Monthly Archives: January 2014

11 Must-Haves When Selling Your Home

11 Must-Haves When Selling Your Home

Below are my 11 must-haves when selling your house faster/for more money in the current market.

1. Make your house easy to show. Accompanied showings or 24 hours notice are will discourage most of your potential buyers who will view other houses they can see easily when it is convenient for them.

2. Price it right. This may sound counter intuitive, but a house priced fairly will sell for more money than an overpriced home. You may think, “We’ll aim high and negotiate down if we need to,” but this does not happen. In reality buyers don’t even bid on an overpriced house. After changing the price a time or two to what it should have been, your house is “stale” and your largest pool of buyers have already looked at it and ruled it out. More times than not, when you finally do sell, it will be for below what your original “fair price” would have been.

More

Short Sale vs. Bank-Owned, What’s the Difference?

Short Sale vs. Bank-Owned, What’s the Difference?

Here’s a short lesson on the difference between buying a bank owned property and buying a short sale.  In today’s market the number of both available has dropped slightly, but there are still plenty of opportunities if you know where to look.

Bank Owned Properties (REO)

The property is owned by a local bank or a national mortgage servicer ( from hereon I’ll use the term Bank). All negotiations are made between a Buyer and an employee of the bank (as opposed to a homeowner). REO properties are almost always vacant and utilities may be turned off.

Standard offers to purchase are used in addition to the required Bank’s addends and disclosures. Consideration ($) will need to be in the form of a cashier’s check (no personal checks). Proof of funds for the down payment and a current loan pre-approval for the balance will also need to accompany an offer. Offers must be complete, correct and filled out according to the bank’s requirements. Do not submit offers that are not in compliance, they will be rejected by the bank or delayed until corrected regardless of the price being offered.

Your opinion of value and the Bank’s may differ, but before a Bank forecloses they have at least one local broker provide an opinion of value. Once they decide to sell the property, they have their listing broker determine if the opinion of value is still correct. The Bank is almost always pricing near market and is expecting to sell the property close to the asking price. Your Buyer’s Agent will give you a comparable market analysis (CMA) for the property prior to your making an offer. If you both feel that the asking price is well over market you should provide that CMA to the listing broker along with the offer. The lender has no obligation to see your CMA and frankly, they don’t care anyway. But if your CMA includes recent sales or similar properties that might not have been included in the original opinion of value, a strong listing broker just might be able to make your case to the Bank.

You may receive an answer within hours or it may take up to a week, but the response time should be fairly quick. Don’t get impatient with the listing broker, they do not have any control over the response time no matter what time frame you put in the offer for acceptance. The best approach is to ask the listing broker for an approximate length of time needed for response and use that in your offer. If the offer is for less then the asking price do not be surprised if the response is an outright rejection or a “best and final” counter offer. Banks are not in the business of owning properties, they are in the business of lending money, but any decision they make will be strictly business. If the offer is a solid offer (close to asking price with minimal contingencies and quick closing date) it may get accepted without a counter.

If your offer is accepted it is unlikely that the Bank will make repairs so an “as-is” sale should be assumed, and you should look the property over very thoroughly before you make an offer. If a few repairs need to be made to facilitate FHA or Conventional financing the Bank might be willing to make them so don’t be afraid to ask, but support any request with a hard quote from a licensed tradesman. If the house is a fixer-upper or a tear-down or in poor condition, (in today’s market ) traditional lenders probably will not lend on the property, so don’t waste your time submitting an offer using an FHA (95-97%) loan. Also, many banks are beginning to have penalties for closings that run beyond the set date so make sure your lender can perform in that time frame and that you do nothing to hold them up.

In summary, REO property sales are very much like conventional sales, just remember you are negotiating with a disinterested 3rd party, not a traditional homeowner, and that any deal you make will be “just business”.

Short-Sales

With short sales the property is owned by a homeowner and the house may be occupied by an owner/tenant or it may be vacant. The owner is “under-water”, the sales price less closing costs is less than the debt(s) on the property and any offer needs lender(s) approval even though the lender(s) might not even know that the property is for sale.

A standard offer to purchase is used, which should include an addendum acknowledging and accepting the fact that this is a short-sale transaction and requires 3rd party approval. Consideration ($) can be a personal check and a current loan pre-approval for the balance will also need to accompany an offer.

Unlike a Bank owned REO, the listing price for the property may be based on something other than facts. The seller might be pricing it low to encourage multiple offers. They might be pricing it high to try to recoup as much money as possible. In rare cases it might be priced correctly. Unless the listing broker tells you they have an “approved” short sale (and even if they do it might be “stale” and will need to be updated at the time of your offer), the lender has not approved a sale at the list price so a Buyer doesn’t know if his offer even at list price will be accepted. Again, your Buyer’s Agent will produce a CMA market analysis to determine the value of the home before you make an offer. It is always good to submit this with your offer because even though the listing price may be based on something other than facts your offer should be based completely on facts. Closings can occur within 30 days but the 30 day clock will not start until the lender gives their approval.

In the beginning, your offer is handled like it would in a non-short-sale situation. The listing broker will present it to the seller and they approve it. It will then be forwarded on to the lender for their approval at which point the listing broker and the Buyer have no control over the process and is in a “wait and see” mode. This approval process may take one week or it may take up to three months. One very important thing to keep in mind is that while you are waiting for an approval of your offer another department of the Bank is working on the foreclosure and may actually foreclose on the property even though there are offers in for approval. If that happens, your deal is dead and the listing contract is terminated as the former seller is no longer the owner of the property and does not have authority to sell. If that happens and you are (still) interested in purchasing the property, you should work with your Buyer’s Agent to follow-up on the property when it comes back on the market as a REO.

Again, an “as is” sales should be assumed, but there may be a little more wiggle room than with a REO. Also, while it might be nice to have repairs made, the seller most likely won’t have the resources to make them and their lender is very unlikely to do so since they don’t own the property, so when you look at the property you should look it over very thoroughly before you make your offer and take into account any obviously needed repairs.

In summary, short sales are not at all like conventional sales, you are dealing with a broke seller, an uncaring bank, and probably a neglected property so you should wade into this swamp slowly and carefully and assume the worst – it probably will happen.

Home Buying is a Process … How it Works

Home Buying is a Process … How it Works

The complete process is simple once you understand the steps

Preapproval or Pre-commitment Letter

Provided by a lending institution to indicate the mortgage amount you qualify for. This process is best accomplished prior to beginning the search for a home, and a copy of the letter should be in your possession for use during the offer to purchase phase.

The Offer

A preliminary but legally binding contract that covers the basic terms of your agreement with the Seller: price, occupancy, financing, and inspection contingencies, and the date for signing the Purchase and Sale Agreement. Each contingency has a cut-off date that must be met. The customary deposit with the agreement is $1000.00 in Middlesex County, other counties may vary.

Inspections

Include a structural, pest, radon, well water, lead paint, and radon gas. These must be done within seven days of signing of the Offer and are conducted at the Buyer’s expense. The Buyer should be present for these inspections.

Purchase and Sale Agreement

Should be entered into ten working days after an accepted Offer, since it is more specific, and therefore protects both parties more fully. The customary deposit with this agreement is 5% of the purchase price although a lesser amount may be acceptable under certain circumstances.

All Deposits

Maintained in a separate Escrow account usually by the listing Broker or one of the Attorneys. Any interest accrued (if any) is split 50/50 between the Buyer and the Seller unless agreed otherwise. Both parties must sign a release for any funds to leave the Escrow account.

Financing

It is usually the only contingency to survive the Offer form (remain on the Purchase and Sale Agreement). Your application must be filed within 3-5 business days of the accepted offer and the loan commitment must be received within a stated time period … currently can be gotten easily within 21 business days of filing the application.

Appraisal

The lending institution hires a licensed appraiser to determine the value of the property and to give a professional opinion of the collateral for their investment. This must be conducted prior to the loan commitment being made, and is coordinated with the listing agent.

Title Search

Ownership of the property in Massachusetts is customarily transferred by a quitclaim deed – the Seller transfers all his/her rights in the property to the Buyer. It is the responsibility of the Buyer and his/her lending institution to determine the validity of the seller’s  title to the property, and is reviewed by the Attorney for the lender and paid for by the Buyer. The responsibility for clearing any clouds on the title rest with the Seller. Title insurance is required for the lender but you can purchase your own title insurance, and I generally recommend that you get it as the cost to clear any title items can get expensive in he future.

Closing

Also referred to as paper passing or simply “passing”. It is conducted by the Attorney for the lending institution, who searches the title to the property and guarantees to the bank and to you that it is clear. The location of the closing is usually at the office of the lending institution’s Attorney, but can also be at the lending institution or the appropriate Registry of Deeds. The closing should take place 45-60 days after signing the Offer.

Possession

Customarily immediately after the closing. Technically it can’t take place until the change of ownership is filed at the County Registry of Deeds.

Attorneys

It is strongly advised that you retain the services of an Attorney to represent your interest prior to signing the Purchase and Sale Agreement and throughout the entire process.

%d bloggers like this: