Monday, March 25, 2013
Did your listing expire?
Low mortgage rates are increasing the affordability of homes, however the increase of short sales and foreclosures have dramatically reduced the buyer pool. These factors have led to buyers looking at too many houses, putting buyers back into the driver’s seat.
Price your home aggressively. When mortgage rates are low and buyers are chasing too few houses for sale, sellers can ask high prices and get them. Even when houses are overpriced for the market, sellers are likely to receive some offers, as buyers are often desperate to find a home that meets their needs. When things are slow, pricing is absolutely critical. But instead of pricing your home aggressively high, you should consider pricing your home no higher than the middle of the range for homes comparable to yours. And if you need to sell your home quickly, you should consider pricing your home among in the bottom 25 percent of comparable homes. Why? With few buyers chasing many homes, you need to quickly get the attention of those who are serious about buying, If your home is priced too high, you many never get buyers to even consider looking at your home.
Quickly cut the price if you don’t get action. Everyone wants to sell their home for as much money as possible. Nobody wants to “give” their home away. But homes that languish on the market in a slow market often are forced to make one price reduction after another, as buyers and real estate agents may begin to question why the home has been on the market for so long. In a slow market with few buyers you may want to cut the price to make the sale more quickly.
Finding the right agent is critical. Any agent can list your house. But when buyers are few you need a first-class real estate professional on your side. They’ll help with everything from pricing to advising you on the other 6 points in this article. Finding leading agents who outsell other agents in your home town are the type of professionals you’ll need on your side. Talk with your family, friends, and neighbors to identify the best agents in your area. Interview several – hire the one who you believe will do the best job for you.
Curb appeal. After pricing, nothing will bring more potential buyers into your home than a house with outstanding curb appeal. Take a walk down your street with a critical eye. How does your home stack up from the outside? If it doesn’t stand out from the rest then it’s time to get to work.
Consider home staging. The quickest way to add home value to a home for sale is a fresh coat of paint. But after you do that, you may want to consider home staging. Either do it yourself or hire an outside firm to do so. A home staging professional will come in and take away some furnishings and rearrange others to make your home show better. When home sales were going gangbusters this was a technique used mostly by those selling high-end homes. When things get slow and homeowners need to sell, more people find home staging professionals to help them prepare their home to make it more appealing to prospective buyers.
Fix stuff. The loose railing. The broken pane of glass. The closet door off of its track. The leaky faucet. They all need fixing. If you don’t have the time or skill, find a handyman to go through your home and make repairs. Also, consider replacing the old roof that looks like it might leak, the antique furnace, and the stained rug. When there are few homes on the market, sellers sometimes offer cash at closing to repair the roof or for the stained rug. With so many homes on the market, buyers can afford to only bid on those that are in move-in condition. Fix what needs repair before listing your house.
Offer flexible terms. Flexibility is the key now. You’d like to close in two months, but the buyers might be in a hurry and need to close sooner. Find a way to make it happen. You were planning to take the appliances to your new home, but the buyers make a bid near the asking price – including the appliances. Leave the washer and dryer behind (and then go find a store that offers no payments on appliance purchases for a year). And for those items that have deep sentimental value, make sure they are removed prior to any showings. Competition between home sellers is high – you don’t want to lose the only buyer who has looked at your home in a month.
Wednesday, March 20, 2013
As you think about applying for a home loan, you need to consider your personal finances. How much you earn versus how much you owe will likely determine how much a lender will allow you to borrow.
Estimate Your Available Finances
Income: First, determine your gross monthly income. This will include any regular and recurring income that you can document. Unfortunately, if you can't document the income or it doesn't show up on your tax return, then you can't use it to qualify for a loan. However, you can use unearned sources of income such as alimony or lottery payoffs. If you own income-producing assets such as real estate or stocks, the income from those sources can be estimated and used in this calculation. If you have questions about your specific situation, any good loan officer can review the rules with you.
Debt: Next, calculate your monthly debt load. This includes all monthly debt obligations like credit cards, installment loans, car loans, personal debts or any other ongoing monthly obligations, like alimony or child support. If it is revolving debt like a credit card, use the average monthly payment for this calculation. If it is installment debt, use the current monthly payment to calculate your debt load. And you don't have to consider a debt at all if it is scheduled to be paid off in less than six months. Add all this up to get a figure that we'll call your monthly debt service.
Housing costs: Calculate your monthly housing costs, including house payments, property taxes and insurance.
Factors Lenders Consider for Loan Qualification
In a nutshell, most lenders don't want you to take out a loan that will overload your ability to repay everybody you owe. Although every lender has slightly different formulas, here is a rough idea of how they look at the numbers.
Note that actual percentage amounts will depend on several factors such as a FICO score as well as each lenders suggested GDSR (Gross Debt Service Ratio) for the type of mortgage.
Housing costs versus gross income: Typically, your monthly housing expense, including monthly payments for taxes and insurance, should not exceed about 28 percent of your gross monthly income. This can be expressed in the formula below:
HC < or = I x .28
or, written another way
I x .28 > or = HC
I = gross monthly Income
HC = monthly Housing Cost including tax and insurance
If you don't know what your tax and insurance expense will be, you can estimate that about 15 percent of your payment will go toward this expense. The remainder can be used for principal and interest repayment.
Housing and debt costs versus gross income: This is sometimes referred to as Gross Debt Service Ratio or GDSR. In addition to having housing costs be no more than a certain percent of your gross income, your proposed monthly housing expense and your total monthly debt service combined cannot exceed about 36 percent of your gross monthly income. If it does, your application may exceed the lender's underwriting guidelines and your loan may not be approved. This can be expressed in the formula below:
HC + D < or = I x .36
or, written another way
I x .36 > or = HC + D
I = gross monthly Income
HC = monthly Housing Cost including tax and insurance
D = gross monthly Debt
The percentage amounts used below are given for example only.Note that actual percentage amounts will depend on several factors such as a FICO score as well as each lenders suggested GDSR for the type of mortgage.
Calculating maximum monthly allowable housing cost: for a monthly income I = $4000, housing costs should not exceed $1120
I x .28 > or = HC
$4000 x .28 = $1120
Calculating maximum monthly allowable housing and debt load: for a monthly income = $4000, monthly housing costs + monthly debt load should not exceed $1440
I x .36 > or = HC + D
$4000 x .36 = $1440
Calculating maximum monthly allowable housing cost based on income and debt load: for a monthly income = $4000 and a monthly debt of $400, monthly housing costs should not exceed $1040
In the example above, we calculated above that the maximum monthly housing and debt load should not exceed $1440
now we subtract the known monthly debt
$1440- $400 = $1040
Depending on your personal situation, there may be more or less flexibility in the percent ratio guidelines. For example, if you are able to buy the home while borrowing less than 80 percent of the home's value by making a large cash down payment, the qualifying ratios become less critical. Likewise, if a rich relative is willing to cosign on the loan with you, lenders will be much less focused on the guidelines discussed here.
Remember that there are hundreds of loan programs available in today's lending market and every one of them has different guidelines. So don't be discouraged if your dream home seems out of reach. Since there are so many different lenders and loan programs, it pays to shop around.
There are a number of factors within your control which affect your monthly payment. For example, you might choose to apply for an adjustable-rate mortgage (ARM) which has a lower initial payment than a fixed-rate program. Likewise, a larger down payment will lower your projected monthly payment.
Monday, March 18, 2013
One of the most important decisions that every parent makes is choosing the best school for their children. This can be a very complicated decision. Here are some ideas to help you evaluate schools and make an informed choice.
Do Your Research: Scholastic Considerations
What is the curriculum?
What are the SAT scores?
What grade does computer education start at?
What is the total student population?
What is the average class size?
What is the student-teacher ration for your child’s grade level?
Make Contact: Connect with Key People and Organizations
If the district has a magnet program that you are interested in, ask the Magnet Director how long the waiting list is and whether your child will get in.
Contact the Director of Computer Education to find out the student-computer ratio and if the district's teachers have participated in a computer training program.
Contact the Parent Teacher Organization and find out how active it is. Studies have shown that children's academic success increases when parents are actively involved in their education.
At the School: Will Your Child be Happy There?
Make an appointment with the Principal for you and your children to visit the school when school is in session so you can observe a normal school day. This is your chance to learn the personality of the school.
Check classrooms for interested and smiling faces.
Look at the projects and student artwork on the walls.
Do the students dress like your kids and do they look friendly?
Find out the style of dress for the first day of school so you can help your kids fit in.
Most importantly, be sure to talk to your kids during and after the tour. They will probably have noticed things that you didn't.
There are many concrete factors that indicator how good a school is. But after you’ve done your research, visited the school and conferred with your kids, the best indicator you have is your intuition and good common sense.
Tuesday, March 12, 2013
March 12, 2013 – The 4-county Metropolitan Milwaukee housing market continued plowing through the winter in February, posting a 16.4% increase in sales over February 2012. There were 960 sales in February, the most for that month since 2007 (1,033), just before the Great Recession began; and marking the 20th month in a row of increased home sales.
Click here to view the graph showing actual sales over the last 20 months. Note the higher level of sales in January and February 2013 compared to the same months in 2012, indicating a much stronger beginning to 2013.
While the continued housing recovery is certainly welcome news, and hopes are that the trajectory of sales depicted in the graph above for 2012 follows into 2013, there is concern over the very low levels of inventory in the market.
The market had 7.08 months of inventory in February (calculated by the number of active listings divided by the average monthly sales over the previous 12 months), which is well below the 11.63 months in February 2012. Only 1,952 homes were listed in February 2013, down 18.3% from a year earlier.
REALTORS® are listing homes to be sure, just not at the rate the market indicates it needs to satisfy current demand. Confusion and skepticism among potential sellers over what price their home might sell for seems to be the main culprit in their hesitation to list.
Sellers will undoubtedly not fetch prices from the peak of the market, however, prices have stabilized in most communities. And, due to the low levels of inventory the length of time a house is on the market has shrunk significantly.
The law of supply and demand would seem to dictate prices should increase soon. With a low supply of homes, stable or increasing demand, historically low interest rates, and positive external factors such as consumer confidence and employment, prices should be pushed upward as buyers outbid one another for a listing.
However, the overall economy is not blazing any trails, job creation is tepid, mortgage applications are detailed and time consuming, and multiple offers are bidding up to a property’s asking price and often including seller concessions. In short, the market is still working through a few challenges that may be holding overall growth back.
While the market is strengthening, it is still too early in the year to say with any confidence that the Milwaukee market will see universal price increases this year. It is still a buyers’ market, but just slightly.
Thursday, March 7, 2013
1. 1 month of pay stubs
2. 2 months of bank statements
3. Last two years tax returns with schedules
4. Hardship letter
5. Financial worksheet
6. List property on market and provide 3rd party authorization letter
Now you place the property on the market with a real estate agent that is knowledgeable with short sale transactions. Your bank might give you pre-approved terms or might not activate the short sale file until an offer is received. Once an offer is received the work begins. Your agent should help you negotiator the best terms possible. For example:
1. Any cash/promissory not contributions required
2. deficiency amount or waiver 3. Relocation assistance / credit reporting If the offer is accepted then the buyer begins to work on their financing requirements.
Please remember that title must be clear of any judgments or liens excluding the lien from your first mortgage. If you have a second mortgage that will also have to be approved by the second lien holder. If clear title is achieved then closing occurs.
Important side notes - The homeowner is responsible for the property until title transfers even if the property has been vacated. A short sale can stop a foreclosure sale, however it's not guaranteed.
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** all information provided is opinion and writer is not responsible for content**
Setting the list price for your home involves evaluating various market conditions and financial factors. During this phase of the home selling process, your REALTOR® will help you set your list price based on:
estimated net proceeds
Pricing Considerations – Find a Balance Between Too High and Too Low
When setting a list price for your home, you should be aware of a buyer’s frame of mind. Consider the following pricing factors:
If you set the price too high, your house won’t be picked for viewing, even though it may be much nicer than other homes on the street. You may have told your REALTOR® to "Bring me any offer. Frankly, I’d take less." But compared to other houses for sale, your home simply looks too expensive to be considered.
If you price too low, you'll short-change yourself. Your house will sell promptly, yes, but you may make less on the sale than if you had set a higher price and waited for a buyer who was willing to pay it.
TIP: Never say "asking" price, which implies you don't expect to get it.
Price Against Comparable Sales in Your Neighborhood
No matter how attractive and polished your house, buyers will be comparing its price with everything else on the market.
Your best guide is a record of what the buying public has been willing to pay in the past few months for property in your neighborhood. Your REALTOR® can furnish data on sales figures for those comparable sales and analyze them to help you come up with a suggested listing price. The decision about how much to ask, though, is always yours.
Competitive Market Analysis (CMA): The list of comparable sales a REALTOR® brings to you, along with data about other houses in your neighborhood that are presently on the market, is used for a "Comparative Market Analysis" (CMA). To help in estimating a possible sales price for your house, the analysis will also include data on nearby houses that failed to sell in the past few months, along with their list prices.
A CMA differs from a formal appraisal in several ways. One major difference is that an appraisal will be based only on past sales. Also, an appraisal is done for a fee while the CMA is provided by your REALTOR® and may include properties currently listed for sale and those currently pending sale. For the average home sale, a CMA probably gives enough information to help you set a proper price.
Formal Written Appraisal: A formal written appraisal (which may cost a few hundred dollars) can be useful if you have unique property, if there hasn't been much activity in your area recently, if co-owners disagree about price or if there is any other circumstance that makes it difficult to put a value on your home.
TIP: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report, i.e., the kind that's complete with photos of the house and neighborhood. Floor plans and a site map is sufficient in most cases.
Market Conditions – Is it a Buyer’s Market or a Seller’s Market?
A CMA often includes a Days on the Market (DOM) value for each comparable house sold. When real estate is booming and prices are rising, houses may sell in a few days. Conversely, when the market slows down, average DOM can run into many months.
Your REALTOR® can tell you whether your area is currently in a buyer's market or a seller's market. In a seller's market, you can price a bit beyond what you really expect, just to see what the reaction will be. In a buyer's market, if you really need to sell promptly, offer an attractive bargain price.
If You Price High, Set a Schedule for Lowering the Price
Some sellers list at the rock-bottom price they'd really take, because they hate bargaining. Others add on thousands to the estimated market value "just to see what happens." If you want to try that, and if you have the luxury of enough time to feel out the market, sit down with your REALTOR® and work out an advance schedule for lowering the price if need be.
If there haven't been many prospects viewing your home after three weeks, you may need to lower your list price. If that doesn't bring any prospective buyers, you may need to lower your list price again. Plan on doing that regularly until you find a level that attracts buyers. Make a written schedule in advance, before emotion takes over and you're tempted to dig your heels in.
Offering Incentives to Hasten a Sale
Sometimes cash incentives are as effective as lowering the price, especially in the lower price range where buyers may be "cash poor." You may offer to pay some or all of a buyer's closing costs and discount points required by the buyer's lending institution.
If you haven't had much traffic through your house and you’re in a hurry to sell, you may want to add the offer of a bonus to the selling broker, in addition to their commission. An example of the wording for such an offer may be "to the broker who brings a successful offer before Christmas."
Estimating Net Proceeds
Once you’ve been given an estimate of market value by your REALTOR®, you can get a rough idea of how much cash you might walk away with when the sale is completed. This can be particularly useful when you start looking for another home to buy.
To estimate your net proceeds, from the estimated sales amount, subtract the applicable costs in the three sections outlined below: seller’s costs, buyer’s/seller’s costs and closing costs.
Seller’s Costs: Subtract the following costs as applicable.
payoff figure on your present loan(s)
prepayment penalty on your mortgage
unpaid property taxes
Buyer’s/Seller’s Costs: Additionally, your REALTOR® can tell you whether local customs or rules dictate whether the buyer or seller pays for the items listed below. Subtract the following costs, as applicable.
title insurance premium
inspections and repairs for termites, etc.
Homeowner Association transfer fees and document preparation
home protection plan
natural hazard disclosure report
Closing Costs: As far as closing costs are concerned, you and your eventual buyer may agree on any arrangement that suits you, no matter what local practice dictates. Your REALTOR® will assist you in estimating what your final closing costs will be.