reason to add stress or time to a process that is already abundantly full of both by allowing an agent to list the property under market value.

As a buyer, under valued short sales are a nightmare.  It is the exception, not the rule, when a short sale is listed with a truly approved list price.  Even short sales that were “previously approved at list price” are likely no longer approved at the current stated list price.  Why? Just because a list price was approved once, does not mean it will be approved again because once a buyer walks away from a short sale, that file is closed and the process starts over when a new buyer is found.

Most times a new processor and negotiator are assigned to the file and the paperwork in the file is reviewed again.  Granted, the process can move quicker because a lot of the leg work has already been completed (tax returns have been submitted and the BPO or appraisal is already in the file) and updated pay stubs or property valuations can be submitted more quickly if needed.  But if anything changes, for example there is an outstanding lien accruing debt or interest, or an updated property valuation comes in higher or the asset manager/investors feel they need to net more, you can kiss that “previously approved list price” goodbye.

At this time, only HAFA approved short sales and FHA approved short sales (where the listing agent actually gets the FHA short sale approval PRIOR to listing the home for sale) are truly approved at list price.

The following is a real life buyer scenario of an under-priced short sale.  Mrs. Smith would like Agent A to show a property at 123 Main St..  The house is listed $20,000 under market value.  Agent A shows 123 Main St. and  points out to Mrs. Smith that the property is listed under current market value.  Agent A explains to Mrs. Smith that the house will likely sell for more than the current list price because similar, comparable houses in similar condition in the area are selling for more money than what the house is listed at, and banks want to get as much money as they can for a property – typically market value.  Agent A, who has newly started working with Mrs. Smith, continues by explaining the short sale process and advises Mrs. Smith that the bank is going to send out one of their representatives to perform a valuation of the property and said valuation will be taken into account along with the sellers’ financial status when reviewing the offer.  Agent A shows Mrs. Smith current comparable sales that clearly indicates market value is higher than current list price, but Mrs. Smith thinks Agent A just wants to close a deal or sell the house for more money to make a larger commission.  Mrs. Smith politely concludes the appointment with Agent A and calls Agent B.

Agent B is newer to real estate and not as willing to be upfront and straight-forward about the fact that said house is listed $20,000 under current market value.  Agent B writes a full price offer on 123 Main St. for Mrs. Smith (which is $5,000 below the maximum amount Buyer A is qualified to purchase at) and Mrs. Smith, according to contract, agrees to wait 90 days for the sellers’ bank to provide an approval to the short sale contract.  The offer is accepted by the seller.

While Mrs. Smith is waiting the agreed upon 90 day waiting period, several properties come onto the market that are appealing and priced according to market.  Mrs. Smith understands that the contract she entered into states that escrow monies will be forfeited to the seller should she terminate the contract prior to the agreed upon waiting period of 90 days.  Mrs. Smith cannot afford to lose the escrow money.  Mrs. Smith is unable to look at these properties;  one of which is a traditional sale that fits all of her criteria and is priced according to market.

Ninety days pass and fortunately for Mrs. Smith, Agent B is notified that the bank has responded to the offer.  Unfortunately for Mrs. Smith, the bank wants $25,000 more than the current price offered.  Agent B calls Mrs. Smith about the response and advises her that the bank wants $25,000 more than the current offer.  Mrs. Smith is upset since she submitted a full price offer.  Mrs. Smith doesn’t feel it necessary to pay more than list price since that is the price the house was listed for – she believes that is what it should sell for.  Agent B shows Mrs. Smith the comparable sales and a discussion about market value ensues.  Mrs. Smith is not able to get financing for much more than list price, but really wants the house.  Mrs. Smith counters at $5,000 more than the original contracted price as that is the most she can afford.  Mrs. Smith waits 2 weeks and the short sale lender counters back at $20,000 higher.  She cannot move forward with the purchase. The seller of 123 Main St. has to put the home back on the market at an increased list price, which will probably be listed as previously approved, and start the process all over again.

Meanwhile, Mrs. Smith is disappointed and mad for not being able to purchase the house.  She is also upset with Agent B since the sale was not able to go forward, and Mrs. Smith was unable to look at or make offers on any of the other properties that were within her budget that could have been a fit and closed.  Mrs. Smith is also upset with Agent B for not discussing the market up front.  Mrs. Smith realizes that Agent A was right all along.  Disappointed, upset and embarrassed, Mrs. Smith takes a short break from house hunting then calls Agent C whose advise and guidance Mrs. Smith listens to.  Mrs. Smith is finally able to purchase a home.

Moral of the story?  If you’re a buyer and it seems too good to be true, it usually is.  If you’re a seller, list it right the first time.  It will save a lot of time and trouble in the long run.

Real Estate Update for Snowbirds

I have been seeing quite a few more Canadian and out of state license plates around town these past couple of weeks.  Snowbirds are returning to the area to escape the cold, unyielding weather of the North.

A lot has happened in our Orlando area real estate world since our neighbors from the North were in town last.  The supply of homes for sale has dropped, prices have been holding steady (and increasing in many areas) and multiple offers have become commonplace.

According to the statistics provided from data interpreted from sales recorded in My Florida Regional Multiple Listing Service (MFRMLS), the Orlando Regional Realtors Association (ORRA) reports that as of September 2012 we have a 3.5 month supply of homes for sale.  A “normal market” supply is 6 months; which happens to be the supply of inventory ORRA statistics showed we had last year at the same time.

Another change we have seen in the Orlando area market is an increase in sale prices….finally.  In September 2011, the average sale price was $148,045.  The average sale price in September 2012 was up to $166,455.  That is a nearly 12% increase in sale prices!

The Realtor Association of Lake and Sumter Counties (RALSC) hasn’t faired as well as the Orlando area market. However, there have been gains.  In September 2011, RALSC reported a 13 month supply of homes actively listed for sale.  Fortunately, as of September 2012, those numbers are edging more towards “normal” with an 8.5 month supply of homes for sale.  Modest gains in sales prices have also been recognized.  The average sale price in September 2011 was at $132,466.  September 2012 brought gains just shy of 4%, reflecting an average sale price of $137,168.

What does all this mean to you, our seasonal visitors?  Well, if you have a second home you have been considering letting go of, now may be the time.  Buyers are out there, and with interest rates still unbelievably low at around 3.3%  and the dramatic drop in home prices, chances are you will be able to fetch the most money the market will allow in today’s market.

Snowbirds that have been renting seasonally may want to consider purchasing a seasonal or second home rather than paying a landlord each time you visit.  Again, for those that would need to finance a purchase, interest rates are unbelievably low , and the cost of owning may very well be worth the initial outlay.  Owning also provides the security and peace of mind in knowing the house is there when you need or want it – especially now considering foreclosures are still moving forward and many vacation home owners/landlords will stop paying on investment properties before forfeiting other assets.

In short, our Orlando area real estate market has made some positive strides while you have been away.

Feel free to get in touch with me if you would like more information or data on your real estate market.  Whether you are buying, selling or feeling out the market, I will be here when you need me.

Foreclosure Prices Rising For All The Wrong Reasons

NAR’s REALTOR Magazine just released an article about the rising sales price of foreclosures. This should be good news. In a number of cities and states, including my Orlando area market, we have seen an increase in sales prices. What we have also seen is a decrease in supply. Supply of homes for sale over the past year has dropped significantly. The supply of bank owned (REO) properties for sale has dropped even more dramatically over the past year. It is not for lack of supply. Those of us in the hardest hit states (FL, AZ, NV, CA) don’t need to drive too far before seeing a vacant home that has been owned by a bank for months or more that is just sitting, sitting, sitting. On a personal level, I have a neighbor who has been living in a home that has been owned by Bank of America for about 2 years now. When they will list it for sale is a mystery.

This limited supply of inventory has caused frustration for many buyers in the market. There is not as much to chose from as there has been in the past and competition is fierce. Multiple offers abound and cash buyers often beat out buyers who are in need of financing to secure a home. This lack of supply has helped to prop up the market and bring us some increases in sales prices.

Banks have been controlling the real estate market for a while now, and it seems they like to go to extremes.

When the market first crashed, banks flooded us with inventory and values plunged to a disgustingly low level. Now, banks are doing the opposite. Banks have a strangle-hold on inventory and are trickling it out to the public ever so slowly. The inventory they are releasing to the public is being priced 10-20% above market. Some of the inventory is move in ready which may help justify paying a little more for a property that needs nothing but there is a portion of this overpriced inventory that really needs some work – new roofs, work on plumbing, significant updates. No matter how you slice it, these properties are not worth the price they are being listed at. I understand the logic behind it, but really? What ever happened to moderation. Let’s get a supply out there that matches demand so we can really get down to stabilizing our market.

Instead, banks trickle out supply to try and get the general public to pay top dollar for a new home or investment property while privately selling properties in bulk to investors (possibly cronies?) at rates below market. Doesn’t seem right to me….