A Sad Story

A Sad Story Relived Over and Over

 

Ask any real estate agent and they will tell you a similar sad story.  The seller, whose home just hit the market, received an offer which was less than the list price, but felt secure their home would sell quickly and countered for more.  For whatever reason, the buyer did not continue to negotiate and moved on.

After a week or two and no other offers, the seller instructed the listing agent to contact the buyer's agent and say that the seller had reconsidered and would now accept their original offer. However, the initial enthusiasm the buyer had was gone and they were looking elsewhere.

This is a story that frequently happens across America, in all price ranges.  The lesson to be learned is that sometimes, the first offer is the best.  Consider the rationale, a home is fresh on the market and buyers, especially the ones who have lost bids on other homes, act quickly to hopefully avoid some of the competition.

When an offer is not accepted, it voids the original offer and, in this case, the seller makes the buyer a counteroffer; the buyer can accept it, make a counteroffer, or walk away.  Even if afterwards, the seller reconsiders and says that he will accept the terms of the original offer, the buyer is under no obligation to accept it.

Alternatively, if the seller accepts the buyer's original offer, a contract has been agreed upon based on the terms within.  The house is sold and closed once any contingencies such as financing and/or inspections have been satisfied.

Think of an example where a seller countered for an additional $5,000.  If he had accepted the original offer, the home would have been sold.  In essence, he bought the home back from himself in hopes of making an extra $5,000.  

To put it in perspective, on a $350,000 home, the additional $5,000 would have been 1.4% of the value.  As an investor, the risk involved in having to continue to own the property may not be justified by such a low rate of return.  Having the property sold may actually provide peace of mind and convenience that far exceeds the $5,000.

When a seller receives an offer, they are faced with three options.  

1. They can accept the offer and the house is sold considering the contingencies can be met.
2. The seller can reject the buyer's offer outright and wait for an acceptable offer.
3. The seller can counteroffer the buyer with terms that are agreeable to the seller.

Many agents feel that if the offer is not acceptable, the counteroffer alternative presents a greater likelihood of negotiating to an acceptable agreement between the parties.  Every situation is unique, but compromise has brought buyers and sellers to agreement in many situations.

One of the valuable advantages sellers have is their agent's experience and lack of emotional connection to the property.  Your agent can provide objectivity and alternatives for you to consider in making you decisions.

article source: In Touch

 

What's Keeping It from Selling?

 

You have too much stuff

Minimalism might not be a big thing where you live, and that's perfectly fine -- while you're living there. But clutter is going to draw buyers' eyes away from the space of the room and their ability to fill it with their stuff, distracting them when you want them to be fully focused on their dream of homeownership.

Garage sales, donation stations and storage units can all be a viable solution for too much stuff, but you need to get it out of the spaces where buyers can see it. (That means the closets, too -- buyers most definitely will open closets and drawers, and if all the clutter is hiding there, it doesn't leave a great impression.)

 

There's no curb appeal

Ideally, buyers are going to start picturing your house as "theirs" as soon as they step out of the car to see it. One thing that will kill that fantasy before it even gets going is a house with little to no curb appeal.

You don't need to landscape your entire outdoors, but make sure you're addressing the basics. Is the grass alive? If so, has it been mowed? Is the porch clean of clutter and swept? Could a couple of planters with flowers make it look more inviting?

 

It's not in great condition

Some buyers are going to be fine with a fixer-upper, but working on a house is not everybody's idea of fun. Of course, no seller wants to spend money on something like a new roof or a sewer main when you're about to leave and can't reap the benefits of your investment -- but if you think a buyer is going to feel just fine about moving into a house that needs a major repair, then that could be why none have made a viable offer on your place.

And sometimes the condition can be just fine, but the house hasn't entirely kept up with the neighbors. If most of the homes for sale in your area have newly updated kitchens and bathrooms, and yours are old enough to vote, then the price needs to reflect that or buyers will just move on to the next opportunity.

 

It smells, or it's noisy

There are a lot of things that can turn buyers off once they actually step inside a house, but two that there's almost no chance of mitigating include noise and odors. Sometimes there's nothing you can do about either -- the jets overhead or the water plant up the road are just going to do their thing sometimes -- but sometimes there's quite a bit you can do to freshen the space up for the senses.

If you have pets, they may have contributed to some of the stink. Get an objective opinion (and don't shoot the messenger!) about how your house smells, and address it if the answer is "not the best."

 

Dirty or damaged carpets

Carpets show more damage than almost any part of your home.  If you have carpeting in your home, it's probably going to be a problem.  If the carpets are not stained and are newer, you m might get away with hiring a professional carpet cleaning company.  If cleaning does not restore them, you'll need to replace them. 

article source: In Touch | plpproperties.com

 

 

 

 

Is a Home Inventory Necessary?

 

Is a Home Inventory Necessary?

Most homeowners have insurance on their home that additionally, gives them coverage on their personal property.  That is the first level of peace of mind to know that it is available to you if there is an unfortunate need for it from a burglary, fire, or some other insured circumstance.

Personal property is handled slightly different than real property.  The claims adjustor could start by asking you for a list of the things lost.  You are allowed to reconstruct it but there is a distinct possibility that you'll forget things, sometimes for months or years after the claim was settled.

An interesting exercise would be for you to visualize two rooms, possibly, the kitchen and main living area.  Without being in the room, create a list of all the personal items in plain sight and those in the closets and cabinets.  When you're through with the list, go into each room to check to see what kind of things were not on your list and what the value of those items amounted to.  It could be substantial.

Remember, you are entitled to claim them regardless of how long it has been since you used them or if you do not intend on replacing them again.

When filing a claim, the more "proof" you have to substantiate it, the better off you are.  Receipts are great but chances are, you may only have them for the big-ticket items.  Photographs or video of the different rooms are great records that the items were in your home.

An itemized list of each room with a description of the content, cost and date of purchase, supported by pictures would be ideal.  This type of documentation will make filing and settling a claim much easier.   The more documentation you have, the more likely you are to have a favorable settlement.

The more expensive the item, the better it would be for you to have receipts, serial numbers and photographs.  A simple count of some items like clothing will suffice like four pairs of jeans, 24 dress shirts, etc.  More valuable items of clothing like a cashmere jacket or a silk dress should be listed individually.  

Depending on the frequency that you purchase new items for the home or possessions, you'll need to consider updating the list and photographs.  Moving creates opportunities to get rid of things that haven't been used for years and to acquire things for the new home.  It is always a good idea to complete a home inventory after you've moved and settled into your new space.

 

article source: InTouch

A Realtor's Prayer

 

First Love, Second Wife or Third REALTOR

 

There is a story of a real estate agent's prayer: "Dear Lord, if I can't be someone's first love, or second wife, at least, please let me be their third REALTOR®."  In a normal market with a balanced supply of sellers and buyers, this describes the preference that it might be better to be the third listing agent to help the seller after they became more realistic about their list price.

In today's market, it might have more to do with buyers because of the increased competition, their chance of having an accepted offer is greatly reduced and it is only after they have lost several that they become more aggressive in the negotiations.

Competition for homes being sold has greatly increased over the previous two years, according to a recent REALTORS® Confidence Index Survey from NAR.   In April of 2021, there were nearly five offers for every home sold which increased from two offers in 2019 and 2020.

Utah reported the highest number of offers per home sold with seven while Arizona, Georgia, New Hampshire, and Washington had six.  California, Colorado, Tennessee, and Texas each had five offers per home sold.

To make their offers appear more attractive, more buyers are making cash offers to eliminate financing contingencies and reduce the chance of rejection.  Cash offers represented 25% of offers in April and 21% in the first quarter of 2021 compared to 18% in 2020.

Buyers who are not able to make cash offers are increasing their down payment.  Nearly half of homebuyers are putting 20% or more down during the first quarter of 2021.  Even first-time buyers are using an 80% mortgage to make their offers more attractive to sellers.

The median days on the market for listings was 17, down from 21 days a year ago.  31% of residential sales were made to first-time homebuyers which is down from 32% in March 2021 and down from 36% one year ago.

While nearly ¾ of homes closed on time, 5% were terminated and 22% were delayed but eventually went into settlement.  Appraisal and financing issues were the major contributors to the delayed transactions.  The two major factors for the terminated transactions were also appraisals and inspections issues.

Today's environment requires a strong, sensitive agent who understands your goals as well as the intricacies of the market to be able to devise a plan to make it happen.  Your agent and their recommendations for the other professionals involved are the boots on the ground necessary whether you are a buyer or a seller.

 

article source: InTouch

Simple Rates of Return

 

Looking for a simple way to determine if a rental property will give you the rate of return you want?  This modified annual property operating data may be just what you've been looking for.

There are many different rates of return that investor's consider to determine whether a property will generate the yield that they expect.  Sometimes the simplest of calculations can tell you whether you want it or not and if you get the other things like tax advantages and appreciation, it just makes it that much better.

The first yield we will look at is commonly called the Cash-on-Cash rate of return.  It is calculated by dividing the initial investment, usually down payment and closing costs, into the Cash Flow Before Tax.

To arrive at Net Operating Income, it is simply taking the gross scheduled income, less vacancy allowance and all operating expenses.  From that is deducted the annual debt service which is the principal and interest payment times twelve.  The remaining amount is referred to as Cash Flow Before Tax.

In this example , the initial investment of the down payment and closing costs, $66,000 was divided into the Cash Flow Before Taxes of $5,468 to get an 8.28% Cash-on-Cash rate of return.

The second yield to be considered is called Equity Build-up.  Each payment made on an amortizing mortgage pays a portion toward the principal balance to retire the loan.  It is calculated by dividing the initial investment into the principal contribution for the year.

Continuing with the example, $66,000 is divided into the principal reduction for year one of $4,606 to get a 6.98% Equity Build-up rate of return.

This approach is easy to understand because you are not considering depreciation, anticipated appreciation, holding period, recapture of depreciation or long-term capital gains. Simply rent the property, pay the bills and if there is money left over, it pays a return on the initial investment.

The same goes for the Equity Build-up.  When you make the payment on the mortgage, the loan is reduced and while you don't have access to the money like cash flow, it is definitely your equity and tangible.

To determine whether an ROI on a rental is good, compare it to what your initial investment is earning currently.  Ten-year treasuries are earning less than 2%.  Certificates of deposit are earning less than 1%.

For more information, download the Rental Income Properties  guide and schedule an appointment with your real estate professional.

 

article source: InTouch

No To Starter Home

 

For generations, people have begun their homeowner experience with a "starter" home.  Part of the logic may be that by beginning with a smaller home, they can learn what it takes to run the home and discover some of the unexpected costs that come along with it.  A slightly longer view into the future could suggest a different strategy.

As of March 4, 2021, the average 30-year mortgage rate according to Freddie Mac was 3.02%; up .37% from the week of January 7th this year.  At the same time, in 2020, the rate was 3.29% and in 2019, it was 4.41%.  That is a difference of 28 and 139 basis points.

The principal and interest payment on a $300,000 mortgage would have been $236 higher two-years ago and $44 more one-year ago.  Today's low mortgage rates are saving buyers lots of interest especially when you factor in the median tenure for sellers is approximately ten years.  Even though prices have increased over the last two years, some people may be able to afford more now with the lower rates.

Anticipating the future wants and needs now may present some opportunities for preparing for the inevitable.  By purchasing a larger home today, a buyer can lock in today's low rates and prices to allow themselves room to grow without the expenses of moving.

Each time you sell and purchase a home, there are expenses associated with each side of the transaction.  Purchase costs could be 1.5 to 3% while sales expenses could easily be 2.5 times that much.  These expenses lower the value of your equity.  

Instead of looking at the low mortgage rates as generating a savings from the payment you might normally have to make, consider it an opportunity to purchase more home that will possibly meet your needs for a longer time while eliminating the cost of selling and purchasing in the transition.

 

article source: In Touch

Is It Time to Cancel the Mortgage Insurance?

Mortgage insurance benefits the lender if a borrower with less than a 20% down payment defaults on their loan.  Most conventional mortgages greater than 80% and all FHA loans require the borrower to have this coverage.

Private mortgage insurance on conventional loans can range from 0.5% to 2.25% based on the loan-to-value and the credit worthiness of the borrower.  A $350,000 mortgage would have a monthly mortgage insurance premium of $146 a month at the low-end of the scale and over $600 on the high-end.

You may request that your mortgage servicer cancel the PMI when the principal balance reaches 80% of the original value at the time the loan was made.  You should have received a PMI disclosure form when you signed the mortgage documents stating the date.  If you have made additional principal contributions, it will accelerate the date.

Other criteria considered to cancel the PMI on your loan is:

• The request must be in writing.
• You must be current on your payments with a good payment history.
• The lender may ask that you certify there are no junior liens in effect.
• If the lender is concerned that the value has declined, an appraisal may be required to show that it is eligible.

Conventional loans are supposed to remove the mortgage insurance when the unpaid balance is 78% of the original purchase price.  

Another possibility is that the lender/servicer must end the PMI the month after you reach the midpoint of your loan's amortization schedule.  For a 30-year loan, it would be after the 180^thpayment was paid.  The borrower must be current on the payments for the termination to occur.

With the rapid appreciation that many homes have enjoyed in recent years, homeowners may be able to refinance their home and if the new mortgage amount is less than 80% of the current appraised value, no mortgage insurance would be required.

The owner would incur the cost of refinancing but eliminate the cost of the mortgage insurance.  To calculate the savings, subtract the new principal and interest payment from the old principal and interest with PMI.  Then, divide the savings into the cost of refinancing to determine the number of months necessary to recapture the cost.

FHA loans have two types of mortgage insurance premium: up-front and monthly.  For loans with FHA case numbers assigned on or after June 3 2013 with LTV% greater than 90%, the MIP will be paid for the entire term of the loan.  If that is the case, refinancing on a conventional loan is the only way to eliminate the MIP.  For loans with original LTV% less than 90%, the MIP is collected for 11 years until the balance is 78% of the original amount.

When buying a home, purchasers may not have enough resources for a large down payment.  It is understandable to use the best mortgage available to buy the home.  The next goal should be to manage the mortgage to lower the overall costs.  In this article, we explored eliminating the private mortgage insurance.

 article source:  InTouch