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Buyers & Sellers

Common Questions for Sellers

How long will it take to sell my home?

That is THE QUESTION, isn’t it! There are three main factors that affect a property’s time on the market: location, condition, and price.

  1. Location is the one thing that you cannot control in the home selling process. In conjunction with condition and price, people choose a home based on the location and accessibility of the property. In many cases, homes will sell faster in desirable neighborhoods because the demand is high. Take into consideration what the demand is to live in your neighborhood. Your REALTOR® can provide information on yours and surrounding neighbourhoods to help you assess this factor.
  2. The condition of your property is also a major contributing factor to the time it will take to sell. When evaluating a home, buyers will first assess the structural condition of items such as walls, ceilings, floors, doors and windows. They will want plumbing and electricity to work efficiently. They will then consider paint, carpets and floor coverings. The front and back yards should be in reasonably good shape. If there is major damage or deterioration to any of these items, buyers will likely hesitate in making an offer. Discuss ways to cosmetically improve your home for a more rapid sale with your REALTOR® professional.
  3. Pricing your property to sell in the current market is absolutely crucial. Obviously, the condition and location of your property should be major considerations when deciding on a price. If your home is priced too high, it will likely remain on the market longer, resulting in a lower final sales price. Your REALTOR® can guide you on appropriately pricing your property for the shortest listing time with maximum profits.

There are several additional factors that can affect the speed of a sale including:

  • Local supply and demand
  • Marketing
  • Closing terms

Is there a surplus of homes for sale in your area? Are technology tools and networking resources being utilized to market your property? Are your closing terms favorable to buyers? The right REALTOR® will be able to coach you in dealing with each of these things to ensure the quickest possible sale.

Unfortunately, there is no magic time frame when it comes to selling real estate. Some properties sell before a sign hits the front yard, and others may sit for months before the first offer comes in. Your REALTOR® can provide you with the average days on the market for properties that have recently sold in your neighborhood; however it is important to remember that the variables affecting this data are not detailed in these comparables. Your REALTOR® will most likely have viewed a majority of the properties included in the comparables and can give you a better idea of why a specific property sold in the time frame recorded.

Do not to get discouraged if a sale takes longer than you anticipated. Instead, try to analyze the reasons your property is not selling and ask your REALTOR® what you can do to facilitate the process.

This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on selling your individual property.

Is there a best time to sell my house?
Property sells year round. It is mostly a function of supply and demand, as well as other economic factors. The time of year you choose to sell can make a difference in the amount of time it takes and the final selling price. Weather conditions are often a consideration in some states than in other parts of the country. Generally the real estate market picks up in the early spring. During the summer, the market usually slows. The end of July and August are often the slowest months for real estate sales. The strong spring market often places upward pressure on interest rates, many prospective home buyers and REALTORS® take vacations during mid-summer. After the summer slowdown, sales activity tends to pick up for a second, although less vigorous, season which usually lasts into November. The market then slows again as buyers, sellers and REALTORS® turn their attention to the holidays. The supply of homes on the market diminish because sellers often wonder whether or not they should take their homes off the market for the holidays. There are still buyers in the market place, but now those buyers have fewer homes to choose from. Those homes on the market at that time have considerably less competition. Generally speaking, you’ll have the best results if your house is available to show to prospective buyers continuously until it sells. 
Are there important factors to consider when selling a home?
The two most important factors are price and condition in selling a home. The first step is to price it properly. Then, go through the house to see if there are any cosmetic defects that can be repaired. A third factor is exposure. It is also important that the home gets the exposure it deserves through open houses, broker open houses, advertising, good signage and listing on the local multiple listing service, as well as the internet. Choose the real estate REALTOR® that you believe will get the job done, not the one that quotes you the highest price – sometimes just to buy your listing.
How much is my home worth?

There are two methods many people use to determine their homes value, an appraisal and comparative market analysis.

Appraisals vary in cost and are defendable in court. They average about $300 for a single family home and more on multi-family dwellings. Appraisers review numerous factors and base information on recent sales of similar properties, their location, square footage, construction quality, excess land, views, water frontage and amenities such as garages, number of baths, etc.

A comparative market analysis on the other hand is an informal estimate of market value performed by a real estate REALTOR® or broker. It is based on sales and listings that will compete with your property that are similar in size, style and location. A range of values will be determined thus arriving at a probable market value. Many REALTORS® offer a free analysis anticipating they will have a new client.

The analysis or opinion should be in writing and should involve professionally accepted appraisal practices.

Some individuals do their own cost comparison. It may take several hours of research at the county recorders office, where there will be indexes to match street addresses and parcel numbers. Once matches have been chosen a tax card can be used to find the assessed value, size, style, number of rooms, baths, etc.

 

Determining the Market Value of Your Home

Now that you have made the decision to sell your home, it is time to determine its asking price. I am here to assist you with the procedure by which it is calculated. Should you price your home too low, you could potentially cheat yourself out of thousands of dollars. Conversely, if you price your home too high, potential buyers will bypass it in favor of something more reasonably priced. Leaving your home on the market for too long could have the adverse effect of giving it an unfavorable reputation. The object is to choose a price that is neither too high, nor too low. The asking price should be both accurate, given its market value, and fair. Count on Scarlett to know the Okanagan market!

What should I do to get my house ready?
The way you live in a home and the way you sell a house are two different things. First and foremost, “declutter” counter tops, walls and rooms. Too many “things” make it difficult for the buyer to see their possessions in your rooms or on your walls, however don’t strip everything completely or it will appear stark and inhospitable. Then clean and make attractive all rooms, furnishings, floors, walls and ceilings. It’s especially important that the bathroom and kitchen are spotless. Organize closets. Make sure the basic appliances and fixtures work and get rid of leaky faucets and frayed cords. Make sure the house smells good: from an apple pie, cookies baking or spaghetti sauce simmering on the stove. Hide the kitty litter, and possibly put vases of fresh flowers throughout the house. Pleasant background music is also a nice touch. The second important thing to consider is “curb appeal.” People driving by a property will judge it from outside appearances and decide then as to whether or not they want to see the inside. Sweep the sidewalk, mow the lawn, prune the bushes, weed the garden and clean debris from the yard. Clean the windows (both inside and out) and make sure the paint is not chipped or flaking. Also make sure that the doorbell works. 
Should I make repairs?
Minor repairs before putting the house on the market may lead to a better sales price. Buyers often include a contingency “inspection clause” in the purchase contract which allows then to back out if numerous defects are found. Once the problems are noted, buyers can attempt to negotiate repairs or lowering the price with the seller. Any known problems that are not repaired must be revealed as a material defect. You do not have to repair the problem, only reveal it and the house should be appropriately priced for that defect.
What are my obligations to disclose?
Items sellers often disclose include: homeowners association dues: whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as any restrictions on the use of property, including but not limited to zoning ordinances or association rules. It is wise to review the seller’s written disclosure prior to a home purchase and ask questions if it does not satisfy you entirely.
Must I disclose the terms of other offers?
No, according to experts, sellers do not have to disclose the terms of other offers. You may disclose the existence of other offers, so that all parties are aware that they should be submitting their best offer.
Are there standard contingencies in an offer?
Yes, the two basic contingencies in a purchase contract are financing and inspections. 
Should I be flexible in granting contingencies?
That often depends on if you are in a buyer’s or a seller’s market, the condition of your home, the price you hope to get, how motivated you are to sell, as well as the quality and quantity of the offers you are getting. Any contingencies that are negotiated are written into your contract. Both the buyer and seller can place requirements on the table during the negotiation phase. A frequently seen contingency is regarding the sale and closing of the buyers home before they can purchase yours. Whether this requirement is reasonable, or even achievable, depends on the individuals involved. Financial capabilities usually play a major role in negotiations. Few people can afford to own two homes simultaneously, except for some all-cash buyers.
What do I do if my house isn't getting activity?
Even in a slow market, price and condition are the two most important factors in selling a home. If a home is not getting the activity it needs in order to sell it is probably because it is overpriced for the market. The first step is to lower the price. Then go through the house and see if there are cosmetic defects that you missed that can be repaired. The second step is to make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage and a listing on the multiple listing service and internet. A third option is to remove the home from the market and wait for overall housing conditions to improve and catch up to the price you are asking. Finally, frustrated sellers who have no equity and are forced to sell because of a long term illness, divorce or financial considerations should discuss a short sale or a deed in lieu of a foreclosure with their mortgage lender and their REALTOR®. A short sale is when the seller finds a buyer for a price that is below the mortgage amount and negotiates the difference with the lender. In a deed-in-lieu-of-foreclosure, the lender agrees to take the house back without instituting foreclosure proceedings. These are considered more radical options than lowering the price.
Is it possible to sell for less than my mortgage?
A “short sale” is for home sellers who are upside down on their mortgage. The home’s value is less than the amount of the mortgage. A hardship must exist, then sometimes home owners can negotiate with lenders and split the difference between the sale price and loan amount, which still must be paid. A short sale is often complicated. If the loan has been sold into the secondary market, the lender will have to get permission from Fannie Mae or Freddie Mac to negotiate a short sale. Fannie Mae, the secondary market giant, has a policy of looking at each loan individually. If the loan was a low-down-payment mortgage with private mortgage insurance (or PMI), the lender needs to involve the mortgage insurance company that insured the low-down loan. Once all these issues are resolved or negotiated, the house may be sold.
How will a foreclosure effect my credit?
Without a doubt a property foreclosure is one of the most damaging events in terms of the borrower’s credit history. Talking to the lender who holds the mortgage note on the property might provide specific answers as the possible courses of action available to the borrower, as well as to the effects those actions might have on that person’s credit report. In terms of the effect on credit history, a deed in lieu of foreclosure or a short sale are not as adverse an event as is the forced foreclosure. However, even after a foreclosure or bankruptcy, there are lenders who are providing loans after 7-10 years have lapsed. The borrower will have many obstacles to overcome and will need to provide a good paper trail to the lender proving they are once again credit worthy.
How long will a bankruptcy or foreclosure stay on my credit report?
Bankruptcies and foreclosures can remain on your credit report for 7 to 10 years. However, there are lenders who will consider an applicant who went through a bankruptcy as recently as two years ago, as long as good credit has been re-established. Much will depend on when the bankruptcy was discharged and what kind of credit a borrower has re-established since then. The longer ago the discharge occurred, the better off a loan applicant will be. Another factor considered will be the circumstances surrounding the bankruptcy. If a borrower went through a bankruptcy because his or her company had financial difficulties due to downsizing or merger resulting in job loss, that means one thing to a lender. If, however, a borrower went through bankruptcy because of overextended personal credit lines from living beyond their means, that means quite a different thing. If you have additional questions consult “Rebuild Your Credit: Law Form Kit,” Nolo Press, Berkeley, California.
Is it possible to refinance after bankruptcy?
Although a good idea, it is usually difficult to refinance after a bankruptcy. If you have been struggling but keeping current on your payments the lender may be accommodating. You first need to contact them and explain your situation. They may suggest or perhaps you can suggest a way to work out alternative payments until you recover.
Am I priced to sell?

Attracting buyers is the name of the game. As a seller, you have two goals:

  1. To get the most money possible.
  2. To sell as quickly as you can.

Be realistic. Price is the number one factor that most home buyers use in determining which homes to view. Although the price is set by you, the seller, the value of the home is determined by the buyer. Don’t allow your enthusiasm to affect your judgment and lead to overpricing, a mistake you can’t afford to make.

What affects your asking price?
  • Urgency. How quickly must you sell?
  • Competition. Are there just a few or many homes available in your price category and area?
  • Available Financing. Does your home come with an assumable loan that is below today’s rate? What are the current home loan interest rates? What financing alternatives are available for your home and area?
  • Competitive Market Analysis. Do you know what similar homes in the area sold for within the last six months?
  • Expenses. What are your selling costs?
What doesn't affect your asking price?
  • Original Cost. Your price is determined by today’s market.
  • Investment in Improvements. Potential buyers will evaluate you home (i.e. wallpaper and carpet) and may include the costs to remove or replace in their offer.
  • The Cost to Build Your Home Today. A replacement value is determined for insurance purposes only.
  • Personal Attachment. Prudent buyers purchase based on their emotions, not yours.
  • Neighbour’s Claims. Don’t listen to what your neighbours tell you is the fair market value for you home. Other homes in your neighbourhood may not be as similar as you think. Also the terms accepted by both the buyer and seller greatly affect the sale price.
What happens to an overpriced house?
  • You’ll Help Sell the Competition. The “correctly priced” homes look even better if yours is overpriced. Most buyers are competitive shoppers.
  • Your Home Will Stay on the Market a Long Time. Did you know that 80% of your potential buyers will see your house in the first four to six weeks? If you don’t sell them then, it takes approximately three months to replace them with an equal number of newcomers.
  • You’ll Lose Market Interest and Qualified Buyers. Serious buyers use the value, quality and price of similar properties as deciding factors.
  • A Negative Impression is Created. People will wonder why your house is still on the market – they’ll believe something is wrong with your home.
  • You (The Seller) Would Lose Money. You may have to make extra mortgage payments as well as incur taxes, insurance and unplanned maintenance costs.
  • You (The Seller) May Have to Accept Less Money. Studies show that the longer a house is on the market, the greater the discount off the list price. Often a seller will accept less than fair market value in order to sell because of an approaching deadline.
  • There is the Potential for Appraisal Problems. The appraiser from your buyer’s lending institution must agree that the home is worth the asking price. If the appraiser believes the price is inflated, the loan may not be approved.
What is market value?

Market value is the highest price that a willing buyer and seller, not under any compulsion or outside pressure, agree upon. Determined by outside influences, such as social and political factors, as well as the economy, market value is the price that your home should sell for in the current market. Your home’s fair market value depends on a number of other factors including, how it was built, its location, the condition it is in, the size of both the house and the property it sits on, as well as the price of other similar homes that have recently sold in your neighborhood. The price you choose will also be determined by the tempo of the market, the public’s confidence in the current economy, and competition within the market. Ultimately, the market will determine the value of your home, not you, making the services of a trained professional who understands it and all of its complexities all the more worthwhile. Don’t hesitate to ask Scarlett any questions you may have – her knowledge could save you thousands of dollars.

Common Questions for Buyers

What price home can I afford?

As a ‘rule of thumb’ you can afford to buy a home equal in price to twice your gross annual income. More precisely, the price you can afford to pay for a home will depend on six factors:

Your income.

The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender.

Your outstanding debts.

Your credit history.

The type of mortgage you select.

Current interest rates.

Lenders will analyze your income in relation to your projected cost of the home and outstanding debts. This will determine the size loan you can borrow. Your housing expense-to-income ratio is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your loan, property taxes and hazard insurance. The sum of these costs is referred to as ‘PITI.’

Monthly homeowner association dues, if you’re purchasing a condominium or townhouse, and private mortgage insurance are added to the PITI. Your housing income-to-expense ratio should fall in the 28 to 33 percent range. 28 percent of your gross monthly income is allotted toward PITI. 33 percent of you gross monthly income is allowed for PITI and all long term debt. Some lenders will go higher under certain circumstances. Your total income-to-debt ratio should not exceed 34 to 38 percent of your gross income.

How do I find out about the condition of the home I'm considering?

First and foremost it is strongly recommended that you hire a professional person to inspect the home. Many inspectors belong to the American Society of Home Inspectors (ASHI). They attend seminars and stay abreast of the latest developments.

Secondly some states require sellers to complete a disclosure form revealing everything known about their property. Home sellers are required to indicate any significant defects or malfunctions existing in the home’s major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.

The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachment of easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.

Also look for settling, sliding or soil problems, flooding or drainage problems.

People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions, if the homeowners association has any authority over the subject property and ownership of common areas with others. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.

How low can I consider offering?

There are always some sellers who for some reason must sell quickly, however in general, a very low offer in a normal market might be rejected immediately. In a strong buyer’s market, the below-market offer will usually either be accepted or generate a counteroffer. If few offers are being made, an outright rejection of offers becomes unlikely. In a strong seller’s market, offers are often higher than full price. While it is true that offers at or above full price are more likely to be accepted by the seller, there are other considerations involved:

Is the offer contingent upon anything, such as the sale of the buyer’s current house? If so, such an 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 before the close of escrow or make a price concession 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.

Are there any requests for seller concessions, such as asking the seller to contribute towards points and/or closing costs? If so, the offer is not really full price.

How and what do I negotiate?

Different sellers price houses very differently. Some deliberately overprice, others ask for pretty close to what they hope to get and a few (maybe the cleverest) underprice their houses in the hope that potential buyers will compete and overbid. A seller’s advertised price should be treated only as a rough estimate of what they would like to receive.

If possible try to learn about the seller’s motivation. For example, a lower price with a speedy escrow may be more acceptable to someone who must move quickly due to a job transfer. People going through a divorce or are eager to move into another home are frequently more receptive to lower offers.

Some buyers believe in making deliberate low-ball offers. While any offer can be presented to the seller, a low-ball offer often sours a prospective sale and discourages the seller from negotiating at all. And unless the house is extremely overpriced, the offer probably will be rejected anyway.

Before making an offer, also investigate how much comparable homes have sold for in the area so that you can determine whether the home is priced right.

Down Payment: Should I put more or less down, if we can afford it?

Various types of loan programs exist. Some require a minimum of 3 percent down payment (FHA Loans) or 5 percent on conventional loans. Veterans can purchase with no money down (VA Loan).

Putting down as little as possible allows buyers to take full advantage of the tax benefits of home ownership. Mortgage interest and property taxes are fully deductible from state and federal income taxes. Buyers using a small down payment also have a reserve for making unexpected improvements. It may be more prudent to make a larger down payment and thereby reduce the amount of debt that must be financed. Once a buyer puts twenty percent or more as a down payment on their desired home, they will waive the requirement for mortgage insurance.

Mortgage insurance is a requirement on all loans, with the exception of veterans guaranteed loans. That means a full years premium for the insurance is collected ‘up front’ at the closing of escrow, plus you will be paying monthly as part of your PITI, principle-interest-taxes-insurance.

What is title insurance?

Title insurance is a form of insurance in favor of an owner, lessee, mortgage or other holder of an estate lien, or other interest in real property. It indemnifies against loss up to the face amount of the policy, suffered by reason of title being vested otherwise than as stated, or because of defects in the title, liens and encumbrances not set forth or otherwise specifically excluded in the policy, whether or not in the public land records, and other matters included within the policy form, such as lack of access to the property, loss due to unmarketability of title, etc. The title policy form sets forth the specific risks insured against. Additional coverage of related risks may also be added by endorsements to the policy or by the inclusion of additional affirmation insurance to modify or supersede the impact of certain exceptions, exclusions or printed policy ‘conditions’. The policy also protects the insured for liability on various warranties of title.

In addition, the policy provides protection in an unlimited amount against costs and expenses incurred in defending the insured estate or interest.

Before it issues a title policy, the title insurance company performs, or has performed for it, an extensive search, examination and interpretation of the legal effect of all relevant public records to determine the existence of possible rights, claims, liens or encumbrance that affect the property.

However, even the most comprehensive title examination, made by the most highly skilled attorney or lay expert, cannot protect against all title defects and claims. These are commonly referred to as the ‘hidden risks’. The most common examples of these hidden risks are fraud, forgery, alteration of documents, impersonation, secret marital status, incapacity of parties (whether they be individuals, corporations, trusts or any other type), and inadequate or lack of powers of REALTORS® or fiduciaries. Some other hidden risks include various laws and regulations that create or permit interests, claims and liens without requiring that they first be filed or recorded in some form so that the potential buyers and lenders can find them before parting with their money.

Since the cost for home owner’s title insurance is usually sharply reduced when taken simultaneously with the issuance of a purchase money mortgage, the risk is one that a well-informed buyer should not take. In fact, several states have adopted statutory requirements which require a notice to home buyers as to the availability of title insurance similar to that being obtained by their purchase money mortgages.

What steps should I take when looking for a home loan?
It is strongly recommended that home buyers are prequalified or pre-approved for a loan as their first step in the process. By being prequalified, a buyer knows exactly how much house they can afford. They can make more informed decisions in the market place. This does not mean they will definitely get the loan because their credit reports, wages and bank statements still need to be verified before you can receive a commitment from the lender for the loan. Almost all mortgage lenders prequalify people at no charge. Many of them will even do it on the internet. In order to be pre-approved, an application will be taken. For a fee, your credit report will be pulled, your employment and income will be verified, your checking and savings accounts will also be verified. In other words, all the necessary documentation will be completed in order for you to obtain a loan. The only things remaining will be for you to find a home, obtain an appraisal on it to prove its value to the bank and perform whatever inspections you may want on the property. This process considerably shortens the time frame to closing. 
Is it possible to negotiate interest rates?

Compare the mortgage charts published in most newspapers.

Occasionally some lenders are willing to negotiate on both the loan rate and the number of points. This isn’t typical among many of the established lenders who set their rates. Nevertheless, it never hurts to shop around, know the market and try to get the best deal. Always look at the combination of interest rate and points and get the best deal possible. This is reflected in what is called the APR or Actual Percentage Rate.

The interest rate is much more open to negotiation on purchases that involve seller financing. Generally, these are based on market rates but some flexibility exists when negotiating such a deal.

Is it better to buy a new home or a resale?

Sales price increases in either type of housing are strongly tied to location, growth in the local housing market and the state of the overall economy.

Some people feel that buying into a new-home community is a bit riskier than purchasing a house in an established neighborhood. Future appreciation in value in either case depends upon many of the same factors. Others believe that a new home is less risky because things won’t ‘wear out’ and need replacement.

“Existing homes have been appreciating a little more than new homes but every once in a while they’re at the same level and sometimes the new home prices go up a little quicker” according to the National Association of REALTORS® (NAR).

NAR figures show the median price of existing homes went up 3 percent between 1994 and 1995; projections are that prices will increase 3.2 percent in 1996 and 1.2 percent in 1997.

New home median prices went up 0.8 percent in 1995 and are likely to increase another 0.5 percent in 1996. For 1997, the group predicts a 1.1 gain in median new home prices.

Fixer-Uppers: Are they good or bad?

Distressed properties or fixer-uppers can be found everywhere. These properties are poorly maintained and have a lower market value than other houses in the neighborhood. It is often recommended that buyers find the least desirable house in the best neighborhood. You must consider if the expenses needed to bring the value of that property to its full potential market value are within your budget. Most buyers should avoid run-down houses that need major structural repairs. Remember the movie ‘The Money Pit’? Those properties should be left to the builder or tradesman normally engaged in the repair business.

Can you borrow the money to repair?

HUD’s Rehabilitation loan program, Section 203(K) is a program designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible.

A 203(K) loan is frequently done as a combination loan. You purchase a ‘fixer-upper’ property ‘as is’ and rehabilitate it. Or, you may refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan.

Investors are required to put 15 percent down. Owner-occupants have a required down payment of 3 to 5 percent. A minimum of $5,000 must be spent on major improvements.

Major repairs can be: a new heating system, roof, replacement windows, etc. You may then also finance additional repairs and improvements i.e.: new carpeting, kitchen cabinets, appliances, etc. You must of course ‘qualify’ for the total amount you will be borrowing through this program.

Two appraisals are required. These appraisals will be on the property ‘as repaired’ not ‘as is’. Plans and specifications for the proposed word must be submitted for architectural review and cost estimation. Once approved mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs.

Is there a good 'return' for my efforts?

Remodeling a home improves its livability and enhances curb appeal, making it more salable to potential buyers. Some of the popular improvement projects are updated kitchens and baths, enlarged master bedroom suits, home-office additions and increased amenities in older homes.

The resale market is often difficult because you are competing with new construction. You need to give your home every competitive advantage you can if you are selling an older home.

Home offices are a relatively new remodeling trend. Adding one to a house often recoups 58 percent of the costs, according to a survey found in a report called ‘Cost vs. Value Report’ in Remodeling Magazine.

Are foreclosures good or bad ideas?

The incidence of foreclosures is cyclical, based on national and regional economic trends.

People can get a rough estimate of the number of foreclosures in a target area by dividing its population by 2,500, according to John T. Reed of Reed Publishing, Danville, Calif.

Buying directly at a legal foreclosure sale can be risky and dangerous. The process has many disadvantages. There is no financing so purchases require cash. The title needs to be checked before the purchase or the buyer could buy a seriously deficient title. The property’s condition is not well known and generally, an interior inspection of the property is not possible before the sale.

Additionally Estate (probate) and foreclosure sales are exempt from some states’ disclosure laws. The law protects the seller (usually an heir or financial institution) who has recently acquired the property through adverse circumstances and may have little or no direct information about it.

How much does my real estate REALTOR® need to know?

Be sure to find out who your real estate REALTOR® is representing before you tell them too much. The degree of trust you have in an REALTOR® may depend upon their legal obligation of representation. An agency working with a buyer has three possible choices of representation. The REALTOR® can represent the buyer exclusively, called buyer agency, or represent the seller exclusively, called seller agency, or represent both the buyer and seller in a dual agency situation. Some states require REALTORS® to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types:

In a traditional relationship, real estate REALTORS® and brokers have a fiduciary relationship to the seller. Be aware that the seller pays the commission of both brokers, not just the one who lists and shows the property, but also to the sub-broker, who brings the ready, willing and able buyer to the table.

Dual agency exists if two REALTORS® working for the same broker represent the buyer and seller in the same transaction. A potential conflict of interest is created if the listing REALTOR® has advance knowledge of another buyer’s offer. Therefore, the law states that a dual REALTOR® shall not disclose to the buyer that the seller will accept less than the list price, or disclose to the seller that the buyer will pay more than the offer price, without express written permission.

A buyer can hire an REALTOR® who will represent their interests exclusively. A buyer’s REALTOR® usually requires a retainer which is refunded once the buyer purchases a house. The amount of the retainer differs from REALTOR® to REALTOR®. A buyer’s REALTOR® can perform enhanced services for the buyer, such as preparing a market analysis on the home they are buying. All information provided to the buyer’s REALTOR® shall remain confidential and will not be relayed to the Seller’s REALTOR

How much do I qualify for?

When buying a home, it is helpful to determine the type of home you’ll like and how much you can afford before beginning your search. Most lenders allocate approximately 28% of your GROSS MONTHLY INCOME to housing expense. Housing expense includes principal, interest, taxes and insurance (PITI). To get an idea of how much you can afford to pay each month for a home, multiply your gross monthly income by 28%.

When coupled with current outstanding loans, the total for your debt service should not exceed 36% of your gross monthly income. Some lenders may have slightly more liberal requirements or loan interest rates which may increase your purchasing power.

Mortgage interest, property taxes, loan fees or “points” are currently tax deductible (up to allowable limits). Points are generally deductible in the year paid. A point equals 1% of the mortgage amount. If you are in the 28% tax bracket, this is equivalent to receiving a 28% discount on your mortgage interest and property taxes. During the first years of the mortgage your tax savings are especially high because most of your monthly payment goes toward loan interest.

What should I offer?

What to Offer

Finding the house you want to make your dream home can be an incredibly exciting moment. Making an offer on that house however, can be a daunting and stressful task. The written offer is a step in the home buying process that requires the finesse, experience and negotiating skills of a REALTOR® professional.

Deciding How Much to Offer

There are several factors to consider when deciding how much to offer: the listing price of the home, the prices of comparable properties that have recently sold, and of course what you can afford.
  • Listing Price: Also called the ‘asking price’, this is a rough estimate of what the seller would like to receive. It is important to consider how long the property has been on the market for and if there have been any price reductions. Other factors that should affect how seriously you consider the listing price include whether the property is a foreclosure or short sale, and if there are multiple offers being presented to the seller.
  • Prices of Comparable Properties: Your REALTOR® can provide you with a list of comparable properties, or ‘comps’ that have recently sold in the area near the property you are about to make an offer on. The most relative and supporting comparables should fall within these guidelines:
    • Sales that have occurred within the last three to six months – the more recent, the better.
    • Sales of properties similar to the one you’re making an offer on, in terms of age, size, and bedrooms and bathrooms.
    • Sales within a reasonable proximity (six to ten blocks in an urban area; consult your REALTOR® in rural areas) of the property you are making an offer on. This radius may need to be reduced if a freeway or other dividing line splits the neighbourhood.
  • What You Can Afford: You should come to the offer table pre-approved. When figuring the total cost of the property, be sure to include closing costs into your budget. Closing costs are typically 2%-5% of the final purchase price.
Once you have considered the factors at hand, it is time to decide on a number. In competitive areas or ‘hot markets’, you may have to offer no less than the asking price. You should be mentally prepared for negotiations, and in some cases even bidding wars, which can erupt among aggressive buyers. In hot markets, properties often sell for 10% to 30% above the asking price. If you are making an offer in a hot market, you may need more than just a well-priced bid. Considering the seller’s needs is the best way to achieve an advantage in the competition. Your ability to close the deal quickly is often an advantage. For example: buying with all cash or having your loan pre-approved tells the seller that you are a serious buyer. Your flexibility and accommodation of seller time frames can also be beneficial. For example: extending the closing time frame for a party that cannot move for several months; or making your offer for the property ‘as is’, meaning you will pay for any needed repairs. In less competitive areas, or ‘cold markets’, you will have more room to negotiate with the seller at a lower purchase price. REO, short sale and Bank Owned properties can often be obtained at great prices, but be prepared for a long and challenging closing process. In any market, you will want to bid to win. Be sure to discuss the best strategy for your offer with your REALTOR®. This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on making a written offer.
Why choose an Accredited Buyer Representative (ABR)?

Until the early 90’s, direct representation of buyers was basically nonexistent. As public interest in the concept began to grow, changes to state real estate regulations were pushed into effect (away from sub-agency and undisclosed dual agency towards direct representation of buyers), and the National Association of REALTORS® (NAR) took notice. In early 1996 the designation was officially recognized by NAR.

Superior buyer representation is now widely available to homebuyers across the country through the ABR designation.

ABR professionals have honed their skills in representing the specific needs of homebuyers throughout the real estate transaction process with comprehensive training, continuing education, keeping informed on issues and trends, and being proactive in consumer awareness.

An ABR professional’s highest mission is to provide homebuyers the high level of representation that was previously only awarded to sellers in a real estate transaction.

Why should I consider a home warranty?

A home warranty is an affordable way to cover the costs of unexpected mechanical failure of a major system or appliance. A home warranty is specifically designed to cover the kinds of repairs that home insurance does not: appliances, plumbing and electrical, air conditioning and furnaces, and pool equipment.

The average annual cost of a home warranty policy is between $250 and $400. Most home warranty companies offer comparable coverage within the same price range. The premium is payable at closing and customarily protects you for one full year. Repairs are typically handled through the home warranty company with a minimal deductible. Often times the cost of the first year premium is offered as an incentive by sellers to solicit the sale of the property.

The age and condition of the home should be a consideration when choosing to purchase a home warranty. A fifteen year-old home with original equipment, versus a two year old home will likely have different financial risks. Your REALTOR® can help you decide if a home warranty policy is right for you based on your individual circumstances.

Homeownership is expensive enough all on its own, without adding the cost of repairs and replacements. When moving into a home where appliances and systems have been previously used, there is always the chance that the general wear and tear, or the way in which they were previously used and maintained, could cause breakdown and/or complete failure. These repairs/replacements can be astronomically costly and often times occur unexpectedly. A home warranty will protect you financially from most of the frequently occurring breakdowns of home system components and appliances.

Discuss your unique needs and concerns with your home warranty representative. If you do not have a trusted home warranty representative, your REALTOR® can refer you to one.

What other costs are involved?
  • Property Transfer Tax – 1% of the fair market value up to and including $200,000, 2% of the fair market value greater than $200,000 and up to and including $2,000,000, and 3% of the fair market value greater than $2,000,000.
  • Lawyer / Notary Fees – Includes your lawyer’s fees and registration of mortgage and certificate of title and disbursements.
  • Appraisal Fee – Some lenders may require an appraiser’s report confirming that the purchase reflects fair market value.
  • House Inspection Fee – When buying a property that is not brand new it is often a good idea to have a property inspection conducted on the property to pinpoint defects. This is not a lending institution requirement
  • Property Tax Adjustment – Based on the “adjustment date,” you may have to reimburse the seller for prepaid property taxes.
  • GST – GST is not payable on some used residential housing. Some buyers may be eligible for partial GST rebates.
  • First Time Home Buyers requirements – For more information, click here.
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