Buyer Housing Incentives Still Remain!

The Federal Income Tax Credit for Homebuyers expired April 30, but there are still incentive programs that benefit homebuyers now. Click here to learn more about a variety of current programs!

Closing 101, Part 7: Glossary of Terms

AN EDUCATIONAL INITIATIVE OF THE AMERICAN LAND TITLE ASSOCIATION

Part 7 of 10 in the "Closing 101" series is a comprehensive glossary of terms. This is a great reference tool for homebuyers and sellers. It's in a printable format or bookmark to your favorites for future reference.

Contract to Closing. Know What's Next.

Evaluating the First Offer

Your dining room table is the scene of high drama. Your home has been listed for sale for six weeks, and finally, the first offer has come in. You are meeting with the agents, and are very excited until they mention the price--it is a lot less than you expected.

Before you feel offended, however, remember that the first offer is often just the beginning of a negotiating process. Your agent can help you weigh the good and bad points, evaluating the price in relationship to the terms or conditions of the sale. Sometimes an offer with a low price can look quite attractive once you understand all of the terms. If you are willing to make some compromises, the buyers may accept a counter offer that will give you more money. A lower price from highly qualified buyers may be better than one from people who may have difficulties with financing. Keep in mind that your first negotiated price is often your best price!


Making An Offer : Low Offers

You have found the perfect house with everything you wanted--and then some--but the price is more than you want to pay. You decide to go for it anyway, and ask the agent to submit what real estate agents call a "low ball" offer.

Low ball offers sometimes work. If the market is fluctuating and the sellers are anxious, they may just accept it. They may be willing to negotiate if they have listed the house at a higher price than is reasonable. Most sellers are open to offers, but they won't give their house away, especially if the asking price is in line with recent sales of similar homes.

What do you have to lose by making a low offer? If the seller yells and screams, the agent will be the focus of his wrath -- and we don't take it personally. If you really want the house, however, a very low initial offer may irritate the seller to the point that he won't consider a better offer, if you decide to submit one. Design your strategy on the basis of how badly you want the house.


First Time Buyers: Credit Card Traps

It is not unusual for first-time buyers to be free of debt. They have been saving for their first home for many months or even years. But after they move into their new home, the new homeowners are often deluged with pre-approved credit card applications from banks and stores offering credit lines. Before they realize what is happening, they can be overwhelmed with debt.

The consumer credit agencies know that mortgage companies do thorough checks before approving a loan, and those who have passed through that process are considered good credit risks. They also know that new homeowners often need to make major purchases of furniture and appliances at a time when they have depleted most of their savings accounts. After years of disciplined savings, new owners may be faced with a tremendous temptation to just say "charge it" for the things they need.

If you have just purchased a home, be aware--and wary--when those credit card applications start pouring in!

Fair Market Value

What is the best price for a piece of real estate? Mortgage lenders, appraisers, and real estate brokers use what is called the "fair market value" (FMV). FMV has been defined as "the price that a buyer is willing to pay and the seller is willing to accept, when both parties are knowledgeable about the property and neither is under any time pressure to buy or sell". Sounds great, but how is this price determined?

The starting point for determining a fair price may be an opinion of the value or "comparative market analysis". Such an analysis uses information on similar properties which are: 1) currently for sale, 2) already sold, or 3) expired properties (those which did not sell). Local, national and international trends and market conditions must also be evaluated.

By comparing similar properties in each of the three categories and the market conditions, appraisers, lenders and agents come very close to the maximum price that buyers would be willing to pay for a house.

The Secret to Pricing Your Home to Sell

Reprinted from GE Credit Union's Real Estate Views

Contrary to popular belief, when selling your home, its value is determined by one thing and one thing only - what a qualified buyer is willing to pay for it. A home without a buyer has no value in the marketplace.

Here is the secret to pricing your home to sell: it's not what you think the home is worth that matters; it's what a reasonable buyer will think your home is worth that will ultimately  determine if your home will sell. If you left it up to the buyer, however, they would pay you as little as possible. But, you have no obligation to sell your home at that price. To purchase your home, the buyer will have to make you an offer you can't, or won't, refuse.

But, here is how many sellers fall into a trap. Sellers believe that they can hold out for an inflated price and eventually the market will come to them. The buyer, however, just like you, the seller, is under no obligation - they don't have to buy any particular home. No amount of marketing will motivate a buyer to purchase an overpriced home. This reveals one of the most important considerations in pricing your home - price versus time.

Price Versus Time

This boils down to your need to sell within a set time frame or instead to hold out for the best possible price. If you would like to sell for top dollar, be prepared to potentially wait longer for a buyer willing to pay a premium price.

On the flip side, if you need to sell quickly, expect to discount your asking price somewhat because of the limited time you have to expose your home to the market. Ask yourself, what is your highest priority - selling quickly at a lower price or leaving your house on the market longer to possibly sell at a higher price? 

Accurate Pricing

Ultimately, your asking price will, in large part, determine your selling time. To accurately price your home, you need to think like the buyer and look at your home through the buyer's eyes. Do you over-value things in your home that a buyer may not? Remember, if you're holding out for a high offer, someone in a similar home in the same neighborhood may have their home priced much lower to sell before your home. It's important to do your research.

An easy tool for accurately pricing your home is a Comparative Market Analysis. This is a report that can compare your home with other homes in your specific neighborhood that have recently sold. This analysis is then used to provide an anticipated sales price or price range for your home. Although it is not a formal appraisal, the report provides a similar function by giving sellers and buyers a clear understanding of the market data that might affect their opinion of the home's value.

Real Estate Services provided by the Home Information Network, Inc.

For more information on your home's value in today's market, contact Roger Morris at (513) 325-1056.