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Top Mistakes of Home Buyers and Home Sellers
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Cheap Government Repo Houses
These days, the prices of houses are extremely high and unaffordable for people who've got a low or average income. And because the prices of houses are expensive, most families find their niches in apartments or condominiums. But a wise family head can better think of a solution. The government has a way of opening chances for people to own their dream houses. That is none other than the cheap go... Read real estate article
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Top Mistakes of Home Buyers and Home Sellers
2006 was an unusal year for residential real estate. The much over-hyped real estate bubble didn't pop. But, home buyers and sellers did a slow dance to determine who was going to be driving the bus. Seller's continued to be stuck in the previous mold of "we rule". Buyers on the other hand saw loads of inventory and rising market times, both signals that they had more clout than ever before. Here are the top mistakes both sides made in 2006.
Sellers
-Used incentives instead of cutting price. Buyers are not impressed by stubborn sellers refusing to lower their price. Who insist on offering buyer incentives of free cars to credits for one-year property taxes or condominium assessments. Buyers, savvy than ever aren't buying the old sales trick, mark-up to discount. Cut to the chase, lower your price and forget the razzmatazz.
-Marketed an energy inefficient home. Forget the real estate bubble, energy prices are a primary concern for homebuyers. Stung by rising higher commuting costs from recent increases at the pump, homebuyers in the last three months have paid extra attention to energy costs during their home search. From my experience and hearing client reports as they look for seasonal homes in southern climates, natural gas, heating oil and electricity costs have moved dramatically up the list as potential deal-killers. Sellers should be prepared for buyer inquiries about energy consumption and efficiency improvements.
-Thought it was still a sellers market and priced accordingly. Pricing is king in today's market. Throw your spread sheets away and your dreams of huge circa profits. Look only at sold comparable's from the last six months, that's exactly what the buyer's mortgage lender will use. Price at market, forget wiggle room, you need to sell, act like it. Seven months ago was a different market.
-Wanted top dollar for a "dated property". Serious sellers should take a good honest inventory of their home. If it lacks recent "must-haves" from buyers such as updated baths and kitchens, a home office or nook, ample and organized closets or features dated paint colors, wallpaper or mirrored walls, take the time and if necessary the money to make your home appealing to buyers that no longer have the time or interest to update a home. Don't wait for feedback from prospective buyers about a lack of must-have features in your home. Deliver from your first day on market what buyers are looking and willing to pay extra for in their next home.
-Endless Open Houses. The open house pendulum has swung from " the house sold in the first day" to "we need to have our house open every Sunday". Desperation is when your home is open every Sunday. Buyers know and track it. Plan on every three weeks to have a public open house.
-Ignored how long it would take to sell an attractive and well-priced home. Figure out the absorption rate for your market. This rate will tell you how many months or years of for-sale inventory there is in your market. Three months is fine, six months is okay, nine months is troublesome and twelve-plus, will not be pretty.
-Refused to accept home-sale contingencies. The contingent-free contract is now just a memory. If you want to sell your home in 2007, keep an open and flexible mind on contingencies. Many buyers want to "move-up" but need to sell their home first, before they can close on yours. Wise sellers realized this early on in the transitional market of 2006.
-Forgot to bury St. Joseph before listing their home. With the slow down in the real estate market even my Jewish home sellers have discovered St. Joseph. A statue of The Holy Family's foster father buried in the yard of home being sold, buried upside down should bring a buyer, or so goes the folklore. Several web sites on the Internet offer a kit that outlines the correct procedure and includes your own St. Joseph.
-Insisted on smoking inside their home while it was being marketed to buyers. Buyers hate second-hand and stale smoke odors. Agents from across the country reported rising in-house smoking among motivated sellers. If you have to smoke go outside.
Buyers
-Low-balled offers to purchase. Potential home buyers wanted deep-discount deals in 2006. Especially with all the media talk of residential real estate markets "correcting" nationwide. Homebuyers need to understand the dynamics of constructing a home purchase contract and how their first price offer can set the stage for price success or failure with a seller. Use sold comparable's from only the last six months, that's what lenders do.
-Thought it was a bubble and not a housing correction. My prediction in the 2006 "What's In, What's Out" I said a soft decline in home prices in most markets. In 2007 I will define soft as 5-8% decline in prices on average between single -family and condominium homes.
-Took as fact online home valuation web sites opinion of value. Technology is great when it works, but tread carefully with online valuation web sites. Ask yourself how long does it take your recorder of deeds and real estate transactions to record them? If up-to-the-minute, okay, otherwise plan the lead time into the online valuation to spew out accurate information.
-Disregarded market timing. Spring is high market, the most demand by the largest number of buyers. Summer is a good market, fall is fair, and winter is the remnant market, the left-over buyers and sellers from the high, good, and fair markets.
-Used Option Adjustable Rate Mortgages. Originally used by the wealthy to finance a home for a short-term, predatory lenders rolled out the Option ARM for credit-challenged and/or highly leveraged buyers. The key feature of this not-so-new-fangled mortgage being negative amortization. Buyers should run not walk from Option Arms.
-Walked from a deal based on the seller couldn't live without them. Bless the patient sellers in 2006 who had to weather uptight, over-cautious buyers who created a surge in contract through's. Many naive buyers wanted everything their way, savvy sellers tried to placate them and but in over ten-percent of transactions sophomoric attitudes and behavior prevailed and the deal didn't go through.
-Bought homes with bedrooms not large enough for a bed. In the boom, rehabbers and developers learned the fastest way to profit was to increase the room count of a home. I saw bedrooms shrink to walk-in closet size when a four-room one-bedroom was gut-rehabbed into a four-room two-bedroom. I kept asking, can you fit a queen-size bed in either room? Boy, the looks I got from gnarly sales representatives.
-Didn't look into reserve funds and special assessments in potential condo purchase. The building or development might look well maintained, but conduct a careful audit of budgets, association meeting minutes and reserve funds balances. Healthy reserves could be your pre-nuptial for a condo building. Reserve funds are set-aside finances for capital improvements such as new windows, roofs and elevators. Substantial reserve funds minimize special assessments levied by ill-managed buildings fro improvements.
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Buying A Home With No Money Down
In this article I'll discuss how it's possible to buy a home with no money down. We've all seen the ads marketed by builders offering to get you into a home with no money out of your pocket. Is this legitimate? It is in fact both legal and legit.
I don't recall mentioning it in previous articles, but the Federal Housing Administration requires 3% down towards the purchase of a home. Let's use $210,000 which is the average price of a home in Southwest Florida.
This would require a down payments of $6,300, which eliminates most young couples that do not have this kind of money saved up. This amount doesn't cover the closing costs which may involve several thousand more dollars. The government knows this and things are now in place that could enable you to get into a home if you find yourself needing more money.
Now the seller or builder can contribute up to 6% of the cost of the home towards your CLOSING COSTS. The seller / builder CANNOT contribute towards your down payment. Don't despair because there is a way around this hurdle. The government does allow you to recieve a gift (as long as it is not a loan) from a family member or a non-profit organization. It sounds weird and it is, but that is the system. Just think, you are not allowed to borrow the down payment, but you can receive it as a gift from a non-profit.
Is this really a gift? Yes, but don't be fooled into thinking the non-profit doesn't want it's money back. The days of free lunches are over. Please don't be naive enough to believe that someone, especially someone you don't know, is going to give you thousands of dollars and not worry about how to get it back. This is especially true if you already have bad credit to start with.
In my next article I'll cover how this all ties together and how to protect yourself against unscrupulous builders and greedy lenders.
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Top Mistakes of Home Buyers and Home Sellers
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