Archive for the 'Buyer and Seller Knowledge Center' Category
Mortgage Payment Is More Important Than Price…..Say What?
January 22nd, 2008 Categories: Buyer and Seller Knowledge Center
You have your home listed along with hundreds of others. What will it take to get a buyer? Reduce the list price? NO! Reduce the buyers monthly payments. But…….
A strategy to consider……help the buyer save money and you will sell your home. But…..
Be smart up front and plan a strategy when you list your home of offering the buyer a reduction in interest rates (buy down) instead of a reduction in your asking price.
What occurs with most offers to purchase from a buyer is a price approximately 5 to 10% (or more) less of your asking price. The initial reaction of sellers is to disregard the offer.
Rethink that strategy. Show the buyer that with you buying down his/her interest rate they save money. How can this occur?
Work with your realtor, banker or mortgage broker and put together a schedule showing the potential buyers the savings they achieve. What will they achieve?
First they will see that with the sellers (your) offer of a buy down of interest they will realize the need for less income to qualify for a loan. Using only numbers would the buyer be impressed by the fact that his/her annual income doesn’t have to be $ 100,000 but could be closer to $ 75,000 to qualify for a loan. You bet! Does it help you? You bet! A very critical point of contract negotiating strategy.
With a buy down strategy the second item that a buyer achieves is a reduction in monthly mortgage payments. Will this be important to the buyer? You bet! Depending on the loan amount buyers can realize $ 100 to $ 500 (or more) less in monthly mortgage payments. Will this impress your buyer? You bet!
And then they can be shown the overall savings in interest that they will achieve over time because of your recommended buy down of interest rate.
What do you get? You sell your home, at the price you want and have a happy buyer.
But you say “it costing me money.” Yes but its money that you would be giving up when you reduce your asking price (remember that 5% to 10% counter offer). You simply have channeled the funds to help you keep a buyer and today “a buyer” is worth more than gold.
Basic information source: Michael Dorr, Mortgage Planner “Should you reduce sales price or reduce buyer’s interest rate.”
Send me your comments regarding this article. Also consider subsribing to the RSS feed. Likewise do send me your email address. Thank you.
| Currently Comments Off
Killer Debt Is Like Quick Sand.
January 4th, 2008 Categories: Buyer and Seller Knowledge Center
With the media attention on foreclosures and credit card debt there are a number of businesses advertising to contact them so they can help people get rid of their debt.
Maybe they can, but most likely they cannot.
But individuals can help themselves to get out of debt at zero cost. All that is needed is the will to get out or reduce debt, a change in attitude and minimize the use of credit.
First to eliminate debt a person has to develop a mind-set of wanting to eliminate their debt. The second thing the person has to do is to write a plan to eliminate all or as much of the debt as possible.
Assuming the mind set is in place, the plan becomes easy.
- List all debt by lender, total amount owed, the interest rate, and monthly payments. (Note example below).
- The next step, list all family expenses and determine which expense can be eliminated or decreased.
A simple task of decreasing an expenditure is to buy a cup of coffee that cost $ 2 instead of $ 5 per day. The individual hasn’t given up coffee, it simply meant finding a place that sells coffee for $ 2 per or less.
Our debt example by vendor/amount owed/interest rate/monthly payment:
Credit card #1 $ 5,000 9% $ 50
Credit card #2 $ 10,000 14.5% $ 100
Credit card #3 $ 2,500 18% $ 50
Mortgage $ 250,000 6.5% $ 1,850 (principle and interest)
Auto Payment $ 25,000 8.5 % $ 375
The Method.
Eliminate the smallest debt amount first (in this case it would be credit card #3).
Add the coffee savings of $ 3 per day or $ 60 per month (5 days per week times $ 3 times 4 weeks) to the payment for credit card #3. Total amount that would be paid per month totals $ 110. Add a note telling the lender that the added payment ($ 60) is to be used to decrease the principal.
If you do not add a note with the payment the money received will be treated as a regular payment with interest being deducted first and whatever is left over going to the principal.
It is critical that you tell them (the credit card company) what it is you are doing. Then each month check to see that it was done as you instructed. If it wasn’t find out why and get the lender to correct the transaction.
Keep paying the minimum monthly amounts on the other cards and debt payment items.
The focus is to pay off on the smallest total amount. Do not worry about the higher interest rates or lowest interest rates just the amount that is due.
The reason to attack the lowest amount is to realize a quicker pay off and see a quick result and accomplishment.
When that debt is paid off reward yourself with a little something…..a movie?
Once credit card # 3 is paid, look at the next lowest amount and in this case it will be credit card #1.
Add to credit card #1’s monthly payment the $ 110 you used to pay off credit card #3. The total payment for credit card #1 now becomes $ 160 per month. As before add a note to the credit card company that the increase payment (in this case the $ 110) is to be directed to the principal.
The same step would be taken to offset the next lowest amount, which is credit card #2. The total payment would be $ 260 per month with (again with note showing that $ 160 going towards the principal).
The next in line would be the automobile and lastly one can attack the home mortgage the same way.
Whatever credit card debt that you create in month while this plan is in place has to be paid off monthly. Otherwise it will not work.
As the credit cards are zeroed out do not close them. Use them knowing that the any monthly use will be paid off each month. And it will help your credit score.
So to get out of debt requires a mind set and secondly, action. When finish you will be surprise as to how much cash you have each month. Why? You are not paying the interest.
How much did it cost you? Nothing. You helped yourself and can take the steps necessary not to get back into debt.
| Currently 1 Comment »
Selling A Home On The Cheap…..
January 2nd, 2008 Categories: Buyer and Seller Knowledge Center
You are planning to market your home and everyone is telling you what to do. I am not going to be any different….except to say “be cheap”.
Paint is the cheapest and easiest thing one can do. Spend the money for a good quality paint. It will do wonders for your home.
What do you paint? Take a look at the kitchen cabinets. If they look worn then paint them a neutral color…..white is OK but there are other colors that can make a kitchens first impressions look great. I have heard but seen that people do paint kitchen cabinets green but I do not think I would recommend that.
After a good coat of paint change the hardware on the cabinets. Kitchen is now done.
You ask about the new counter tops, new appliances. Forget it! If you have to do something look at the bathrooms.
Yep…..paint and replace bathroom fixtures. If the toilet is outdated, replace it. Whatever you do in the bathroom(s) is worth the time and money.
Look outside…..yep, you got it…..paint. Make sure the sidings are all in good shape. If there is one area that needs to be looked at, that would be windows. If you think replacement will help sell the house spend the money on good windows. Windows are called the soul of the home. The recovery cost replacing windows is approximately 80-85% of the cost. Not a bad investment. So do not look for the cheapest windows but get good reasonable priced windows….they will pay for themselves.
Do get a home inspection before you put the home on the market. It is interesting to see the differences between a buyer’s and seller’s home inspection reports. To be sure it can be somewhat revealing when two “experts” come to different conclusions. But from a seller’s stand point knowing what has to be fixed is essential. Sometimes it is far cheaper to replace the furnace than have the potential buyer asking for a $ 10,000 to $ 15,000 credit to complete the sale. What will cost the seller one dollar, the buyer will ask for $ 3 to $ 5 in credit or discount. So an expenditure of $ 2,000 is far better than giving a buyer a $ 10,000 discount on the purchase price.
Why do things on the cheap? First replacing anything in the house is simply to satisfy the owner (seller).
Secondly, when comps are made it is a strict comparison of what one house sold versus another. Very seldom are potential buyers interested in the big ticket items that were done to make the home “saleable”. In fact they may replace everything that you do.
Replacing the front door is another reasonable cost or painting it is better. If you live in a condo area you may have to get approval especially if you paint the front door a different color.
Wall paper….get rid of it. And that 1970’s cheese cake on the ceiling! Get rid of it but do not go over board. You will have to get an expert in to determine what you have on the ceiling and if it has asbestos material then rethink what you want to do.
Basic source: Wall Street Journal article by Amy Hoak, 1/2/2008.
| Currently 1 Comment »
How Your Credit Score is Calculated.
December 17th, 2007 Categories: Buyer and Seller Knowledge Center
Fair, Isaac criteria for calculating credit scores are divided into five areas:
Payment History
Credit card payment history, retail accounts, installment loans and mortgages accounts for 35% of the total score.
Amount Owed
What is important is how many accounts have balances and how much of the total credit line is being used on credit cards and other revolving credit accounts. This accounts for 30% of the total score.
Length of Credit History
Credit history accounts for 15% of the total credit score. It is suggested that parents start their children on credit before the youngster leaves home.
Types of Credit
Types of credit takes into account the mix of installment loans, mortgages, retail accounts, credit cards and finance company accounts. This accounts for 10% of your total score.
The Rest Is Calculated by:
Salary is definitely considered but other items considered in the composite number includes:
-
Education level. A person with a college degree gets more points than a high school graduate.
-
Number of years you’ve lived in a single location. If you have moved around a lot, you lose points. If you have moved because of better-paying job, you can recoup some of those points if your salary has increased.
-
Years spent with an employer. Scoring agencies like people who are stable. They assign more points to people who have lived in a particular place for several years or who have worked for a single employer for many years.
-
Home ownership. If one owns a home you get additional points. Renters are considered more transient and less reliable for the repayment of loans.
Change is coming.
The system at times appears to be arbitrary and unfair to some but lenders insist that the scoring system is not biased or unfair to minorities but that it simply reflects overall lending histories.
With the pending FICO scoring change to be introduced in the first quarter of 2008 there may be an increase in the critisism of FICO scoreing. It is currently planned those with thin credit will be will be measured lower than those with more active credit accounts.
The added score parameters can help those who have a variety of cards, a mortgage and a car payment since as proposed these people will be graded higher. The thinking is these people can better manage credit.
The flip side is, if these individuals show that they are using most of their available credit they will be scored lower.
| Currently 2 Comments »
Ignore Home Permits and Pay….Big Time
December 12th, 2007 Categories: Buyer and Seller Knowledge Center
Often people do work on their home (add a room; change the garage into a family room or TV room) without getting a permit for the work. When the property is put on the market to sell, the seller must inform the buyer that the expansion and other home improvements were done with or without a permit(s).
If there is no permit this can create a problem for the buyer because:
(a) if they accept and purchase the property knowing about the absence of permits, they in turn become responsible for the lack of a permit if one is needed in the future;
(b) and when the property is appraised the un-permitted work will not be included in the appraisal.
If the buyer insists on purchasing the property without the required permits than they should negotiate a significant purchase discount for the risk they will undertake.
Expensive and Difficult
The resolution to the problem can be expensive and difficult. The City/County planning department can:
- Have the un-permitted work torn down and have you re-do the improvements.
- Or the City/County inspectors can have you tear down part of the improvements (ie., some walls) to view the electrical and other utility items for inspection.
- Or the City/County can accept everything as is and have you apply for a permit but hit you with a fine (maybe upward of 2-5 times the original permit feed) and other costs for failing to get a permit.
Being Quiet Will Not Help
Should the seller be mute on the subject (ie., not tell the buyer of the un-permitted work) they expose themselves to a possible (future) law suit. If the lending company is unaware of the un-permitted work (which should not occur), they too can take legal action against both the buyer, seller and possibly the appraiser and it could extend to the listing/selling real estate broker/agent and title company.
When it becomes a legal situation the old adage rules: “Throw mud against the wall and see what sticks” knowing full well that someone has to pay.
Big Brother
Of course when the assessor is made aware of the increased floor space the home owner will be exposed to an adjusted property tax increase and possibly the assessor may seek payment of back taxes.
By not obtaining the permits one can face severe and costly remedial consequences to resolve the situation. One may save a penny upfront but it could be costly in the future.
I think it is safe to say that getting the permits upfront is far cheaper than the added headaches incurred by not having them.
| Currently 1 Comment »
