People not Paychecks.

I saw a Facebook post a colleague made this morning.  He said, “My day started out great and ended with a real estate nightmare. Sleepless night and hoping that today is a better day. Real estate isn’t for the faint of heart.”

He’s right, real estate isn’t for the faint of heart.  Things can change on a dime.  At a moment’s notice sellers and buyers can go from carefree and feeling fine to wondering if they have to unpack and start from scratch – or worse.

The response that prompted me to right this blog post was this, “Keep telling yourself… it is only a house , it is only a house…”  True, it is only a house.  It’s the lives attached to the house are what keep a Realtor up all night, tossing and turning, concerned for a clients’ well being.

I have had buyers’ on the brink of homelessness at the possibility of a deal falling through.  I have seen family members heart broken at the sale of a long loved family home filled with memories.  I have seen buyers break down and cry over the stresses of daily life compounded with a home search/purchase/lender demands for documentation.

Real estate is not cut and dry.  Combine one of the largest purchases and sales of a person’s life with the emotional attachment/drain such a transaction can make, and a real estate purchase/sale can be one of the most emotionally challenging events of a persons life (next to marriage/birth/death).  If a transaction has bumps along the way, those emotions compound.

Many agents find themselves wearing many hats – including counselor.  We are attached to our clients.  We care about them and the outcome of the transaction.  Not for the paycheck – for the people.  We understand the heavy burden we chose to carry.  We understand how important home ownership – having a roof over your head is.  We care about you and are working towards your success.  It’s not about the mighty dollar, and those who think it is, are sorely mistaken.

We do our best, often time going above and beyond, to “fix” situations that are beyond our control, we offer alternatives and advise that may not be apparent, we work hard to ensure our clients are taken care of and their best interests met.  Are there some bad apples, yes.  Every field has them.  But if you ask me, most Realtors care about their clients.  They want them to be happy.  They want their dreams to come true and they will do everything in their power to make that happen, even, no especially, when the chips are down.

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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 Buyer and Credit Survey

Experian recently released their Experian Home Buying and Credit: Survey Report, 2015.
Results are based on answers provided by buyers that purchased a house in the past year or plan to purchase in the next year.

I’m sure everyone who reads/looks at this report will get something different out of it. Here’s what I found most interesting.

The survey found that “more than two in five future buyers are worried that they will not qualify for the best home loan rate and have delayed purchasing to improve their credit.” The survey goes on to say that 55% are working to improve their credit to qualify for a better home loan rate.”

Here’s the thing, interest rates are really low – still. They have been for several years now. A 4% or 4.5% mortgage is nothing to squawk about. Interest rates fluctuate and waiting a few months to bump up a credit could cause more harm than good should rates continue to rise (and they will). That great interest rate you are working towards getting today may not be there tomorrow or next month or the month after.

If you find a loan program that can put you in a monthly payment that fits your budget, would that work?

Another factoid I found interesting is that only half of recent buyers reported “checking their credit as soon as they considered purchasing a home.”

Buying a house is scary. It is a big step; one of the biggest steps adults take in life. Delving into credit can be scary as well – especially when you aren’t sure what will be on that report.

Here’s what Experian found though….43% of recent buyers had a better credit score than expected, and 30% were surprised by their credit. So odds are pretty good your credit is not as bad as you think.

You know what they say, we are our own toughest critic….

Checking credit and getting qualified for a mortgage are the first steps in taking the leap to home ownership yet according to this survey 67% of future home buyers are not pre-approved. Here’s the deal, finding a house on Realtor.com or Zillow is not the first step to home ownership. Getting qualified for a mortgage with a lender is your first step. Here’s one thing that could happen: Say you put the cart before the house and find an agent that will take you house hunting without a qualification letter from a lender (this is not likely but it happens from time to time). You could see a house, fall in love with it, want to write and offer, call a lender and find you do not qualify for a house in that price range . Deflating to say the least.

So if you’re considering buying your first home. Do your homework. Pull your credit, and call a mortgage lender before you start scrolling through home sites. Don’t know how to read your report or don’t understand something on it? That’s ok. A good lender can help you understand what’s on your report and help guide you in the right direction if improvements need to be made.

If for some reason your credit score is not where it needs to be to qualify, at least you know and can begin working on correcting the item or items that are holding your score down and you back from purchasing your first home. Building a credit score does take time but not as long as you may think once the repairs are made.
Knowing is half the battle. Taking steps to correct past mistakes leads to victory. But again, Experian found that 43% of recent buyers had a better credit score than expected, and 30% were surprised by their credit. So please, don’t let what you don’t know hold you back from taking a step forward – in home buying or life.

 

When it comes to staging a scent for an Open House, Keep it Simple.

I showed a house the other day that had candles burning in every room.  I thought it was a bit much…..guess I’m not the only one.

Here’s a link to an article in Wall Street Journal that discusses using scent to sell.

http://online.wsj.com/article/SB10001424127887323696404578298513849141412.html

 

 

 

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.