When you prepare an offer to purchase a home, you already know the seller’s asking price. But what price are you going to offer and how do you come up with that figure?
Determining your offer price is a three-step process.
First, you look at recent sales of similar properties to come up with a price range. Good place to go would be http://yahoo.iplace.com/sales_search.asp. Then, you analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your "fair" price and come up with what you want to put in your offer.
Comparable Sales
The first step in determining the price you are willing to offer is to look at the recent sales of similar homes. These are called "comparable sales." Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase. Specifically, you want to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size, and type of construction.
If the home you are interested in is part of a tract of homes, then you will most likely find some exact model matches to compare against one another.
There are three main sources of information on comparable sales, all of which are easily accessed by a real estate agent. It is somewhat more difficult for the general public to access this data, and in some cases impossible. Two of the most obvious information sources are the public record and the Multiple Listing Service.
Comparable Sales in the Public Record
The most accessible source of information on comparable sales is the public record. When someone buys a home the property is deeded from the seller to the buyer. In most circumstances, this deed is recorded at the local county recorder’s office. They combine sales data with information already known about the property so they can assess property taxes correctly.
Provided there have been no additions to the property, the information available from the public record is usually correct regarding sales price, square footage, and numbers of rooms. This makes it easy to use the public record as a source of data for comparable sale information.
Accessing the data is another matter, at least for the general public. Realtors can generally look up this information through title insurance companies. The title companies either compile the data directly from the county recorder’s office or purchase if from other companies.
One problem with the public record is that it tends to run at least six to eight weeks behind. Add another four to six weeks for the typical escrow period and you can see the data is not current. The most current information is the most valuable.
Comparable Sales in the Multiple Listing Service
Most of the public is aware that the Multiple Listing Service is a private resource where Realtors list properties available for sale. Recently, the public has been able to access some of that information on such sites as Realtor.com, MSN HomeAdvisor, and others.
Once a property is sold and the transaction has closed, the selling price is posted to the listing in the Multiple Listing Service. Over time, it has become a huge database on past sales, containing much more information on individual homes than can be gleaned from the public record. This information is only available to real estate agents who are members of the local Multiple Listing Service.
Comparable Sales – Pending Transactions
The most valuable information would be the most current, of course. A sale last week has more validity in helping you determine a purchase price than a sale from six months ago. The problem is that there is no actual record of the sales price until the transaction is completed. The information is not available in the public record because no deed has yet been recorded.
Neither is the information available in the Multiple Listing Service. Once a property is sold, it becomes a "pending sale" and all pricing information is removed from the listing. Prices are not posted until it becomes a "closed sale." This protects the seller in case the transaction falls apart and the property is placed back on the market. It would give an unfair advantage to future potential buyers if they already knew what price the seller had been willing to accept in the past.
However, if a Realtor has a reason to know the sales price, they can usually find out through professional courtesy. Also, some real estate brokerages post sales information on a transaction board in their office.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=43
Monday, June 18, 2007
Do You Know The Real Price Of Your ARM?
Adjustable-rate mortgages are complicated instruments. No one characteristic fully describes one.
This is why, when readers ask me for the pros and cons of COFI ARMs, or Libor ARMs, or flexible payment ARMs, I get heartburn. You can't assess an ARM based on only one of its features.
But some features are more important than others. If any one feature deserves to be considered the "real price" of an ARM, it is the fully indexed rate, or FIR. Yet ironically, I have never had a reader ask me a question about the FIR.
The FIR is the most recent value of the interest rate index used by the ARM (such as COFI or 1-month Libor) at the time the loan is taken out, plus a margin. The margin is the lender's spread over the index, often 2.5 percent to 3 percent, but it can vary widely.
On Dec. 20, 2003, when this was written, the most recent value of the COFI index was 1.171 percent for the month of November. If an ARM using COFI had a margin of 3 percent, its FIR would be 4.171 percent.
The importance of the FIR is that it indicates where the ARM rate may go when the initial rate period ends. If the rate index does not change, the FIR will become the ARM rate, subject to any caps that may limit a rate change. Ignoring the FIR is deception by omission.
Just how deceptive this omission can be is well-illustrated by an advertisement for a "1.95 percent ARM," which I found in my e-mail this morning. What the ad does not say is that the 1.95 percent rate holds for just one month. If I closed on this loan today, and if it used the COFI index with a 3 percent margin, my rate in January would be 1.95 percent, and in February it would jump to 3 percent plus the index value in December.
In other words, the ad told me the rate for one month, but it did not give me any information bearing on what the rate might be over the subsequent 29 years and 11 months. If you went to the lender's Web site, you would not find the FIR. It is not a required disclosure and does not appear on any documents.
Neither is the FIR mentioned by loan officers. If they can help it, loan officers don't discuss numbers that invite comparison with those of other lenders. They are in the business of selling ARMs, which they do by focusing on one sexy feature, such as a low initial rate and payment, a stable index, or payment options.
This is why I continually receive letters asking about these features, but I have never had a letter asking me about the FIR. Loan officers may not even know the most recent value of the index, although they will know the margin.
The importance of the FIR to the borrower depends mainly on the length of the initial rate period. With a monthly ARM, it is critically important, as already noted. With an ARM on which the initial rate holds for 10 years, the FIR may mean little. With other ARMs, the importance of the FIR will depend on the likelihood that the borrower will be in the house past the expiration of the initial rate period.
If the FIR is important to you, reconcile yourself to the fact that the system is rigged against you and you are going to have to dig it out for yourself. The loan officer will give you the margin if you ask, and will usually be able to identify the rate index. You are fine if he says COFI, MTA, CODI, or Prime Rate because these are all unique series. Don't accept "Treasury" or "Libor" because there are multiple indexes under each of these headings, and you need to know the one that applies.
When you have identified the rate index, you can find the latest value on the Internet. Go to "ARMs/Rate Indexes" on my site, where you will find a list of all the indexes, and the Web sites at which the latest values can be found.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=145
This is why, when readers ask me for the pros and cons of COFI ARMs, or Libor ARMs, or flexible payment ARMs, I get heartburn. You can't assess an ARM based on only one of its features.
But some features are more important than others. If any one feature deserves to be considered the "real price" of an ARM, it is the fully indexed rate, or FIR. Yet ironically, I have never had a reader ask me a question about the FIR.
The FIR is the most recent value of the interest rate index used by the ARM (such as COFI or 1-month Libor) at the time the loan is taken out, plus a margin. The margin is the lender's spread over the index, often 2.5 percent to 3 percent, but it can vary widely.
On Dec. 20, 2003, when this was written, the most recent value of the COFI index was 1.171 percent for the month of November. If an ARM using COFI had a margin of 3 percent, its FIR would be 4.171 percent.
The importance of the FIR is that it indicates where the ARM rate may go when the initial rate period ends. If the rate index does not change, the FIR will become the ARM rate, subject to any caps that may limit a rate change. Ignoring the FIR is deception by omission.
Just how deceptive this omission can be is well-illustrated by an advertisement for a "1.95 percent ARM," which I found in my e-mail this morning. What the ad does not say is that the 1.95 percent rate holds for just one month. If I closed on this loan today, and if it used the COFI index with a 3 percent margin, my rate in January would be 1.95 percent, and in February it would jump to 3 percent plus the index value in December.
In other words, the ad told me the rate for one month, but it did not give me any information bearing on what the rate might be over the subsequent 29 years and 11 months. If you went to the lender's Web site, you would not find the FIR. It is not a required disclosure and does not appear on any documents.
Neither is the FIR mentioned by loan officers. If they can help it, loan officers don't discuss numbers that invite comparison with those of other lenders. They are in the business of selling ARMs, which they do by focusing on one sexy feature, such as a low initial rate and payment, a stable index, or payment options.
This is why I continually receive letters asking about these features, but I have never had a letter asking me about the FIR. Loan officers may not even know the most recent value of the index, although they will know the margin.
The importance of the FIR to the borrower depends mainly on the length of the initial rate period. With a monthly ARM, it is critically important, as already noted. With an ARM on which the initial rate holds for 10 years, the FIR may mean little. With other ARMs, the importance of the FIR will depend on the likelihood that the borrower will be in the house past the expiration of the initial rate period.
If the FIR is important to you, reconcile yourself to the fact that the system is rigged against you and you are going to have to dig it out for yourself. The loan officer will give you the margin if you ask, and will usually be able to identify the rate index. You are fine if he says COFI, MTA, CODI, or Prime Rate because these are all unique series. Don't accept "Treasury" or "Libor" because there are multiple indexes under each of these headings, and you need to know the one that applies.
When you have identified the rate index, you can find the latest value on the Internet. Go to "ARMs/Rate Indexes" on my site, where you will find a list of all the indexes, and the Web sites at which the latest values can be found.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=145
Does Home Remodeling Always Pay Off?
Perhaps you've heard stories about homeowners who've greatly improved their net worth by remodeling homes and selling them.
But, while remodeling can add value, there's no guarantee that a future buyer will pay you enough to recoup your investment.
Consider the example of a homeowner who lost his home in the Oakland Hills, Calif., firestorm of 1991. Rather than rebuild, this fire victim decided to buy an existing replacement home. He invested his insurance proceeds in the purchase and subsequent remodel of the property. When he decided to sell several years later, he barely recouped the money he'd invested in the renovation. He had over-improved the property for the neighborhood. Buyers weren't willing to pay more than the property was worth on the open market.
Some homeowners fall into the trap of thinking that their home is worth what they paid for it, plus the money they've invested in remodeling projects. This logic is often faulty, and can result in unwise investments.
Replacement cost value is not the same as market value. Market value is the price a ready, willing and able buyer will pay for a property. This is the only value that's relevant when you're selling your home. Replacement cost value is an important consideration when you've evaluating how much insurance coverage you'll need to replace your home if it burns down. But, it may have little bearing on the selling price of your home.
Another homeowner made the mistake of completing a major expansion and renovation of a home before doing a thorough investigation of the infrastructure. After years of living in a home that was too small and had an inefficient floor plan, the owners hired an architect to redesign the home to better suit their lifestyle.
The renovations indeed added value from a market perspective. When the owners put the home on the market, they received multiple offers. They accepted an offer at a price that more than returned the money they'd invested. However, the sellers ended up giving back a huge chunk of their profits when a termite inspection revealed that there was extensive dry rot in the internal framing.
REMODELING TIP: Before tackling a major remodel, make sure to have the property inspected by a structural pest control inspector. It's also a good idea to have an engineer look at the foundation to make sure that you're not investing good money to improve a home that's sitting on a bad foundation.
Another reason to inspect the infrastructure before remodeling is that you may be able to upgrade facilities while you're taking care of routine maintenance. Before starting an extensive remodel of the kitchen, another homeowner had a termite inspection done. The report revealed dry rot in the master bathroom.
Rather than simply repair the damage, the owners had the kitchen contractors rip out the master bath and redo it at the same time they did the kitchen job. By doing so, they reduced the cost of the bath remodel significantly. Furthermore, instead of a simple repair, the owners ended up with an entirely new bathroom that added considerably to the value of the property.
To realize the most from your remodeling efforts, stick to classic designs and finishes. Trendy designs may look outdated five or 10 years from now when you decide to sell.
Don't invest in a major renovation if you're planning on selling in the near future. It's highly likely that you won't be repaid for your investment.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=143
But, while remodeling can add value, there's no guarantee that a future buyer will pay you enough to recoup your investment.
Consider the example of a homeowner who lost his home in the Oakland Hills, Calif., firestorm of 1991. Rather than rebuild, this fire victim decided to buy an existing replacement home. He invested his insurance proceeds in the purchase and subsequent remodel of the property. When he decided to sell several years later, he barely recouped the money he'd invested in the renovation. He had over-improved the property for the neighborhood. Buyers weren't willing to pay more than the property was worth on the open market.
Some homeowners fall into the trap of thinking that their home is worth what they paid for it, plus the money they've invested in remodeling projects. This logic is often faulty, and can result in unwise investments.
Replacement cost value is not the same as market value. Market value is the price a ready, willing and able buyer will pay for a property. This is the only value that's relevant when you're selling your home. Replacement cost value is an important consideration when you've evaluating how much insurance coverage you'll need to replace your home if it burns down. But, it may have little bearing on the selling price of your home.
Another homeowner made the mistake of completing a major expansion and renovation of a home before doing a thorough investigation of the infrastructure. After years of living in a home that was too small and had an inefficient floor plan, the owners hired an architect to redesign the home to better suit their lifestyle.
The renovations indeed added value from a market perspective. When the owners put the home on the market, they received multiple offers. They accepted an offer at a price that more than returned the money they'd invested. However, the sellers ended up giving back a huge chunk of their profits when a termite inspection revealed that there was extensive dry rot in the internal framing.
REMODELING TIP: Before tackling a major remodel, make sure to have the property inspected by a structural pest control inspector. It's also a good idea to have an engineer look at the foundation to make sure that you're not investing good money to improve a home that's sitting on a bad foundation.
Another reason to inspect the infrastructure before remodeling is that you may be able to upgrade facilities while you're taking care of routine maintenance. Before starting an extensive remodel of the kitchen, another homeowner had a termite inspection done. The report revealed dry rot in the master bathroom.
Rather than simply repair the damage, the owners had the kitchen contractors rip out the master bath and redo it at the same time they did the kitchen job. By doing so, they reduced the cost of the bath remodel significantly. Furthermore, instead of a simple repair, the owners ended up with an entirely new bathroom that added considerably to the value of the property.
To realize the most from your remodeling efforts, stick to classic designs and finishes. Trendy designs may look outdated five or 10 years from now when you decide to sell.
Don't invest in a major renovation if you're planning on selling in the near future. It's highly likely that you won't be repaid for your investment.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=143
Dream homes on eBay (Barbie not included)
Suzanne "Mercedes" Hayes sells a lot of stuff on eBay.
Just this week, the eBay merchant's list of for-sale items included a "Star Wars" chess set, the Jay Jay plush rocker by Toy Island, two mint-condition porcelain harlequin clowns with brown feathers, a Lite Brite Cube, a Caterpillar toy plastic wheelbarrow with jackhammer, a Hummer Pedal Car by Velocity Toys, a Playmobil Jungle Skeleton Dinosaur Cave toy and a Lou Rankin plush Charlie Chow stuffed animal.
That list also includes a multimillion-dollar home. No, not a Barbie Dream Home. This is the real thing: Bowman's Farm Estate in Bucks County, Penn. It's a 16,600-square-foot Georgian-style home on the Delaware River, with access to a 25-acre private island. The home carries a $3.99 million price tag.
Bowman's Farm is an example of the many real estate gems hidden on the Web. The Internet has become a venue where people go to seek out their wildest, most unique housing dreams.
Hayes is also a Realtor with Weidel Realtors in Flemington, N.J., and she's got enough eBay experience so she decided to try her hand at selling the high-end home on the popular Web site. The estate is listed for sale on eBay but, unlike many items, is not going to be auctioned.
"My client was pretty excited about it," said Hayes, who posted the home on eBay last month. "I have been an eBay merchant for five years; I have a very good comfort level with eBay. Most of our marketing has been traditional, through the (multiple listing service)." The seller, she said, has had a lot of local exposure for the property but not a lot of showings.
There is a glut of about 28 homes for sale in Bucks County that are listed between $2 million and $6 million, Hayes said, so she decided to try something different to spread the word about the Bowman's estate. "Most of the Realtors in my office didn't know there was an eBay real estate category. The prevailing opinion in the industry is that eBay is a waste of time (for home sales). At this point I think it's strictly a tool for advertising." Hayes said. "I feel like I'm kind of a ground-breaker."
But she expects home sales through sites like eBay to catch on. "My gut feeling is it's only a matter of time. What better way to get exposure, right?" she said. And the cost of a 30-day listing on the site was $150, which is cheaper than a lot of other advertising options, she added.
More than 10,000 people viewed the eBay home posting, but Hayes suspects that the vast majority "were just being nosy." So far she's had just a handful of calls related to the posting, and most of those have been from people who work at owner-financing companies, she said. "So far eBay has not been a very good tool." But who knows, she said, the Internet was what led her to become the home's listing agent. "If I got my buyer through eBay that would be real kudos."
EBay promotes a potential audience of 70 million people for real estate listings at the site, and its fees range from $150 for a 30-day ad or auction listing to $300 for a 90-day ad listing. There are no final value fees or commissions charged for real estate sales. More than 2,200 real estate properties sell on eBay each month, on average, and the site is particularly popular for posting unique homes, vacation homes and investment properties.
Hayes has seen a lot of for-sale-by-owner home listings on eBay. One sign vendor in Albuquerque, N.M., capitalized on this trend by offering customized eBay real estate signs that can be personalized with the home's eBay item number and the homeowner's phone number.
While luxury-home postings are popular on eBay, the site also features some real fixer-uppers. This week, a Kentucky Lake Weekend Cabin was posted for bid with a starting price of $30,000, for example. "It's not fancy, but it's a good place to stay while your (sic) hunting or fishing for crappie on the weekend. Also, I am haveing (sic) a new driveway put in this week (paved) at the cabin," according to the online description of the cabin. The ad also states the cabin "is in a cozey (sic) setting."
Another property for sale on eBay, a three-bedroom, one-bathroom home in Cherokee, Ala., has "a terrible smell from all the dogs that used to live there," "a big hole where the dryer blows straight through the wall," and, "is infested with fleas and it's almost impossible to walk through the house without them getting all over you." But "other than the smell and the fleas, the rotten wood on the outside of the house and the broken windows, it's a pretty good house," the item description states. The purchase price was listed at $14,500, and bidding on the down payment started at $1.
Homes aren't the only real estate for sale on eBay. Timeshares, vacation rentals, land and commercial properties have also been posted on the site. A few entrepreneurs have even attempted to sell entire towns through eBay.
Tortilla Flats, Ariz.; Minkler, Calif.; and Bridgeville, Calif., were all put up for sale on eBay in the past couple of years.
Owner Sylvia Ashcraft put Minkler up for sale in January. The asking price was $600,000 for a general store, a mobile home and two other buildings in Minkler, which is about 230 miles north of Los Angeles, but the town did not have a buyer after generating about 39,000 hits during the three months it was on eBay.
Bridgeville, in Mendocino County, generated nationwide attention when it was listed on eBay in December 2002. After much media hype, the price jetted from a minimum price of $775,000 to about $1.78 million at the time the auction closed. But that deal fell through, and even the lower bidders fell away, one by one, until the eBay auction was a total bust. In May of this year the town, which included 10 homes, four cabins, a post office and a cemetery, sold for $700,000 to an investor in Southern California, but this time through traditional methods.
Denise Stuart, a real estate agent for California Real Estate in Eureka, said the overwhelming publicity from the attempted sale of Bridgeville on eBay was great, but she would never again attempt to sell a property on eBay. "It ate up six months of my life," she said. "It was just kind of a fiasco—too much too fast." She fielded calls from prospective buyers in the Ukraine and England. Media from around the globe called her for interviews. She referred some business to other agents in her office because the town sale was gobbling up too much of her time.
"I had my hands full," she said. But, she added, the Bridgeville sale did generate a lot of leads for her and her company. "It was a really positive thing for my office."
The eBay auction fell apart because there weren't any real legal teeth to the auction that bound the sale, she said. The highest bidder "got buyer's remorse," she said, and quickly stepped away from the table.
Tortilla Flats, a remote Old West-era town along the Apache Trail in Arizona, was for sale this year on eBay with an opening bid of $5.5 million. In 2003, acreage on a private, uninhabited island in Whitefish Bay was for sale for about $700,000.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=171
Just this week, the eBay merchant's list of for-sale items included a "Star Wars" chess set, the Jay Jay plush rocker by Toy Island, two mint-condition porcelain harlequin clowns with brown feathers, a Lite Brite Cube, a Caterpillar toy plastic wheelbarrow with jackhammer, a Hummer Pedal Car by Velocity Toys, a Playmobil Jungle Skeleton Dinosaur Cave toy and a Lou Rankin plush Charlie Chow stuffed animal.
That list also includes a multimillion-dollar home. No, not a Barbie Dream Home. This is the real thing: Bowman's Farm Estate in Bucks County, Penn. It's a 16,600-square-foot Georgian-style home on the Delaware River, with access to a 25-acre private island. The home carries a $3.99 million price tag.
Bowman's Farm is an example of the many real estate gems hidden on the Web. The Internet has become a venue where people go to seek out their wildest, most unique housing dreams.
Hayes is also a Realtor with Weidel Realtors in Flemington, N.J., and she's got enough eBay experience so she decided to try her hand at selling the high-end home on the popular Web site. The estate is listed for sale on eBay but, unlike many items, is not going to be auctioned.
"My client was pretty excited about it," said Hayes, who posted the home on eBay last month. "I have been an eBay merchant for five years; I have a very good comfort level with eBay. Most of our marketing has been traditional, through the (multiple listing service)." The seller, she said, has had a lot of local exposure for the property but not a lot of showings.
There is a glut of about 28 homes for sale in Bucks County that are listed between $2 million and $6 million, Hayes said, so she decided to try something different to spread the word about the Bowman's estate. "Most of the Realtors in my office didn't know there was an eBay real estate category. The prevailing opinion in the industry is that eBay is a waste of time (for home sales). At this point I think it's strictly a tool for advertising." Hayes said. "I feel like I'm kind of a ground-breaker."
But she expects home sales through sites like eBay to catch on. "My gut feeling is it's only a matter of time. What better way to get exposure, right?" she said. And the cost of a 30-day listing on the site was $150, which is cheaper than a lot of other advertising options, she added.
More than 10,000 people viewed the eBay home posting, but Hayes suspects that the vast majority "were just being nosy." So far she's had just a handful of calls related to the posting, and most of those have been from people who work at owner-financing companies, she said. "So far eBay has not been a very good tool." But who knows, she said, the Internet was what led her to become the home's listing agent. "If I got my buyer through eBay that would be real kudos."
EBay promotes a potential audience of 70 million people for real estate listings at the site, and its fees range from $150 for a 30-day ad or auction listing to $300 for a 90-day ad listing. There are no final value fees or commissions charged for real estate sales. More than 2,200 real estate properties sell on eBay each month, on average, and the site is particularly popular for posting unique homes, vacation homes and investment properties.
Hayes has seen a lot of for-sale-by-owner home listings on eBay. One sign vendor in Albuquerque, N.M., capitalized on this trend by offering customized eBay real estate signs that can be personalized with the home's eBay item number and the homeowner's phone number.
While luxury-home postings are popular on eBay, the site also features some real fixer-uppers. This week, a Kentucky Lake Weekend Cabin was posted for bid with a starting price of $30,000, for example. "It's not fancy, but it's a good place to stay while your (sic) hunting or fishing for crappie on the weekend. Also, I am haveing (sic) a new driveway put in this week (paved) at the cabin," according to the online description of the cabin. The ad also states the cabin "is in a cozey (sic) setting."
Another property for sale on eBay, a three-bedroom, one-bathroom home in Cherokee, Ala., has "a terrible smell from all the dogs that used to live there," "a big hole where the dryer blows straight through the wall," and, "is infested with fleas and it's almost impossible to walk through the house without them getting all over you." But "other than the smell and the fleas, the rotten wood on the outside of the house and the broken windows, it's a pretty good house," the item description states. The purchase price was listed at $14,500, and bidding on the down payment started at $1.
Homes aren't the only real estate for sale on eBay. Timeshares, vacation rentals, land and commercial properties have also been posted on the site. A few entrepreneurs have even attempted to sell entire towns through eBay.
Tortilla Flats, Ariz.; Minkler, Calif.; and Bridgeville, Calif., were all put up for sale on eBay in the past couple of years.
Owner Sylvia Ashcraft put Minkler up for sale in January. The asking price was $600,000 for a general store, a mobile home and two other buildings in Minkler, which is about 230 miles north of Los Angeles, but the town did not have a buyer after generating about 39,000 hits during the three months it was on eBay.
Bridgeville, in Mendocino County, generated nationwide attention when it was listed on eBay in December 2002. After much media hype, the price jetted from a minimum price of $775,000 to about $1.78 million at the time the auction closed. But that deal fell through, and even the lower bidders fell away, one by one, until the eBay auction was a total bust. In May of this year the town, which included 10 homes, four cabins, a post office and a cemetery, sold for $700,000 to an investor in Southern California, but this time through traditional methods.
Denise Stuart, a real estate agent for California Real Estate in Eureka, said the overwhelming publicity from the attempted sale of Bridgeville on eBay was great, but she would never again attempt to sell a property on eBay. "It ate up six months of my life," she said. "It was just kind of a fiasco—too much too fast." She fielded calls from prospective buyers in the Ukraine and England. Media from around the globe called her for interviews. She referred some business to other agents in her office because the town sale was gobbling up too much of her time.
"I had my hands full," she said. But, she added, the Bridgeville sale did generate a lot of leads for her and her company. "It was a really positive thing for my office."
The eBay auction fell apart because there weren't any real legal teeth to the auction that bound the sale, she said. The highest bidder "got buyer's remorse," she said, and quickly stepped away from the table.
Tortilla Flats, a remote Old West-era town along the Apache Trail in Arizona, was for sale this year on eBay with an opening bid of $5.5 million. In 2003, acreage on a private, uninhabited island in Whitefish Bay was for sale for about $700,000.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=171
Estimating How Much Home You Can Afford
It's the question you need to ask yourself before you even BEGIN your new home search. It's the most important factor in determining what kind of home you can secure, and where you can begin to look. It's a crucial consideration for first-timers and veteran home buyers alike.
How much can you afford to spend on your next – or first – home?
Primary Rule – Annual Income
Most experts would advise you to follow a basic rule to determine your "home buying power" – multiply your annual gross income by two and one-half. Several factors may raise or lower this number, but it is a good baseline to use as an estimate when beginning your home search. Using this rule, you can predict the amount for which you will qualify when seeking a pre-approval document from a lender - a "must-have" before beginning your home search in earnest.
Secondary Rule – Housing Expense Ratio
A second rule to consider, and another that lenders will contemplate in determining your loan amount, is your ability to make a monthly mortgage payment that falls between 25% and 33% of your gross monthly income. This "housing expense ratio" can fall outside of this range to some degree (depending on a number of factors), but lenders are more likely to approve loans that deduct a smaller percentage of your monthly income.
Debt-to-income Ratio
Your debt and credit history are also import considerations in this decision. Lenders will obviously look more favorably on candidates who have a history of paying their credit card bills, vehicle loans, and student loans in a timely manner, and whose debt does not exceed more than 30% to 40% of their income.
Other Factors
While the mortgage payment is certainly the major element of a homeowner's monthly housing expense, there are a number of other factors prospective buyers should keep in mind when predicting and estimating these costs:
Down Payments – The First Hurdle
For most home buyers, the first hurdle to overcome in any home purchase is making the initial down payment. This is often the largest single payment you will ever make in your life, and it is usually the determining factor in whether a seller accepts your bid.
Fortunately, there are a number of sources into which you can tap to satisfy a down payment requirement. As always, speak to a tax professional for advice on using these options:
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=198
Finding a Good Home Inspector: What You Should Ask
You've found the house, your offer has been accepted, and funding is in place. But before you start packing, be sure you hire a professional home inspector to make sure your house doesn't have any major defects that could cost you down the road.
A home inspection typically includes an examination of heating and central air conditioning systems, interior plumbing, electrical systems, the roof, attic, visible insulation, walls, ceilings, floors, windows, foundations, and basements. Inspections may also include appliances and outdoor plumbing.
Once the inspector examines the house, he or she will write up a report with findings. If there are any major problems, you'll need to negotiate with the seller to either lower the sale price of the home, or determine how the problem will be fixed.
When you make an offer it's wise to have a contingency clause based on the home inspection. In other words, if the inspector finds $10,000 worth of problems and the seller doesn't want to provide the fix, you can rescind your offer.
In fact, two in five resale houses will have at least one major defect that could cost you from a few hundred dollars to as much as $15,000 to repair, according to the 2000 HouseMaster Resale Home Deficiencies Study.
Spending a few hundred dollars for a home inspection is well worth the peace of mind.
If you don't know how or where to find a home inspector, be cautious about asking your real estate agent.
"Be careful, though, of inspectors who are popular with agents - that popularity may stem from not killing too many deals by going easy on their inspections," says Eric Tyson and Ray Brown in their book Home Buying For Dummies (Hungry Minds, Inc., 1999).
Tyson and Brown say the American Society of Home Inspectorsis a good place to start.
"Just because an inspector is an ASHI member doesn't guarantee that you'll get a good inspection, but it certainly increases the likelihood that you'll be working with a qualified professional," Brown and Tyson write.
All certified members have performed at least 250 inspections have passed two written proficiency exams. They must also adhere to standards of practice, continuing education requirements, and code of ethics.
The authors and the ASHI recommend you interview several inspectors before choosing one. Some of the questions you should ask include:
- What does the inspection cover? Make sure the inspection and the inspection report meet all applicable requirements and comply with the ASHI Standards of Practice.
- How long have you been in the profession and how many homes have you inspected? Again, ASHI Members are required to have completed at least 250 paid professional home inspections and passed two written exams that test the inspector's knowledge.
- Are you specifically experienced in residential inspection? The answer should be yes. If someone says they have specialized training in something like construction or engineering but not in residential inspection, you may want to move on to the next candidate.
- Does the inspector's company offer to do repairs or improvements based on the inspection? The answer should always be no. This is against the ASHI Code of Ethics because it might cause a conflict of interest.
- How long will the inspection take? The average for a single inspector is two to three hours for a typical single-family house; anything less may not be enough time to do a thorough inspection. Some inspection firms send a team of inspectors and the time frame may be shorter.
- How much will it cost? Costs vary quite a bid depending on the region, size of the house, scope of services and other factors. A typical range might be $300-500, but consider the value of the home inspection in terms of the investment being made.
- Does the inspector prepare a written report? Ask to see samples and determine whether you understand the report.
- Does the inspector encourage the client to attend the inspection? This is a valuable educational opportunity for you to learn about how things work around what could be your house, and the inspector may point out things that don't quite merit a mention in the report but which you should keep an eye on. An inspector's refusal to allow you to be present should raise a red flag.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=91
For-sale-by-owner fallouts
Why most do-it-yourself sellers give up after 30 to 60 days.
Are you planning to sell your home in the next few months? According to the National Association of Realtors and state Realtor associations, the home sales market in most areas is booming. Most community median sales prices are at or near record levels.
The obvious reason is today's ultra-low mortgage interest rates have flooded the home sales market with eager buyers. Landlords are complaining about high apartment vacancies because virtually every renter who can afford rent can afford to buy a house or condo.
In addition to extremely low mortgage interest rates, virtually every mortgage lender offers 90, 95, 97, 100 and even 103 percent mortgage financing. As a mortgage broker recently told me, "Even a bankrupt arsonist can get approved for a home loan today."
But home sellers aren't complaining because, if they owned and occupied their principal residence any two of the last five years, they can claim up to $250,000 tax-free sales profits (up to $500,000 for a married couple filing jointly).
If you're thinking of selling your home, don't miss the fall sales market.
The best time to sell your home is usually in the spring and early summer. That's when the most home buyers are searching for homes in most communities. Statistics show the 2002 national home sales volume so far is likely to set a new annual record.
But the second best time to sell your home is in the fall. Weather is usually good and, especially with today's low mortgage rates, prospective home buyers are out in droves. If you have a lower-priced home that is likely to appeal to first-time home buyers, now is a great time to sell. Just ask any realty agent who specializes in residential sales.
To hire a real estate agent, or not; that is the question.
Most home sellers, at least for a few fleeting moments, dream of selling their home alone without having to pay a typical realty agent's sales commission of 6 or 7 percent.
Just run a few newspaper ads, put a "for sale by owner" sign on the front lawn, hold some weekend open houses, and the home will sell. That's what do-it-yourself home sellers dream about.
But the reality is usually far different. According to National Association of Realtors statistics, less than 20 percent of U.S. homes are sold without the help of a professional realty agent. However, maybe you are in that 20 percent who can sell your home alone and "save" the sales commission. Review this checklist of six key questions to help decide:
1. How can I correctly set my home's asking price? Here's a little "insider secret" for correctly setting your home's asking price: Interview at least three successful local realty agents who sell homes in your vicinity and compare their estimates of your home's market value.
Even if you want to market your home "for sale by owner" (called "fizzbo" by real estate agents), they won't mind giving you their listing presentations. The reason is, they know that within 30 to 60 days, most "fizzbo" home sellers give up and list with a professional real estate agent. Chances are you will eventually list with one of the agents you interviewed.
Each agent you interview should give you a written comparative market analysis (CMA). The CMA form shows a) recent sales prices of comparable nearby homes, b) asking prices of similar neighborhood residences now listed for sale (your competition), c) asking prices of recently expired comparable homes listed for sale which didn't sell, and d) each agent's estimated sales price and recommended asking price for your home. Best of all, this service is free.
2. How can I effectively market my home alone? Placing newspaper classified ads, putting up a "for sale by owner" lawn sign and holding a few weekend open houses usually is not enough to sell a home.
Important problems to anticipate are how to handle the phone calls which will result, how to arrange showings if you will be home alone, who will conduct the weekend open houses and what to tell real estate agents who have prospective buyers.
Will you agree to pay a buyer's agent half of a typical real estate commission? Or will you refuse to cooperate with agents who have serious prospective buyers? Paying half of a customary sales commission to an agent is usually smarter than not selling your home.
A major marketing problem is how to make your home stand out from the crowd of other nearby homes for sale. Real estate agents have the local multiple listing service (MLS) to market listed homes to hundreds of member realty agents, many of whom have waiting buyers looking for a home like yours. But without access to the MLS, and the increasingly important Internet Web site www.realtor.com for MLS listings, how can your home compete?
3. How can I obtain a legally binding sales contract and comply with all the new disclosure requirements? As part of his or her listing presentations, each agent should show you the required and optional disclosure forms used in your area. Depending on state and local laws, these include the lead-based paint disclosure, known-defect disclosures, radon disclosure, hazardous substance disclosure, building code and permit disclosure and energy efficiency disclosure.
More important, do-it-yourself home sellers ask themselves, "When a serious buyer wants to make a purchase offer, especially on a weekend when most homes are sold, how can I obtain a legally-binding purchase contract?"
The obvious answer is to have a pre-arranged real estate attorney standing by to quickly prepare the necessary legal paperwork. Unfortunately, most real estate attorneys are not available on weekends. By Monday or Tuesday, your serious buyer might have contracted the dread disease, "buyer's remorse." Worse, the buyer might have bought another home.
4. When a buyer wants to make a purchase offer, how can I know if the buyer is financially qualified to complete the purchase? Most real estate agents know how to evaluate purchase offers from pre-approved buyers and recommend their sellers accept or reject them. But successful do-it-yourself home sellers need to be familiar with FHA, VA, Fannie Mae or Freddie Mac and jumbo mortgage terms. Pre-arrangement with a nearby mortgage lender offering easy-finance alternatives greatly eases do-it-yourself “fizzbo” home sales.
Some buyers, known as "flakes," are not financially qualified to purchase a home. But they will waste your time. However, other potential buyers are already pre-approved for a mortgage by a mortgage lender and are ready to buy. Still other prospective buyers are unsure how to proceed with a home purchase unless an experienced real estate agent guides them through the process.
5. What home purchase contingencies are normal? Most home purchase contracts contain reasonable contingency clauses for at least (a) a satisfactory appraisal by the buyer's mortgage lender, and (b) a professional inspection report satisfactory to the buyer.
However, some buyers will add contingency clauses that are usually not in the seller's best interests, such as a contingency for the sale of the buyer's current residence. Most real estate agents advise against accepting a purchase offer with such a contingency unless the local home sales market is very slow and there are no other prospective buyers.
But, as a do-it-yourself home seller, you'll need to know what to do if a second buyer then makes an equal or better purchase offer with no contingency for sale of another residence.
6. Who will handle the home sale closing details? Depending on local custom, the actual home sale closing should be handled by an attorney, escrow or title firm. The buyer's earnest money purchase deposit is usually held by the same entity.
Who pays for the closing settlement costs? What about arranging title insurance? Who pays the transfer taxes and other closing costs? These are home sale expenses that home sellers should anticipate.
How to decide if you can sell your home alone:
After reviewing this do-it-yourself home sale checklist, you might find the task of selling your home alone without a professional agent overwhelming. Or, you might relish the opportunity to save the sales commission by selling your home yourself.
But there's one more consideration. It is the buyer who, when purchasing from a for-sale-by-owner, expects to share in the commission savings. That's why "fizzbos" should be prepared to sell for less than the recent sales prices of nearby comparable homes.
Still another situation "fizzbos" need to anticipate is how to handle buyer's agents who ask to receive 50 percent of a typical real estate sales commission for bringing a qualified buyer. Will you pay half of a commission? Or will you refuse to pay any commission, risking loss of that agent's buyer?
Conclusion: Selling a home is never easy. But it can be especially challenging when the seller insists on selling without a professional agent. After 30 to 60 days without sales success, most do-it-yourself sellers give up and decide to list their homes with one of the agents previously interviewed.
That's why most real estate agents enjoy giving their listing presentations to home sellers who think they can sell alone. However, experienced agents know few homes are sold without professional help.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=54
Are you planning to sell your home in the next few months? According to the National Association of Realtors and state Realtor associations, the home sales market in most areas is booming. Most community median sales prices are at or near record levels.
The obvious reason is today's ultra-low mortgage interest rates have flooded the home sales market with eager buyers. Landlords are complaining about high apartment vacancies because virtually every renter who can afford rent can afford to buy a house or condo.
In addition to extremely low mortgage interest rates, virtually every mortgage lender offers 90, 95, 97, 100 and even 103 percent mortgage financing. As a mortgage broker recently told me, "Even a bankrupt arsonist can get approved for a home loan today."
But home sellers aren't complaining because, if they owned and occupied their principal residence any two of the last five years, they can claim up to $250,000 tax-free sales profits (up to $500,000 for a married couple filing jointly).
If you're thinking of selling your home, don't miss the fall sales market.
The best time to sell your home is usually in the spring and early summer. That's when the most home buyers are searching for homes in most communities. Statistics show the 2002 national home sales volume so far is likely to set a new annual record.
But the second best time to sell your home is in the fall. Weather is usually good and, especially with today's low mortgage rates, prospective home buyers are out in droves. If you have a lower-priced home that is likely to appeal to first-time home buyers, now is a great time to sell. Just ask any realty agent who specializes in residential sales.
To hire a real estate agent, or not; that is the question.
Most home sellers, at least for a few fleeting moments, dream of selling their home alone without having to pay a typical realty agent's sales commission of 6 or 7 percent.
Just run a few newspaper ads, put a "for sale by owner" sign on the front lawn, hold some weekend open houses, and the home will sell. That's what do-it-yourself home sellers dream about.
But the reality is usually far different. According to National Association of Realtors statistics, less than 20 percent of U.S. homes are sold without the help of a professional realty agent. However, maybe you are in that 20 percent who can sell your home alone and "save" the sales commission. Review this checklist of six key questions to help decide:
1. How can I correctly set my home's asking price? Here's a little "insider secret" for correctly setting your home's asking price: Interview at least three successful local realty agents who sell homes in your vicinity and compare their estimates of your home's market value.
Even if you want to market your home "for sale by owner" (called "fizzbo" by real estate agents), they won't mind giving you their listing presentations. The reason is, they know that within 30 to 60 days, most "fizzbo" home sellers give up and list with a professional real estate agent. Chances are you will eventually list with one of the agents you interviewed.
Each agent you interview should give you a written comparative market analysis (CMA). The CMA form shows a) recent sales prices of comparable nearby homes, b) asking prices of similar neighborhood residences now listed for sale (your competition), c) asking prices of recently expired comparable homes listed for sale which didn't sell, and d) each agent's estimated sales price and recommended asking price for your home. Best of all, this service is free.
2. How can I effectively market my home alone? Placing newspaper classified ads, putting up a "for sale by owner" lawn sign and holding a few weekend open houses usually is not enough to sell a home.
Important problems to anticipate are how to handle the phone calls which will result, how to arrange showings if you will be home alone, who will conduct the weekend open houses and what to tell real estate agents who have prospective buyers.
Will you agree to pay a buyer's agent half of a typical real estate commission? Or will you refuse to cooperate with agents who have serious prospective buyers? Paying half of a customary sales commission to an agent is usually smarter than not selling your home.
A major marketing problem is how to make your home stand out from the crowd of other nearby homes for sale. Real estate agents have the local multiple listing service (MLS) to market listed homes to hundreds of member realty agents, many of whom have waiting buyers looking for a home like yours. But without access to the MLS, and the increasingly important Internet Web site www.realtor.com for MLS listings, how can your home compete?
3. How can I obtain a legally binding sales contract and comply with all the new disclosure requirements? As part of his or her listing presentations, each agent should show you the required and optional disclosure forms used in your area. Depending on state and local laws, these include the lead-based paint disclosure, known-defect disclosures, radon disclosure, hazardous substance disclosure, building code and permit disclosure and energy efficiency disclosure.
More important, do-it-yourself home sellers ask themselves, "When a serious buyer wants to make a purchase offer, especially on a weekend when most homes are sold, how can I obtain a legally-binding purchase contract?"
The obvious answer is to have a pre-arranged real estate attorney standing by to quickly prepare the necessary legal paperwork. Unfortunately, most real estate attorneys are not available on weekends. By Monday or Tuesday, your serious buyer might have contracted the dread disease, "buyer's remorse." Worse, the buyer might have bought another home.
4. When a buyer wants to make a purchase offer, how can I know if the buyer is financially qualified to complete the purchase? Most real estate agents know how to evaluate purchase offers from pre-approved buyers and recommend their sellers accept or reject them. But successful do-it-yourself home sellers need to be familiar with FHA, VA, Fannie Mae or Freddie Mac and jumbo mortgage terms. Pre-arrangement with a nearby mortgage lender offering easy-finance alternatives greatly eases do-it-yourself “fizzbo” home sales.
Some buyers, known as "flakes," are not financially qualified to purchase a home. But they will waste your time. However, other potential buyers are already pre-approved for a mortgage by a mortgage lender and are ready to buy. Still other prospective buyers are unsure how to proceed with a home purchase unless an experienced real estate agent guides them through the process.
5. What home purchase contingencies are normal? Most home purchase contracts contain reasonable contingency clauses for at least (a) a satisfactory appraisal by the buyer's mortgage lender, and (b) a professional inspection report satisfactory to the buyer.
However, some buyers will add contingency clauses that are usually not in the seller's best interests, such as a contingency for the sale of the buyer's current residence. Most real estate agents advise against accepting a purchase offer with such a contingency unless the local home sales market is very slow and there are no other prospective buyers.
But, as a do-it-yourself home seller, you'll need to know what to do if a second buyer then makes an equal or better purchase offer with no contingency for sale of another residence.
6. Who will handle the home sale closing details? Depending on local custom, the actual home sale closing should be handled by an attorney, escrow or title firm. The buyer's earnest money purchase deposit is usually held by the same entity.
Who pays for the closing settlement costs? What about arranging title insurance? Who pays the transfer taxes and other closing costs? These are home sale expenses that home sellers should anticipate.
How to decide if you can sell your home alone:
After reviewing this do-it-yourself home sale checklist, you might find the task of selling your home alone without a professional agent overwhelming. Or, you might relish the opportunity to save the sales commission by selling your home yourself.
But there's one more consideration. It is the buyer who, when purchasing from a for-sale-by-owner, expects to share in the commission savings. That's why "fizzbos" should be prepared to sell for less than the recent sales prices of nearby comparable homes.
Still another situation "fizzbos" need to anticipate is how to handle buyer's agents who ask to receive 50 percent of a typical real estate sales commission for bringing a qualified buyer. Will you pay half of a commission? Or will you refuse to pay any commission, risking loss of that agent's buyer?
Conclusion: Selling a home is never easy. But it can be especially challenging when the seller insists on selling without a professional agent. After 30 to 60 days without sales success, most do-it-yourself sellers give up and decide to list their homes with one of the agents previously interviewed.
That's why most real estate agents enjoy giving their listing presentations to home sellers who think they can sell alone. However, experienced agents know few homes are sold without professional help.
http://www.americanhomeguides.com/homebuying_tips_view.php?RowID=54
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