Friday, August 12, 2011

Why Isn't My Home Selling?

Why Isn't My Home Selling?

Price is the No. 1 culprit

If your answer is price, you’ll be right a good majority of the time. If your home isn’t selling, buyers think the value of your house is less than the price you want.
For all the time and effort that goes into buying and selling, the economics of the process is relatively simple. Anything is only worth what a buyer is willing to pay and a seller willing to accept. This is the same whether it’s a pack of baseball cards or a $1 million house.
Although the economics may be simple, arriving at that magic price is difficult. Just think of the cost, time and energy that companies put into pricing a product so it succeeds in the marketplace. It’s no different in real estate.

If you’ve taken the time to educate yourself on the local market and are diligent in hiring a professional agent, and are willing to listen to her, you can get a lot closer to the magic number. But you are setting yourself up for disaster if you don’t do your homework and go with what you “feel” your house is worth. Worse yet, is interviewing agents and choosing one solely because she says she can get you more than what the other agents think the house will sell for.
These are some of the most common mistakes sellers make when setting a price:

Price based on need
What you want to make from selling your home means absolutely nothing to buyers or the marketplace. So setting a price based on what you want so you can retire, move up, start a business, etc. will almost certainly fail.

Price based on ego
Your neighbor sold for $200,000 last year so you want $210,000 because you “know” your house is better. Regardless that the market dropped five percent since your neighbor sold. Nearly every owner thinks their house is the best on the block, or at least better than any of the ones that have recently sold or are on the market. Unfortunately for sellers, your opinion doesn’t carry any weight with buyers. Only their opinion matters.

Price based on greed
Even if it’s been shown that your house will likely sell for around $250,000, you insist on listing it for $275,000 because “you never know, someone could come along who just has to have it. Besides, if we don’t get any bites we can always lower the price later.” The problem is it won’t take long for buyers to realize your price is unrealistic and think you are, too, and won’t want to deal with you unless the house is “a steal.” The listing languishes, so you drop the price, but not enough, it sits even longer and pretty soon you have a listing that’s been on the market so long buyers decide there is something wrong and steer clear.

The solution is to get the price right. This is done by using what is called a Competitive Market Analysis (CMA). If you’ve hired the right agent, this is the first folder out of their briefcase when you meet to list your home. A CMA breaks down the sales price of homes that are similar to yours in location, size, age and condition.

Your agent will also consider the listing prices of homes on the market, but these are used more to identify the competition. Even with a strong agent and CMA, your price may not be on target. That’s because the market is always changing and your agent should be updating your CMA whenever anything comparable to your property sells.

Not every reason your home isn’t selling will be the price, although they will be related to it. Here we have that value vs. price issue. If buyers perceive imperfections in your listing, they will want a discount, so if they’re not buying, your price is not discounted enough for buyers to believe the value to them at least equals that of your price.

For example, if your lawn is brown and the landscaping worn, buyers will want a discount. The problem is that a seller will not consider this a major issue and attach a much lower discount than a buyer will accept.

This is why it is imperative that sellers do everything they can to eliminate any issues buyers may have with their house before listing. Obviously, you can’t do anything about a bad location, such as being near railroad tracks, or that you have just one bathroom. But you and your agent should have factored these drawbacks into the listing price.

Here are some of the most common reasons buyers are turned off by a particular house, so make sure these are addressed before lopping thousands of dollars off the asking price:

Put on a good show
This is the second biggest reason a home isn’t selling. Buyers often talk of “connecting” to a house. This is not likely to happen if your house is not company-coming-over clean and ready to show like a model. This goes for the outside as well. If you don’t want to put the effort into doing this, then you’d better adjust your price to compensate because buyers will only consider your house because it’s a good deal, not because it “speaks to them.”

Can’t buy what they can’t see
If you make it difficult for people to see your property, then chances of a sale at the price you want drops considerably. Selling can be a nuisance, but it’s a necessary one. If you don’t allow a lockbox or require appointment-only showings, you are the culprit to the house not selling.

Out of your hands
It’s not always the seller’s fault that a house isn’t selling. Sometimes the market changes and buyers disappear. Maybe a new home development has opened nearby and they are “stealing” the customers. Or maybe you’ve received bad advice from your agent. Any of these can affect whether your house sells, which means you need to consider the reasons and make the necessary adjustments.

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Copyright © by Move, Inc. By Diana Lundin

Tuesday, August 2, 2011

The 203K Mortgage

The 203k Mortgage

Real estate consumers today can find ample value in distressed homes – properties that are under a foreclosure order or up for short sale. In many cases, however, “distressed” speaks more for the condition of the homes than their recent financial histories, as they’ve sat empty for extended periods and have been subject to vandalism and theft.
Those considering homes in need of repair and renovation should consider a 203k mortgage, which enables homebuyers to finance both the acquisition and rehabilitation of the property with just one loan.
“FHA 203k purchase loans are the perfect financing vehicle for homeowners seeking the value proposition offered by REO homes,” said David Wind, president and board chairman of White Plains, N.Y.-based Guaranteed Home Mortgage Company, in a company statement this June. “Home buyers’ ‘perfect’ home can be purchased in less than perfect condition with a single-close loan product that allows repairs and remodeling.”
There are two types of 203k loans: the 203k streamline and the full 203k. The 203k streamline is the most popular among homebuyers and lenders.
“The maximum allowable in repairs is $35,000 under the 203k streamline and it does not allow any structural repairs to be done to the home, unless [the repairs are] a result of an unforeseen circumstance,” explained David Krushinsky, a certified mortgage planning specialist for Mesa, Ariz.-based AmeriFirst Financial Inc. “The full 203k allows structural repairs and will allow the buyer to exceed the $35,000 in home repairs. Both loans allow up to $1,500 in swimming pool repairs.”
Contractors chosen to perform repairs must be licensed, bonded and insured, and they usually must provide the lender with a resume and two client-reference letters.
“After the close of escrow is when all the rehabilitation work begins,” said Krushinsky. “Funds usually aren’t released immediately so it’s important for your contractor to start work in a timely manner. Typically, if they’ve been in business, they have existing relationships with vendors so they can order materials and begin work. If not, the project may take longer than anticipated.”
Since the 203k mortgage is based on the home’s potential value after repairs -- not its existing value -- you can be approved for a higher loan amount. The mortgages also carry long-term-fixed rates, are insured as soon as they fund, and include escrow accounts for the scheduled repairs.
Loan amounts are capped according to local FHA limits. Only owner-occupied properties of one to four units qualify for 203k mortage financing; homes also must be at least one year old.

Prudential Fox & Roach Realtors is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.