September 2010

Tips For Buying Your First Home: A First Time Home Buyers Guide

by Lisa Udy on September 30, 2010

Realtor Holding A BinderI have written many articles on real estate, going into extreme details about complicated real estate deals. I have tried to inform my readers about the most surprising twists and turns of the real estate process.

Today, this article is about the basics. If you have never bought a home, it’s best to start at the very beginning, and this article should give you some great information to get started.

Hire A Buyer’s Agent

Realtor with help wanted sign.I would highly recommend using a real estate agent for your first deal. I would also recommend specifically hiring a buyer’s agent. A buyer’s agent is required by law to work as a fiduciary to you, the buyer. They work for you. They have your best interest in mind.

No Upfront Costs – You don’t have to put any money upfront when you hire a buyer’s agent. When you purchase a home listed with a real estate agent, the commission is already added into the purchase price. The seller is responsible for the commission to both a buyers agent and their sellers agent.

Get A Referral – Talk to family members and friends about the experiences they’ve had with Realtors they’ve used in the past. Interview agents they recommend and hire the one you feel the most comfortable with.

Listing Alerts – Ask your agent to sign you up for listing alerts. A listing alert is automatically sent to your email through the agents website or sent directly through the multiple listing service (MLS). Listing alerts can be set to the specifications of your choice. If you need 3 beds and 3 baths, you can set your alert to show you only homes with those attributes.

Agent Advantages – Real estate agents have many advantages. We often know of new listings before they hit the market.  You can waste the agents gas and not your own when touring homes. Agents can preview homes for you. Agents know if listings are overpriced. Agents have market data. Plus many more.

Don’t forget to check out our post on real estate agent interview questions.

Woman Holding Piggy BankTalk To A Lender

Unless you have cash to purchase a home, you will need to obtain a mortgage. Many people get excited about buying a home, only to find out after they find the perfect house, they can’t get approved for what they thought they could. It is recommended to get a pre-approval before you go house hunting for this reason.

Get Pre-Qualified – Also, if you write an offer on a home, and you haven’t at least been pre-qualified, you could lose out to a competing offer. Home sellers today are very adamant about home buyers providing proof they can obtain financing before they will commit to a contract.

Prove Your Serious - Once under contract, a seller will have to remove their listing from the MLS. They won’t be willing to do that unless you are serious about purchasing their home. Talking to a lender, providing proof of your ability to purchase, and submitting an offer with that proof, tells a seller you are ready to go.

Ask For A Referral – Just as all real estate agents aren’t the same, all lenders are not the same either. Talk to your agent about lenders they recommend. I would also suggest you look for a lender with in house underwriting, as it makes the deal go more quickly, and there is less chance of something getting lost in the shuffle.

Check out our post on Utah home loan programs.

Find A House

Have A House!When looking at homes, I would recommend scheduling no more than 7 appointments at a time. After viewing 7 homes, your head starts to spin, and it makes it difficult to distinguish properties.

Research Online – If you have access to the internet, you can find many websites to preview homes on. If you are in the Cache County area, you can view all Logan real estate listings by visiting that link.

Attend Open Houses – Open houses are a great way to get started looking at homes, especially if you haven’t found an agent yet. You can pop from one house to the next talking to a different agent at each one. If you find an agent you click with, ask them if they would like to work with you.

Check out our post on how to pick the perfect house.

Write An Offer

First Time Home Buyer Writing An OfferIf you find a home you feel is right, don’t be afraid to write an offer. Be sure to run the numbers, and don’t offer to much to start out with. Talk to your agent about comparable properties, and determine if the home is priced right.

Comparable Sales - When writing an offer, the great thing a Realtor can do for you is give you information on the market. Your agent should complete a comparable market analysis of the property to give you a starting point with your offer.

Check out our post on writing an offer.

Buying a home is a serious financial decision and can be extremely frightening. As a first time home buyer, remember that the roller coaster of emotions is normal. I always recommend to my first time buyers, before submitting an offer, take a day to think it over. Talk to friends and family, run the numbers, and don’t do it if you aren’t 100% in. If you feel it’s the right time to buy a home, have some fun, and enjoy your new place. Good luck!

You read through this whole post? Great! Want more information Super! Check out our:

Complete Guide To The Home Buying Process

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Why Short Sales Fail And How To Avoid Short Sale Denial

by Lisa Udy on September 24, 2010

Failed Short Sale!!Short sales are complicated, time consuming, and stressful to all parties involved. Depending on the bank you’re dealing with, it could take up to a year for a final approval on a short sale.

The fact that it takes so long makes it that much more difficult to find a buyer who is willing to wait months before they know if they can even buy the home.

In 2009, it was believed that only 20% of short sales were approved and finalized. That stat tells you, getting a short sale approved is not easy for anyone, let alone someone who is inexperienced. Plain and simple, many short sales fail to be finalized, and here are the common reasons why.

Why Short Sales Fail And How You Can Avoid Short Sale Denial

Incomplete Short Sale DocumentsIncomplete Or Fraudulent Short Sale Package – A short sale package is submitted to the lender when you receive an offer and accept it. The short sale package must be complete with everything the bank requires.

If it is not complete, it could delay the process. Many of the lenders out there won’t even call and tell you what’s missing. They will set the package aside and it will be handled later when they have the time, which will end up delaying the process, and you could end up in foreclosure because of it.

All information in your short sale package better be true or you can kiss your short sale approval goodbye. One example would be to lie about your financial situation. Hiding money in different accounts, pulling out cash to hide it from the bank, or giving money to relatives to hold onto during the short sale could end up costing you big time. Banks do not have to approve your short sale. If they find out you’re not telling the whole truth, you will be denied.

Short Sale Package Not Submitted Properly – All lenders are different and they each have their own protocols when dealing with short sales. Your agent must submit the package exactly how your lender requires it.

If they want it faxed, it better be faxed. If they want it scanned and emailed, it better be emailed. If they want 10 copies, they better get 10 copies! How a short sale package is submitted isn’t you or your agents decision. It’s the lenders, and it better be followed to the T!

A young woman sitting in a cafe opening her empty purseOffer Too Low – It is the job of your agent and you to secure the best possible offer on your property when submitting it to the bank. Each lender has their own formula for accepting offers, but one thing they all agree on is getting the most money possible.

It is the job of your short sale agent to give you an accurate analysis of the market and the value of your property. It is their job to counsel you to counter any offer to establish the best price and terms possible prior to accepting it.

Buyer Not Financially Strong Enough – Lenders want to see contracts that have a strong chance of closing. A pre-qualified buyer is not as strong as a pre-approved buyer. It is your agents duty to follow up with the buyers lender, or even better, you may want to have a lender you trust qualify the buyer as well.

If it’s a cash buyer, you will need proof of funds and proof of the ability of the buyer to access those funds in the time needed to close.  Any contingency in the contract could end up costing you the deal. It is best to remove as many contingencies during contract negotiations as possible before submitting to the bank.

Short Sale Buyer Backing OutBuyer Backs Out – This is probably the number one reason short sales fail. Buyers get tired of waiting, or they find a better house and back out of the deal.

This can be avoided by asking for a substantial earnest money deposit prior to acceptance of the contract. If the buyer has more skin in the game with say a $5,000 earnest money check, they will be more reluctant to give that up.

Your agent should counsel the buyers agent, or the buyer themselves, on how long short sales typically take to close. Keeping the lines of communication open on a weekly basis between your listing agent and the buyers agent can help keep the deal together. Buyers tend to stick around longer, at least in my experience, if they know what’s going on at all times.

Inaccurate Market Analysis/Appraisal/BPO – If  the BPO (Broker Price Opinion) was inaccurate, it could delay the closing. Lenders request BPO’s on short sales that are completed by third parties, whether it’s another real estate agent or an appraiser. Inaccuracies could give the lender a distorted view of what fair market value of the property is, this could influence the lender’s approval.

It’s important for your short sale agent to to ask the negotiator how the BPO compares to their market analysis. If your agent believes there are discrepancies with the BPO, it’s important for them to prove their point of view. Adding photos, better comparable properties, and any other information to support their claims.

Short Sale Clown!Incompetent Short Sale Agent – To avoid having your short sale denied, it’s extremely important to hire a Realtor that knows what they’re doing. Inexperienced and incompetent short sale agents should be avoided with one of the most important financial decisions you will ever make.

Some sellers end up facing foreclosure due to the lack of effort from their agent, and it’s a terrible situation for all parties involved.  Research real estate agents thoroughly before hiring them. Do not use a friend because they are your friend. You could end up going into foreclosure do to the lack of experience of a new short sale agent.

Don’t Let Your Short Sale Fail! Educate Yourself And Choose An Experienced Short Sale Agent!

When short sales fail, it’s the homeowner left holding the bag. Most likely, the homeowner will go into foreclosure, which is the last thing anybody wants.

Foreclosures devalue neighboring properties, cost banks tens of thousands of dollars, but most of all; a failed short sale will ruin your credit for 7-10 years, will cause you to lose your home, and will severely limit your access to credit for many years to come.

Please research short sale agents, put together a full and accurate short sale package, and follow all lender protocols when trying to short sale your home. If you do everything you can to avoid these common mistakes, you have a great chance for a short sale approval!

Related Articles:

Short Sale Investors Committing Fraud?

Common Short Sale Questions Answered

The Short Sale Process – Approval Time Frame – Withdrawal Period – Writing A Short Sale Offer

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The Real Costs Of Selling A Home

by Lisa Udy on September 16, 2010

Costs Of Selling A HomeThere are many fees and extra costs associated with selling a property. The last thing you want going to the closing table is unknown costs popping up at the last minute.

Any decent Realtor will give you a net sheet sometime prior to closing, but I also recommend you become familiar with these costs make sure you aren’t getting the short end of the stick.

The Cost Of Selling A House

Sales Commission – This is going to be your biggest cost associated with selling a home. Realtor commissions can be up to seven or eight percent of the sales price, although it’s more common at six percent. If you’re selling a $300,000 home, that could be anywhere from $15,000 to $24,000!!! Of course, these numbers are all negotiable with your agent.

Hopefully, when you signed your listing agreement with your agent, you worked out a commission agreement you were comfortable with. A good agent will do a net sheet at the listing appointment to show you how much you need to get out of your home to pay for this expense. I always do a net sheet at listing appointments so my sellers know exactly what they are paying.

Property Taxes – No matter when you sell your home, you will have to pay the property taxes up to the day you transfer title. The title company will pro-rate the taxes, and you will have to pay what you accrued before you sell. If you have already paid your taxes, be sure to let your agent know, and bring some sort of proof to closing so you don’t get double charged.

Closing Costs – Many sellers today are paying for buyers’ closing costs in order to get a deal done. If you agreed to a closing cost allowance, be sure to deduct that from the sell of your home. Closing costs usually end up being around two to seven percent of the purchase price on the home. Talk to your escrow officer about these costs before heading to closing.

Transfer Fees – Real estate transfer taxes are state and local taxes that are assessed on real property when ownership of the property is transferred between parties. Many also refer to these taxes as the Death Tax. Also, you need to be aware of the Capitol gains tax, which can be deferred as long as you you use a 1031 exchange form. Learn more about transfer fees here.

Document Fees – There are a lot of documents that need to be printed and dug up when selling a home. Title companies will charge you a doc fee as well as a notary fee for their services. I would recommend calling around to a few title companies to get a competitive price.

Required Repairs – No matter how new your home is, there can always be repairs that are required by the lender or the buyer before they will buy your home. These repairs could be very minimal or very large depending on how well you maintain your property.

Before you head to the closing table, you should be able to get a net sheet from your Realtor or title company. All fees will be on the settlement statement and will be explained to you at the closing table by your escrow officer.

If you see anything that wasn’t explained to you upfront, be sure to bring it to everyones attention. In this case, your agent or the title company, whoever was responsible for the fee, may have to eat it themselves if you were unaware.

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How Home Sellers Should Price Their House To Sell In 2010

by Lisa Udy on September 13, 2010

Women Pricing Her House OnlineWhen selling a home, pricing your property is crucial, and the psychology that goes into determining a price can leave your insides churning.

Should you start out high and see if you can get top dollar? Should you start low knowing the competition out there is tough? If you just drop your price later, how many buyers did you miss out on at the start?

The decision to price your home is extremely important. I can’t stress this enough.  Pricing your home not only dictates how much money you will make, it also dictates how many people will see your home. Here are a few things to consider before you set the price of your home.

Change Your Mindset If You Wish To Sell Your Home In A Buyers Market

Women Thinking About Pricing Real EstateEmotional attachment to a home can end up costing a home seller thousands of dollars. In my ten years of experience, I can’t tell you how many times I have had a seller price to high because they were stuck in the mindset of:  My home is worth more because it’s mine.

It’s easy for me, as a Realtor, to look at a home with a coldblooded point of view and determine a price it would sell for. But for sellers with emotions, a history, and attachment to the property, this becomes very difficult.

This is called the “endowment effect” and is a psychological human emotion. We tend to think, even with something with little value, that since we own it, the item is worth more than it really is.

The truth is, buyer’s don’t care how much you paid for your home when you bought it. They care about what comparable homes are selling for today.  This is a large step for home sellers to overcome.

You can’t price your home to sell for what you owe if the market says it’s worth less. Once you understand this and overcome the emotions of pricing your home, you’re on your way to a successful sale.

Make Your First Week Count

Dead Real Estate DealDon’t kill your sale before you even start. The first week is crucial to selling a home. When you put your home on the MLS, most buyers will only see it when it first pops up in their daily listing alerts.

If the price is too high, these buyers won’t ever see it again, and you may have killed the sale before it even started. If the price is right, many of these buyers will schedule a showing within the first week of seeing it.

Identify your homes true value and price it just below. For example; if your market analysis comes in at $150k, pricing your home at $147k will give you a lot more activity.

Even though you’re priced slightly below market value, with the amount of activity that price will bring, you may end up getting multiple offers which will drive the price back up. If you don’t get multiple offers, you will at least get an offer close to asking price.

Test your price as a buyer would looking for homes. Pretend you were a buyer and look online at homes within your price range. Be realistic when doing this. Find which homes standout to you, and if your home doesn’t pop out at you like the others, your price is probably to high.

Most sellers generally start out with a price higher than what it sales for. Because of this, they end up chasing buyers with price reductions later on, and by that time they have already spent a lot of money on marketing, house payments, insurance, taxes, and all the other expenses that come along with owning a home. They end up losing a lot more than if they would have priced it slightly lower than value from the get go.

Selling A House FastHow fast do you need to sell? What’s more important to your situation: tome or money? If you need to sell within 30 days, price your home lower than if you could hold out for 60-90 days. You may get less with the 30 day sale, but you will get rid of the home faster. If you price for 90 days, you may get more money, but you’ll lose out on time.

If you sell within the first 90 days, you should be all right. If you’re home sits longer, you could end up losing a lot more money and time than anticipated with your original list price. Pricing your home to high will end up netting you less money in the long run during a declining market. You will end up chasing lower prices, and you should try to avoid that situation if at all possible.

If your home sits to long, don’t be afraid to get aggressive. The longer your home sits on the market the more stale it becomes to buyers in that price range. Obviously, after sitting for an extended amount of time, your home isn’t worth what your asking.

To get out of that “stale” market, take decisive action and drop your price a substantial amount. By doing this, you will attract new buyers in new price ranges. If you drop the price in small increments, it’s like dieing by a thousand cuts.

Buyers can see all your price reductions, and it shows you’re getting more desperate the more you cut. A quick, substantial cut in price is going to give buyers a real incentive to take another look at your property.

If, after all of this, you still can’t get your home to sell, it may be time to take if off the market or consider a short sale. If you can’t afford to price a home at a price that will allow it to sell, talk to your agent about the possibilities of a short sale if you feel you need to go that route.

Related Articles:

Struggling Home Sellers Should Consider Lease Options

How To Avoid Going Into Foreclosure

5 Reasons Your Home Isn’t Selling

Why You Should Counter Every Low Offer You Receive

Home Selling Negotiation Strategies

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Can You Still Make Money Flipping Real Estate?

September 10, 2010

This is a tough question to answer. Investors have made money flipping real estate during any market, but with today’s swollen inventory levels, it’s becoming a whole lot harder. The answer to the question, can you still make money flipping real estate is yes, but there’s a catch. The home has to be perfect in [...]

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Cheap And Easy Tips To Make Your Utah Home Greener

September 2, 2010

Who isn’t searching for ways to save money today? I know I am. So, I did a little research on how to make my Utah home greener to save some greenbacks. Here’s some things I found that you can try too: 1. Install more energy efficient lighting. This is probably the easiest way to go [...]

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Lower Down Payments To Boost Housing Recovery?

September 1, 2010

I recently read an article on CNBC where the author talked about Bill Gross’s recommendation to lower the down payment requirements for people to purchase homes. He states that in order for housing to play a role in the recovery, it’s paramount to ease the up-front cash requirements. This article brings many questions to mind, [...]

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