ASK BRAD – www.BradSnyder.com at Sierra Vista Realty…. the Property manager.
Have questions about real estate? I can help.
My home has been on the market for 18months…not one offer. Why won’t my home sell? Jonathan, SV
It’s a challenging home sale market for sellers in many areas around the country and Sierra Vista is not as bad however we still have challenges. Sellers who are having difficulty selling have several options.
The first goal is to find out why your home isn’t selling. Ask your listing agent for information about listings similar to yours in your neighborhood that sold within the last three to six weeks.
You need to know the facts about listings that have sold and closed and those that went pending during this period. A pending sale is one where the sellers have accepted an offer, but the sale has not yet closed.
Pending sales are an indicator of the most recent market activity in your price range. If you find that listings like yours have sold during this time period then there is either something wrong with your home or your home isn’t priced right for the market.
Your agent should talk to agents whose buyers considered your home but bought another listing instead. Find out why they didn’t choose your home. If you get feedback that your home doesn’t show well, do what you can to enhance its appeal. You might consider temporarily withdrawing your home from the market during the makeover.
You may discover that your home has an incurable defect, like a location next to a busy street. There’s nothing you can do about this except adjust the price.
In many cases, the main reason a home isn’t selling is the list price. Most sellers have an emotional attachment to their homes. This can cloud their judgment about its current market value. Another factor influencing sellers’ objectivity about the value of their homes is denial.
According to the recent Q4 Homeowner Confidence Survey conducted by Zillow.com, 49 percent of U.S. homeowners didn’t think their homes lost value during the past year. In reality, 74 percent of U.S. homes lost value over the past year.
TIP: Sellers who are serious about selling should adjust the list price of their home as soon as the data indicates that the price is out of line with current market conditions. This is recommended even if the listing has been on the market only for a couple of weeks.
It’s risky to wait to make a price adjustment to see if conditions improve. The market is continually changing. But, this means that the market could deteriorate before it gets better. Waiting to bring the price down so that it’s in line with the market could mean selling for even less.
An insignificant price reduction is unlikely to trigger a sale. To have an impact, the new price should undercut your competitor’s prices so that your home is perceived as the best value in the neighborhood. Usually, a price reduction of less than 5 percent won’t bring about the desired result. Seller’s who make a series of small price reductions can end up chasing a declining market.
The fact is, there is no guarantee that next year will be better. Some economists think that we haven’t yet hit bottom in the housing cycle and that the median price could drop another 10 or 20 percent in 2009 before the market turns around.
Regarding the 500 thousand federal tax exemption on home sales, is this a “one time only” exemption or can i use this tax exemption several times, each time that I sell my house? Mike
Right now, you can use it over again if you meet the qualifications of living in the house an aggregate of 3 of the last 5 years. But, who know what the new administration will bring since this is a HUGE loss to the Feds., but then again, who has equity in a home these days.
I own a property with one other person and want to buy them out. Do I add the cost of the commission I will have to pay when I eventually sell the property and use that in figuring out the final buyout price?
I think this is a matter of personal preference. In my opinion, I would not add the cost of commission. For example, what happens if you choose to never sell the property? Your partner would have shared in a cost that never happens. What if you do sell the property and the value has gone up since you bought out your partner? Are you going to take the future equity into account in coming up with a buy out price and give your partner more than half of what it is presently worth?
In my opinion, you figure out the present value of the property. This should be as accurate as possible. I would suggest paying for an appraisal (and yes, this cost you could take off the top). Take any costs for processing the buyout including present mortgages, divide by 2 and you should have a fair settlement.
What is a realistic number of homes you should view prior to buying? Sue SV
This is an interesting question and one that is very difficult to answer…The short answer is “as many as it takes to find a home for you”.
The long answer is complicated and will likely change depending on your circumstances.
Purchasing a home will most likely be the single largest investment someone ever makes. As such, it is important to make sure you find a home that meets your current, and future, needs.
We tell our buyers to list home qualities and features into three categories:
1) Must Haves — things you simply can not live without
2) Nice to Haves — things that would be nice, but you could do without
3) Can’t Haves — things you simply can not live with.
Armed with a detailed list of these three items, a good agent can include and exclude many homes from your potential search. As more homes are visited, it becomes easier (most of the time) to refine the potential homes that may work for you. Be prepared, sometimes you may find things actually move around in your three categories!
Before you begin viewing homes it is important to discuss in detail with your agent the strategy and approach you will take to find, and view homes. There are agents out there that limit how many homes they will show someone — an utterly ridiculous practice in my opinion.
I’ve heard some agents say “no one should have to look at more than 10 homes before deciding which one to buy”.
Poppycock.
Everyone is different. We’ve helped people who bought a home after looking at 3 houses, and have other people we’ve shown over 100 homes to. It is important not to get into “analysis paralysis” and second-guess everything. It’s also important not to pass up on a home you love “just in case” something better is out there. But by taking a systematic approach to looking at homes, keeping your priorities in order, and working closely with your agent, you can find the home that is perfect for you.
How do you determine the value of a troubled property?
Buyers considering a foreclosure property should obtain as much information as possible from the lender, including the range of bids expected.
It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property’s condition.
It also is possible to do your own cost comparison through researching comparable properties recorded at local county recorder’s and assessor’s offices, or through Internet sites specializing in property records.
How can I save on closing costs?
Studies show that the closing costs, which can average 2 to 3 percent of a total home purchase price, are often more costly than many buyers expect. But there are some ways to save:
* Negotiate with the seller to pay all or part of the closing costs. The lender must agree to this as well as the seller.
* Get a no-point loan. The trade-off is a higher interest rate on the loan and many of these loans have prepayment penalties. But buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.
* Get a no-fee loan. Usually, though, these fees are wrapped into a higher interest rate though it will save you on the amount of cash you need upfront. * Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.
* Rent the property in which you are interested with an option to buy. That will give you more time to save for the upfront cash needed for the actual purchase.
* Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.
How do you choose between buying and renting?
Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property.
There also are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially.
Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.
“For some people, owning a home is a great feeling,” “It does, however, have a price. Besides the maintenance headache, the amount of after-tax money paid to the lender is usually greater than the amount of money otherwise paid in rent,
As for evaluating the risk associated with home ownership, a good property located in growth
What kind of home insurance should I get?
A standard homeowners policy protects against fire, lightning, wind, storms, hail, explosions, riots, aircraft wrecks, vehicle crashes, smoke, vandalism, theft, breaking glass, falling objects, weight of snow or sleet, collapsing buildings, freezing of plumbing fixtures, electrical damage and water damage from plumbing, heating or air conditioning systems, according to the Insurance Information Institute, a Washington, D.C.-based nonprofit group for the insurance industry.
Such policies are “all-risk” policies, which cover everything except earthquakes, floods, war and nuclear accidents.
A basic policy can be expanded to include additional coverage, such as for floods and earthquakes and even workers’ compensation for servants or contractors. Home-based business-coverage, an increasingly popular rider, does not cover liability associated with the business.
Insurance experts recommend that homeowners obtain insurance equal to the full replacement value of the home. On a 2,000-square-foot home,for example, if the replacement cost is $80 per square foot, the house should be insured for at least $160,000.
For personal items, homeowners can increase their coverage beyond the depreciated value of items such as televisions or furniture by purchasing a “replacement-cost endorsement” on personal property.
Some experts recommend an inflation rider, which increases coverage as the home increases in value.
What is a lease option?
When a renter signs a lease with an option to purchase a property for a specific price within a certain time frame, that is called a lease option. In most lease-option situations, a portion of the rent is applied to a future down payment.
Lease options are most popular among buyers who don’t have enough funds for a down payment and closing costs.
Is a low offer a good idea?
While your low offer in a normal market might be rejected immediately, in a buyer’s market a motivated seller will either accept or make a counteroffer.
Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:
* Is the offer contingent upon anything, such as the sale of the buyer’s current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition.
* Is the offer made on the house as is, or does the buyer want the seller to make some repairs or to lower the price instead?
* Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
Can I use an agent for a new home?
Yes, however buyers should be aware of the differences inherent in working with sales agents who are employed by the developer, rather than traditional real estate agents.
Builders commonly require that an outside agent be present, and sign in, the first time a prospective purchaser visits a site before payment of commission even is discussed. At times when buyers use an advertisement to find the development themselves first, builders can refuse to pay any commission regardless of how helpful an agent may become later in the process. It is advisable to call the development first and inquire about their policy on compensating real estate agents if you are using one.
What are some guidelines to follow when trying to find a contractor?
While hiring contractors recommended by friends is usually a safe route, never hire a construction professional without first checking him or her out. If your state has a licensing board for contractors, call to find out if there are any outstanding complaints against that license holder. Also, call your local Better Business Bureau to see if there are any complaints on file.
If you are satisfied with the answers you find there, interview the contractor candidates. Ask what kind of worker’s compensation insurance they carry and get policy and insurance company phone numbers so you can verify the information. If they are not covered, you could be liable for any work-related injury incurred during the project. Also be sure that the contractor has an umbrella general liability policy.
If they pass the insurance hurdle, next check some of their references. A good contractor will be happy to provide as many as you want.
Finally, don’t let yourself be rushed into making a decision no matter how competitive the market may seem. Also, never pay a deposit to a contractor at the first meeting. You may end up losing your money.
What can I afford?
Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. In general, lenders don’t want borrowers to spend more than 28 percent of their gross income per month on a mortgage payment or more than 36 percent on debts.
It pays to check with several lenders before you start searching for a home. Most will be happy to roughly calculate what you can afford and prequalify you for a loan.
The price you can afford to pay for a home will depend on six factors:
1. gross income
2. the amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
3. your outstanding debts
4. your credit history
5. the type of mortgage you select
6. current interest rates
Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (or PITI as it is known). If you have to pay monthly homeowners association dues and/or private mortgage insurance, this also will be added to your PITI.
This ratio should fall between 28 to 33 percent, although some lenders will go higher under certain circumstances. Your total debt-to-income ratio should be in the 34 to 38 percent range.
Can you do the math and show me a example of the financial benefit of not paying cash for a home, but rather paying the monthly mortgage?
Since most people, especially in our current economy, do not have the ability to pay ‘cash’ for their property, financing is the only option. I would say, that the one single benefit with this would be that the interest on the mortgage is one of the few deductions a homeowner has to claim. Not that the government didn’t try several times to take it away ( can you say - thank you to the REALTORS political action committee). There are other benefits, but it is up to each individual & their financial situation to determine.
Six Signs It’s Time For Home Buyers To Buy
If you’re waiting for signs of a housing bottom, join the club. Nobody blows a whistle and say, “It’s time to buy!”
That’s why market timing is an art, not a science, but you can improve your odds of buying wisely.
First, stop paying attention to the national media. Fear has sidelined buyers even in good markets, and that’s exactly when you need to take advantage — before other buyers wise up.
Second, be ready to pounce when you see the home you want.
The time is right to buy when you see these signs in your marketplace:
* Inventories start to decline. That means that the best buys are leaving the market, and best doesn’t necessarily mean cheap. It means the homes with the highest likelihood of profitable resale. Desirable homes will leave the market first.
* Days on market reduce. Days on market refers to the period when a Realtor enters a home in the MLS for marketing to other brokers, until the home sells. When DOMs are shorter, that signals a coming seller’s market. A seller’s market has more buyers than homes, so prices go up and selection goes down.
* Mortgage applications increase. Interest rates recently turned back the clock, causing many homeowners to jump in and refinance. Purchase applications were also up. Either way, that means homes are about to leave the market, so less inventory means firmer prices. Sellers will stop dropping their prices.
* Sold homes go for closer to listing price. In 2007, home prices dipped for the first time in four decades. With a 1.9 percent decline, homes still sold within 97 percent of listing price. When they get to 98 percent, you’d better be ready.
* Prices remain firm or rise. Prices are a product of demand. To attract buyers, sellers reduce their prices and offer more incentives. If homes are selling reasonably well, prices won’t move downward — they’ll go up.
* Incentives disappear. When a market begins to favor sellers, they don’t have to do as much to sell homes. Watch new homes and see if builders are still giving away swimming pools and granite kitchens. If they aren’t, times have changed.
Any change in condition will change others, so again — be ready. Now’s the time to buy a better house while prices are low, interest rates are low and inventory is still high.
We’re going to take a quick break, You can e-mail your questions to brad@bradsnyder.com. You’re listening to “Open House” on KTAN1420am. I’m Brad Snyder.
Commercial Break (4 minutes)
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Welcome back to “Open House”. My name is Brad Snyder and we have talking about home buying.
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Closing thoughts:
Thanks for joining us today on “Open House” and e-mail your real estate questions to brad@bradsnyder.com and make it a great day!!
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