| Real Estate Forecast for 2010: Best of Times & Worst of Times.
During more than 22 years in real estate, I have watched the ebb and flow of the market from a Buyer's Market to a Seller's Market and back again. Recently, we have heard the bad economic news blaring from our televisions, radios and internet news sites. We have watched real estate values plummet, jobs disappear and banks and Wall Street nearly collapse. In more than 50 years on this planet, I have never seen worse economic times.
Yet, in this winter of despair, the spring of hope may be about to blossom.
During the next three months, the real estate industry will experience dynamics which have never before co-existed and those forces will cause a very strange coincidence:
The first quarter of 2010 will be the best time for buyers to buy and the best time for sellers to sell. Here's why:
1. Why is it a great time to BUY?
a) Low prices. For buyers, home values are at an historic low, especially when you adjust for inflation. The prices of the homes are more affordable than they have been in decades, but just as important, the interest rate on a mortgage is about the same as home buyers paid in 1962.
b) Low interest rates. Interest rates are hovering around 5% per year right now, the lowest mortgage interest rates we have seen in decades. Recently the Federal Reserve has been using TARP money (Troubled Asset Relief Program) to buy up bank's bad loans, thereby significantly mitigating the number of foreclosures dumped into the market at one time.
Without the TARP money, banks would have raised mortgage interest rates considerably to cover losses and future risk. But the TARP train is slowing to a stop; the Fed has already indicated it will cease buying up banks' assets at the end of March, 2010.
c) Low "Cost to Purchase." The combination of low prices AND low interest rates adds up to low "Cost to Purchase." Cost to Purchase is the monthly payment to buy a home. Presently, you'd pay approximately 5% on a $100,000, 30-year fixed mortgage. In a year, you will pay interest of $5,000 and $1,444 on the mortgage principal ? a monthly payment of $537. That's right, you can buy a $100,000-plus home for $537 per month, not including taxes, insurance or down payment and closing costs!
d) Tax Credit to Home Purchasers. First-time home purchasers will receive a refundable tax credit for up to $8,000 (10% of the home's purchase price) and current homeowners will receive a $6,500 tax credit (see limitations) if they reach an agreement prior to the end of April and close before June 30, 2010.
e) Limited Time Offer. The specter of interest rates spiking at the end of March, 2010 looms large on the economic horizon. When the Fed stops rescuing banks' assets, the banks will raise mortgage interest rates, especially because there are millions of foreclosure properties still in the pipeline; many economists estimate as much as half of them have not yet hit the market! In effect, the Fed has already told us when interest rates will be going up ? at the end of March.
f) Confluence of Events. Look carefully at the time line. 30 days before the tax credit runs out, interest rates will being going up. Historically, as interest rates start upward, buyers rush into the market to avoid losing the low interest rates. So, interest rates start upward and buyers rush the market, jumping into direct competition with those who have been shopping for months. April 2010 could be the most active month for real estate sales in all of 2010.
2. Should I wait to see if prices go down further?
a) "Price" vs. "Cost." When you last purchased a car, do you remember the price you paid for it ? exactly? Most people don't remember the out-the-door invoice amount, with tax, title, license fees, warranties and options added. But most people know exactly the amount of the check they write out every month for the payment, right?
Most home buyers want to know they can afford their new home, that it will be manageable in their monthly budget. Yet, when it comes to shopping for a home, they look at the price, they negotiate for a lower price and, quite often, they lose their dream home because of a few thousand dollars.
But price is just one factor in the cost of purchasing a home; the interest rate is just as important.
Do you know that if home prices drop by 10% but interest rates go up one point, your monthly payment is almost the same? In fact, the lower- priced home will cost you more per month!! Don't believe it? Check this out with your favorite lender:
1) Monthly payment on a $100,000, 30-yr. fixed-rate mortgage at 5% = $537
2) Monthly payment on a $90,000, 30-yr. fixed-rate mortgage at 6% = $539
Because of the impact of mortgage interest rates on the Cost to Purchase, it can be argued that, for most buyers, locking in a low interest rate before rates go up is more important than waiting to get the steal of the century.
Waiting for prices to gown down further will me more than offset by rising interest costs.
b) Competition for Home Inventory. It is highly unlikely that prices will drop before the end of April and it is very likely interest rates will spike upward after March. Buyers will recognize this dynamic in the marketplace and, in my view, the first quarter 2010 will be active. Buyers competing for the homes on the market may cause a temporary "bump" upward in prices. My recommendation is to get into the market early to have plenty of time to find the right home before competition heats up and interest rates start to climb.
3. Why will first quarter 2010 be the best time to SELL?
a) Prices have leveled off 3; for now. Values are not plummeting as in the past 18 months and buyer activity expected in the next 3 ? 4 months will most likely support real estate values from further decline. That's the good news.
The bad news is, there are millions of foreclosures in the pipeline that have not yet been dumped on the market. When will that happen? Nobody knows for sure but when the Fed stops buying up banks' assets at the end of March, it can be expected that the banks will unload those assets onto the market.
b) Motivated buyers will be shopping for homes. Buyers motivated for all the reasons I listed above will be out in force, starting now. By the end of March, they will start to see interest rates climb and at the end of April, they will lose their opportunity to get a tax credit for buying a home.
c) After April, it's anybody's guess. Many economists are predicting that real estate values will drop as much as another 10%, albeit at a slower rate than what we have seen in the past 18 months.
4. Should I wait till values go back up?
Most economists agree that economic recovery will be slow. The market will not bounce back like it has in the past. Estimates are that, in order for real estate values to return to their 2006 peak, we will wait until 2023 ? fourteen years from now. Some economists have warned that if sellers don't sell by the end of the first quarter 2010, today's values will not be seen again until at least 2014.
Is that great news for sellers? Of course not. From all indications, however, the first quarter of next year will be their best opportunity to get the most for their home over the next several years.
Myths vs. Facts About Selling Real Estate in a Buyer's Market
After 20 years of selling real estate, I have a considerable collection of "Myths vs. Facts." In today's real estate market, it is essential to identify which is which. For any of you who have been in real estate for more than a week, you've probably already encountered most of them. Hope this helps!
Myth: "Houses just aren´t selling."
Fact: MOST houses aren't selling, it's true. The good ones still are, however, and at prices that are at or very close to the asking price, provided the asking price is not a pipe dream to begin with. The "good ones" are those that have been properly prepared for marketing.
Just last week I had a transferee shopping for homes in the $350,000 - $400,000 range. I was amazed! Even in that price range, sellers had not prepared their home to sell. Carpeting was worn and shadowy from frequent traffic, countertops were stained, scorched or scratched, the homes smelled of cigarette smoke and pet odors. Not just in one or two of the homes, but every one! Except for the next-to-last home. Pristine. Great colors, completely updated, clean, clean, clean. And at the same price as the others. Hmmm, which one did they buy? Take a guess.
Myth: "We should price it just a little higher to leave room to negotiate down to the price we really want."
Fact: That is the major reason MOST homes aren't selling. Instead of having a price that causes a buyer to fear losing it to another buyer, sellers (and weak agents) "play the real estate game." They try to out-think buyers and wind up outsmarting themselves. Today's buyers are smart; they are extremely well-informed. If you want to play the "real estate game" in a buyer's market, you will lose.
Myth: "The Multiple Listing Service (MLS) is really what sells homes, so it doesn´t matter which Realtor® you choose to list your home."
Fact: Fewer than 40% of the homes listed on the MLS sell. That´s right! More than 6 out of 10 homes listed on the MLS DO NOT SELL. Choosing an agent with an aggressive marketing plan and proven track record for getting homes SOLD could make all the difference in whether your home sells, when and for what price.
Myth: "My brother-in-law has a real estate license and sells real estate on the side. He can sell our home."
Fact: You've heard of the 80/20 Rule - 20% of the people in any industry - cars, insurance, whatever - do 80% of the business. In real estate, the ratio is even more extreme. Recently, the National Association of Realtors indicated that 5% - 10 % of Realtors in any geographic market account for more than 90% of the real estate transactions in that area.
Think about it. The successful 10% of real estate agents do 90% of the business and the other 90% fight over the 10% of scraps that are left. Consistent success doesn't happen by accident.
Unless your brother-in-law is in the top 10% (and can prove it), hire a Realtor with a proven record of success.
Myth: "We can always come down if we get an offer; we want to leave room to "negotiate.´"
Fact: Typically, buyers want to buy the most home they can afford. If your home is in the wrong price bracket, you will be competing against other homes with more to offer. You won't see an offer, especially an offer you can accept. Overpricing will exclude your legitimate buyer and leave you with "low-ballers" who are looking for a bargain.
Myth: "We can always come down but we can't go up in price."
Fact: You can do anything you want - down, up, sideways. But if you're hiring a Realtor to give you good advice, it's probably a good idea to listen to him or her.
Just a week ago, a couple wanted to overprice their home and just "test the market." After explaining such a strategy in this market would most likely fail, I finally looked at them and said, "Now let me get this straight. YOU called ME to list your home because I am an expert in the area, one of the most knowledgeable, experienced and successful agents in West Michigan and you want me to do precisely what the UNSUCCESSFUL real estate agents do, is that right?"
Myth: "It only takes ONE buyer."
Fact: Actually, it takes at least TWO -- one to write out a buy/sell agreement and the other to scare 'em into it.
Buying a home is the largest single purchase most people will make in their lifetimes and the longer they can put off making a decision, the better. Buyers shop till they drop ... or until they find a home that is close to what they are looking for and recognize that someone else will buy it out from under them unless they act quickly.
Myth: "If I spend money redecorating, maybe I won´t choose colors a buyer will like."
Fact: You are probably right. That is why you should get the advice of a good Realtor, one who knows what buyers are buying. Remember this: Buyers want to see themselves living there, and it is often very difficult for them to see past olive-color carpeting, harvest gold appliances or powder blue bedrooms.
Myth: "I need to price my home at $(insert amount here) in order to be able buy my next home."
Fact: Buyers will offer a fair market value for your home without regard to your personal finances. Pricing your home based on what you need for your next home is like pricing a used car $2,000 over Blue Book because you owe money on your credit cards.
Myth: "I had an appraisal done when I refinanced two years ago and it says my home is worth $ (insert amount here)."
Fact: Appraisals are not buy/sell agreements. They are nothing more than one appraiser´s opinion of value. Only the marketplace can establish a true value for your home -- that is, the amount an able and willing buyer will pay for the property.
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
Facing Foreclosure? First, Don't panic.
Faced with the possibility of losing your home, panic is an understandable -- and common -- reaction. Denial is another. Unfortunately, neither of those reactions will save your home nor will they mitigate the damage to your credit rating and future ability to purchase a home.
If you are facing foreclosure, there are several steps you should take to a) keep your home, and/or
b) minimize damage to your credit rating and future ability to buy a home.
This article will offer suggestions on what to do if you are facing foreclosure.
Step 1: Stop feeling ashamed. You're not alone. You are not the only homeowner facing foreclosure today. In fact, in December, 2007, 40% of all home sales closed in the Greater Grand Rapids area were foreclosures or short sales (home sales where banks negotiated the amount owed in order to minimize their losses.)
The truth is, lenders contributed enormously to the foreclosure debacle we are experiencing today. In case you missed Sunday evening's CBS News 60 Minutes broadcast, it provided an excellent review of the economic impact sub-prime mortgages have had on today's U.S and worldwide economy. If you'd like to watch the video, click on:
http://www.cbsnews.com/sections/60minutes/main3415.shtml
and click on "House of Cards" video.
One example cited in the 60 Minutes' article involved a couple whose payment ballooned from $2,500 per month to $4,200 per month! No wonder homeowners are in trouble.
Keep this in mind: Unlike 5 years, ago, lenders today are recognizing how deep and widespread the foreclosure problem is and they are more willing than ever before to work with homeowners to avoid foreclosure.
Step 2: Determine whether your deficit is short-term or long-term. Are you struggling because of a temporary job layoff or medical problem, or is it more long-term, like a permanent pay cut, job loss or divorce? Be realistic. It will help you establish the correct plan of action later. If you determine it is temporary, try to estimate how long it will take you to get back on track.
Step 3: Review your assets and liabilities. Do you have any savings you can access? Do you have a 401K you can borrow against or a whole-life insurance policy? If you paid off some or most of your credit card balances with those hidden assets, would you be able to make your house payment? Do you have assets you can sell -- recreational vehicles, boats, snowmobiles, guns, jet skis, motorcycles, big-screen TV's?
Step 4: Ask for help. Asking friends or family for money isn't easy but ask yourself this: If they needed your help and you could give it, would you? Now is as necessary a time as any to put pride aside and ask for help if you need it.
Step 5: Consult an attorney. The only reason this step is not Number 1 is that most attorneys will want to know the information you have collected in the steps above. It will save you money to go to an attorney with some legwork already done.
I must emphasize how important an attorney's guidance is in the foreclosure process. Unless Uncle Harry passed the bar, he is not an attorney. I am not an attorney. Most Realtors are not attorneys. Only attorneys are attorneys, and right now, you need one.
It is absolutely critical that you know what your rights and responsibilities are during the foreclosure process. Follow your attorney's advice. What I offer in this article are suggestions, but whatever you do, heed your attorney's advice.
Step 6: Establish a Plan of Action. Once you know your resources, the expected duration of your situation and your legal rights and responsibilities, determine your plan of action. Are you going to attempt to stay in the home and get back on track or simply turn the keys over to the bank.
Step 7: Call your lender sooner than later. If you call your lender within the first month or two of missing a payment, they will be much more receptive to working with you than if you call a week before the sheriff's sale.
Ask to meet in person, if possible. If that's not possible, ask to speak to someone in their Loss Mitigation Department.
Explain your situation, including how long you expect the situation to last. If the problem stems from temporary unemployment, for example, you will find many lenders will work with you to get back on track. You may reach an agreement to skip a payment or two, reduce the payment to interest only, negotiate a lower interest rate, etc. Your lender may also agree to a "short sale," which is when a lender agrees to accept less than the full amount owed on the mortgage in order to minimize its expense of going through the foreclosure process.
Step 8: Try to sell your home on a short sale. Before you attempt this, know what your lender is willing to accept and get it in writing.
Too often, lenders make sellers play "Pin the Tail on the Donkey" with short sales, trying to find a target with a blindfold on. "Bring us an offer and we'll consider it," they will say, but months after providing them an offer, they're still "considering it." All the while, the foreclosure process is proceeding.
If you choose this option, be sure you find experienced, knowledgeable help. You need a Realtor who is familiar with the short-sale process and a good real estate attorney.
Step 9: Know when to throw in the towel. Let's face it. If you have no resources left, you see no end to your financial dilemma in sight and you cannot work out any arrangements with your bank, you must accept you will be facing foreclosure. Even so, you still have choices to make about how to handle it:
1. Remain co-operative but don't be bullied. Banks' loss-mitigation departments are accustomed to angry homeowners so lashing out at them will do no good. Likewise, don't allow the lenders to bully you into any actions that are not in your best interest. Refer them to your attorney and simply say, "I appreciate your position and thank you for your call." Then hang up.
2. Keep the property maintained. If a lender sees its collateral being abused or abandoned, it may choose to accelerate the foreclosure process to protect its investment. Keeping the home maintained is in your interest, too. It will reduce repairs required to sell the home on the foreclosure market and thus minimize your potential additional liability.
Step 10: Don't be a sucker for "Rescue Schemes." Rescue schemes take various shapes but one of the most common is this: An investor offers to help you "save your home" by purchasing it on a land contract and leasing it back to you until you can re-purchase it. The investor is going to cover your mortgage for a year (or two) until you get back on your feet and then you can buy the home back (at an inflated price, of course.) You may pay a lower payment during that time but the investor is adding the difference to the balance you owe, raising the purchase price when you buy it back.
There are several flaws in this ointment:
1. Often, the investor does not make the payments to the bank as promised and you lose the house by foreclosure anyway. Instead, the investor pockets the money you've paid and your past-due mortgage payments are never caught up. Simply put, this scheme is fraud and if it has happened to you, call an attorney or the prosecutor's office.
2. Virtually all mortgages today have "Due-on-Sale" clauses. When you purchased your home and signed the mortgage, you agreed that when you sold the home you would pay off the underlying mortgage. That includes selling it on a land contract to an investor. Once your lender gets wind that you've sold the home but not paid them their money, they will demand the full balance immediately. Since neither you nor the investor have that kind of cash on hand, the lender can take the property.
3. The new purchase price will be inflated beyond appraisable value. Let's pretend that you weather your financial storm, the investor actually does make the payments and your bank doesn't find out you sold it. It is now two years later. The additional expense the investor has added to the cost of the home in deferred payments and high-risk interest rates will have added at least 10% to the price of the home. In today's economy, real estate values are going down, not up, and especially not up 10%. Two years down the road, the home will not appraise at a value that your investor is willing to sell it back to you and you will wind up losing the home anyway.
If you consider, even for a moment, to get involved in a rescue scheme, do not pass GO, do not collect $200. Call your attorney immediately and make sure he or she reviews and approves every single word in any document you sign.
Foreclosure is one of the most stressful situations we can experience in life. But it can signal a new beginning. It depends on the way you choose to see it.
If you find yourself in a short-sale situation, call me. I'd be happy to help.
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
Eight Steps to Powerful Negotiating in a Buyer´s Market
Here in Grand Rapids, Michigan and elsewhere, the real estate market dynamics have shifted from a seller´s market to a buyer´s market. Buyers have plenty of inventory to choose from and sellers have lots of competition up and down their streets.
Buyers can get good deals, no question about it. But how do you get the BEST deal?
Whether you are a buyer shopping for a home or investment property or you are a buyer´s agent working to get your buyer a great find, here are some tips that may help you get the best deal.
Step One: Get "Pre-Approved," not "Pre-Qualified!"
This rule is just as important in a buyer´s market as in a seller´s market. If you want to get the best property you can for the least amount of money, make sure you are in the strongest negotiating position possible. Price is only one element in the negotiations, and not necessarily the most important one. Often other terms, such as the financial strength of the buyer or possession time are equally important to a seller.
Step Two: Sell First and Then Buy.
If you need the equity to buy your next home, you will obviously need to sell it before buying your next home.
While the market has changed and more contingency offers are being written today, consider this scenario: You've found your ideal house. You make an offer to the seller: You want the seller to accept a low price and wait until you sell your house. The seller knows he risks losing a buyer who doesn´t have to sell a house while he's waiting for you to get yours sold, so he agrees to remove the house from the market for 30 or 60 days, but at a price that is not quite as low as your offer. You have now paid more for the house than you might have because of the contingency. What´s more, you need to sell your home quickly or lose your dream home! You are the one feeling a little pressure now; you might take an offer that's lower than if you had more time. The bottom line is that buying before selling might cost you thousands of dollars.
Step Three: Keep Your Wish List Short.
Keep your search criteria broad. Avoid too many "must haves" on your list because it will narrow the field of possible homes considerably. Remember that you are not the only buyer looking for acreage away from the city with a pole barn and a babbling brook. The more focused your wish list is, the more likely you are to encounter another buyer who will be bidding against you for your dream home. The more committed you are to your wish list, the more likely you are to get sucked into a bidding war.
Leaving your options open also minimizes your emotional investment in any one home 3; until it is actually yours.
Step Four: Go Shopping and Play Eights & Aces
Ace is low in this game. Eights are high. Create a list of criteria important to you: school district, number of bedrooms and baths, yard or acreage, etc. Remember, keep your wish list short; include only those features essential to you.
Make copies of the list and slide it into a clipboard. Note each address at the top of the list. After you´ve toured a home but before the next one, make your evaluation. One score for each criterion from low to high -- 1 to 8, respectively.
Example: Yard: Nice, we´ll give it an 8. Bedrooms: Only 3, not 4. Hmm, we´d prefer 4 but can live with 3, we´ll give it a 4. Schools: Great schools, excellent sports and music but a little too rural, we´ll give it a 6.
After you´ve looked at all the homes that fit your search criteria, add up the score for each one. The ones with the highest scores may where you want to start making offers.
Remember, while our objective is to get a great deal, it´s a home you´ll be living in for some time. Even if you are only buying an investment property, the criteria you scored high will very likely be scored high by a future buyer.
Step Five: Don´t Nitpick the Offer.
Negotiate the big stuff; don´t get bogged down in the minutiae. Keep your offer as simple as possible. A seller will be more likely to accept an offer that is $20,000 or $30,000 under the listing price if the buyer is not also asking for the beer fridge in the basement, the curtains in the bedroom (that match the comforter), and Fido´s dog house.
Give the seller as much of what they want as possible in terms of possession, reserved items (like a refrigerator or sentimental rosebushes) and keep your offer focused on the price.
Step Six: Provide Your Buyer´s Credit Score to the Seller Along with the Offer.
"What???" you say? That´s right. Give the seller more than "information contained in a credit report." Give them specifics. Specific information is much more powerful than general information.
Wouldn´t it make your buyer look a lot stronger to a seller if you said, "The buyer has a 740 credit score" rather than "They´ve got really good credit." This is in your buyer´s interest and is an equally good strategy in a seller´s or buyer´s market.
I can´t tell you how often a (weak) agent or equally spineless lender has told me disclosing such information is a violation of the Privacy Act and, as a listing agent, I have no right to that information. To them, I have suggested they read the law or consult an attorney 3; because I have, and it is my understanding that your buyer has every right to give YOU the right to disclose that information to the seller with the buyer´s permission. (Get it in writing from your buyer!!)
When I am working for buyers, the third form I require they sign ? after agency disclosure and a buyer´s agency contract ? is the permission form to disclose their credit score to a seller as part of the negotiation process.
Step Seven: Put Your Money Where Your Mouth Is.
Did you ever hear the saying: "Never bring a knife to a gun fight?" Same holds true of earnest deposits. Show you are serious about buying the seller´s home by putting up a hefty earnest deposit. If the normal earnest deposit in your market is 2% of the selling price, put up 5%. If the norm is 5%, put up 10%.
If you want to really get the seller to take you seriously, remove the contingency that your offer is subject to financing approval. After all, you should have a good idea whether your buyer is going to be approved, right? If you received an acceptable pre-approval from a top-notch lender, the likelihood the buyer´s mortgage will be denied is pretty slim.
You are asking the seller to take the risk of removing the house from the market for 30 days. If the buyer can bolster the seller´s confidence in doing so, the greater chance your offer will be accepted.
Step Eight: Be Nice.
It was once said, "You can get more from a Smith & Wesson and a kind word than just the kind word."
Consider the dynamics of today buyer´s market to be the Smith & Wesson ? YOU must be the kind word. No one likes to have a gun held to their head but often a kinder, gentler approach can temper the seller´s frustration.
Too many buyers and buyer´s agents are bullying sellers today. Be the exception. Call for showings well in advance. Arrive on time, leave a card and turn the lights off when you leave.
Write your offer. Present it to the other agent or seller (per custom in your area) politely. Don´t editorialize. Don´t apologize for the price. Don´t take on the seller´s anger and get defensive. Just present it in the kindest way possible: For example: "I completely understand your seller was hoping for more and I sincerely wish the market were different. The buyer feels this is a fair price for the home in today´s market. I know you´ll do your best. Thanks!"
Buyers and agents who treat sellers respectfully will have a head start when it´s time to negotiate.
Written by:
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
21 Questions to Ask an Agent Before You Hire One .©
Don Phelan
Copyright 2003
Finding a real estate professional that´s right for you requires asking a few questions. You deserve to know what you´re getting for your money.
1. What commission percentage do you charge? Is it negotiable? Under what conditions?
2. Does your commission cover a full range of services, from marketing and advertising to processing and closing the sale?
3. Does your company charge "transaction fees" in addition to the commission or is the commission the entire compensation your company will receive?
4. Will you prepare, review and sign an estimate itemizing all of the costs to get our home sold and/or to buy a one?
5. How easy will it be to reach you? How promptly do you return phone calls? Do you have an e-mail address? Cell phone? Website? Pager?
6. How often will you be in touch with us to recap your marketing activities, feedback on showings, and updates on the progress of getting the sale closed? Will you put that in writing?
7. Will you call us with feedback or will we be hearing from a less-experienced assistant or title company processor?
8. Does your company invite your agents to tour our home on Tuesday mornings so all the agents in your office see our home?
9. What is your specific marketing plan for our home? When and where will our home be advertised? How many internet real estate websites will have information about our home?
10. Do you recommend open houses and, if so, how often? Will you advertise the open house with a photo ad? Will you send an announcement to our neighborhood announcing the open house? Will you, personally, be present for our open house or will you delegate that job to another agent?
11. Will you offer a guaranteed sale or trade-in on our home?12. If we´re unhappy with your service or marketing efforts, what will you do to resolve the problem?
13. Are you a full-time agent? For how many years? How many homes have you sold in the past five years?
14. What is the average time on the market for the homes you´ve listed? As compared to those on the Multiple Listing Service?
15. What percentage of your listings actually sell? As compared to the MLS?16. Are you a good negotiator? What is the average actual sales price for homes you have sold?
17. In addition to experience, what are your real estate credentials? Are you licensed as a salesperson or have you achieved the higher level of "broker?" Are you a Certified Residential Specialist? Graduate, Realtors´ Institute? Accredited Buyer´s Representative?
18. Are you part of a nationwide real estate franchise with the largest referral network in the world?
19. Do you know our area? How many homes have you sold in our neighborhood or school district? Are you familiar with prices and market times in our area?
20. What is the one thing about our home you believe will make it sell? What will make it sell better?
21. Do you have a list of references with telephone numbers?
The best choice is to choose an agent who will work well with you and your family. Find someone who is eager to get the job done, but not high-pressure. Select an agent who is diligent and knowledgeable, and able to negotiate well with all parties. To schedule a personal visit to find out if I'm the right agent for you, call me today!
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
Getting Your Home Ready To Sell©
Don Phelan
Copyright 2003
So, you want me to level with you? If you have visited my website you have already seen that my motto is "Common Sense. Uncommon Service." Real estate is not rocket science. There is no magic bullet that will make a home sell. It takes some thought, some common sense, and exceptional follow-through to get the job done. It also takes honest, direct answers.
Since 1989, I´ve sold more than 350 homes that other agents couldn´t get sold, usually because their previous agent didn´t tell them what the house needed ... or the homeowner didn´t want to hear the truth.
The following recommendations aren´t sugar-coated. They may not be what you want to hear. But they´re based on more than 17 years of success in the real estate business, largely spent selling homes that were listed previously with other companies and did not sell.
So, here goes. From the top: Decide when you want to sell. "I´m going to wait till spring." One of the great real estate myths is that the spring market is the best time to put your home on the market. Willie Sutton, the notorious bank robber was once asked, "Why do you rob banks?" He answered, rather obviously, "Because that´s where the money is. "The best time to put your home on the market is when there are more buyers than sellers, because that´s where the money is. When there are more buyers than sellers, buyers are competing for homes. Multiple and full-price offers are not uncommon in that environment.
How do you know when there are more buyers than sellers? Ask your Realtor. Realtors receive reports every month on the number of homes listed, the number of homes sold, and the average sales prices. Today, buyers are much more interest-rate sensitive than in the past. Because today´s home prices are triple the prices of 25 years ago, today´s interest rate has a far greater impact on buyers´ monthly cash flow.
Historically, buyers bought in the spring and summer so their children could change before the new school year starts. Today, they are considerably less worried about that for a couple of reasons: 1) Corporate transfers have become more prevalent and have shown us that moving mid-year seldom has major drawbacks, and 2) Some psychologists believe that a mid-term move may help children to acclimate more quickly to their new school and classmates. That said, however, it is a choice for you to make.
When is the time that´s right for you? Is your primary goal getting the most money from your home or is it more important to make a move that is convenient to you and your family? Once you´ve figured out when you´re going to sell, start early. Each year, homeowners ask me to look at their homes and tell them what they should do to make it more marketable. Unfortunately, they usually ask a month or so before they´re planning to sell and there´s simply not enough time to prepare it properly.
If you´re like most of us, you´ll want to clean, de-clutter and paint a bit before putting your home on the market. Every project seems to take longer than we thought it would and "grows" while we´re doing it, so allow at least a month, preferably two or three. If your home needs major repairs to get it ready for market, add 20% to your projected completion date. That´s approximately when the home will be ready to put on the market.
To get the ball rolling, here´s the first step: See what your buyer will see. First and foremost, take a critical look at your home from at least 50 feet away. In fact, start by getting in your car and driving to your own home. What do you see? Are you on a busy street? If you´re in a neighborhood, is there a shopping center on the corner or a warehouse across the street? Do your neighbors park several cars in their driveway or on the street? Are their homes larger than yours? Or smaller? Are their homes in good repair or in need of maintenance? What you see is what your buyer will see and while you may have no choice in those circumstances, they will not be missed by the buyer. They will significantly, negatively affect your home´s marketability. Since you can´t move the shopping center or may not be able to persuade your neighbor to paint his house, you will need to offset the negatives with positives about your home. Either make yours the "crown jewel´ of the neighborhood or make it the best value for a home of its kind.
Stop in front of your house and take a hard look at it. Can you see the facade of the home or have the trees and shrubbery become so overgrown you can´t tell whether the home is a ranch or a multi-level? If so, it´s time to trim, chop & pull! Trim them up if you can, and if you can´t, chop 'em down and pull 'em out! Replace them with new, compact trees & shrubs that complement your home´s architecture instead of overwhelming it.
Is the driveway cracked? Sidewalks? Are the shingles of your roof curling and gathering moss? Is the garage door warped or sagging? Is your exterior clean and crisp? Are your windows dirty? How about the front door? Is the paint chipped? Faded? Outdated? Does the storm door hide it? The outside of your home is the buyer´s first impression. If it´s not a good one, they won´t even bother to get a second impression inside.
Apple Pies, Fresh-Baked Bread and Chocolate Chip Cookies.
If you´re lucky enough to get the buyer inside, the first thing that hits them is the smell of your home. Cigarette smoke is the Number One offender, followed closely by cat litter and dog odor. Clean curtains and drapes. You may need to replace carpeting because shampooing doesn´t generally eliminate odors and stains. Wash or paint walls that are shadowy or yellowed from smoke. Check the basement and bathrooms for mildew odor. If they are damp, they probably have signs of mold and mildew and smell accordingly. Use bleach or a pine solution to clean them and use a dehumidifier to dry those areas out. (Remember, this doesn´t solve the underlying dampness cause or more serious, hidden mold. This only helps your home smell better.) Some agents might tell you to mask the odors by baking bread or cookies right before showings. Besides being a lot of work and a serious violation of your Atkins diet, it is rarely successful. If you want to bake a pie to make your home seem warm and cozy, go right ahead. Just don´t try to cover up household odors with it. Be sure to avoid using plug-in air fresheners, heavily scented candles and flowery potpourri to mask smells. It makes the buyer wonder just how bad the odor is without those things and also causes them to wonder what else you´re trying to hide.
Now, as we all know, our olfactory senses most easily adjust to smells. We are not the best judges of odors in our homes. Our noses have gotten used to them. So, at the risk of losing a friendship, ask a friend to come into your home and tell you the truth. But you have a major responsibility here. You have to thank them when they´re done and believe them. You must recognize the risk they´re taking to tell you your house stinks. They won´t tell you about odors if it isn´t true.
Start at the bottom and work your way up.
While you´re in the basement, check the "mechanicals:" The furnace, water heater, electrical system, plumbing, foundation and so on. You don´t need a contractor´s license to look at your home and recognize that something doesn´t look right. Is there mold or mildew on the basement walls or a recurring puddle in the corner? Is there rust or caked-on lime on the furnace where the now-deceased humidifier is? Are there loose wires and open junction boxes? If you have any reason to believe that there´s a problem, call in a licensed contractor to check it out further. If you find problems, what do you do? You want the best price for your home? FIX THEM. Period. Buyers don´t pay top dollar for homes that are a handful of headaches. Fix the problems before you put the home on the market or be prepared to concede more than the cost of repair in the sales price of your home.
Where´s the house? If buyers can´t see your home past the overgrown trees and shrubs, buyers won´t get inside. If buyers can´t see your home past the knickknacks, furniture-crowded rooms, junk drawer, cluttered countertops and jam-packed closets, buyers will leave, quickly. Remember that clutter not only hides the positive features of your home but it is also distracting. Buyers tend to focus more on the messy counter than on your roomy kitchen. Be ruthless in your de-cluttering. Reduce your tabletop ornaments to no more than 3. Take all but 4 refrigerator magnets and photos down ? 2 if you have the family calendar there. Pack it up and put it in the basement but be careful! If you still have your collection of Barbie dolls from 1964 packed in 3 boxes next to your children´s 8 boxes of Beanie Babies, it´s probably a good idea to start by cleaning out the basement and finding temporary storage. Don´t forget the garage and storage shed when you´re straightening up. Throw away old paint cans; the colors won´t match any longer anyway. Wood scraps you´ve been saving to build that birdhouse can be tossed. And nobody cares about your collection of nails, screws, bolts and assorted fasteners. Pack them away for your next workshop.
Redecorate, don´t remodel.
Thinking about tearing out those old kitchen cupboards and redoing the kitchen? Or putting a new Jacuzzi and Corian counters in the bath? It´s too late. If you´re hoping to sell in the next twelve months, you won´t get your investment back. The time to remodel is when you´ll have at least a few years left in the home to enjoy it and when the home´s equity has a chance to catch up with the investment. Keep in mind that if your home´s bathroom or kitchen is outmoded by today´s standards, you can´t expect to price your home at the top of the market range. Homes like yours that have new kitchens and baths are simply worth more money. But remodeling now isn´t the answer; it´s highly unlikely you´ll return dollar-for-dollar if you do it now. If you´re planning to sell, stick to redecorating. Don´t wallpaper anything; buyers´ tastes in wallpaper are much too personal to guess. Use paint to update your decor, but be careful. Be sure you're updating, not outdating. For example, the deep reds are in fashion, but fire engine red and burgundies are out. Neutral paint is safe but boring. Today, buyers expect to see some color, a little pizzazz. Buy home decorating magazines to see the most popular colors. Better yet, visit a respected paint & wallpaper store and ask for their help. In Grand Rapids, Seven's is at the top of its game to guiding homeowners toward the best current colors.
Check all the carpet for wear, stains, style and color.
Replace any carpet that has ground-in traffic patterns, pet stains or is dated. If it´s avocado shag, it doesn´t matter how well it has worn, replace it! When you replace carpeting, don´t make each room a different color. That idea went out of vogue 25 years ago. Flow the color from the living room and dining room, down the hall and into the master bedroom. In the children´s bedrooms, keep the colors in the safe, neutral zone. If you want a Berber in the family room, keep it in the same color family as the primary carpet. Add color and excitement with area rugs and throws.
It´s showtime, folks!
Now that your home is ready for market, make sure the windows are clean, inside and out. Take Fido to the neighbors´ house. Dust and vacuum thoroughly. Open all of the curtains and turn on all the lights. Take the pie out of the oven and Leave.Get out. Go away. Let the buyers buy. The worst thing a seller can do is hang around. Buyers feel uncomfortable enough going through someone else´s home, but to have the homeowner hovering about is enough to make them leave quickly. Give them the chance to "try your home on for size." Let them get comfy there. Encourage them to run the faucets, open the cupboards, open and close the doors.
Start Packing!!
Follow my recommendations and you´ll be moving soon! For more ideas on getting your home ready to show, read my FREE REPORT "Ten (or more) Tips to Sell Your Home" available on my website:
www.donphelan.com.
For a personal, no-obligation evaluation of your home´s value and marketability, call me today at 791-0110 ext. 2121.
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
Sell the s i z z l e, not the steak©
Don Phelan
Copyright 2003
Set the stage to sell quickly.
The new buzz in the real estate world is "staging." Taken from theater, staging is just that. It´s creating an exciting environment to tell your story. Staging, in its simplest form, is the "to-do" list your Realtor gives you for showings and open houses open the curtains, turn on the lights, and bake an apple pie. These suggestions are intended to make visitors feel welcome, as well as to present your home in its best light.
Have you ever gone into a home for sale, only to find it´s cluttered and cramped by too much furniture and too many knick-knacks? Or the kitchen cupboards and carpeting are serviceable but very dated? Have you ever looked at a brand-new house from a builder? No window treatments, no area rugs, no furnishings and personal touches? The house feels cold, uninviting. Too often, sellers rely on a buyer´s vision to place update carpeting or cupboards, or change the basic white walls to sage or eggplant. Too often, the warmth of well-placed Ralph Lauren fabrics or bathroom linens goes unimagined in the buyer´s rush to leave. Surprisingly, most buyers cannot visualize possibilities when it comes to homes and decorating. It´s not what they do. They are lawyers and accountants and furniture makers, not builders, interior designers, and Realtors.
Don´t make their imaginations struggle; make it easy for them to fall in love with the home you´re selling. Staging employs using fabrics for windows & linens, lighting, area rugs, flower arrangements, even pots & pans! A properly-staged home will draw people in; it will engage them. It will "take them there." But staging is more than just adding updated decorative touches. In its more elaborate form, staging demonstrates the lifestyle the home offers. It presents more than the sticks and bricks that hold up the roof.
Staging showcases a home´s highlights in a powerful way -- visibly and tangibly. It translates the features of a home -- its location, architectural design, and floor plan, for examples -- into dreams the consumer can´t live without. Today, home offices are essential to the way we live, but they´re often converted bedroom or basement space. Show how the space can be used efficiently with organizers or a modular workspace. Exercise rooms are popular. If you have a treadmill, weight room or exercise bicycle, be sure to have your favorite exercise tape on for the showing. A wall-mounted TV with an exercise video is even better. Don´t just let your grand piano sit quietly in the great room; hire someone to play it for open houses. Do you have a home theater? Leave a popular DVD in and let buyers experience what your home has to offer. If you have top-quality appliances, make sure the (super quiet) dishwasher is running, and leave a note: "The dishwasher is on, but please feel free to open it if you´d like."
Staging sells the dream: the sizzle, not the steak. If you´re too busy building to bother with staging, hire it done. Hire a Realtor who has the experience and resources to do it well. Or job it out to professional stagers who will consult on an hourly basis and bill you time and materials. Either way, in the overall selling effort, be sure to include staging as an essential marketing cost.
Soon, the spring market will bring prospective buyers streaming through new homes. It´s the perfect time to make sure your home reaches out and talks to its audience.
As the renowned Broadway choreographer, Bob Fosse, once said, "It´s show time, folks."
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
TEN (Eleven) TIPS TO SELL YOUR HOME ©
Don Phelan
Copyright 2003
Get your home ready!
1. Make a good first impression. Keep your lawn & landscape green & trimmed (or, if winter, make sure your driveway and walks are shoveled.) Put a fresh coat of paint on your front door and exterior of your home, if needed. Be sure there are no warped panels or peeling paint on the garage door. Make the buyers eager to get inside!!
2. Freshen the home before putting it on the market. Wash the windows inside and out, wash or paint smudges on walls, buff up wood floors and shampoo any carpeting that appears shadowy from high traffic areas. Replace carpeting that is worn, dirty or "dated."
3. Find out if your home has any odors that need to be treated. Cigarette smoke and pet odors are the most frequent offenders. You may not even be aware of the odors, but the buyer will be ... immediately! (Ask someone objective; your friends may not want to tell you.)
4. Remove clutter. Clear off kitchen counters. Remove excess furniture or furnishings that make your home seem cramped. Clean out closets. Closets jammed tight appear small. Clean and straighten the basement and garage. Now that you´re ready to put it on the market:
5. Interview three real estate agents. Ask them to show their credentials, their experience and, most of all, their marketing plan to sell your home. For example, will your home appear on the internet with interior photos? How will the agent target potential buyers of your home? Ask for references with phone numbers.
6. Price your home within its proper price bracket. Putting your home up against unfair competition by placing it in the wrong price category will result in fewer and lower offers. Remember, you can always say "no" to an offer that is less that your listed price, but you can't accept an offer that isn´t written.
7. Always include kitchen appliances in the asking price. They add value and remove an obstacle to a Buyer buying your home. You can always say "no" to the appliances if the buyer doesn't offer full price.
When it´s time to show your home:
8. Make it easy to schedule showings. Be sure agents may call you directly to schedule showings. It results in more showings and more competition for your home.
9. Turn on all the lights and open all the drapes. Make it look bright and cheery. Remember, buyers have never seen your home before, and dark corners are repelling, not inviting.
10. Make your house feel like a home. Bake a pie. Turn some music on low. Put a fire in the fireplace (in winter, of course) or open the windows for a nice breeze, weather permitting.
11. LEAVE. Get out. Go away. Buyers feel very uncomfortable with Sellers hovering about. Let the showing agent do his or her job, and let the Buyers do theirs -- opening drawers and cupboards, turning on faucets, etc.
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
Finding the Best Real Estate Professional
Finding the Best Agent to Sell your Home
Finding the right real estate professional requires doing a little research and asking a few questions. You need to know everything about the selling process. What is the marketing strategy? What kind of advertising will be done? Is the Realtor capable and willing to communicate effectively? Is the Realtor experienced and able to anticipate (and help you avoid) potential pitfalls along the way? Is the Realtor knowledgable and well-versed in the field of residential real estate? Can the Realtor effectively present and sell the less-noticeable assets of the property?
NEVER choose a Realtor on price alone. Do you choose your doctor based on price? Or your lawyer? Choose the Realtor who offers the most VALUE for the price.
Finding the Best Buyer Agent for you
When working for buyers, real estate professionals need to be knowledgeable about the community. They need to have a feel for the history of the area and the approximate price that people will be willing to pay. Also, real estate agents should know what the competition -- other communities, school districts, etc. The best choice is to choose an agent who will work well with you and your family. Someone who is eager to get the job done, but not high-pressure. Select an agent who is diligent and knowledgeable, and able to negotiate well with all parties.
To schedule a personal visit to find out if I'm the right agent for you, call me today!
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
Seven selling mistakes you don't want to make!
Mistake #1 -- Pricing Your Property Too High
Every seller obviously wants to get the most money for his or her product. Ironically, the best way to do this is NOT to list your product at an excessively high price! A high listing price will cause some prospective buyers to lose interest before even seeing your property. Also, it may lead other buyers to expect more than what you have to offer. As a result, overpriced properties tend to take an unusually long time to sell, and they end up being sold at a lower price. Remember, fear of loss is a greater motivator than the opportunity to gain. Unless a buyer is afraid of losing your home to another buyer, they won't make a good, solid offer. Pricing your home too high ensures they won't be afraid to lose it to someone else.
Mistake #2 -- Mistaking Re-finance Appraisals for the Market Value
Unfortunately, a re-finance appraisal may have been stated at an untruthfully high price. Often, lenders estimate the value of your property to be higher than it actually is in order to encourage re-financing. The market value of your home could actually be lower. Your best bet is to ask your Realtor for the most recent information regarding property sales in your community. This will give you an up-to-date and factually accurate estimate of your property value.
Mistake #3 -- Forgetting to "Showcase Your Home."
In spite of how frequently this mistake is addressed and how simple it is to avoid, its prevalence is still widespread. When attempting to sell your home to prospective buyers, do not forget to make your home look as pleasant as possible. Make necessary repairs. Clean. Make sure everything functions and looks presentable. A poorly kept home in need of repairs will surely lower the selling price of your property and will even turn away some buyers.
Be sure to read my "Ten Tips to Sell Your Home" FREE report to get your home ready to market!
Mistake #4 -- Trying to "Hard Sell" While Showing
Buying a house is always an emotional and difficult decision. As a result, you should try to allow prospective buyers to comfortably examine your property. Don't try haggling or forcefully selling. Instead, be friendly and hospitable. A good idea would be to point out any subtle amenities and be receptive to questions. An even better idea is to leave altogether. Has anyone ever "sold" YOU a house? No, of course not! Buyers BUY houses. The ones they feel good in. Let them be! Let them feel good in your house!
Mistake #5 -- Trying to Sell to "Looky-Loos"
A prospective buyer who shows interest because of a "for sale" sign he saw may not really be interested in your property. Often buyers who do not come through a Realtor are a good 6-9 months away from buying, and they are more interested in seeing what is out there than in actually making a purchase. They may still have to sell their house, or may not be able to afford a house yet. They may still even be unsure as to whether or not they want to relocate. A good Realtor will be able to distinguish real buyers from "lookers." A GOOD Realtor will find out a prospective buyer's savings, credit rating, and purchasing power in general. If your Realtor fails to find out this pertinent information, you should do some investigating and questioning on your own. (If you have to do this work yourself, consider finding a new Realtor!)
Mistake #6 -- Not Knowing Your Rights & Responsibilities
It is extremely important that you are well-informed of the details in your real estate contract. Real estate contracts are legally binding documents, and they can often be complex and confusing. Not being aware of the terms in your contract could cost you thousands for repairs and inspections. Know what you are responsible for before signing the contract. Can the property be sold "as is"? How will deed restrictions and local zoning laws will affect your transaction? Not knowing the answers to these kind of questions could end up costing you a considerable amount of money.
Mistake #7 -- Limiting the Marketing and Advertising of the Property
Your Realtor should employ a wide variety of marketing techniques -- internet exposure, newspaper and cable TV advertising, the Multiple Listing Services, brochures and more. Your Realtor should also be committed to selling your property; he or she should be available for every phone call from a prospective buyer. Most calls are received during business hours, when you're probably at work, too.
Make sure your Realtor is a full-time, career professional available to your customers during business hours, and weekends, too.To avoid making these mistakes, please call me today!
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
Investing in Land Contracts in an Uncertain Economy
Years ago, people who wanted to fulfill their dream of home ownership had limited options. Except for their most prized customers, bank´s mortgages were typically "conventional," requiring 20% cash down payment. Back then, one of the few options buyers had to purchase homes with less than 20% down were land contracts. Sellers could earn up to 11% interest on their investment by selling their homes on a land contract. The property itself was collateral for the home loan.
Since the 1960´s, FHA-insured lending programs have offered buyers the opportunity to buy homes with low down payments at competitive interest rates. FHA even required sellers to repair deficiencies in the property prior to closing. Later, private mortgage insurance companies cropped up, and buyers had more options for low down payment financing. All but the riskiest buyers were able to purchase homes with those new low-down mortgage programs.
Land contracts all but disappeared. In fact, land contracts got a bad name. Everyone had a horror story of someone who sold their home on a land contract and lived to regret it. True, but most of the time those sellers a) didn´t have the expertise to know how to avoid truly risky buyers, or b) had their home so overpriced that selling on a land contract to an unqualified buyer was the only way to get their price. When the buyer tried to refinance a few years later, they didn´t have enough equity in the property to obtain financing.
Today, though, the land-contract financing landscape has changed considerably. In recent years, economic instability has lead to corporate downsizing, leaving downsized employees to find new employers or strike out on their own. Despite their solid credit histories, these buyers very often cannot obtain financing because they´ve not been on the job long enough or their start-up company hasn´t been in business for two years. Short-term -- 1 to 3 year -- land contract financing could be attractive to those buyers who, despite their good credit ratings, are unable to get mortgage financing.
Often, displaced executives and middle managers have managed to keep up their house payments and good credit histories even though their loan-to-debt ratios still reflect their previous salaries. They are locked into the "credit spiral" -- their debt ratio continues to rise as they try to fund their unmanageable house payment with credit. It´s difficult for them to find financing to downsize because their debt ratio is escalating. Many such buyers would be happy to pay above-market interest rates for 2 to 5 years while they get their debt ratios under control.
Land contract financing is attractive to real estate investors, too. Investors want to leverage as much of their purchase as possible so they can keep their cash available for repairs and improvements. Many banks require 20% to 25% down for non-owner-occupied financing. Even with FHA owner-occupied financing, FHA-required repairs must be completed prior to closing. The investor´s cash is gobbled up before he takes possession. Land contract financing enables the real estate investor to purchase a property in its present condition and permit the investor to complete necessary repairs after closing. In addition, many banks that are funding investor properties do so with commercial loans, with rates higher than those available on residential real estate.
For the land contract holder, land contract financing offers the opportunity to earn above-market interest rates while holding the property as collateral. Land contract holders can earn 8, 9, 10, even 11% per year on their real estate investments, without the hassles of mowing the lawn, fixing the tenant´s plumbing, replacing the roof and paying the property taxes.
Is there risk? Sure. As any stock market investor will tell you, your level of return is commensurate to your level of risk. A land contract holder who wants to earn 10 or 11% on his money must be prepared to accept riskier buyers. But those land contract investors who want to earn returns that are moderately above current mortgage rates can be much more selective in who they lend money to. Land contract investing can be a win-win situation. With care and diligence, a land contract investor can more than double his return on investment when compared to certificates of deposit or simple savings accounts.
Moreover, it is highly unlikely that a careful land contract investment will end up like Worldcom stock ... worth 9 cents a share!
To learn more about land contract investing, call me today!
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
A Few Points About Interest Rates!!
Information Offered by
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
Less is more.
If you're new to investing or real estate and don't know the first
thing about interest rates, here's a good tip: the higher the interest
rate, the more expensive it's going to be. High interest rates mean
you will have to pay back more on the money you borrow. Another good
rule of thumb is that affordability increases if you use an
adjustable rate mortgage (it's easier to qualify this way). Of
course, there will be a wide range of prices that you can choose
from, depending on what kind of financing you choose.
Not even the Fed knows for sure
The Fed holds a considerable amount of power, but they can't control
everything. Mortgage interest rates are affected by many unpredictable
political, economic and social events. So there is no guarantee what
direction interest rates will go, despite the forecasts of the
experts. Therefore, make your financial decision based on where
things are today including your budget, your needs and your future
plans.
Locking in rates assures your lowest interest
Some lenders will offer you a "rate lock" for a period of time. Rate locks ensure that while you´re shopping for the home that´s right for you, the interest rate on your future mortgage does not increase, thereby causing the home to become unaffordable.
Bpear in mind, however, that, in Michigan, rate locks are a contract, and are ONLY enforceable if they are in IN WRITING!
If you do decide you want to lock in at a certain interest rate, you
will need to complete and sign a loan application, send it to your lender and get the lender's signed agreement before your rate lock is effective.
Do that as soon as possible so that your commitment doesn't
runout before your loan is approved. Follow up and be se sure that
the lender is receiving all of the necessary documentation. Get a
property appraisal, which usually costs about $300, through your loan
agent as soon as possible.
Don't obsess and miss a good real estate deal
Although rising interest rates can create more problems for home buyers, waiting and hoping for low rates is not necessarily a smart move. You may end up paying a higher price. Also, refinancing is always an option in the event that interest rates come down.
Visit again soon! I have more information that you will need!
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
10 Important Tips to Successful Real Estate Investing
Be a Real Estate Investor - 10 Important Secrets
When it comes to investing, everybody has certain goals and
aspirations. However, we have found that there are certain guidelines
every aspiring real estate investor needs to know:
1. Compare property values and rents.
Financial statistics only go so far; the best measure of a property's
market value is often the sale prices of nearby properties. The same
holds true for area rents. A low price can often be justified by a
reasonable rent; renters who can afford a high rent can afford to buy
instead, so reasonably priced rent is a need.
2. Be careful! Tax laws may change.
Don't base your tax investment on current tax laws. The tax code is
constantly changing, and a good investment is a good investment
regardless of the tax code. The right property with the right
financing is what you should look for as an investor.
3. Specialize in something you know.
Start in a market segment you know. Whether you focus on fixer-uppers,
foreclosures, starter homes, low-down payment properties,
condominiums, or small apartment buildings, you'll benefit from
experience by specializing in one aspect of investment real estate
properties.
4. Know the costs going in!
Know the financial statements inside out. What are operating expenses?
What are loan payments? Vacancy costs? Taxes? What does the cash flow
statement look like? These are key issues that must be addressed
before making a solid investment.
5. Know the current tenants´ plans for future residency.
If the last rent increase was recent, your tenants may be considering
a move. If tenants have a short-term lease, they may be living there
simply to attract unsuspecting buyers. It is also important to collect
the tenants' security deposits at closing.
6. Assess the tax situation.
Taxes are an integral part of successful real estate investing, and
they often make the difference between a positive cash flow and a
negative one. Know the tax situation, and see how it can be
manipulated to your advantage. It may be a good idea to consult a
tax advisor.
7. Investigate insurance coverage.
If seller's coverage is based on lower-than-current replacement value,
your insurance cost may increase when you pay a higher purchase price.
8. Confirm utility costs.
Ask the local utilities to verify recent utility expenses, especially
if any of these costs are included in your tenant's rent.
9. Consult your accountant.
Taxation is a key element of successful real estate investing, so be
sure to find an accountant who is well-versed with the constantly
evolving tax code.
10. Inspect!
Make sure that you always perform a thorough inspection of the
property before buying it. Never, ever buy any property without at
least examining the site. In some cases, hiring professional
inspectors to examine the structural mechanical system may be a sound
investment.
Visit my site soon for more updated information!
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
How to Make Money Investing in Real Estate
Know What You´re Buying.
The first step in buying houses for income purposes is to make sure you know what you´re buying. Sounds simple, right? Not always, especially when it comes to rental property.
Know the Property´s Mechanicals and Structure.
You need to know what the "physical plant" is you´re paying for. As you should when buying a personal residence, have a full spectrum of inspections performed when buying an income property. Roof, Structural, Plumbing, Heating, Electrical and Radon inspections are all available and recommended.
Know the Cost of Utilities.
Are the utilities separated and billed to tenants? What about the water bills? Any utilities currently in arrears or under shutoff notice? An unpaid water bill can become a lien on the property with the new owner responsible to pay it. Verify with the city water department that there are no unpaid bills. A gas shutoff notice could result in the furnace being shut down without your knowledge. A subsequent cold snap could cause major damage to your investment.
Know Your Tenants.
Regardless of what kind of real estate you choose to invest in, timely rent collection is absolutely necessary. A positive cash flow - whether it be pre-tax or after-tax -- requires rental income. Be sure to find quality tenants; a thorough credit and employment check is a good idea.
Know the Property´s Income Structure.
What are the rents? What are the expenses? How often have the tenants changed in the past 5 years? Are they under lease contract or month-to-month? Make your offer to purchase subject to your review and acceptance of 1) any and all lease agreements currently in force, and 2) the owner´s Annual Property Operating Data form, preferably certified by the owner´s C.P.A. or signed by the seller as a true representation of the property´s gross and net income and expenses. The APOD is recognized throughout the income real estate industry as a thorough, easy-to-understand format for showing the income and outflow of rental property.
Know if the Property has Positive Cash Flow.
There are two kinds of positive cash flows: pre-tax and after-tax. A pre-tax positive cash flow occurs when income received is greater than expenses incurred. This sort of situation is difficult to find, but they are usually a strong and safe investment. An after-tax positive cash flow may have expenses that outweigh collected income, but various tax breaks allow for a positive cash flow. This is more common, but it is generally not as strong or safe as a pre-tax positive cash flow.
Know Where the Security Deposit Is.
You don´t want to find out at the closing table that the earnest deposit has been spent by the seller on some repairs. Make your offer subject to verification of funds so that the security deposit can be transferred to you at closing.
Know Your Tax Options.
Tax incentives for real estate investors can often make the difference in your tax rates. Deductions for rental property can often be used to offset wage income. Tax breaks can often enable investors to turn a loss into a profit. For which items can investors get tax breaks? You could claim deductions for actual costs you incur for financing, managing and operating the rental property. This includes mortgage interest payments, real estate taxes, insurance, maintenance, repairs, property management fees, travel, advertising, and utilities (assuming the tenant doesn't pay them). These expenses can be subtracted from your adjusted gross income when determining your personal income taxes. Of course, these deductions cannot exceed the amount of real estate income you receive.
In addition to deductions for operating costs, you can also receive breaks for depreciation. Buildings naturally deteriorate over time, and these "losses" can be deducted regardless of the actual market value of the property. Because depreciation is a non-cash expense -- you are not actually spending any money -- the tax code can get a bit tricky.
For more information on depreciation and various tax alternatives, ask your tax advisor about Section 1031 of the U.S. Tax Code.
Know What a 1031 Exchange Is and If You Qualify.
Do you own a business or other rental income now? You may qualify to shelter your capital gains on those holdings through a 1031 Exchange. Talk to your C.P.A. to learn more about what is required.
Know How to Use Leverage
One of the most important factors in determining a solid investment is the amount of equity you are purchasing. Equity is the difference between the actual worth of the property and the balanced owed on the mortgage.
Know What Your Equity Goals Are.
While investing in real estate is relatively complex, it is often worth the extra work. When compared to other financial investments, like bonds or CD's, the return on investment for real estate purchases can often be greater. The key to real estate investing is equity. Determine an amount of equity that you want to achieve. When you reach your goal, it's time to sell or refinance. Determining the proper amount of equity may require the assistance of a real estate professional.
Call me for more information!
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell)
MOVING TIPS
Easing the Transition to Your New Home
Use the right boxes, and pack them carefully
Professional moving companies use only sturdy, reinforced cartons.
The boxes you can get at your neighborhood supermarket or liquor store
might be free, but they are not nearly as strong or padded, and so
can't shield your valuables as well from harm in transit.
Use sheets, blankets, pillows and towels to separate pictures and
other fragile objects from each other and the sides of the carton.
Pack plates and glass objects vertically, rather than flat and
stacked.
Be sure to point out to your mover the boxes in which you've packed
fragile items, especially if those items are exceptionally valuable.
The mover will advise you whether those valuables need to be repacked
in sturdier, more appropriate boxes.
The heavier the item, the smaller the box it should occupy. A good
rule of thumb is if you can't lift the carton easily, it's too heavy.
Label your boxes, especially the one containing sheets and towels,
so you can find everything you need the first night in your new home.
For your family's safety and comfort
Teach your children your new address. Let them practice writing it on
packed cartons. You can lighten your load and reduce any storage space
you need to rent by hosting a garage or yard sale.
Fill two "OPEN ME FIRST" cartons containing snacks, instant coffee or
tea bags, soap, toilet paper, toothpaste and brushes, medicine and
toiletry items (make sure caps are tightly secured), flashlight,
screwdriver, pliers, can opener, paper plates, cups and utensils, a
pan or two, paper towels, and any other items your family can't do
without. Ask your van foreman to load one of these boxes, so that
it will be unloaded at your new home first. Why the second box? In
case the movers are delayed getting to your house on the day of the
move.
Keep your pets out of packing boxes and away from all the activity on
moving day.
Let all your electrical gadgets return to room temperature before
plugging them in.
Since you may need to call old neighbors or businesses from your new
home, pack your phone book.
Work hand-in-hand with your mover
Give the mover's foreman your reach numbers and email addresses so
you can stay in contact.
Read the inventory form carefully, and ask the mover to explain
anything you don't understand. Make a note of your shipment's
registration number, and keep your Bill of Lading handy.
If you're moving long distance, be aware that your property might
share a truck with that of several other households. For this reason,
your mover might have to warehouse your furniture and belongings for
several days. Therefore, ask your mover whether your goods will remain
on the truck until delivered. If they have to be stored, ask whether
you can check the warehouse for security, organization and
cleanliness.
Thanks for visiting! Come again!
Don Phelan, Realtor
RE/MAX of Grand Rapids, Inc.
Associate Broker
Certified Residential Specialist (CRS)
Real Estate Electronic Marketing Professional (e-PRO)
Graduate, Realtors´ Institute (GRI)
http://www.donphelan.com
donaldrphelanjr@ameritech.net
616-791-0110 ext. 2121
616-648-0800 (cell) |