The property price dilemma
As a homeowner selling your home you are faced with a dilemma when setting the asking price for your property. Ask too much and you risk your property sitting on the market for months without attracting any offers. Ask too little and you lose out financially. Faced with this choice many homeowners set their asking price too high believing that they can always lower the price if the property doesn’t sell. However this can have disastrous consequences for the value of your home.
Setting the correct price is the most important part of selling your home. Whether selling your home FSBO or through a real estate agent it is vital to get the asking price right first time. Your aim is to sell your property in a reasonable amount of time and to get on with living your life, in order to do this you must set a realistic price.
Buyers know the real estate market
Buyers are often well researched when it comes to the current real estate market. Therefore if a property is overpriced, it simply won’t sell. As a homeowner you may well feel that a prospective buyer can always make you an offer but in many cases buyers will simply walk away. It is said that a reasonably priced property will attract reasonable offers but an excessively over priced property will attract no offers.
If a property is over priced and doesn’t sell it will sit on the market and will quickly become stale. Buyers will recognize the property as having been on the market for some time and assume that there must be something wrong with it; the property will have gained the reputation of being a lemon. If you overprice the house to test the market and then reduce the price later, it signals to buyers that the property was and may still be overpriced. Homes that are listed through real estate agents are particularly vulnerable as many agents give homeowners inflated valuations on their property to try and secure the listing. The owner is later conditioned by the agent to accept a lower offer that is often less than the true value of the property.
Factors affecting the price of your property
The amount of time that you have to sell your home will affect its sale price. Any property will sell if the price is low enough. If the real estate market is slow and you need to sell quickly you may have to accept a lower price to sell you property. By offering a property for sale at a lower price the pool of potential buyers is expanded as the property becomes attractive to real estate investors who either want to rent the property to tenants or renovate and sell at a profit. If you are not in a hurry to sell your property you can concentrate on appealing to homeowners rather than investors. Homeowners are less likely to be concerned about rental yield and profit margins and will pay more for a home that they fall in love with.
Some factors other than time that affect the price of a property are:
Location: You can’t get away from this one; the cliché location, location, location is well known because it is true. If your property is located in a desirable area that is in demand, you will be able to get a higher price than you can for the same house in a less desirable area.
Condition: A house that has been well maintained and can be moved into without the new owners having to undertake any major renovations will always sell for more than one that has been neglected and needs work.
Desirable amenities: If your house has popular amenities such as parks, schools and shops close by, it will sell for a higher price.
FSBO and property prices
As a FSBO homeowner you are in a fantastic position in that you can under cut your competition (properties listed with real estate agents) and still keep more of the equity in your pocket as you have no real estate agent’s fees to pay. However a significant number of FSBO owners erode their competitive advantage by asking the same or more than properties listed through an agent.
Opinion is divided as to whether buyers would rather buy direct from the owner or through an agent. Some people feel that buyers prefer to negotiate through an agent, as they can be more honest in their feedback, therefore if these buyers are to be enticed to consider FSBO properties they need a reduced price to attract them. Others feel that buyers would rather deal direct with owner rather than have to put up with the deceit and games played by some agents. Having dealt with many agents and FSBO owners I would rather deal direct any day.
Whether the prospective buyer prefers to deal direct or would rather be negotiating through an agent one thing is for certain. The buyer knows that the homeowner is saving a considerable amount through not having to pay commission and will expect the homeowner to share some of this saving with them.
Any sensible FSBO vendor will share the saved commission with the buyer by accepting a slightly lower price. The homeowner is still ahead in terms of the equity they have in their pocket and can move on and get on with their life in their new home. It is important to focus on selling your home not how much you can save.
How to determine the price of your property
In order to determine the price of your property it is necessary to compare your property to other homes that have sold in your neighborhood. There are three ways that this can be done:
1. Online valuation service
These services compile reports based on historic sales data for a particular suburb or street. They are a useful overview and provide information quickly and easily but provide fairly high level information e.g. you may be able to find out the average house price in a street but may not know how many bedrooms the average house has.
2. A professional valuer
A professional valuation is the most accurate way to find out how much your property is worth. A valuation from a professional valuer is not the same as a valuation that you might get from a real estate agent. A professional valuer has no financial interest in your property and is legally responsible for their valuation. Banks will require a valuation from a professional valuer in order to issue a mortgage. Banks will not accept a valuation from a real estate agent, as they know that these are not reliable.
In order to value your home the valuer will visit the property to make measurements and assess the condition. They will then consider how your property compares to other properties that have sold in the local area.
3. Comparative market analysis
It is possible to conduct your own market analysis by comparing your home to others that have sold in the area. The key here is to compare to the selling price of other properties and not the asking price.
Find 4-5 houses similar to yours that sold in your area over the last 6 months. Ask agents or owners or use property records to find out what the properties listed and sold for. Keep an eye on newspaper property pages for examples of recent sales.
As no two homes are exactly the same it will be necessary to make adjustments for differences between your home and those in the comparison e.g. if the home in the comparison has a renovated bathroom and your property does not you will need to reduce the comparison price.
Setting the asking price for your property
It is difficult trying to subjectively value your home because of the emotional attachment that you have. This can lead you to over emphasize the property’s good points and to overlook any shortcomings. In order to get the most accurate valuation we would recommend investing in a professional valuation.
When setting the asking price it is important to remember that the only thing that is relevant is how much a buyer is prepared to pay for your home today. It does not matter how much you paid for your home five years ago, nor does it matter how much your new home is costing or how much you still owe on your mortgage. It is only your property’s value as determined by the current real estate market that is relevant.
You may however wish to include a small buffer to allow for some negotiating room. 5% more on the asking price will give enough room to negotiate but will not overprice the property so much that buyers are scared away.
How to maximize your equity
In order to maximize the amount of money that you end up with in your pocket we recommend using a professional valuer to determine the property value.
Once you have decided how much to sell your property for listing with a good FSBO website (also known as private sale) means you avoid paying commission to a real estate agent and can maximize the amount of equity you are left with.
A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.
In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower’s financial situation.
A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a Broker Price Opinion( BPO) (also known as a Broker Opinion of Value (BOV) or through a valuation of an appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.
Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.
Negotiations
Lenders have a department (typically called “loss mitigation”) that processes potential short sale transactions. Today, lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before. This is great news for borrowers who are “under water” ” or in other words those who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure because of this.
Lenders have a varying tolerance for short sales and mitigated losses. The majority of lenders have a pre-determined criteria for such transactions. Other distressed lenders may allow any reasonable offer subject to a loss mitigator’s approval. Multiple levels of approvals and conditions are very common with short sales. Junior liens – such as second mortgages, HELOC lenders, and HOA (special assessment liens) – may need to approve the short sale. Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax – as opposed to real property taxes, which have priority even when unrecorded) and mechanic’s lien holders. It is possible for junior lien holders to prevent the short sale. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender’s loss in the short sale. The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized type of real estate transaction which is why unfortunately short sale deals have a high failure rate and often do not close on time to save homeowners from foreclosure when they are not handled by a knowledgeable and experienced professional. The best sources of knowledge and expertise in short sales are short sale negotiators, loss mitigation specialists, and real estate lawyers who specialize in short sale.
One thing a buyer should know about a short sale is there is no necessary commitment by the bank to sell the house. When the bank completes a short sale they have to write off the difference between their loan amount and the lesser proceeds from the escrow, something they wish to avoid. You may go through all the paperwork to make an offer on the house, pay for inspections, and put down a deposit to start the sale process. After you have made your offer, the bank may try to convince the seller to refinance their loan and stay in the house, which avoids the bank having to take the write off. Any short sale contract includes a contingency where the bank must approve the sale. If the bank persuades the seller to refinance the house, the bank doesn’t approve the short sale and the buyer gets their deposit back. In this situation the bank has tied up several months of the buyers time and now the buyer must start the buying process over again. So if you have a fixed time period to get in a specific city or neighborhood you may be better off with a foreclosure (the bank formally took possession of the property) or a situation where the seller has equity. So in a short sale situation look for clues like has the seller moved out (revealed they have no intention of staying in the property) and/or grill the selling realtor about how much the selling bank has agreed to sell the house at (the price you want to offer).
Credit Reporting
A short sale does adversely affect a person’s credit report, though the negative impact is typically less than a foreclosure. Short sales are a type of settlement. Like all entries except for bankruptcy, short sales remain on a credit report for seven years. Depending upon other credit information it is typically possible to obtain another mortgage 1-3 years after a short sale.]
While it is frequent if not common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating mortgage balances zero balance after a short sale. However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior.
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23How To Find The Best Real Estate Deals Without Leaving Home…
Posted By: Ramon Rivas on July 23, 2009 at 3:08 pmXima USA provides the best and most accurate foreclosure and pre-foreclosure information, data, and statistics available, making it a valuable resource to invest wisely Xima USA offers you everything you need to profit from foreclosure investing. It is your one stop destination to search for foreclosed homes, foreclosures Florida, properties with positive equity, short sale, pre-foreclosures or distressed homes. It creates comprehensive property comparison reports in a specific area, giving you a very powerful tool when making or negotiating an offer. XimaUSA is mainly geared towards real estate brokers and investors, and the main purpose is to identify the best investment properties. You are able to search for properties with 30%, 40%, or even 50% equity, and identify possible short sales. You can also identify distressed sellers and FSBOs, so you may easily get those hot listings.
All this information is collected from many different sources and presented to you in one place, in a very easy format. This will give you the ability to get MLS listings information, public records, mortgage, pre-foreclosure and foreclosure details, you can get comparables of active listings, closed sales and rentals. Best of all, you can customize and print reports, mailing lists and labels for easy mailings.
