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October 2007 Entries
A Good Real Estate Start
When a real estate agent begins to work with a new buyer, we will sit down with you, ask a number of questions, and listen carefully to your answers. Our purpose during this initial interview is to get a clear idea of what kind of property you are looking for and your approximate price range. We explain how we will function as your representative, what the local market is like, and what we can do to help you locate that perfect home.
It is important for you as a prospective buyer to be as clear as possible about your needs. After we have talked and you have decided how much you can comfortably spend, we will know how to facilitate your home search. We won't take you through a three-story colonial with a top floor master suite if you want to avoid climbing up and down stairs! Establishing clear communication with our clients helps us save you hours of unfocused house hunting.
To get started simply go to www.askaboutrealestate.net and fill in your request for one of our TOP Real Estate Agents or Professionals to assist you with all your Real Estate needs.
A Buyers Market
Is the real estate section of your local paper filled with stories about how the real estate market in your area is slowing down? Is it taking months to sell the homes on the market? If this description fits your area, and you have been waiting for the right time to buy a house, it may be time for you to make a move.
This kind of market is referred to as a "buyers' market" for good reason--it is an opportunity for buyers to select from a large number of homes that could satisfy their needs. Everyone involved is ready to bend over backwards to make it possible for you to buy your dream home. Most sellers are highly motivated and so are the local real estate agents, loan officers, title companies, and other professionals involved in the transaction. It is important to remember that the real estate market runs in cycles, and conditions can change without a lot of warning. This could be the perfect time to contact a good real estate agent to discuss your needs and to explore the possibilities available to you.
If this is the right time to buy for you contact www.askaboutrealestate.net and request one of our TOP Real Estate Agents to assist you in capitalizing on this current market.
Get Rich Quick with Real Estate
You see them on cable TV, sitting around a swimming pool, sharing stories about how they got rich quick by buying valuable real estate for give-away prices. They took a course on how to invest in real estate and became millionaires overnight--with nothing down and no credit hassles from mortgage lenders. The course worked for them, and they say it will work for you, too.
If all this sounds too good to be true--it is! These "get-rich-quick" courses and schemes are being investigated by consumer fraud agencies around the country.
This does not mean that you can't become a millionaire by investing in real estate. But investing in real estate requires one important thing from you--an investment of cash. You can't build an empire overnight, but you can do very well over the long term by selecting property in a good location that is priced well, and which can provide a reasonable cash flow.
There are some great values in the current market. Now it the best time in the last 20 years to be an investor of real estate. What are you waiting for?
Selling Your Home - Should You Consider a Home Inspection?
by Bob Mori
Bob and Judi Mori work as Realtors in Fairfield County, Connecticut and surrounding areas.
If you are putting your home up for sale, should you consider having your own building inspection? Should this be part of your "pre-sale home improvement" process?
The answer is "Yes."
Once a buyer makes an offer and you accept it, you have a contract. One of the most common conditions of that contract is, "offer contingent upon satisfactory building inspection." The buyer is going to have a professional home inspector go through your house to make sure there are not any hidden problems.
The last thing that you want is to have your deal fall through because of an unknown problem uncovered by the buyer’s building inspector. This is especially true if it is a minor problem and could easily have been repaired ahead of time -- if only you had known about it.
Many a transaction has fallen apart because of building inspection surprises.
When preparing your house for sale, you are going to do lots of things to make it more appealing to potential buyers. You are going to clean up the yard, apply a fresh coat of paint where needed, get rid of all clutter in and around the house, have the kitchen and all bathrooms at their sparkling best, get the rugs cleaned, clean all windows, etc.
Why not spend the relatively few dollars and also have a building inspection? Find out the hidden problems with your home and correct them in advance. If you don’t, you can be assured that the buyer’s inspector will find them. When the buyer’s inspector finds a problem, it can throw a monkey wrench into the works.
The buyer will ask you to fix the problems found by their inspector – or no deal. If you do not want to fix the problems, they will ask for a reduction in price or a cash credit at closing – or no deal. In some cases, they buyer may even cancel the purchase entirely, not giving you a chance to make any corrections.
If the buyer cancels the purchase, where does that leave you? It leaves you with a house that you will have to put back on the market – a house that has been stigmatized. Future potential buyers and their Realtors will always wonder, "What happened with that first deal?"
If you hire your own home inspector and find problems but elect not to repair them, be sure to tell your Realtor. They should be disclosed to all potential buyers. In some states this is mandatory. Home sellers and their Realtors who have known of problems but not disclosed them have successfully been taken to court for damages.
Think of yourself. Isn’t it easier to identify and handle problems in advance rather than finding out about them later? If there is a problem that you decide not to repair, disclose it up front and indicate that the estimated buyer’s cost to fix it has been reflected in the offer price of your home.
Conclusion
As a professional Realtor, I have owned, lived in and sold five houses of my own. I have always paid to have a building inspection before I put any of these homes on the market. As a result, neither the buyers, nor I, were surprised by unknown problems. For every sale, that made the process of getting to the final closing a lot easier.
The Top Five Reasons Your House Hasn’t Sold!
MARKETING PLAN
by Jerry Fowler
Jerry works as a Realtor in South Carolina
Aggressive Marketing Plan
If your house won’t sell but you feel the house is priced right, in good condition, in a good location, and your agent is easy to work with, the marketing plan is probably the problem. Gone are the days when all the agent had to do was put a sign in your yard, place your house on the multiple listing service, run an ad, and wait for the offers to come in.
Today’s agent must have an aggressive written marketing plan that is made as an addendum to your listing agreement, allowing you to cancel should the agent fail to perform as promised. Your agent must make effective use of the latest technologies and must be attuned to the new information age. A good agent will spend thousands of dollars marketing their listings.
Lock-Box & Ease of Showing
That brings us to ease of showing. If you don’t allow your agent to put a lock box on your door you will miss out on a huge part of the showing market. Let me explain why and a step-by-step process of a typical showing agent.
Here’s how that agents works: when an agent has a couple coming in from out of town to buy a house, the agent will prepare a list of possible properties to show the couple. The properties are based on a previous in-depth interview to determine the couple’s needs. After searching the MLS computer, the agent will print a list of possible properties.
The first thing a highly organized agent will do is check out the showing instructions, separating the possible showings into two piles: properties with lock boxes and properties for which the agent must make an appointment or pick up a key. Because most agents and buyers are on a very tight schedule, the agent will place all the easy-to-show properties on the "A" List with a showing schedule in 30- to 45-minute increments.
Your House May Be on the "B" List
If the agent must make an appointment to show your house, you’re going to miss the first few rounds of showings because your house is going to be placed on the "B" pile. If the buyers don’t find a house that meets their needs in the first few days, the agent goes back to the second pile of properties and starts showing the ones without lock boxes or houses whose instructions demand an appointment by calling the listing agent.
Suppose this couple falls in love with a house on the first few rounds of showings. Even if you have the best house in the city in the best condition -- you’ve lost that sale. So for every showing you do get, just think of how many you’ve missed. Allow your agent to put a lock box on your house and never require an appointment to show. You’ll get much better traffic and a quicker sale that way.
The Top Five Reasons Your House Hasn’t Sold!
LISTING AGENT
by Jerry Fowler
Jerry works as a Realtor in South Carolina
The Listing Agent and their Reputation
The fourth reason a house won’t sell in a great market like we’re currently experiencing is the listing agent.
Your listing agent could cause huge problems if he or she is hard to get along with or difficult to work with. That’s something you can’t really anticipate, but that kind of attitude in an agent can make other REALTORS not want to show his or her listings unless they simply can’t find anything else to show potential buyers -- even though such behavior goes against the REALTOR’s code of ethics. It’s only natural not to want to work with someone who has a bad attitude or a condescending nature.
Agents who are rude, arrogant, and difficult to work with will not have as many showings as an agent who is cooperative and enthusiastic.
Many times an buyer’s agent will see a certain listing agent’s name on the multiple listing sheet and immediately take that house out of their showing schedule. Just because an agent is a top producer in your area does not guarantee that he/she has the respect of other agents in town. The only way to guard yourself against this type of discrimination is to check out the reputation of the agent you are thinking about hiring or get personal referrals.
The Top Five Reasons Your House Hasn’t Sold!
LOCATION
by Jerry Fowler
Jerry works as a Realtor in South Carolina
Location
The third reason a house won’t sell in a good market is location. Such things as undesirable schools, a higher crime rate, filthy/messy neighbors, a busy road, or noise pollution (i.e. beside a busy railroad track or under a flight pattern) can mark a bad location.
Mary’s location was good. There were no real negatives to affect her sale.
However, if your house is located poorly, the only thing that can compensate is a lower listing price. In order to sell a house in a bad location, the owner would have to ask for less than what similar homes in more desirable areas have sold for. Favorable terms could also help sell your house, especially if you are in the position to offer owner financing or a lease with options.
A good REALTOR will be savvy enough to recommend a good strategy and overcome a bad location.
The Top Five Reasons Your House Hasn’t Sold!
CONDITION
by Jerry Fowler
Jerry works as a Realtor in South Carolina
Condition
After concluding that Mary had her house listed too high, the next step was to ask about the condition of the home. She said it was in pretty good shape, but that it was hard to keep it clean with a family and that it needed painting. She thought she could avoid that expense in such a good market.
Mary couldn’t have been more wrong.
Buyers are looking for model-home conditions. The paint inside and out should be near perfect. Everything should be kept perfectly straight and orderly. In fact, a buyer should be able to move into her house without doing anything, including cleaning the carpet.
Even if Mary received an offer, the condition of the house would cause the buyer to offer less than market value. Mary need to take the house off the market and paint it inside and out, cleaning everything, including the carpets, windows and light fixtures.
Although it may be difficult, a seller really has to walk through the house as if they are a potential buyer, being very critical and asking whether they would purchase a home in this condition. If you don’t feel you can do that, hire an interior designer to do it for you and to suggest what needs to be done to prepare your house for the most important show time you’ll ever have.
Once Mary had completed the recommendations above, the next step would be to invite all three agents back to visit and do another market analysis. She might even invite another agent that had impressed her during the previous listing period.
Another common question that many sellers ask and that is what do I do about pets, especially dogs. The results of a recent survey stated that 60 percent of all people are extremely scared or highly allergic to animals. What does this mean to a seller? Its very simple -- you need to make other arrangements for your family’s pets. Of course, these pets are family members and you probably don’t want to board your pet. That’s okay, but you may not sell your house in a timely fashion or at its full market value.
With dogs, just the liability factor is huge. Your pet is the friendliest around but some little boy may come in pull your dog’s tail, causing your pet to react by biting this boy. Then you have problems. Therefore, its best to board your pet, let a friend keep him, or have some relatives take care of him during this important stage of selling your home.
The things that make your house stand out the most is price and condition
PRICE
by Jerry Fowler
Jerry works as a Realtor in South Carolina
The Initial Interviews
Before listing her house, Mary had wisely interviewed three agents. This is a smart move, even if the first or second agent makes you feel comfortable enough to list your house immediately. Without multiple interviews, you have no way to compare each agent’s marketing plans, including their price recommendations.
Each agent had proved Mary a written price opinion, which is called a comparable market analysis (CMA). Two agents had recommended a similar price, and the other had suggested a price that was a bit higher.
Mary said one of the agents told her she could get $20,000 more than the other two agents had quoted. The agent was so enthusiastic, believable and convincing that Mary really believed this agent. After all what did Mary know about market values? This agent was an expert.
"Buying" a Listing
What probably happened is the agent "bought" the listing by quoting Mary a higher price during her presentation, knowing that Mary’s house would never really sell at that price. More likely than not, the agent intended to wait a few weeks before convincing Mary to lower the price.
This is commonly called "buying a listing."
Mary’s situation demonstrates a valuable lesson for sellers: if one agent quotes you a significantly higher price than the others, that agent is probably not the right one for you. The market doesn’t lie, so each agent you deal with should arrive at a very close figure. If you list your house higher than market value then drop your price later, your house will be "market worn." Your final selling price will probably be lower than if you had listed it correctly in the beginning.
Let’s say you list your house for $150,000 but it’s really worth $140,000. Buyers in the $140,000 range will never see your house because they’re not looking at $150,000 houses. They can’t afford them. And $150,000 buyers will be comparing your house to others that are truly worth that price, meaning those houses will sell while yours just sits there. In fact, many agents will show an overpriced house for comparison when they’re trying to sell their listings that are more realistically priced.
Why do Some Owners Overprice?
Often it’s on their agent’s advice, which we just discussed. Another reason they’ll overprice is based on past value. Assuming a house appraised for $140,000 three years ago, they’ll add an annual appreciation rate of three, four or five percent to come up with $150,000 or more. Makes sense, right? But that’s not valid reasoning. I’ve never found any research to indicate that a home is guaranteed to appreciate.
Your house is worth what today’s market says it’s worth, regardless of what the house was worth one, two, five or ten years ago.
Comparing Home Prices to Stocks
Houses are just like stock. Hopefully they go up in value. Sometimes they come down. If you paid fifty dollars for one share of IBM stock two years ago and it’s valued at $30 per share now, would you expect to sell your stock at what you paid ($50) plus a profit? Of course not. Well your house is the same. A property’s value is determined by today’s market, not by yesterday’s value plus appreciation.
Mary’s price was too high. That’s the number one reason it hadn’t sold after four months
The Top Five Reasons Your House Hasn’t Sold! (Intro to 1 of 6)
by Jerry Fowler
Jerry works as a Realtor in South Carolina
Why won’t your house sell?
One day a woman named Mary called to ask for real estate advice. She started by saying that her house had been listed for four months with another agent. Activity was slow and she had no offers. When she questioned her agent, she was simply told, "Well, selling a house takes time."
Quite rightly, that answer didn’t satisfy Mary.
Nationwide research shows that there are five main reasons real estate doesn't sell in a timely fashion. Click on any of the below to explore why:
- Price
- Condition
- Location
- Listing Agent
- Marketing Plan(which includes ease of showing)
Top 10 Mistakes Sellers Make When Choosing a Realtor
by Crissie Cudd
Selling a home should be like any other business transaction, but all too often sellers make emotional or impulsive decisions that cost them money and time. Choosing the right Realtor to market a property and negotiate the sale is the most important step in the process.
“My friend (or family member) sells real estate.”
Friendship alone isn’t enough to establish a professional’s credentials. Use tough standards when selecting an agent, just as you would when hiring an attorney, a doctor, or an accountant to handle your taxes. A true friend will understand and appreciate that this is a business decision and will offer their credentials and expect to compete for the listing. Besides, if a problem or challenge develops while selling your home, do you want to risk damaging a friendship or family relationship?
“Your presentation sounds good. I’ll list right now”
Look at more than one presentation and consider the advantages and disadvantages of each. Making an impulsive decision when caught up “in the moment” could be difficult to correct later. Since you normally contract to list your house with the agent for a specific period of time, you may find yourself unable to “switch” to another if you find yourself unhappy with the service you receive.
“You’re the only agent who agrees with my selling price.”
Some agents tell you what you want to hear. In the real estate profession, this is known as “buying a listing” and is employed by shortsighted agents who are more interested in themselves than they are in you. However good it works as a short-term “sales tactic” in getting your listing, it is an extremely poor strategy in selling a home at the highest possible price.
You see, your house gets the most attention from other agents when it is a “new” listing. If priced properly, lots of agents will show it to their buyers. If you price it too high, no one will show the house and it will sit on the market for some time. When you finally drop your price to reflect its real value, your house is “old news” and buyers may think you are growing desperate. Therefore, the prices you are offered will come in lower and lower – and you may find yourself accepting a price that is below what you could have received had the house been priced properly to begin with.
Besides, pricing your home too high will only make similar houses for sale look that much better.
“I don’t need references. I’m a good judge of character.”
A snap judgement isn’t good enough. You also need to determine if the agent is competent and the best way to do that is to check up on references. Ask for references on recent sales -- check up on references of recent customers. Find out how an agent’s customers feel about their selling experience.
Remember that how long an individual has been in real estate isn’t necessarily all you should look for. Experienced agents can grow jaded and not work as hard – newer agents sometimes make up with enthusiasm and effort what they lack in experience.
“I’m going to list with the agent who has the lowest commission.”
You get what you pay for. Paying a cut-rate commission will often get you a sign in the front yard and placement in the Multiple Listing Service, but little additional effort from your agent.
Realize that agents and real estate companies put up their own funds to market and advertise your home. Marketing and advertising costs money -- the lower the commission, the less incentive for an agent to put up his or her own money to market your home.
Incentive plays a very important role in sales. A “full service” agent earning a full commission will often “drop everything” to handle any challenges that come along – an agent earning a small commission does not have that same incentive.
Incentive is also important to the buyer’s agent. Since there are almost always two agents involved in every sale, they split the commission according to the listing agent’s instructions. One agent is your listing agent. The other agent is the buyer’s agent. When your listing agent dropped his commission, did he also reduce the commission that will be paid to the buyers’ agent? If so, you won’t find as many agents willing to show your house – they’ll be showing houses that offer a customary commission to the buyer’s agent.
Finally, negotiating ability is an important skill in a listing agent. Are you willing to put your faith in an agent who can’t even negotiate his or her own commission?
“The agent is what counts – not the company.”
Agents who work for large well-established companies with lots of agents do have some advantages. Large companies generally have longer office hours, so someone is always available to answer an ad call on your home. Large offices often have larger budgets and can spend more on advertising. The ad space for your particular home might not be huge, but because the total ad is so large it gets lots more attention.
Large real estate companies often have lots of agents. This is important because when your house is newly on the market, the company may stage an “office preview” where every agent in the office comes through and tours your home. Every agent who views your home and is impressed is another agent on your sales team.
Additionally, larger companies are often better at offering ongoing education to their agents. As a result, your agent may be better qualified and prepared to offer a quality service. Although most states require real estate agents to enroll in “ongoing education” to keep pace with changes in the real estate market, many agents only take the “bare minimum” in ongoing education courses. Sometimes, large offices are better at convincing their agents to go beyond the minimum.
There are exceptions to every rule, of course. Some very effective agents go off on their own and open private offices or “boutique” agencies.
“All realtors passed the same test so they must know the same things.”
The real estate profession is constantly changing and, as mentioned above, the best real estate professionals stay abreast of those changes by continuing their education. Some go beyond the required minimum requirements. Many agents acquire “professional designations” that show they took additional specialized courses.
For information about professional designations, click here.
“This agent will hold an open house every week.”
Open houses can and do sell homes, but usually not your home. Only a small fraction of the homes held open are sold as a direct result of the open house. More often, “open houses” are a way that real estate agents “prospect” for potential clients. If they develop a rapport with those visitors to your open house, they can find out about their housing needs and sell them the home that most closely matches those needs. Meanwhile, the person who eventually buys your home may be visiting someone else’s open house.
Good agents know better than to pin all their selling efforts on an open house. They use their time in more effective marketing methods. The most effective marketing is not directly to the public, but to other agents. By getting other agents interested in your home, your listing agent multiplies your sales force beyond just one individual.
“I want an agent who lives in my neighborhood.”
Knowledge of the local market isn’t only acquired by living in the immediate neighborhood. Sure, your agent should have intimate knowledge of recent sales, models, schools, businesses, and so on, but that is easily achieved through extensive research. Convenience shouldn’t be the primary reason for choosing an agent.
“This agent sold more homes last year than anyone else.”
That should only be the beginning. What is more valuable -- an agent who listed 32 homes and sold 25 – or an agent who listed twelve homes and sold all twelve? So you need to ask some questions. How many of their listings did not sell? How many were reduced over and over before they sold? How long were the houses on the market? How smoothly was the process handled? How accessible was the agent when there were questions or problems?
Quantity is important, but only if all of the quality questions have been answered satisfactorily.
The best agent is the one who will do the most effective job of marketing the property, negotiating the most favorable terms and conditions, and communicating with the seller to make the process as smooth as possible.
Crissie Cudd - Crissie is a Realtor for Prudential WCI Realty in Naples Florida. To visit her web site, click here.
What is “Home Staging” and How Does it Help Sell My House?
by Lori Matzke
“Home staging” is not a new term, but for many homeowners and real estate agents the concept of “professional home staging” is shedding new light on how to promote a home in the real estate marketplace. In past years, homeowners were left to their own discretion as far as preparing for home showings. Though they could occasionally rely on an agent for instructions, more often than not real estate agents were just as perplexed at working out the details as the homeowner.
While agents are experts in the field of selling and closing, many are not design savvy. Agents usually know exactly what factors can help sell a home. It’s just not always easy to get a home into selling condition in a timely manner without some sort of experienced assistance.
Professional home stagers are practiced in the art of preparing a home for resale. They work with the “flow” of a home, eliminate clutter, edit and arrange furniture, and even assist in enhancing curb-appeal. With the aid of a professional home stager, your house can make a notable first impression on potential homebuyers.
As the real estate industry often stresses, the first impression is the key factor in selling your home. Typically,” says Jan Van Horne of Coldwell Banker Burnet Realty in Eden Prairie, Minnesota, “a potential buyer has made up their mind ten seconds after they step in the front door. They were already forming an opinion as they pulled into your driveway!” That really doesn’t leave too much room for fault.
“To achieve the greatest possible outcome,” Jan adds, “a home should always be presented at its best the first time around.”
You find and select a professional home stager much like you would find any other professional service. Ask around and get referrals. Check with your real estate agent. A number of larger real estate companies offer access to a listing of professional home services in your area. These individuals and companies have often already been pre-screened by the real estate agencies or their agents.
When you contact a home stager, ask for an estimate. Most home staging businesses will be happy to give you a free estimate and it is usually a quick process. Keep in mind that this is only an estimate and estimates can be a bit off. However, unless something unforeseen takes place between the estimate and the actual job itself, an estimate should be fairly accurate.
Get several free estimates and make some calculations. Just like any service, pricing in the home staging industry can vary over a wide range. Some charge an hourly rate and some will charge you a set fee for the entire job. Be sure to ask how they determine their fee so that you can make an educated decision. Also, factor in the condition of your home, the average amount of time homes have been on the market in your area, and the asking price of your home.
Asking price can play a huge factor in what a homeowner should be willing to pay for staging services. Some professional home stagers bring in rented furnishings, driving the price up considerably. Some simply charge too much to make it pay off. A lot of home stagers seem to forget that their clients are planning on moving out of the house very soon. Most home sellers are not willing to invest a huge amount of cash in a house they are planning on leaving behind.
Find out up front what the stager is planning to bring in and at what cost. Though expert services do come at a price, the cost should balance with the expected benefit of a higher selling price. As a rule, the higher the asking price of the home, the more one can spend to have it professionally staged.
In some instances, it makes sense for a real estate agent to contribute to the cost of professionally staging a home. “As a real estate agent,” says Tony Cirelli, a Minnesota Re/Max agent from Apple Valley, “I have to look at profit margins. I analyze current market trends and what will be spent on advertising before dropping any cash into staging.”
Pat Cirelli, Tony’s wife and partner, agrees. “For the most part, an agent should be able to determine if a home is in need of this type of service, and if it would be of benefit or not. If you know it would be in the homeowner’s best interest and if you know that something will need to be done before the home is listed, it might be wise to set aside an amount of your marketing budget for staging. If it’s a reasonable fee, it is usually a worthwhile investment. It could certainly make all the difference in your showing.”
Lori Matzke - for further information on professional home staging and a printable tip list for showing your home, visit Center Stage Home Presentation Services
Real Estate Broker's Responsibility
More often then not, the keyword in the real estate industry is "sell" rather than "represent". Far too many brokers and agents appear to have an undeclared mission statement that reflects "salesmanship" rather than "representation" of Buyer or Seller. The California Department of Real Estate unwittingly reinforces this by identifying the licensee as a "Broker" or a "Salesperson". A "Salesperson" should be more properly identified as a "Broker Associate" or "Broker Affiliate" to more properly identify the responsibility inherent in this role.
First and foremost, ethically and legally, a real estate agent should be continuously aware of his or her fiduciary responsibility to the client. "Fiduciary" simply means handling funds on behalf of another. Integral to that definition is the element of trust which is as much a responsibility, as it is a privilege. Real estate breeds the most litigation of any industry, a fact that could very easily be a thing of the past if more agents would faithfully execute their fiduciary responsibility to their clients. It would reduce litigation significantly.
There is an adage in this industry that says, "20% of all agents make 80% of all sales". Is this a measure of success? Perhaps, but a better measure of success would be one that measures character and responsible representation.
Accessibility to your Home with the Lockbox
If you are selling your home, you should not be present when an agent brings a potential buyer to view the property. Successful marketing means that buyers need to be able to imagine the house as their future home. Nothing puts a damper on that more than having the current owners hanging around.
That is one reason why the lockbox is such a key tool for real estate agents.
A lockbox is a hollow metal box that attaches to the front doorknob or some secure place nearby. Inside the hollow area is another matchbox sized box that contains the key to the house. When an agent opens the lockbox, that smaller container slides out.
The lockbox gets its name because it is a locked box. A stranger cannot come by, open the box, get the key and gain entry to the house.
Only agents can do that.
Most modern lockboxes have a tiny microprocessor inside. You need an electronic key to open it and the only way to get a key is to become a member of the local Multiple Listing Service. All of the keys have a unique identifier so when someone opens the box, the microprocessor inside “registers” the agent who opens it. Agents are forbidden to let another agent use their electronic key.
Since the box is “reset” just before being placed on the door, any agent who opens the box can be identified – as well as the date and time they entered the house. That information can be downloaded at the local MLS Association. This works as a security measure for the homeowner.
But the main purpose of the lockbox is that it facilitates the sale of the home. Without it, selling or buying a home would be much more difficult.
Think of the alternatives.
Without a lockbox, the seller would have to be present when the buyer came by with their agent, and that does not really help to sell the home. Sellers could leave the door unlocked, of course, but in today’s security-conscious world, that is not a great idea.
One possibility is that the seller could give a key to their listing agent, but then the listing agent would always have to be present when another agent brought a buyer to the home. Showings would have to be scheduled tightly and that would be an inconvenience to the listing agent and the buyer’s agent…
…and it would be an inconvenience to the buyer..
An Appraisal to Determine Your Home's Price?
Recently a homeowner wanted to know the value of her house.
The most common reason people want to know is because they are thinking of selling, but there are other reasons. Perhaps you are being relocated and your company intends to assist you. Maybe you're thinking of a refinance. You may be intending to deed a portion of the property to a family member and need to place a value on it. There may (heaven forbid) be a divorce pending.
There are all kinds of reasons you may want to know your home's potential sales price.
A common questions is, "So where do I get an appraisal?"
You probably don't need an appraisal.
Appraisers define market value differently than real estate agents do. Appraisers focus on recent closed and pending sales. In short, they are looking backward to use data they can document. An agent is looking to the future, taking into account comparable sales, pending sales, listed prices, the market, average sales time, and available inventory, in order to predict a future selling price.
For that reason, a qualified local real estate agent will generally outperform appraisers in anticipating the near-future market price of a particular home.
Inexperienced appraisers will argue that point. Experienced ones recognize it to be true.
So how do you know the real "market value" of your home?
You ask a real estate agent.
Agents know what the market is like "right now." They know if the market is hot -- they know if it is cold. They know if your home is over-improved for the area. They can look in the Multiple Listing Service and see what has sold but not yet closed.
They have the expertise to know what your home is worth and they are willing to share that knowledge with you for.
...free. No cost. No money. Free.
If you need an agent at some point down the road, then you give them a call and give them an opportunity to tell you what they can do. That's all they want in exchange for this free service...and most perform this service very well.
Just ask for a Competitive Market Analysis.
Or...you could ask for a "CMA." Using jargon always makes you sound "savvy" and in the know.
Commercial real estate still strong
Property sales reach $401 billion through mid-October, easily outpacing last year's $359 billion.
October 22 2007: 7:20 AM EDT
WASHINGTON (AP) -- The excesses that led to a bust in the housing boom haven't spread to the commercial real estate market, where the outlook is cautious but decidedly upbeat.
Led by strong growth in the office and retail segments, commercial property sales hit $401 billion through Oct. 18, outpacing last year's $359 billion total, according to Real Capital Analytics, a New York based real-estate research firm.
Construction spending on office buildings, shopping centers and other private, nonresidential projects jumped 15.2 percent in August, the Commerce Department said last month.
There are some signs of slowing growth, analysts say, but nothing compared to the residential real estate market, where foreclosures and mortgage defaults are still rising rapidly, mainly from subprime mortgages extended to risky borrowers. Most economists forecast further declines in home sales and prices, making it "the most significant current risk to our economy," Treasury Secretary Henry Paulson said last week.
The commercial market has not been dragged down by the residential mortgage mess because for the most part, buyers and sellers are more sophisticated, and they have more financial flexibility and resources to ride out credit-market turmoil, experts said.
"It's a different animal than the nonresidential construction business with the direct relationship between banks and business leaders, not banks and homeowners," said Bernard Baumohl, managing director of The Economic Outlook Group in Princeton, N.J.
That doesn't mean the market would be unaffected if economic growth stalls.
"As home prices continue to fall, people feel poor and spend less," and that puts pressure on the profits that fuel corporate spending, said William Wheaton, research director at the Massachusetts Institute of Technology's Center for Real Estate. He puts 50-50 odds on a mild recession in the U.S. within the next six months.
Economic data due out soon is likely to show that September was one of the slowest months in several years for all areas of commercial real estate - from apartment buildings to retail properties, according to Real Capital Analytics.
If the broader economy stumbles, the commercial real estate market would be vulnerable to "credit-risk contagion," Wheaton said. Already, the credit crunch that started in mortgages has spread to other markets, including the commercial market, with some sellers asking for more capital upfront when mortgage-backed assets are financing a transaction.
Projects in Midwestern cities dominated by individual investors have seen prices plateau and capitalization rates rise compared with developments in New York, Washington and San Francisco, where institutional and foreign investments remain stable, said Dan Fasulo, managing director of Real Capital Analytics.
Risk premiums also are up, which means commercial real estate investors can't get sellers to finance as much debt as before. And there has been an "above-normal flow" of lodging project cancellations and postponements, even though the increase is "not excessive or alarming," said Patrick Ford, president of Lodging Econometrics, a Portsmouth, N.H.-based real estate consulting firm. Speculative deals or developments with marginal profits are "dead," Wheaton said.
Yet only a handful of deals have been cut, analysts said, generally because the buyer or developer had terms that "pushed the envelope's edge" in a tight credit market. As an example, Wheaton cited recent media reports of struggles at Macklowe Properties, which in February financed the roughly $7 billion purchase of eight Manhattan office buildings with little equity and heavy short-term debt.
Representatives from New York-based Macklowe Properties did not return calls for comment. But Fasulo said "anyone expecting defaults on those loans will be disappointed," especially since Citigroup (Charts, Fortune 500), Bank of America (Charts, Fortune 500) and JPMorgan Chase (Charts, Fortune 500) this week said they will pool money to buy distressed short-term debt in markets that were roiled this summer by a collapse in securities backed by subprime mortgages.
Homeowners who foreclosed or would-be home buyers who can no longer get financing are seeking to rent, a positive development for the apartment sector in the commercial property market.
Fundamentals in the commercial market remain strong with rising rents and occupancy levels expected to continue, especially in metropolitan areas. And while overbuilding in residential housing is worsening the magnitude of the downturn, commercial markets are not in oversupply mode.
"There's plenty of excess capital that wants into real estate, especially in metro areas," Fasulo said, adding that apartment building operator Archstone-Smith Trust's $22.2 billion acquisition by a partnership led by Tishman Speyer earlier this month provided a "real shot of adrenaline to the marketplace."
Tishman Speyer, which owns New York's Rockefeller Center and Chrysler building, led the takeover with capital organized by Lehman Brothers (Charts, Fortune 500), Banc of America Strategic Ventures and Barclays Capital (Charts).
As the housing market struggles to regain its footing, the outlook for commercial real estate is mostly positive, and investors are reaping the benefits.
A recent example: Host Hotels & Resorts (Charts, Fortune 500), the nation's largest lodging real estate investment trust, this month reported third-quarter results that beat Wall Street estimates on improved occupancy and lodging rates. 
Mortgage Basics
Adjustable or floating rate, 15-year or 30? How much mortgage can you afford? These are just a few of the many questions home buyers will find information on in this report.
Buying a home is the biggest financial investment most of us will ever make. As with any large project or goal, it requires dealing with a variety of complex issues. The best approach is to divide the process into manageable tasks. The following deals with the first steps of gathering your records, determining what you can afford, and understanding mortgage options.
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Before you go looking for a home, you should determine how much home you can afford. Most lenders will prequalify you to borrow up to a certain amount. Prequalification allows you to focus in on a realistic price range and makes you a more attractive buyer. Whether or not you want to prequalify, eventually you'll need to complete a loan application and it may take some time to gather and assemble the required information.
It's also a good idea to review your credit report. Contact local lenders to determine which credit bureaus they use. Then contact the credit bureaus and request a copy of your credit report (in most states, credit bureaus are required to provide individuals with a free copy of their report). Review your report to ensure that all information is correct. If you have past credit problems, don't lose hope. Be prepared to present a rationale for each slipup, and demonstrate an improvement in your ability to pay bills on time.
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The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Two income-to-debt ratios established by Fannie Mae are standard requirements for conventional mortgages. The first requirement is that monthly mortgage principal and interest payments (P&I), plus insurance and property taxes, cannot exceed 28% of the buyer's gross monthly income (some exceptions may apply to increase this limit to 33%). The second requirement limits total monthly debt payments (housing, credit cards, car payments, etc.) to 36% of gross monthly income. In addition to these requirements, you may have to pay 10% to 20% down on the total purchase price to qualify for a conventional mortgage.
Mortgage Rates and Minimum Incomes Needed to Qualify
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| Interest Rate |
Monthly Payment |
Minimum Annual Income |
| 4% |
$454 |
$21,770 |
| 5% |
$510 |
$24,479 |
| 6% |
$570 |
$27,340 |
| 7% |
$632 |
$30,338 |
| 8% |
$697 |
$33,460 |
| 9% |
$764 |
$36,691 |
| 10% |
$834 |
$40,017 |
| 11% |
$905 |
$43,426 |
| 12% |
$977 |
$46,905 |
Mortgage companies use ratios to analyze your mortgage payment. The above example shows the monthly payments of principal and interest, and income needed to qualify for a $95,000 mortgage at various interest rates, amortized on a 30-year schedule, assuming a payment ratio of 25%.
Source: National Association of Home Builders, Economics Division.
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How much house you can buy also depends on your mortgage's term and interest rate. The term is the length of time (usually 15 or 30 years) over which payments will be paid. The rate can be fixed (meaning it doesn't change over the loan's term) or adjustable (it fluctuates with market conditions). Thirty-year fixed-rate mortgages remain the most popular. The longer term lowers the monthly payment, while the fixed rate provides stability over the life of the loan. Given relatively low interest rates, these mortgages are attractive to buyers planning to stay at least six or seven years in their new home. The drawbacks are low principal payments in the early years, and the risk that market rates will decline over the term. However, if your credit history is sound and you have sufficient income, you can usually refinance your mortgage when rates decline.
A 15-year term lowers the interest rate, reduces total interest payments, and increases principal payments. But it also increases monthly payments. If you can't afford the higher payments now, you might opt for a 30-year mortgage. If there are no prepayment penalties, you can make additional principal payments as your income increases. Making just one extra monthly payment a year will pay off a 30-year mortgage in less than 22 years and can save tens of thousands of dollars in interest costs. If you plan to stay in a home no more than three years, you might want an adjustable-rate mortgage (ARM). ARMs offer initial rates that are lower than fixed mortgages. At some point, usually after the first year, rates are tied to market conditions and are subject to potential rate increases. Most ARMs include a cap on rate increases in any given year, as well as over the life of the loan. Some ARMs offer initial rates at least 2% below fixed rates and limit increases to 1% annually and 5% to 6% over the life of the loan. Many home buyers are attracted by the affordability of an ARM during the initial period. However, you should be confident that your future income will be sufficient if both interest rates and your monthly payments increase.
Another popular mortgage involves a balloon payment. A balloon is a lump-sum payment that pays off the loan in full after a fixed period of time. Generally the rates on balloon mortgages are 1/4% to 3/4% less than on 30-year fixed mortgages, but during an initial period of between 3 and 15 years, payments are similar. After this period, the remaining outstanding principal balance is either due in full or subject to refinancing. This is a good option for home buyers who plan to sell before the final payment is due. But because property values fluctuate, you may not be able to sell when you want. You may also face higher payments if you are forced to refinance at a higher rate, and there is also a risk that you may not be in a position to refinance when the balloon becomes due.
Three Steps to Finding the Right Mortgage
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- Estimate how long you expect to live in the house. If the answer is less than three to five years, consider an Adjustable Rate Mortgage (ARM), which typically starts out with a lower rate. If you plan to live in your new home longer than five years, a fixed-rate mortgage offers protection against rising interest rates.
- Shop around for mortgage rates. Banks, credit unions, and mortgage companies all offer mortgages. Compare at least six lenders in your area.
- Add up all the costs for each lender. Include fees, points, closing costs, etc., to arrive at the total mortgage cost for each lender.
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Points are interest paid in advance to reduce the rate on a loan. One point is equal to 1% of the mortgage amount. The general rule is that 1 point is worth 1/8 of 1% off the loan rate. The decision to pay points for a lower rate is based on how much the seller is willing to contribute to points, how long you plan to stay in the house, and how important lower payments are compared to higher closing costs. You will need to calculate the long-term value of points based on these factors, keeping in mind that points are generally tax deductible in the year paid.
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If you cannot afford a conventional mortgage, there are a variety of alternatives. An anxious seller will sometimes offer owner financing. Federal Housing Administration (FHA) loans offer down payments as low as 3%, but may require the buyer to purchase mortgage insurance. (The FHA is a government agency responsible for insuring affordable housing mortgages.) The Veterans Administration (VA) offers no-money-down mortgages to qualified veterans of the U.S. military. Finally, there are local affordable housing advocates that offer low-cost, low down-payment loan alternatives. For further information, contact the FHA, VA, Fannie Mae, or your local mortgage lender or real estate broker.
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Summary
- The first step in acquiring a home mortgage is to gather the information you'll need to include in a mortgage application.
- Review your credit report by ordering a copy from the credit bureaus used by local mortgage lenders.
- Prequalifying for a mortgage lets you know how much you can afford and makes you a more attractive buyer.
- Conventional mortgages limit housing costs to 28% of gross income and total debt payments to 36% of gross income.
- Mortgage terms are usually 15 or 30 years. The longer the term, the lower your monthly payment, but the higher your overall interest costs.
- Thirty-year loans often permit additional principal payments. One additional monthly payment per year will reduce a 30-year loan to 22 years.
- Interest rates are fixed or variable over the term of the loan. Variable rates may be best for buyers who plan to sell within three years.
- Generally speaking, one point is worth 1/8 of 1% off the loan rate.
- A balloon payment is a lump sum payable at the end of a specified term.
- Points and interest on mortgages or home equity debt are usually tax deductible.
Checklist
- When your credit reports arrive, review them for accuracy. Correct any mistakes immediately.
- Get prequalified for a loan. Paying off debts ahead of time might qualify you for a better mortgage.
- If you're a veteran, contact the U.S. Veterans Administration to find out whether you're eligible for a no-money-down mortgage.
The quickest path to finding true foreclosure bargains
Monday October 15, 1:07 pm ET
By Jennifer Openshaw
Following the facts on discounts can help you find the real deals
NEW YORK (MarketWatch) -- You've heard a lot (probably too much!) about real estate market problems and especially the rapid rise in foreclosures. But as a real estate investor you're picking up big-time "bargain" signals on your antennae.
The headlines are ominous: some 243,000 foreclosures in August, up 36% from July and 115% from August 2006. There's blood in the streets.
So how do you get from "there must be bargains out there" to "how much will I save, and where are the best bargains?"
I like to guide any buying decision as much as possible with the facts. But while lots of foreclosures are out there, how good an opportunity they might be was hard to know. Until now.
For sale and on sale
RealtyTrac, the same real estate portal and analysis group that supplies monthly national foreclosure statistics, also calculates the average discount-to-value by market -- that is, how much foreclosed homes actually sold for vs. their estimated market value in their markets. So -- bingo -- you've got a good indicator of how good an opportunity you're looking at.
Search on "foreclosures by state," and then click "view (state) foreclosure trends," and you'll get a nice snapshot of foreclosure filings, actual sales, average sales price and -- most of all -- the discount-to-value.
You could page through state by state to get a national picture of where the good deals are. Instead, I went to the source. RealtyTrac was kind enough to supply me with source data in a spreadsheet. I'll share the most interesting findings.
National trends
Nationwide, in the three months June through August, some 68,426 foreclosed homes sold in 2007 vs. 54,886 in 2006. The average sales price dropped from $271,000 to just over $239,000.
The discount-to-market ratio increased slightly from 76.42% to 77.68%. How do you read this ratio? It is the actual foreclosure sales price compared to the perceived market value of the home. So 77.68% means, on average, you'd get just over a 22% savings or "discount" on your foreclosure purchase. That's down from just over 23% a year ago.
The best (and worst) around the country
So, now the fun part: a state by state look at where the best deals and biggest changes are happening:
From June-August 2006 to June-August 2007, California, Nevada, Michigan, Massachusetts and Arizona showed the greatest increase in the number of foreclosure sales, while New York, New Jersey and North Carolina posted the biggest decreases among states that had 1,000 or more foreclosure sales.
But while California heads the list in sales, the discount is relatively small -- one of the five smallest in the country at only 17%. The best deals are in troubled Rust Belt or manufacturing-centric states -- Alabama, Pennsylvania, Indiana and Ohio.
| States with largest discounts |
Average foreclosure sale price |
Average % of market value |
| Alabama |
$133,834 |
59.95 |
| Pennsylvania |
110,936 |
61.68 |
| Indiana |
99,255 |
63.50 |
| Ohio |
90,300 |
64.70 |
| Missouri |
144,768 |
67.25 |
| States with smallest discounts |
Average foreclosure sale price |
Average % of market value |
| Hawaii |
$657,211 |
85.41 |
| Washington |
288,397 |
83.68 |
| Virginia |
338,912 |
83.48 |
| Massachusetts |
290,835 |
83.03 |
| California |
437,813 |
83.00 |
Finally, trends are interesting: Discounts are increasing in Midwestern states and in New Mexico, while decreasing some in Alaska, Iowa and Texas. This may be a sign of strengthening real estate markets in those states -- or weak market values to begin with.
| State |
Average % of market value |
Discount increase (decrease) |
| Louisiana |
74.04 |
15.88% |
| New Mexico |
72.59 |
12.01 |
| Minnesota |
72.79 |
10.50 |
| Indiana |
73.52 |
9.82 |
| Alabama |
63.50 |
7.48 |
| Alaska |
82.02 |
(8.03) |
| Iowa |
77.32 |
(5.34) |
| Texas |
78.75 |
(4.82) |
| Kansas |
74.03 |
(4.56) |
| Hawaii |
85.41 |
(3.47) |
These facts will help you know how much to pay -- and to know if foreclosures are right for you in the first place. They may also say something about which way the market in your area is likely to go. Either way, they will help you find the "real" deal.
Peter Sander contributed to this article.
Jennifer Openshaw is the author of " The Millionaire Zone" and CEO of Openshaw's Family Financial Network. She hosts ABC Radio's Winning Advice and serves as an adviser to some of America's top corporations. You can reach her at jopenshaw@themillionairezone.com
Market Value & Comparable Sales
Comparable sales are recent sales of similar properties in the nearby neighborhood or in a similar neighborhoods with similar prices. In short, they are "comparable" to the house you are buying or selling.
The comparable sales method is the best way to determine market value for 1 to 4 unit properties. Other methods are available, but they are mostly used for larger apartment buildings, commercial structures, and agricultural real estate. They don't apply in determining market value for traditional
If you're a seller, your listing agent will help you determine your sales price by showing you some recent comparable sales. If you're a buyer and preparing an offer, your selling agent will probably show you some comparable sales so you can come up with your offer price. Whether you are a buyer or seller, you'll have to make adjustments based on the property and any recent changes in the market.
Agents provide advice, but buyers and sellers make the final decisions.
Realtors excel when anticipating market changes. They have their fingers on the "pulse" of the market and know what is going on...now. When determining market value, you need an agent. An appraiser's main role is to justify a market value or purchase price.
Even so, in most cases buyers need to obtain an appraisal to satisfy the lender that the property is equitable collateral for their loan. Appraisals of 1 to 4 unit homes almost always use the comparable sales method to justify a purchase price or market value..
Usually, finding comparable sales is not that difficult. For example, if the home is in a housing tract where most of the homes were built by the same builder, it is usually pretty easy to obtain comparable sale information. As time goes by and individuals modify their homes, it can get a little more difficult. More adjustments need to be made..
Occasionally, comparable sales are impossible to find. Most often, this happens in newly built-up areas where the sales tract is new. Whether you can find comparable sales does not affect the market value of the home, but it does impact a buyer's ability to find a lender. Fixed rate lenders may not lend until there is more history on the area, so the alternative is usually a portfolio lender. A Realtor has access to title company information and can pull up information on which lenders are lending in a specific area.
Role of a Listing Agent
Your first exposure to a real estate agent was probably when you bought your home. Based on those experiences, you formed a generalized impression about exactly what it is that agents do. When it comes time to sell your house, you probably expect your listing agent to do the same things that your agent did when you were looking to buy a home.
The person who helped you buy your home was a "selling agent" (often referred to as a "buyer's agent" on the web). Selling agents advertise in newspapers, on the internet, and other places, hoping to get buyers to call on the ads. Since over 90% of buyers do not buy the home in the ad, selling agents begin showing other properties to the potential homebuyers.
So sellers want their listing agents to advertise in newspapers and to hold open houses, thinking this is what makes them effective agents.
You couldn't be more wrong.
A listing agent's primary job has absolutely nothing to do with finding buyers -- it is to convince all of those selling agents to show your home to their buyers.
That is why there is a "broker preview" or an "office preview" of your home -- including food or other "enticements" that appeal to selling agents. They want the selling agents to "preview" your home so it will be "fresh" in their mind to show potential buyers.
Your listing agent also puts your house in the local Multiple Listing Service and sends flyers to all of the other local office (and their agents) -- telling them about your property. They talk to as many agents as they can about your house.
This is also why you want to price your home properly during that preview period. If you price it too high, the selling agents just laugh and say they'll wait till the price comes down. Of course, by then your house is "old news" and no longer fresh in their mind.
As for all those "open houses" and "ads" you want your agent to run - or else you feel like they aren't doing anything? Those rarely sell your house. Sellers just "think" they do. That is part of why most FSBO's do not successfully sell their homes on their own. They begin with a false impression of what makes a good listing agent effective.
The real value of a listing agent is proper pricing, providing instruction at what you need to do to properly "present" your house, and in marketing -- but not marketing to buyers -- marketing your home to other agents.
Add Quick Curb Appeal and Value with FLOWERS!
Even if you have a black thumb or hate to deal with gardening, colorful flowers can create a positive emotional impact on homebuyers and visitors to your home. They are inexpensive and easy, immediately enhancing your home's "curb appeal."
You can plant them in the ground, but it is actually easier to use an inexpensive redwood planter's box. Planter's boxes are rectangular in shape and fit nicely on a porch, patio, windowsill, or practically anywhere.
For the flowers, a splash | |