My Real Estate Tips

If you really want to sell your home when you put it on the market there are some things you must know.  In an earlier article (Real Estate Values Are Always Local, Part 2) I gave information on how you could appraise your own property.  If you followed that advice you have found what your home is worth now using comparables.  For those of you who didn’t get a chance to read the article, here is an excerpt.

Call at least three Local real estate offices and tell them you are considering selling your property.   Ask one of their agents to make a comparative market study of your property.  Tell them to include ALL the sales in your market area that compare to your home.  They will call you back later and want to set an appointment to deliver the information and tell you about their company and ask you to list your property with them.  When they do, let them make their presentation, then ask them to leave all the information on the property analysis and their company, so you can study it and make a decision.   After you have all of the information from all three companies, lay it out on a BIG table and create a work sheet of your own.  Using one line per property, list each of the SOLD properties with their selling price per square foot on the far right.  You don’t need to worry about including the active listings that are up for sale, they aren’t relative to your study in determining the value of your property.  Do hold on to the information as they WILL be important later in determining the price you wish to ask for your property, because they will be the properties you are competing with.  That is, competing for the buyers that are available in the current market who will be looking at other properties actively listed.  Now, add up the column on the right and divide the results by the number of properties on your list.  Multiply that result by the number of square feet in your home, and the result should be the current value of your property, within a percent or two. 

The number you arrived at may be lower than you are comfortable with, and in some parts of the country it’s a shocking reality.  Even worse, to sell today you will probably need to price your property a little under the figure you arrived at.

People are accustomed to real estate values going up and up and up, year after year.   Most of us like to count our profits as that happens, we remember back to how much we paid for the property and in our minds calculate many times all the money we will make if we ever sell.  It becomes a source of pride of accomplishment and it is not something we will give up without some resistance.  It is much more difficult to admit or even think about losses.

If you are going to put your house on the market and want to sell it you must be competitive.  More than ever you will have strong competition.  Competition from properties that have been foreclosed on for default on loans and taxes.  These homes are often priced below the market for quick sales.  You are in competition with other property owners who are selling their properties to avoid foreclosure and these are often priced below the market.  There isn’t nearly as much demand as there is product.  In other words, there are a lot of homes/properties for sale now, making it a “buyers market.”

Here are some of the advantages for pricing your property correctly. 

•  A property usually gets the most attention just after it is placed on the market.  If it is priced competitively it will get the most attention.
• Real Estate sales agents are drawn to properties that are priced competitively and you will have more showings.  More showings equals better opportunities to sell.
• If a property is priced competitively there is usually less negotiation on the price.
• Competitive pricing will attract more qualified buyers

 Besides correct pricing there are other things you can do to help sell your property.  Creative marketing can help distinguish your property from all the other available properties, and in today’s buyer’s market, you want to stand out from the crowd.

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There are always issues to resolve before you sell your home or other Real Estate property — and I’ll bet you haven’t thought of them all.

Here’s a great check list to work from before you call your Realtor.

• Was your property inherited?  If so, you will need a copy of the will and probate or Affidavit of Heirship.
• Do you have a survey?  In some states you can save the expense of a new one if you have a copy the survey from when you bought the property and you haven’t made any changes (built a fence, garage, storage bldg. ,etc)
• Have you changed your marital status since you’ve owned the property?  If so you need copies of the divorce or marriage license.
• Since you owned the property have you filed for bankruptcy?  If it was within the last seven years you will need all the paperwork before you close the sale.
• Is there a lien on the property?  You must disclose any loans, tax liens, mechanic’s or vender liens so they can be paid off or released before closing.
• If you are handling the sale for someone else, do you have a power of attorney?
• Do you owe past due property taxes or owe taxes to the IRS?  If so you will need a release from them.
• Is there a Home Owners Association connected to your property by deed?  If so you will need to pass to the new buyer copies of the bi-laws and restrictions and pay off any past due home owner dues.
• If you borrowed money to buy your property and have since paid the loan off, do you have a copy of the release of lien?
• Are you current on your home loan payments?  If not is there an arrangement with your lender that will forestall foreclosure until you get the property sold.  You will need a copy of this agreement in writing.
• If you have a manufactured home on the property, is there a separate lien (loan) on the home itself?
• Are there other parties who have an ownership interest in your property?  If so you will need releases from them.
• Are there any leases involved, like a guest house or land lease?  If so those will have to be disclosed to the buyer and lease money prorated at closing.
• Are you aware of any property easements?  If so you must disclose that information to the buyer.
• If you have signed any agreements regarding the property, you will need them before closing.

As you can see there are many issues to consider before selling your real estate.  I hope this list of some of them will help you resolve any issues before they become problems. 

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A short sale is a real estate property being sold where “Seller’s net proceeds at closing will be insufficient to pay the balance of seller’s mortgage loan.”   In other words, you owe more money on the property than you can sell it for, which is a position many Americans are finding themselves in lately.  There are some things you can do to protect yourself, if you are one of the people in this position. 

Be sure you let your mortgage company know you are putting your home on the market and that you will probably have to sell it for less than you owe.  Since it’s happening a lot these days, your mortgage company may already have their own procedures set up for such a circumstance.  They may even have a “short sale” package they can provide you with as a guide.

If you are having a realtor handle the sale, be sure before listing the property for sale with him, that he understands all the circumstances, including that the lender will have to be in agreement with the sale before it can be completed.  Be sure he relays a complete disclosure of all that information to the buyer.

There are several things you should consider putting in your contract to sell.  They are that you the seller require:

1.  The consent of the lien holder to sell the property in accordance with the terms of the contract.
2. The lien holder will accept seller’s net proceeds in full satisfaction of your (seller) liability under the mortgage and provide you (seller) with an executed Release Of Lien against the property.
3. You may want to include the following to be fair to the buyer — The contract will be terminated and the buyer’s earnest money will be returned if the lien holder refuses or withdraws it’s consent and agreement prior to funding and closing.

    

 Your lender may not be willing to take the full loss of the difference in your loan balance and your net proceeds, however it’s a good idea to have it that way in your contract.  If the lender refuses, you can decide what to do next as an option – for instance, you may negotiate to take half the loss as a promissory note and get them to take the other half as a write off.  In any case, try to leave things open enough so that you can negotiate the best deal possible.  Your Realtor, Attorney and/or CPA can help you with that.  (For some solid tips on selling quickly Click Here!)  

This article is intended to make you aware of certain options that may be available to you when you try and deal with sliding real estate values in turbulent economic conditions.  These are important issues for you to consider and the information above is not intended as legal advice.  I recommend you consult with an attorney and other professionals such as your CPA and Real Estate Professional about these and other issues regarding this type of transaction.

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Before you start to determine the realistic value of your real estate, consider this first.  It’s difficult for us to accept change and we all resist it, sometimes even subconsciously.  It is possible, when working with statistical information, to pick and choose what data you use and consciously or subconsciously alter the results.  If you don’t control the urge to do that, your results will be of no benefit to you whatsoever.  You must accept the results of your work OR you won’t be able to price your property correctly, and therefore may not be able to sell it.

Okay!  Let’s get to it.  You can appraise your own property without spending a lot of money and be reasonably confident of your results.  Call at least three Local real estate offices and tell them you are considering selling your property.  Ask one of their agents to make a comparative market study of your property.  Tell them to include ALL the sales in your market area that compare to your home.  They will call you back later and want to set an appointment to deliver the information and tell you about their company and ask you to list your property with them.  When they do, let them make their presentation, then ask them to leave all the information on the property analysis and their company, so you can study it and make a decision. 

After you have all of the information from all three companies, lay it out on a BIG table and create a work sheet of your own.  Using one line per property, list each of the SOLD properties with their selling price per square foot on the far right.  You don’t need to worry about including the active listings that are up for sale, they aren’t relative to your study in determining the value of your property.  Do hold on to the information as they WILL be important later in determining the price you wish to ask for your property, because they will be the properties you are competing with.  That is, competing for the buyers that are available in the current market who will be looking at other properties actively listed.  (I’ll cover that later in another article.)  Now, add up the column on the right and divide the results by the number of properties on your list.  Multiply that result by the number of square feet in your home, and the result should be the current value of your property, within a percent or two. 

That’s all there is to it — and if you have included ALL the properties on your list (not eliminated the low ones to make sure you like the results) you are ready to sell your property.  In this process you also have met three realtors and have enough information to evaluate the realtors, should you decide to use one to help sell your property.  If you decide to try and sell it yourself, there are several resources that can help you find the legal forms that you need (For Forms Click Here!) and creative ideas on how to sell quickly (Click Here! for Selling Tips).  Good luck, I hope this helps.

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What your home is worth today is determined by a factor that most  people don’t consider.  The single most important factor in establishing value in Real Estate is knowing where a property is located, whether it is your home, a commercial property, rental property or raw land – it’s where it is located.  That means in what market will be the major determining factor of a property’s value. 

With the headlines on CNN, newspapers and magazines screaming the news that real estate values have dropped 20-30%, and I have heard it said as much as 50%, it’s important you have an understanding of  your property’s value.  For most people their home is the only major investment they have.  With interest rates now at a 35-year low you may want to consider refinancing, or your own financial situation (because of job loss or another financial down turn, such as the stock market) could mean you will be considering selling your home or other investment property, just to continue meeting expenses.  If that’s the case, you must know its present value.  This article is for you.

Appraisals can be expensive and some lenders may require a certified appraisal before loaning money on your property.  However, if you have some equity, you should be able to find a lender that will accept a recent tax evaluation, and if they perceive you have substantial equity in your property you may not need one at all.  Most lenders will allow you to put the cost of a new appraisal in the new loan, and you might find a lender who will waive it.  So when talking with lenders, be sure to ask about that.  Anyway, in today’s “financial crisis” world you need to know where you stand, especially if you are thinking about selling.  In a market like this where buyers are able to pick from many properties and make the best deal, you will have to spend extra time preparing your property to sell. (For Selling Tips Click Here!)  If you do a little home work you can establish a value that should be within a few percentage points of what an appraisal would be.

I was really surprised at what I discovered last week while gathering year end figures for our business, part of which is to assign the value movement in real estate in our local area (50 mile radius).  As we computed the actual difference in the average residential selling price (not listings for sale, but sold and closed homes) between 2007 and 2008, it was only down a little over 2%!  This was really surprising, because I’ve been reading the same news as you and was braced for grim figures.  I have friends in other geographic locations who are reporting that for the same period their drop was more than 23%.  So my point is… You’ve got to know the value of your property in YOUR MARKET LOCATION!

See Part Two for the Valuation Method to use. 

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How to Live Rent Free – If you have good credit, and that’s a credit score of 700 or above, there is a really neat program you need to know about.  The FHA has a program that allows you to buy rental property as long as you live in one of the rental units yourself.  If you work it right, you not only can live there rent free, it will pay you extra money to cover other expenses.  Here’s how it works — you can buy up to at least $289,000 in rental property with this program.  So, let’s say you find a really great four-plex (a building with 4 rental units) in good condition and not too old, with the plumbing and electrical in good shape.  It costs $289,000.

Building (4-plex) cost       $289,000     

Down Pmt approx. 3.5%   $ 10,200

Loan amount                    $278,800

@6% for 30 years Pmt is            $1671.55 per month

Closing costs Approx. 6% paid by seller (negotiated by you)

Three of the units are leased for $1000 per month each with a total income of $3000 per month.

NOW, after you close and own the property you collect $1000 per month from each tenant, a total of $3000 every month as long as all your units stay rented.  That gives you enough money to make the payment plus pay for your property taxes and property insurance, with maybe a little left over to spend on yourself or use in a maintenance fund for future repairs.  IT GETS EVEN BETTER!!!

Hidden Bonus – When qualifying to get your loan to buy this property, 75% of the Income on the leased units can be added to your income in figuring out if you qualify with enough income to buy the property, even though you don’t own the property yet.  That’s $27,000 that can be added to your real income per year to count as qualifying income.

Another Hidden Bonus  – If you are a first time home buyer (my understanding of the definition is, you haven’t owned a home in the last three years), you will qualify for a tax credit of $7500.  Now you need to confirm this with your lender and a CPA but this is what it means. You will be getting an interest free loan for fifteen years on $7500. Example:  If you owed and paid $7500 or more in income taxes the year you buy and it was deducted from your payroll check, it’s ALL REFUNDED TO YOU!!!.  What you do with it is up to you.  You do have to pay the money back in $500 payments added to your taxes each year for 15 years — so basically it’s an interest free loan to you for 15 years.  You could even give back 75% of the money your family or friends gave you for a down payment. 

Go to Annual Credit Report.com, the central site established by the three main credit bureaus where you can order one free credit report per year from each credit rating bureau, Equifax, Experian, and TransUnion.  We highly recommend that everyone take advantage of this free government-mandated program.  If your score is not as high as you’d like, The Attorney’s Guide to Credit Repair can help you with tips and legal methods to improve your score.    Click Here! 

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When you sell your home, commercial, or rental property don’t let your realtor misrepresent the size of your property.  In today’s market many people don’t need much excuse and will look for a reason to sue. There are some severe legal liability issues for you and the realtor to consider if the buyer can prove misrepresentation.  Recently there have been court rulings against Realtors and Home Sellers for doing just that. 

It’s easy to make a mistake, so list the source of any information you provide.  Some people use an old appraisal, some use the tax records, some use information that was passed along by the previous seller or realtor.  Some sellers have just taken the word of a neighbor or have included roof overhang, not just interior space.  It’s not always easy to arrive at the correct number.  Most appraisers measure the building’s exterior walls and use math formulas to calculate the interior square footage.  The tax records often show footage taken from the original builder’s plans when he applied for the permit to build the structure.  Many home owners have a copy of the advertising floor plan that they got from the builder’s showroom when they bought the home.

             So, as you can see, there are a lot of ways to look at it. There are all kind of variables. It’s most common and accepted to just count the area of the home, office or commercial building or rental’s living or occupy-able space.

             The key to staying out of trouble though, is the way it’s referred to when you try to sell it, in advertising such as on the MLS (Realtor Multi Listing Service), Newspapers, Flyers and Signs.  If you refer to the square footage in any advertising at all, you need to list the source of that information. In most cases it’s the tax records, a set of architectural plans, or a certified appraisal.  If you refer to one of those sources you should be okay, even if it’s wrong and you don’t know it. Some appraisers, architects and builders have been known to make mistakes themselves.  Many times there may have been additions where no building permit was obtained, so the addition is not shown on the tax records.  If that’s the case YOU may be the source and you will need to maintain a file containing plans and specs that will prove the additional footage and back up any information you’ve provided.

             If you and your realtor have made your best effort to pass along the information you have and believe to be correct and make no attempt to inflate or misrepresent the numbers, you should be on solid grounds.  I am not a lawyer and am not attempting to give legal advice.  If you are in doubt always seek the advice of an attorney for legal issues.  

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