How to Evaluate an Offer on Your Home

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For most homeowners selling their home the thought of negotiating an incoming offer is a matter of settling in on a price that both sides can agree upon.  But did you know that there is another key aspect of negotiations aside from price that could have even greater impact on the sale?  The terms of your contract hold equal weight and importance as price in the sale of your home and are critical to a successful sale.

Here are five essential things to consider when navigating through the negotiation process after an offer comes in on your home.

Preapproval

After the housing market crashed in 2007 lenders, buyers and sellers have proceeded very cautiously. Lenders are staunchly following stringent requirements, buyers and sellers are savvier than ever before and what seemed like formalities in the process before are now becoming necessities.  Preapprovals are one of the things that did not always need to be done in advance of buyers finding a home. But as you receive your offer on your property, be sure that your buyer has a preapproval from a reputable lender.  The letter should indicate what the buyer can afford and how much the lender is willing to loan them, assuming they meet all requirements at the time of application.

Down Payment

One of the requirements lenders have today is to have an appraisal done on the home to equate its value with the selling price.  Unless the buyer has a significant down payment available, a less than ideal appraisal can stand to affect the sale altogether, even causing the deal to break down.  Check to see how much your buyer is able to put down on the house and add up the down payment with the loan amount to see if they equal your asking price.

Existing Home

Does the buyer have an existing home they need to sell?  This can be a problem for you as a seller if they want to include a contingency in the contract that absolves them from the commitment of buying your home if their home does not sell.  This can wreak havoc on the sale of your property, as it would require you to leave the terms of your sale up to the success of another sale.  It would be best to avoid offers that include existing home contingencies.

Closing Date

When does the buyer want to close on the home?  If the requested closing date extends beyond 90 to 120 days then it might be time to reconsider the offer.  Lenders have timing guidelines that dictate a 45-day policy, within which buyers must apply for a loan before closing.  Anything longer than that would get in the way of the lenders’ policy leaving the seller hanging in limbo during those off weeks.  When a buyer cannot meet the contractual obligation to get a commitment within 45 days, it might be a good idea to forego the offer altogether rather than to risk the sale.

Cash Transaction

Some buyers offer cash rather than opt for financing and though it is an attractive offer at first, you need to make sure that the buyer has the cash.  Asking your Realtor to verify the availability of those funds will become a necessary additional step before you can move on in the offer.  In some cases, buyers opt for alternative financing and when the time comes to verify the funds they are unable to do so.  The risk is too great so unless you can be sure the cash is there, it is a better idea to move on to the next offer.

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Navigating through offers is a tricky process – especially in today’s market. It is no longer just a matter of coming to agreement on a sale price, rather both parties must agree to all aspects of the terms.  For customized guidance on your real estate endeavors, contact us today!

Are Bi-Weekly Mortgage Payments Worth the Time and Effort?

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In most cases, yes! It’s essentially a process by which you make extra payments on your mortgage. That way, you save interest costs and pay off the loan faster.

How Does It Work?

You make a payment to your lender every two weeks instead of once a month. This means that each payment is equal to half of the monthly amount due. The result – you’re paying the equivalent of 13 full payments rather than the usual 12.

It gets even better! The full amount of the extra payment is applied toward the principal. And because the principal balance is the amount on which interest is calculated, paying down principal results in a reduction in accrued interest!

Let’s look a traditional payment monthly schedule vs. a bi-weekly schedule so you can see exactly how it works.

Example 1: Traditional monthly payments

Let’s assume you have a loan balance of $250,000 with a 6 percent interest rate and a 30-year loan term. In this example, your monthly payments are $1,498.88. So, over the life of the loan, you’d pay a total interest of about $289,595.

Example 2: Bi-weekly payments

Using the same loan balance and terms described above, the difference would be the following:

• $749.44 paid every two weeks

• About $225,490 paid in total interest

• This results in a savings of more than $64,000 in interest!

• In addition, the loan is paid off in 24 rather than 30 years

Bi-monthly payments are still a good strategy if you’re an individual who doesn’t plan to keep your house for 24 or 30 years. Why? Because bi-weekly payments still reduce principle, even over a short period of time.

For example, in the first year, the principle is reduced by nearly $1,600. And, at the end of the fifth year, the principle amount has been reduced by about $9,000!

How Do I Arrange Bi-Weekly Payments?

The first task is to contact lenders to find out if they do offer a bi-weekly payment schedule.

If they offer one, ask what the participation requirements are. In typical situations, lenders require you to have payments automatically withdrawn from your bank account since they dislike processing checks every two weeks.

Often, it’s the case that a one-time fee is charged for this service. The fee can be minimal or be in the several-hundred-dollar range, depending on the lender.

So, after all these benefits, how can there possibly be disadvantages to bi-weekly mortgage payments?

Well, the first disadvantage relates to a situation I mentioned above - the lender’s fee is very expensive for the service provided. In such a case, the costs may outweigh or cut down your overall savings.

A second disadvantage occurs when paying bi-weekly is too hard on your budget. Upfront, you need to make sure that you have the money available for the increased payments.

The final potential disadvantage relates to the length of time you plan to stay in your home. That can affect your overall savings on interest.

I recommend that you weigh the pros and cons of bi-weekly mortgage payments by using one of the many online calculators. Just enter your numbers and the calculator will give you a comparison.

If you’d like the assistance of an expert on the subject, contact us immediately!

The Housing Market Finds Its Strength

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2012 was a great year thanks to a very active real estate market.  According to year-end reports, we’re seeing a turnaround.  One sign of strength was the number of houses that sold.   Overall, home sales grew by 16% from 2011 to 2012 with our office seeing a 30% increase.  This definitely indicates consumer confidence.  Top off increased home sales with a step in the right direction—an increase in the average sales price of 1% from 2011 to 2012.  It’s the first time we’ve seen an increase since 2006, so that’s encouraging.  

At the same time the number of homes for sale is very low and yet we have good demand from buyers.  What does this mean for you?  If you want to get top dollar for your property, you should take advantage of the low inventory.  Here’s the thing:  supply and demand affect what you’ll get for your home.  When everyone who has been thinking about selling their home puts their home on the market is not the time to dive in—if you want to get the most out of your home.  If you wait until spring (the typical time people put the For Sale sign up), you’ll have lots of homes to compete with.  And when the supply of homes goes up, the price you’ll get for your home inevitably goes down.  At the end of the day, you have a better chance at success if you decide to sell now, instead of waiting until all the Joneses get into the market.

Keep in mind that the mortgage loan rates are still fantastic, making buying a home more affordable than ever.  A 30-year fixed-rate mortgage hovered at record-low rates during 2012, but the rates won’t last forever, so there’s not a better time to buy than now.

Next time, we’ll talk about short sales and foreclosures and what we see happening in 2013.  All in all, the market looks good.

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If you are interested in buying or selling your home and want to get in on record-setting low interest rates, contact us today at (760) 873-4161 or randi@mysierrahomes.com or dawong1@tellis.org so we can build a strategy to get you the results you want.  We’d be happy to assist you. 

Happy 2012 Holidays and Warm Season’s Greetings!

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To all our cherished friends, neighbors, family and clients – we are so proud to have been able to work with you and be a part of your lives! As we end this year and turn to the exciting time and events that 2013 holds, we just wanted to take a moment to thank you for all that you bring to our lives.

We have some really great plans in the coming year to bring more success to all your real estate endeavors. And with each transaction that makes it to the closing table in the coming months and years ahead – we know that there will continue to be new and exciting things to follow for all of us.

On behalf of the entire group – Happy Holidays, Season’s Greetings, Peace and Joy!

What's a Real Estate 'Short Sale' and Why Should I Buy One?

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The best way to explain a short sale is with an example:

Assume a homeowner has an unpaid loan mortgage balance of $200,000, but the property will sell for only $175,000. The lender holding the mortgage agrees to sell the house for the $175,000 amount, which, of course, leaves it “short” of the full amount of $200,000. Thus, the name “short sale!”

Obviously, lenders don’t like short sales since they’re not in business to lose money. But such situations do occur for various reasons often related to “hardship” situations. Examples include:

• Permanent injuries
• Financial insolvency
• Job layoffs, etc.

This is a sad situation for the homeowner, but it does offer an opportunity for you to pick up a bargain. However, there are several potential downsides you should be aware of before you make an offer.

Pitfall 1: Allow time for the lender’s decision.
Once your offer is accepted by the seller, the contract will be sent to the seller’s lender for approval. This process can take anywhere from 2 to 12 months, and there’s oftentimes no way to know beforehand exactly how long the lender will take.

Pitfall 2: The lender is under no obligation to accept the short sale.
Often times, lenders will come back with a counter of a higher price, or will sometimes reject the offer outright. There is no way to know beforehand exactly what the lender is thinking. This risk can be reduced by pre-qualifying the seller and making sure he or she has a genuine hardship, and by making sure you offer close to market value.

Pitfall 3: The seller must be committed to the process.
A great deal of paperwork and commitment will be required of the seller. There have been cases where the seller does not complete everything that is necessary and causes the lender to reject the deal. Additionally, there have been cases where the seller backs out to declare bankruptcy. Make sure the seller is committed to the process before you begin!

Summary

You can pick up great bargains in the short sale market, but you have to be very knowledgeable and very patient! And, as mentioned earlier, there are risks and often times you will face disappointment. Hiring a professional realtor who has experience with the ins and outs of short sales can help reduce these risks.

Tips for Pre-Sale Preparedness

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What do we do when we are looking for love, go out to meet others and attract their interest?  We make sure we look our best, present our best effort and highlight our endearing qualities to “reel in” the perfect catch.  The real estate market is no different.  When you are selling a home, you are looking for the perfect buyers to show interest in your home and you hope to share with them what it is you love about the house.

Like meeting a new person in the dating scene, selling a home can be a hit or miss game but unless you make the effort to present your home in the best light, you may be in for a string of not-so-perfect buyers that are less than interested in making an offer.  Here are some things you can do to make sure that buyers get that twinkle in their eye when they first set their sights on your home.

Make Them Love It At First Sight

The old adage about not judging a book by its cover certainly does apply to properties but the last thing you want to do is lose a potential sale because you haven’t paid attention to first impressions.  Most homeowners these days have watched some HGTV and one of the things that come up in many of their shows is “curb appeal”. Curb appeal refers to how attractive or enticing the exterior of a home is in terms of landscaping, the driveway area, front porch, entryway, garage and other exterior features.

It goes without saying that you should repair any damage and clean up areas that are out of sorts.  Adding soft touches like some flowers or even some professional landscaping can also make a world of difference in buyers’ impressions of the home.  If you are showing a home after dark, one thing you can do is to turn on exterior lights, creating an appealing peek through as people first drive up to the home.

Keep Things Classic, Clean and Clutter-Free

Nothing is more of a turn off to buyers than a home filled with too much stuff. The last thing buyers want to see is closets and counter space bursting at the seams with too many things, an over-abundance of personal items or a mismatched and unattractive arrangement of furniture.  Classic, simple décor with clean lines and neutral colors is most appealing. Not only does this allow them to see the actual house but it also gives them the opportunity to visualize their own customization in the space. 

Walk through the home and remove all extra items that are lying around, clear off kitchen counters and remove all personal items from bathrooms and other surfaces.  Imagine walking into the perfect hotel room – while looking lived-in, the space is still elegant without too many things crowding the space. 

Highlight the Home’s Features

Whether showing off shiny granite countertops, impeccable resurfaced wood floors or displaying the backyard pool – it is important for buyers to be able to see all that the home offers in terms of amenities and features.  If the walkout basement is a strong selling feature, you could clear the area and pose potential uses for the space such as making it a media room or workout area.  When buyers see versatility with which the space is utilized it will create more interest in your home.

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Remember, buying a home is just like finding a new love.  There must be chemistry.  And unless you make the effort to present the home in its best light, chances are you will not find the perfect buyer.

Market Update - September 2012

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As we transition into the final quarter of the year, we are seeing some positive changes in our marketplace. Overall, things are headed in the right direction. Plus with the 2012 Presidential Election around the corner there are some good things to be expected with the economy. Taking a look at the number of available properties on the market, the time it takes for homes to receive an offer, interest rates and more – we can safely say that things are turning around. Here is a closer look at these statistics with respect to these important aspects of the market.

Fewer Homes Available on the Market

Looking at the same time last year, we are seeing fewer homes available on the market. What this is does is to increase demand which in turn then acts to increase home prices. This trend has been seen across the nation and is emulating in our own neighborhoods as well – paving the way for an even stronger market in the months ahead.

Number of Sales Continue to Rise

This year we have seen an increase in the number of sales with 194 till date as opposed to 184 in 2011 within the same time frame. This indicates better consumer confidence as well as buyers tapping into the resources and programs out there available to them. Buyers are eager to lock in historically low interest rates and sales are happening.

Short Sale Process Becoming More Streamlined

There have been some recent changes on a national level in terms of short sales where the National Association of Realtors’ President engaged in talks with the FHFA to help simplify the short sale process. In our local marketplace, short sales have been moving faster and relatively smoothly – owing to banks’ desire to shorten escrow time frames. Conversely, we are seeing an increase in the number of short sales however with smoother processing it will likely be less cumbersome.

Interest Rates Still Very Low

We are still seeing all time low interest rates that are making it more affordable than ever before to own a home. Right now buyers can get anywhere from 3.5% to 4% on a 30-year fixed rate loan. In addition, there are mortgage programs where buyers are only required to make a 3.5% down payment, making it possible for a much wider spectrum of buyers to own a home.

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All in all, we are looking at good market conditions. The number of days it takes to sell a home is shorter (just 65 days) in our office than our region’s average of 100 days. If you have been on the fence about selling your home, now is a good time to re-evaluate your situation with how it relates to the factors mentioned in this article. Without a doubt, this is also still the best time to buy a property considering prices and interest rates.

For a custom consultation to discuss your needs, contact us today – we welcome the opportunity to serve you!