What Is PMI?
PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.
Benefits of PMI
PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership. With this type of insurance, it is possible for you to buy a home with as little as a 3 percent to 5 percent down payment. This means that you can buy a home sooner without waiting years to accumulate a large down payment.
New PMI Requirements
A new federal law, The Homeowner's Protection Act (HPA) of 1998, requires lenders or servicers to provide certain disclosures concerning PMI for loans secured by the consumer's primary residence obtained on or after July 29, 1999. The HPA also contains disclosure provisions for mortgage loans that closed before July 29, 1999. In addition, the HPA includes provisions for borrower-requested cancellation and automatic termination of PMI.
Why a Change in PMI Requirements?
In the past, most lenders honored consumers' requests to drop PMI coverage if their loan balance was paid down to 80 percent of the property value and they had a good payment history. However, consumers were responsible for requesting cancellation and many consumers were not aware of this possibility. Consumers had to keep track of their loan balance to know if they had enough equity and they had to request that the lender discontinue requiring PMI coverage. In many cases, people failed to make this request even after they became eligible, and they paid unnecessary premiums ranging from $250 to $1,200 per year for several years. With the new law, both consumers and lenders share responsibility for how long PMI coverage is required.
The Homeowner's Protection Act (HPA) of 1998
What Loans Are Covered?
Generally, the HPA applies to residential mortgage transactions obtained on or after July 29, 1999, but it also has requirements for loans obtained before that date. This new law does not cover VA and FHA government-guaranteed loans. In addition, the new law has different requirements for loans classified as "high-risk." Although the HPA does not provide the standards for what constitutes a "high risk" loan, it permits Fannie Mae and Freddie Mac to issue guidance for mortgages that conform to secondary market loan limits. Fannie Mae and Freddie Mac are corporations chartered by Congress to create a continuous flow of funds to mortgage lenders in support of homeownership. As of January 1, 2000, mortgages in amounts of $252,700 or less are considered conforming loans. For non-conforming mortgages, the lender may designate mortgage loans as "high risk."
What Is a Residential Mortgage Transaction?
There are four requirements for a transaction to be considered a residential mortgage transaction: (1) a mortgage or deed of trust must be created or retained; (2) the property securing the loan must be a single-family dwelling; (3) the single-family dwelling must be the primary residence of the borrower; and (4) the purpose of the transaction must be to finance the acquisition, initial construction, or refinancing of that dwelling.
How Do You Cancel or Terminate PMI?
Cancellation
Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.
Automatic Termination
Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once you pay down your mortgage to 78 percent of the value if you are current on your loan. If the loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.
For high risk loans, mortgage lenders or servicers are required to automatically cancel PMI coverage once the mortgage is paid down to 77 percent of the original value of the property, provided you are current on your loan.
Final Termination
Under HPA, if PMI has not been canceled or otherwise terminated, coverage must be removed when the loan reaches the midpoint of the amortization period. On a 30-year loan with 360 monthly payments, for example, the chronological midpoint would occur after 180 payments. This provision also requires that the borrower must be current on the payments required by the terms of the mortgage. Final termination must occur within 30 days of this date.
What Disclosures Does the HPA Require?
For Loans Obtained on or after July 29, 1999
The HPA establishes three different times when a lender or servicer must notify a consumer of his or her rights. Those times are at loan closing, annually, and upon cancellation or termination of PMI.
The content of these disclosures varies depending on whether: (1) PMI is "borrower-paid PMI" or "lender-paid PMI," (2) the loan is classified as a "fixed rate mortgage" or "adjustable rate mortgage," or (3) the loan is designated as "high risk" or not.
At loan closing, lenders are required to disclose all of the following to borrowers:
The right to request cancellation of PMI and the date on which this request may be made.
The requirement that PMI be automatically terminated and the date on which this will occur.
Any exemptions to the right to cancellation or automatic termination.
A written initial amortization schedule (fixed-rate loans only).
Annually, your mortgage loan servicer must send borrowers a written statement that discloses:
The right to cancel or terminate PMI.
An address and telephone number to contact the loan servicer to determine when PMI may be canceled.
When the PMI coverage is canceled or terminated, a notification must be sent to the consumer stating that:
PMI has been terminated, and the borrower no longer has PMI coverage.
No further PMI premiums are due.
The obligation for providing notice of cancellation or termination is with the servicer of the mortgage.
An annual statement must be sent to consumers whose mortgages were obtained before July 29, 1999. This statement should explain that under certain circumstances PMI may be canceled (such as with consent of the mortgagee). It should also provide an address and telephone number to contact the loan servicer to determine whether PMI may be canceled.
The HPA's cancellation and automatic termination rules do not apply to loans made before July 29, 1999.
Although parts of the new law apply only to loans obtained on or after July 29, 1999, many lenders report that they plan to follow the HPA's requirements for both new and existing loans. Making a call to your mortgage loan servicer will help you understand exactly how the law applies to you and your mortgage.
What If Your Home Value Has Increased?
When making mortgage payments, most of the payments during the first few years are finance charges. Therefore, it can take 10 to 15 years to pay down a loan to reach 80 percent of the loan value. If the home prices in your area are rising quickly, your property value may increase so that you can reach the 80 percent mark a lot faster. Your property value could also increase due to home improvements that you make to your home.
If you think your home value has increased, you may be able to cancel PMI on your mortgage. Although the new law does not require a mortgage servicer to consider the current property value, you should contact them to see if they are willing to do so. Also, be sure to ask what documentation may be required to demonstrate the higher property value.
Wednesday, February 6, 2008
Tuesday, February 5, 2008
Life Expectancy of Home Components
One way to prepare for the costs of owning a home beyond the mortgage payment, insurance and taxes, is to know the expected life expectancy of your home's components.
Such knowledge doesn't supersede the use of a home inspector when buying a home, new or old, but it can help you develop a savings plan so you are prepared for the inevitable. Sooner or later you'll have to repair or replace many of your home's parts -- inside and out.
Knowledge of components' life expectancies is what homeowner associations use, in part, to build a reserve fund designed to spread, over time, the cost of the inevitable.
When the roof goes, the appliances conk out, or the paint begins to fade, it's a lot easier to come up with the cash if you've already got some socked away for just this kind of rainy day.
Last year, the National Association of Home Builders, along with the Bank of America developed the "NAHB/BoA Home Equity Study of Life Expectancy of Home Components" to help you take the guess work out of preparing for the worst.
The report suggests you use the timelines as a general guideline. Local weather conditions, use habits, regular maintenance -- or the lack of it -- can all affect the life expectancy of many components.
Personal tastes for contemporary upgrades, remodeling needs and other factors may also dictate replacing parts before their useful life time is up.
In any event based on a comprehensive telephone survey of manufacturers, trade associations and researchers NAHB developed information about the longevity of housing components.
From the foundation to the rooftop, here's a quick look at how long, on a national average, some of the most common home components are expected to last.
Foundations. Poured concrete block footings and slab foundations should last a lifetime, 80 to 100 years or more provided they were quality built. The foundation termite proofing, 12 years, provided the chemical barriers remain intact.
Properly installed waterproofing with bituminous coating should last 10 years.
Flooring. Natural wood flooring has a life expectancy of 100 years or more with proper care. Marble, slate, and granite, likewise, but again, only with proper maintenance. Vinyl floors wear out in 50 years, linoleum about 25 years, and carpet between 8 and 10 years, tops.
Electrical system. In the electrical system, copper plated wiring, copper clad aluminum, and bare copper wiring are expected to last a lifetime, whereas electrical accessories and lighting controls are expected to fail not much longer than 10 years.
Outside materials. Outside materials typically last a lifetime. Brick, vinyl, engineered wood, stone (both natural and manufactured), and fiber cement typically last as long the house exists. Exterior wood shutters get 20 years, well maintained gutters, 50 if they are copper, 20 years if they are aluminum. Copper downspouts last longest, 100 years or more, while aluminum ones give out after 30 years.
Doors. Exterior fiberglass, steel and wood doors will last as long as the house exists, while vinyl and screen doors have a life expectancy of 20 and 40 years, respectively. Closet doors are expected to last a lifetime, and French doors have an average life of 30 to 50 years.
Windows. Wooden windows last longer than aluminum ones -- 30 years compared to only 15 or 20.
Heating, ventilation, and air conditioning systems require a religious regimen of maintenance. Still, most components give up within 25 years. Furnaces break down in 15 to 20 years, heat pumps 16 years, and air conditioning units 10 to 15 years. Tankless water heaters can go for 20 years or more, but electric or gas water heaters only 10 years. Thermostats have a 35-year lifespan but are often replaced for more efficient models.
Appliances. Appliances' life expectancies depend largely on how much they are used, but they are typically replaced long before they are done. One must keep up with the Joneses. Among major appliances, gas ranges live15 years, dryers and refrigerators die at 13, compactors, dishwashers and microwave ovens might last until they are 9 years.
Roofing. The life of a roof is largely dependant upon local weather conditions, proper building and design, material quality, and adequate maintenance. Slate, copper, and clay/concrete roofs have the longest life expectancy, 50 years or more. Wood shake roofs, go for 30 years, fiber cement shingles last 25 years, asphalt shingles give up at 20.
One way to prepare for the costs of owning a home beyond the mortgage payment, insurance and taxes, is to know the expected life expectancy of your home's components.
Such knowledge doesn't supersede the use of a home inspector when buying a home, new or old, but it can help you develop a savings plan so you are prepared for the inevitable. Sooner or later you'll have to repair or replace many of your home's parts -- inside and out.
Knowledge of components' life expectancies is what homeowner associations use, in part, to build a reserve fund designed to spread, over time, the cost of the inevitable.
When the roof goes, the appliances conk out, or the paint begins to fade, it's a lot easier to come up with the cash if you've already got some socked away for just this kind of rainy day.
Last year, the National Association of Home Builders, along with the Bank of America developed the "NAHB/BoA Home Equity Study of Life Expectancy of Home Components" to help you take the guess work out of preparing for the worst.
The report suggests you use the timelines as a general guideline. Local weather conditions, use habits, regular maintenance -- or the lack of it -- can all affect the life expectancy of many components.
Personal tastes for contemporary upgrades, remodeling needs and other factors may also dictate replacing parts before their useful life time is up.
In any event based on a comprehensive telephone survey of manufacturers, trade associations and researchers NAHB developed information about the longevity of housing components.
From the foundation to the rooftop, here's a quick look at how long, on a national average, some of the most common home components are expected to last.
Foundations. Poured concrete block footings and slab foundations should last a lifetime, 80 to 100 years or more provided they were quality built. The foundation termite proofing, 12 years, provided the chemical barriers remain intact.
Properly installed waterproofing with bituminous coating should last 10 years.
Flooring. Natural wood flooring has a life expectancy of 100 years or more with proper care. Marble, slate, and granite, likewise, but again, only with proper maintenance. Vinyl floors wear out in 50 years, linoleum about 25 years, and carpet between 8 and 10 years, tops.
Electrical system. In the electrical system, copper plated wiring, copper clad aluminum, and bare copper wiring are expected to last a lifetime, whereas electrical accessories and lighting controls are expected to fail not much longer than 10 years.
Outside materials. Outside materials typically last a lifetime. Brick, vinyl, engineered wood, stone (both natural and manufactured), and fiber cement typically last as long the house exists. Exterior wood shutters get 20 years, well maintained gutters, 50 if they are copper, 20 years if they are aluminum. Copper downspouts last longest, 100 years or more, while aluminum ones give out after 30 years.
Doors. Exterior fiberglass, steel and wood doors will last as long as the house exists, while vinyl and screen doors have a life expectancy of 20 and 40 years, respectively. Closet doors are expected to last a lifetime, and French doors have an average life of 30 to 50 years.
Windows. Wooden windows last longer than aluminum ones -- 30 years compared to only 15 or 20.
Heating, ventilation, and air conditioning systems require a religious regimen of maintenance. Still, most components give up within 25 years. Furnaces break down in 15 to 20 years, heat pumps 16 years, and air conditioning units 10 to 15 years. Tankless water heaters can go for 20 years or more, but electric or gas water heaters only 10 years. Thermostats have a 35-year lifespan but are often replaced for more efficient models.
Appliances. Appliances' life expectancies depend largely on how much they are used, but they are typically replaced long before they are done. One must keep up with the Joneses. Among major appliances, gas ranges live15 years, dryers and refrigerators die at 13, compactors, dishwashers and microwave ovens might last until they are 9 years.
Roofing. The life of a roof is largely dependant upon local weather conditions, proper building and design, material quality, and adequate maintenance. Slate, copper, and clay/concrete roofs have the longest life expectancy, 50 years or more. Wood shake roofs, go for 30 years, fiber cement shingles last 25 years, asphalt shingles give up at 20.
Friday, February 1, 2008
Keep that Heating Bill Lower
Seven Tips to Slash Soaring Home Heating Bills
(ARA) - Consumers will likely pay record prices to heat their homes this winter, up an average of 10.5 percent from last winter, says NEADA, a group of state energy aid officials. Now is the time to give your home a “check-up.” Here are seven tips from the Comfort Institute to make your home an energy sipper instead of a gas guzzler.
Ask your HVAC contractor to test your duct system for air leaks. Many assume that windows and doors are the major cause of a home's energy wasting air leaks. But according to recent research by the Department of Energy (DOE), gaps, joints and disconnections in the typical home's duct system are much more significant. The DOE states that the typical duct system loses 25 to 40 percent of the energy put out by the central furnace or heat pump. Authorities recommend sealing ducts with a brushed on fiber-reinforced elastomeric sealant. Duct tape usually dries out and fails. It turns out duct tape is great for many things, but sealing ducts isn't one of them.
Ask your contractor to perform an Infiltrometer “blower door” test. The blower door is a computerized instrument originally invented by the Department of Energy. It pinpoints where your home's worst air leaks are, such as duct leaks, and also measures how leaky the overall house is.
Most homes have the equivalent of an open window in combined air leaks. Many heating contractors offer an Infiltrometer test as part of a “Home & Duct Performance Checkup” that also checks insulation levels and overall duct performance.
Have your heating system cleaned and tuned. A pre-season tune up is a great investment. It reduces the chances of breakdowns on cold winter nights, improves safety and more than pays for itself through more energy efficient operation. For a free report: “How to Identify a Good Heating and Cooling Contractor,” go to http://www.comfortinstitute.org/.
Replace your furnace or heat pump air filter (or clean it if it is an electronic unit). Most systems need this done every month to ensure safe and efficient operation. Keep forgetting to do it? Ask your contractor for an extended surface area central air filter that only needs to be replaced once a year. It also does a far better job of keeping your equipment and the air in your home clean.
Close your fireplace damper. Did you remember to close it last time you used the fireplace? Shut it now or waste precious warm air all winter long.
Install a programmable set-back thermostat. Turning down the thermostat eight degrees for eight hours a day will save 8 percent on home heating costs. An easy way to take advantage of these savings is to lower the thermostat temperature while away from home or sleeping. Ask your heating contractor about new models which are much easier to program.
Consider replacing your old furnace or heat pump. Just like a car, heating and cooling equipment doesn't last forever. Is your system more than 12 years old? Planning to stay in your home more than a few years?
Many authorities recommend replacing it before it fails permanently. New units can pay for themselves over time as they are up to twice as energy efficient. However, government and utility research has found that over 90 percent of newly installed high efficiency systems have energy wasting mistakes. Today's new equipment is drastically compromised if it is hooked up to bad ducts.
Do some homework before talking to contractors. For more information, visit http://www.energystar.gov/ and http://www.comfortinstitute.org/. Print out the free Comfort Institute report “Tips and Secrets to Buying A New Heating and Cooling System.”
Courtesy of ARAcontent
(ARA) - Consumers will likely pay record prices to heat their homes this winter, up an average of 10.5 percent from last winter, says NEADA, a group of state energy aid officials. Now is the time to give your home a “check-up.” Here are seven tips from the Comfort Institute to make your home an energy sipper instead of a gas guzzler.
Ask your HVAC contractor to test your duct system for air leaks. Many assume that windows and doors are the major cause of a home's energy wasting air leaks. But according to recent research by the Department of Energy (DOE), gaps, joints and disconnections in the typical home's duct system are much more significant. The DOE states that the typical duct system loses 25 to 40 percent of the energy put out by the central furnace or heat pump. Authorities recommend sealing ducts with a brushed on fiber-reinforced elastomeric sealant. Duct tape usually dries out and fails. It turns out duct tape is great for many things, but sealing ducts isn't one of them.
Ask your contractor to perform an Infiltrometer “blower door” test. The blower door is a computerized instrument originally invented by the Department of Energy. It pinpoints where your home's worst air leaks are, such as duct leaks, and also measures how leaky the overall house is.
Most homes have the equivalent of an open window in combined air leaks. Many heating contractors offer an Infiltrometer test as part of a “Home & Duct Performance Checkup” that also checks insulation levels and overall duct performance.
Have your heating system cleaned and tuned. A pre-season tune up is a great investment. It reduces the chances of breakdowns on cold winter nights, improves safety and more than pays for itself through more energy efficient operation. For a free report: “How to Identify a Good Heating and Cooling Contractor,” go to http://www.comfortinstitute.org/.
Replace your furnace or heat pump air filter (or clean it if it is an electronic unit). Most systems need this done every month to ensure safe and efficient operation. Keep forgetting to do it? Ask your contractor for an extended surface area central air filter that only needs to be replaced once a year. It also does a far better job of keeping your equipment and the air in your home clean.
Close your fireplace damper. Did you remember to close it last time you used the fireplace? Shut it now or waste precious warm air all winter long.
Install a programmable set-back thermostat. Turning down the thermostat eight degrees for eight hours a day will save 8 percent on home heating costs. An easy way to take advantage of these savings is to lower the thermostat temperature while away from home or sleeping. Ask your heating contractor about new models which are much easier to program.
Consider replacing your old furnace or heat pump. Just like a car, heating and cooling equipment doesn't last forever. Is your system more than 12 years old? Planning to stay in your home more than a few years?
Many authorities recommend replacing it before it fails permanently. New units can pay for themselves over time as they are up to twice as energy efficient. However, government and utility research has found that over 90 percent of newly installed high efficiency systems have energy wasting mistakes. Today's new equipment is drastically compromised if it is hooked up to bad ducts.
Do some homework before talking to contractors. For more information, visit http://www.energystar.gov/ and http://www.comfortinstitute.org/. Print out the free Comfort Institute report “Tips and Secrets to Buying A New Heating and Cooling System.”
Courtesy of ARAcontent
Tuesday, January 29, 2008
MORTGAGE RATES
AVERAGE MORTGAGE RATES AS OF 1/29/2008
Loan Type Today Last Week
30 Year Fixed 5.45% 5.42%
15 Year Fixed 4.94% 4.93%
1 Year ARM 5.12% 5.29%
30 Year Fixed Jumbo 6.56% 6.46%
5/1 ARM 5.05% 5.12%
3/1 ARM 4.98% 5.08%
Loan Type Today Last Week
30 Year Fixed 5.45% 5.42%
15 Year Fixed 4.94% 4.93%
1 Year ARM 5.12% 5.29%
30 Year Fixed Jumbo 6.56% 6.46%
5/1 ARM 5.05% 5.12%
3/1 ARM 4.98% 5.08%
Saturday, January 19, 2008
Pricing Your Home To Sell
8 tips for pricing your home
article by Cheryl Allebrand
In many cases, making a smart deal and getting the best price comes down to studying your market and being an educated seller.
"You've got to know more than you would have if you'd sold a year ago," says William Poorvu, professor emeritus at Harvard Business School and author of the upcoming book "Creating and Growing Real Estate Wealth." "If you want to protect yourself, you have to become knowledgeable."
8 factors to keep in mind as you prepare to sell:
1. Recognize that housing markets are local.
2. Analyze who is buying and selling in your market.
3. Ask the professionals.
4. Know what your house is worth.
5. Consider strategic pricing.
6. Rebate your "commission."
7. Evaluate whether you really have to sell now.
8. Assess the market where you plan to buy.
1. Recognize that housing markets are local.
Home prices are like the weather -- very different in different areas.
In many markets, home prices have actually gone up from last year, says Dick Gaylord, president of the National Association of Realtors.
In addition, demand will change depending on the price range and even the neighborhood. What you need to know: What's the demand for a house like yours in your area?
"You have to look at what's being sold and at what price," says Poorvu. "That's important."
Look at comparables for similar houses. Study prices and sales for one year ago, six months ago, three months ago and current numbers, says Gaylord.
What are the trends? Are prices going up or down -- and by how much? How many days are homes staying on the market? If they are on the market longer, how much of that could be seasonal? In many areas, spring and summer are the busy seasons.
Pay special attention to "the delta between the list price and the sales price," says Ron Phipps, broker with Phipps Realty in Warwick, R.I. That is, look for a meaningful relationship between list price and sales price. Perhaps most homes are selling for 5 percent less than the list price.
"An agent who works the market will be in the best position" to find "the tipping point between nice, attractive and interesting -- and being sold," Phipps says. You want to find the point between, "Hey, that's interesting," and "It's too good to pass up."
If you're not using a real estate agent, it's especially important to use the Internet, visit open houses in your area and study home sales in your Sunday paper, says Greg Healy, vice president of operations for ForSaleByOwner.com.
But you also need to realize that the paperwork alone only tells part of the story. While sales and prices are public, many times seller concessions are not.
2. Analyze who is buying and selling in your market.
What's your competition? Who are the buyers, and why are they shopping?
Do you live in an area like Phoenix, "a growing market with people coming in," says Poorvu. Or are you living in an area that doesn't attract a lot of new residents, where many shoppers are "bottom fishers" who don't have to buy but are "looking to pick up a bargain," he says.
Are you competing against a flood of new houses from builders eager to sell, or are you selling a newer home in an area where most of the housing stock is older?
3. Ask the professionals.
Don't ignore the elephant in the living room. When you interview real estate agents, ask about the market conditions for your area and price range.
Specifically, ask about the "absorption rate" says Phipps. What that means: In the current conditions with the current inventory, how long would it take the market to absorb or sell, all the houses on the market?
If the supply is much larger than the demand, ask potential agents how they would "price to offset that inventory," he says.
4. Know what your house is worth.
Talk to a handful of agents. Get an appraisal from a certified professional appraiser. Look at your comparables. Taken together, that information will give you a pretty good idea of what your home is currently worth.
5. Consider strategic pricing.
Here's how it works: If prices in your area are dropping 1 percent each month, and you want to sell within the next three months, you take 3 percent off your price right off the bat, says Phipps. So if you were going to put your home on the market for $400,000, you set the price at roughly $388,000.
The upside: You'll have the competitive edge over the guy who's dropping his price every month, without the air of desperation. Plus, in a market where prices are falling, you'll make more money if you sell quickly.
The downside: Predicting the market is a tough call, even for the pros. And it's really difficult to raise the price if your market starts to rebound, Phipps says.
6. Rebate your 'commission.'
If you're selling it yourself and need to move quickly, consider subtracting half of what would have been the commission from the sales price, says Healy. The standard commission is about 6 percent, so if you subtract 3 percent, your $300,000 house would go on the market for $291,000, he says.
Listing a home for "$9,000 to $10,000 under that value should create higher interest," especially if it's new to the market, says Healy.
The downside: If the house doesn't sell and you end up hiring an agent, you'll need to cover the commission, which may mean raising your sales price or taking a smaller profit.
7. Evaluate whether you really have to sell now.
If you want to get the best possible price for your home and the local market is tanking, "see if you can delay the sale," says Poorvu. Otherwise, in a lot of markets, sellers have "to be willing to accept a pretty good haircut over what they thought their home was worth last year," he says.
The downside of waiting: The market could decline or your circumstances could change to the point that you might need to sell quickly.
But for situations where the move is optional (or you might be able to rent the property until your local market improves), waiting is a solid option.
Just because you've already planted that "for sale" sign doesn't mean you can't change your mind if you're not seeing the interest you anticipated.
"If you know there are no sales or sales are decreasing, and you have the opportunity," taking it off the market is a decent solution, says Healy. "I think we're seeing a lot of that."
8. Assess the market where you plan to buy.
If you're selling one house and buying another, look at the market where you plan to move. Says Poorvu, "It might be that, with the housing there, it's a great time to buy."
article by Cheryl Allebrand
In many cases, making a smart deal and getting the best price comes down to studying your market and being an educated seller.
"You've got to know more than you would have if you'd sold a year ago," says William Poorvu, professor emeritus at Harvard Business School and author of the upcoming book "Creating and Growing Real Estate Wealth." "If you want to protect yourself, you have to become knowledgeable."
8 factors to keep in mind as you prepare to sell:
1. Recognize that housing markets are local.
2. Analyze who is buying and selling in your market.
3. Ask the professionals.
4. Know what your house is worth.
5. Consider strategic pricing.
6. Rebate your "commission."
7. Evaluate whether you really have to sell now.
8. Assess the market where you plan to buy.
1. Recognize that housing markets are local.
Home prices are like the weather -- very different in different areas.
In many markets, home prices have actually gone up from last year, says Dick Gaylord, president of the National Association of Realtors.
In addition, demand will change depending on the price range and even the neighborhood. What you need to know: What's the demand for a house like yours in your area?
"You have to look at what's being sold and at what price," says Poorvu. "That's important."
Look at comparables for similar houses. Study prices and sales for one year ago, six months ago, three months ago and current numbers, says Gaylord.
What are the trends? Are prices going up or down -- and by how much? How many days are homes staying on the market? If they are on the market longer, how much of that could be seasonal? In many areas, spring and summer are the busy seasons.
Pay special attention to "the delta between the list price and the sales price," says Ron Phipps, broker with Phipps Realty in Warwick, R.I. That is, look for a meaningful relationship between list price and sales price. Perhaps most homes are selling for 5 percent less than the list price.
"An agent who works the market will be in the best position" to find "the tipping point between nice, attractive and interesting -- and being sold," Phipps says. You want to find the point between, "Hey, that's interesting," and "It's too good to pass up."
If you're not using a real estate agent, it's especially important to use the Internet, visit open houses in your area and study home sales in your Sunday paper, says Greg Healy, vice president of operations for ForSaleByOwner.com.
But you also need to realize that the paperwork alone only tells part of the story. While sales and prices are public, many times seller concessions are not.
2. Analyze who is buying and selling in your market.
What's your competition? Who are the buyers, and why are they shopping?
Do you live in an area like Phoenix, "a growing market with people coming in," says Poorvu. Or are you living in an area that doesn't attract a lot of new residents, where many shoppers are "bottom fishers" who don't have to buy but are "looking to pick up a bargain," he says.
Are you competing against a flood of new houses from builders eager to sell, or are you selling a newer home in an area where most of the housing stock is older?
3. Ask the professionals.
Don't ignore the elephant in the living room. When you interview real estate agents, ask about the market conditions for your area and price range.
Specifically, ask about the "absorption rate" says Phipps. What that means: In the current conditions with the current inventory, how long would it take the market to absorb or sell, all the houses on the market?
If the supply is much larger than the demand, ask potential agents how they would "price to offset that inventory," he says.
4. Know what your house is worth.
Talk to a handful of agents. Get an appraisal from a certified professional appraiser. Look at your comparables. Taken together, that information will give you a pretty good idea of what your home is currently worth.
5. Consider strategic pricing.
Here's how it works: If prices in your area are dropping 1 percent each month, and you want to sell within the next three months, you take 3 percent off your price right off the bat, says Phipps. So if you were going to put your home on the market for $400,000, you set the price at roughly $388,000.
The upside: You'll have the competitive edge over the guy who's dropping his price every month, without the air of desperation. Plus, in a market where prices are falling, you'll make more money if you sell quickly.
The downside: Predicting the market is a tough call, even for the pros. And it's really difficult to raise the price if your market starts to rebound, Phipps says.
6. Rebate your 'commission.'
If you're selling it yourself and need to move quickly, consider subtracting half of what would have been the commission from the sales price, says Healy. The standard commission is about 6 percent, so if you subtract 3 percent, your $300,000 house would go on the market for $291,000, he says.
Listing a home for "$9,000 to $10,000 under that value should create higher interest," especially if it's new to the market, says Healy.
The downside: If the house doesn't sell and you end up hiring an agent, you'll need to cover the commission, which may mean raising your sales price or taking a smaller profit.
7. Evaluate whether you really have to sell now.
If you want to get the best possible price for your home and the local market is tanking, "see if you can delay the sale," says Poorvu. Otherwise, in a lot of markets, sellers have "to be willing to accept a pretty good haircut over what they thought their home was worth last year," he says.
The downside of waiting: The market could decline or your circumstances could change to the point that you might need to sell quickly.
But for situations where the move is optional (or you might be able to rent the property until your local market improves), waiting is a solid option.
Just because you've already planted that "for sale" sign doesn't mean you can't change your mind if you're not seeing the interest you anticipated.
"If you know there are no sales or sales are decreasing, and you have the opportunity," taking it off the market is a decent solution, says Healy. "I think we're seeing a lot of that."
8. Assess the market where you plan to buy.
If you're selling one house and buying another, look at the market where you plan to move. Says Poorvu, "It might be that, with the housing there, it's a great time to buy."
Wednesday, January 9, 2008
Rates drop again...
Real estate rates drop for 5th night
30-year fixed rate at 5.55%; 10-year Treasury yield at 3.78%
Wednesday, January 09, 2008
Long-term mortgage interest rates continued to fall Tuesday, and the benchmark 10-year Treasury bond yield dipped to 3.78 percent.
The 30-year fixed-rate average sank to 5.55 percent, and the 15-year fixed rate slid to 5.06 percent. The 1-year adjustable rate, however, was up at 5.34 percent.
The 30-year Treasury bond yield slipped to 4.31 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average tumbled 238.42 points, or 1.86 percent, finishing at 12,589.07. The Nasdaq lost 58.95 points, or 2.36 percent, closing at 2,440.51.
30-year fixed rate at 5.55%; 10-year Treasury yield at 3.78%
Wednesday, January 09, 2008
Long-term mortgage interest rates continued to fall Tuesday, and the benchmark 10-year Treasury bond yield dipped to 3.78 percent.
The 30-year fixed-rate average sank to 5.55 percent, and the 15-year fixed rate slid to 5.06 percent. The 1-year adjustable rate, however, was up at 5.34 percent.
The 30-year Treasury bond yield slipped to 4.31 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average tumbled 238.42 points, or 1.86 percent, finishing at 12,589.07. The Nasdaq lost 58.95 points, or 2.36 percent, closing at 2,440.51.
Wednesday, January 2, 2008
Price reductions
HOME SELLER TIP: The best time to make a price reduction is as soon as you discover that your home is priced too high for the market. Waiting too long to lower the price can cost money in the long run if the market is moving lower. Reducing too little, too late can lead to a series of further reductions and ultimately to a lower selling price. Ideally, you should avoid such an unpleasant downward spiral.
The goal is to sell without having to reduce the price. To do this, you must accept current market conditions. You also need to recognize that no matter how wonderful you think your home is a buyer will find fault with it.
To be a successful seller in this market -- and to some extent in any market -- requires separating pride of ownership in the property from the task as hand, which is to sell for the highest price possible. It's not easy for most sellers to put their emotional feelings about their home on ice. It helps to stop thinking of the property as "home" and to start looking at it as a commodity you want to sell.
Before listing a property for sale, sellers should seriously consider their motivation. Successful sellers in today's more difficult marketplaces have a compelling need to sell. They don't simply want to sell if someone will make it worth their while. Many of today's prospective home buyers have a wait-and-see attitude about the market. They are looking, but it will take a fabulous home offered at a great price before they'll commit to buy.
Sellers should also check out the temperature of the local market. Residential real estate is a localized business. Even if you live in a city where prices are down, that might not be the case in your neighborhood. The supply of homes for sale and demand for housing are critical variables, as is the local employment picture.
There is a common theme to the listings that sell well now. These listings look great, are in good condition, don't have incurable defects and are priced right for the market.
Being realistic about what to expect is half the battle.
The goal is to sell without having to reduce the price. To do this, you must accept current market conditions. You also need to recognize that no matter how wonderful you think your home is a buyer will find fault with it.
To be a successful seller in this market -- and to some extent in any market -- requires separating pride of ownership in the property from the task as hand, which is to sell for the highest price possible. It's not easy for most sellers to put their emotional feelings about their home on ice. It helps to stop thinking of the property as "home" and to start looking at it as a commodity you want to sell.
Before listing a property for sale, sellers should seriously consider their motivation. Successful sellers in today's more difficult marketplaces have a compelling need to sell. They don't simply want to sell if someone will make it worth their while. Many of today's prospective home buyers have a wait-and-see attitude about the market. They are looking, but it will take a fabulous home offered at a great price before they'll commit to buy.
Sellers should also check out the temperature of the local market. Residential real estate is a localized business. Even if you live in a city where prices are down, that might not be the case in your neighborhood. The supply of homes for sale and demand for housing are critical variables, as is the local employment picture.
There is a common theme to the listings that sell well now. These listings look great, are in good condition, don't have incurable defects and are priced right for the market.
Being realistic about what to expect is half the battle.
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