Understanding Seller's Assistance

I get asked to explain how seller’s assistance works all the time and have recently been in heated conversations about it… so I thought it would be helpful to clear the air on how exactly it works. Before I get there though, I wanted to share a girlfriendsguide2 fun fact that really just amazed me. I was looking through the statistics on my views and found I have small audiences in India, Iran and Vietnam. This is kind of funny because I focus on local residential Real Estate, but hey, here’s to you my international (girl)friends! I hope you enjoy! J

Ok back to business, seller assist in my opinion, is a very useful and creative financing tool for today’s buyers. It has bunches of applications. Most common would be if a buyer is approved for a mortgage but doesn’t have enough money to cover all of their closing costs or simply would like to conserve some after sale funds then they can ask for seller’s assistance in their price negotiations. Typically a buyer will offer a little higher on the asking price to make it cost effective for the seller. The mortgage is based on the purchase price and at settlement a portion of the seller’s proceeds will be applied towards the buyers’ closing costs. Of course this needs to be approved through a mortgage professional before starting negotiations but it is a pretty common practice in today’s real estate world.

Every once in a while I come across a seller who is not thrilled about the idea of assisting the buyers to purchase their home. I hear things like “When I bought this home I saved to put 20% down and covered my own closing costs. Why would the new buyers expect me to help pay their closing costs” and “I wouldn’t even be able to give that much money to my own children why would I give it to strangers?” Very valid concerns indeed. The way I see it is to focus on the bottom line. If the offer with the seller’s assist factored in meets your financial goals and the home appraises for the purchase price then you’re in pretty good shape. If you are lucky enough to get two similar offers, one with assist and one without, then by all means consider the more financially stable buyer. In other words, sometimes it’s just how you look at things.

There are tons of unique situations and scenarios associated with every real estate transaction. The road to buying and selling can sometimes be frustrating. In today’s climate my best advice is to make the absolute best with what you’ve got and don’t sweat the small stuff!

A Short Sale Story...

This story started in 2007 when a lovely young couple excitedly purchased their first home. They bought the home with the hopes of raising a family and planting their roots. The husband worked in the military at the McGuire base in NJ. His perception of the base was that most people who work there usually retire there. So he and his wife were comfortable with purchasing their first home with a little help of the VA. With a VA loan you can finance 100% of the purchase price and that’s exactly what they did. My simple definition of a short sale is: owing more on your home than it is actually worth and getting the bank (or mortgage holder) to agree to accept less to satisfy the loan.

Flash forward to December 2010. The husband received orders that he was being deployed to London for the next 4 years and the chance of going back to the Maguire base was slight. The military or more specifically, USAA gives its members real estate benefits. So they contacted USAA and let them know they were thinking of selling their home and in turn, USAA sent out 2 agents from 2 different companies (a standard protocol). The first agent who came out told them that because they still owed $225,000.00 on the home that they should list $15,000 higher than what they owed so they could cover closing costs and that was their best bet to sell their home.

 I was the second agent who went out to meet with them. Before I went out I was aware that they purchased in 2007 and that they did 100% financing. I was also aware that the neighborhood they lived in experienced a significant decrease in home values.  Their home was a 2 bedroom; the neighborhood consisted of mostly 3 bedroom homes. There were also a LOT of homes on the market in the neighborhood and the average listing price was about $200,000. So one of the first things I did was talk to them about selling by way of a short sale. The last agent never uttered those words to them so they were a little taken back. From my perspective if they listed their 2 bedroom home for $240,000 when their competition (mostly 3 bedroom homes) were listed in the low $200,000’s it would be a great waste of time not to mention that even if they did sell for $240,000 we would probably not be able to get it appraised for that amount. They were leaving for London in September of 2011 and what in the world would they do if the house didn’t sell? They couldn’t afford to keep up with their mortgage when they were in London and how in the world would they be able to rent it out and manage tenants from over the pond?  Well, I guess they could have hired someone to manage their rental but their goal was to sell and get out from under their “dream home” so they could be free to go to London.

The message I tried to convey to them was that they did NOTHING wrong. They bought the home at fair market value at the time. No one could have predicted the way the market would go or that they would be deployed overseas for such a long period of time. They weren’t terribly concerned about how it would affect their credit since they weren’t planning on buying another home until their lives settled in the States again, so guns blazing they agreed to sell short and decided to list with me.

So just like my young couple, guns blazing, I decided that I would dedicate myself to selling their home short. In my mind it was their only option and based on the other agent’s strategy, I was their only option. We listed the home in January of 2011 and flash forward to April 15 2011 we successfully made settlement. I know I am skipping a lot here but the moral of the story is that we succeeded in what we set out to do. The negotiations with the bank were difficult at times but we followed directions and made it work. They got out from under their home and are free to go to London and I had one of the most fulfilling learning experiences of my career.

This story is about setting goals and reaching them and having the courage to do things that you have never done before. We can’t predict the future or the way the Real Estate market is going to go, we can only do the best we can with what we’ve got.

March Madness

Alright so this post doesn’t really have anything to do with college basketballJ. The March Madness refers to this most wonderful time of year, the Spring Real Estate Market.  Notoriously spring has been known as the best time of the year to list your home for sale. The madness also surronds the buyer pool as there are more homes available to choose from and the interest rates continue to be historically low. For me, this is the most exciting time I’ve seen in my Real Estate career.

This post is dedicated to the future sellers and takes a look at inexpensive ways to help your home stand out from the healthy amount of competition.  So aside from doing a walk though of your specific home, I can take you through some common thoughts and observations.

Curb Appeal: It’s so common for a buyer to see a home on the internet and do a little “drive by” before scheduling an appointment to see the inside. It’s always a good practice to keep your property well groomed and clean.  So get in there… pull those weeds, spray the weed killer, trim the shrubs and hedges, and keep that grass groomed. You want to entice buyers enough to want to see the inside. Once the warm weather finally gets here a little color with simple flowers can also go a long way!

Spring Cleaning: Being that you are planning to move, now is an excellent time to do your spring cleaning. I always recommend going room to room and really getting your home as clean and organized as possible. Another thought is to do a smell check, yes a smell check. It’s easy to become immune to the odors in your home so a friendly “outsider” can come in handy here. Lot of light is helpful, so pull back those shades, and try to fill your home with as much natural sunlight as possible. We are aiming for “bright and cheerful”. As the warm weather approaches it’s also nice to open the windows and get some fresh air moving through your space.

The Double D’s: Minds out of the gutter people! This is, in my opinion the 2 most important steps in preparing your home for sale. De-clutter and de-personalize. When a potential buyer walks through your home the last things you want is to distract them with your personal items because then they are not focused on the potential your home has for them. Also, if you have kids or pets (and I know how difficult this can be) try your best to keep the toys organized and contained for showings. If you have an abundance of personal photos through your home, consider minimizing them to a small tasteful amount.  This is also an excellent time to start packing away stuff you don’t often use. Your moving anyway right? Good. So go ahead and get rid of the clutter!

Small fixes: I sometimes recommend sellers to try and see their home witha very critical eye. Little fixes can really go a long way, i.e. touching up paint, repairing any holes, cleaning carpets, etc. In my experience with buyers, some common cosmetic complaints I hear concern wall paper, paint, and flooring. To try and appeal to the largest amount of buyers as you can… neutral colors are best. Go for warm beige, not white. Paint is an inexpensive way to update a space, so if you have a unique or funky color on the wall, a fresh coat of neutral colored paint will go a long way. Wallpaper turns a lot of buyers off as well. Buyers can be very picky and might not want to or have the time to remove it, not to mention it can date your home. So again, a little time here to remove it beforehand can remove these objections.

Here’s a helpful link from realtor.org that I love with more ideas on getting your home ready for sale:

http://www.realtor.org/library/library/fg303

If you are thinking about listing your home for sale in the Bucks, Montgomery or NE Philadelphia area, please feel free to drop me a note. I would be happy to provide a more personalized and comprehensive plan. I realize that in the world of decorating and staging some people are more talented than others so if you need a little help, an aesthetically gifted friend or Realtor can be most helpful.

Happy Selling, here’s to a great Spring Market!

Move In or Move On

This post is inspired by what I call: The Slam Dunk Buyer. These fascinating phenoms are the determined and decisive buyers who see a property they like, write an offer and move forward with the purchase of their dream home. This is All in their first time out looking.

The large majority of buyers, in my experience, will exhaust themselves in the pursuit of the perfect house.  Looking at hundreds of homes in person and online and carefully calculating budgets, statistics, square footage and anything else you can crunch.  Not to say that they haven’t considered what’s important i.e. price, location and otherwise, they just now what they want and come prepared. As a slightly indecisive individual, I am so fascinated by the Slam Dunk Buyers.

So the question is how far are you willing to go to get what you want? If you’re not in the business and you never bought a home you might be surprised to realize how exhaustive the process can be.  An offer consists of far more than just an offer price. There are all types of negotiable terms like settlement dates, good faith deposits and the inclusion or exclusion of personal property. Then there are contingencies on mortgages, inspections, appraisals and home sale contingencies. I am probably missing a few but after this week, I could probably write a few chapters on the home sale contingencies alone. In a nutshell there are basically 3 different types of home sale contingencies and they are as follows:

1.       Sale and Settlement contingency: This means you have to sell your current home before you can settle on the next. Here, you are basically asking the sellers to kindly take their home off the market while you try and sell yours. Rarely is this acceptable in today’s market.

2.       Sale and Settlement Contingency with the Right to Continue Marketing: much as it sounds, you can get the home under agreement but basically someone else can come along and “steal” the property from under you while you are still trying to sell your current home. Sometimes it works out but it can be risky.

3.       Settlement Contingency: the most commonly accepted of the bunch. Your home is sold and you’re ready to buy. Your offer is contingent on just the settlement of your property. What happens when the seller doesn’t accept this?

Unless you can remove this contingency, your options are offer more, beg, write them a letter (send them an email after doing a comprehensive search online for their email address)?  Okay OK I don't necessarily recommend that last one but the question you need to ask yourself is if it is worth pursuing, figure out how much you are willing to pay and even then the sellers may still say no.  Inspired by my clients this week, I learned that you either can try to move in or move on. If your best offer was not accepted and you did absolutely everything you could, then... as the saying goes…it just wasn’t meant to be.

Flood Zones, Easements and Encroachments Oh My!

This post comes to you courtesy of challenging and rewarding week in Real Estate. Here’s the thing and I will get right to it. When purchasing a home the question is not whether or not you will run into any issues during the process but which issues will you run into? Here is a feature of this week’s complications ; )  The truth is I envisioned this blog to be fun and light but sometimes you need to take a good hard look at the information you are faced with. If I am to write about the practice of buying and selling Real Estate what better resource do I have then first hand experience?

Flood zones: Usually it is a no brainer. Your home is either in a flood zone or it is not. I have recently experienced confusion and conflicting information as FEMA is in the process of updating their maps. In a recent experience a client purchased a home somewhat close to water.  To ensure it was not in a flood zone and flood insurance wasn’t required we checked into Public records. Public records showed flood zone X (not in a flood zone), the mortgage and Insurance companies all said the same.  You would think this was a non issue, not in a flood zone, right? Yeah me too. Here is the thing…when you borrow money to buy a home, the lender or more specifically the underwriters will have the final say on whether or not it’s in a flood zone and if flood insurance is required. Don’t agree? You can try to appeal however the surest way is to hire a surveyor to do an elevation study. You will need an elevation certificate to provide to FEMA with a LOMA (Letter of Map Amendment) to remove the property from the flood plain. Unless of course it really is in a flood zone then you simply pay the insurance!  Normally this is always disclosed before you decide to buy but sometimes you get hit with a curveball so just try to be prepared. On a side note, while I would agree that FEMA is a wonderful and upstanding organization may I suggest they update their web site to be more user friendly?  Seriously, have you ever tried to find something on their site?  Not a lot of fun.

Easements and Encroachments: Every home has a public utility easement, but some homes could have other easements like two properties sharing a driveway or a paper streets running through your back yard!  Again, the surest way to find out is through a survey.  That survey will also serve to show you any encroachments. For instance, whether or not your fence or shed or driveway is encroaching on your neighbor’s yard or theirs on yours. It's amazing how the land surveryor can serve so many purposes! How to proceed with all of this information? Well, perhaps that’s where all the fun starts. Every situation is different.

My hopes are to have this turn into a soundboard of comments, suggestions and questions and build on it from there.  Even though I have no followers …yet J I am at least happy to see the hits (albeit half are me) but it makes me happy nonetheless. Again, I hope that I was able to provide you with some useful information!  I would like to dedicate this post to this week’s newest homeowners.  Best of luck with the new house and the new baby!

-Jessica

The Five Thousand Dollar Letter

I would like to start by talking about the simple act of writing a letter. Seems almost a lost art form but it has very practical uses, especially when writing an offer on a home in a competitive bid situation. For the first time since the end of 2008 I am seeing an increase in the amount of competitive offer situations and deem this a very good sign to the spring forecast! : )

It's a simple idea but I have seen letters perform miracles!  When a seller knows where you are coming from they will be far more receptive to your offer. I am not saying that cash isn't king but sometimes just sometimes it can be the difference between winning and losing in a competitive offer situation.

In a recent experience a buyer had an extremely profound effect on the seller through their letter. So profound, that the sellers turned down another offer five thousand dollars higher!  Crazy I know this gave me goose bumps! In this situation the sellers related to the buyers letter so strongly it was like serendipity. They wanted to help make a difference in the buyer’s life and that fact was far more valuable to them than the other offer just a little higher...amazing.

Of course this isn’t happening every time. Sometimes a letter may not be practical and most of the time it IS all about the money, but it's undeniably a simple little tool that can make a big difference.

 -So please bare with me this is the first time I have ever blogged ...watch out ; ) I had the idea for the concept of this blog on a long and dark ride home from New Hope, PA after working for 10 hours straight on a SUNDAY!  I got to thinking that because I am so enthralled in this business day in and day out that it would be easy for me to talk about the everyday practicality of buying and selling Real Estate. Share all of the little tips and tricks that I have picked up along the way. Hey, maybe even a funny story or two. I promise not to take it too seriously and have some fun with it all the while providing practical and useful information. So I hope you enjoy, that’s all for now folks!