Archive for
June, 2009
Posted by Annalisa Burgos | June 9, 2009
It’s no secret that listing agents typically charge a commission of about 4 percent to 6 percent of the home’s selling price. Most sellers will price that commission into their asking price so they can walk away from the sale with the profit they want.
So if you sell your home for $300K and you agree on a 5% commission, your agent will get a nice $15,000 paycheck and you get $285K minus your selling expenses.
I know what you’re thinking — $15,000 seems like a lot. Why not skip the commission and sell the house yourself? After all, your home is in good condition in a good neighborhood, you’re well connected with a marketing background, you have the time and patience — what’s the big deal about going FSBO?
Well, today’s real estate market is very different from the one a few years ago when homes practically sold themselves. And you can’t just plop a “for sale” sign on the lawn, post an ad on Craigslist and wait for buyers to show up. (Maybe if people are clamoring to get into your neighborhood or you price the home way below market value.)
Today, homes can take as long as 6-9 months to sell. Listing agents are paid a commission once they find you a “ready, able and willing buyer.” And in this market, that’s no easy feat. Sure buyers are everywhere, but a serious buyer who’s got financing? Kinda like finding a single guy at a movie screening of “The Proposal.”
Before you decide to take matters in your own hands, weigh the pros and cons. Do you really have the time to market your listing, show your home to buyers, coordinate inspections and close the deal? $15,000 may seem like a lot, but when you add up the value of the time and effort it takes to sell in this market, it may not be so unreasonable. Besides, commissions are negotiable, and many agents are willing to work with you to get your business. If you’re just wary of working with a real estate agent, try these tips for finding the right agent for you.
And to help you get a handle on the selling process, check out FrontDoor’s Guide to Selling a Home. You’ll get a better sense of what the process entails so you can decide whether you can take this on yourself or would rather leave it up to a professional.
Posted by Annalisa Burgos | June 8, 2009
HGTV has always been about enhancing your home and home life. So it makes sense that FrontDoor.com, the real estate site powered by HGTV, is about enhancing your search for the place you call home. That means bringing you valuable tips and advice to help you make smart decisions. So in addition to our blog and large library of articles and videos, we’ve created a vlog.
Real estate topics can be dry and boring, and most of the real estate news videos I’ve seen out there are just that. As the host, I want this to be informative and fun. And as a journalist, I want this to be relevant, since today’s buyers and homeowners don’t have time to sift through all the information that’s out there.
The vlog is not meant to be fancy or flashy. It’s our way of connecting with you as that smart friend “in the know.” Future episodes will feature different topics and occasionally a special guest. If there’s something you’d like to know or have an idea or pitch for the vlog, we want to hear it. Post a comment here and we could feature it in our next episode!
Posted by Annalisa Burgos | June 4, 2009
We’ve all heard about the $8,000 tax credit for first-time homebuyers — the government’s carrot to spur buying and help reduce unsold inventory.
How it used to work: A first-time buyer would complete the homebuying process, file their tax return with the IRS in January and the credit would be applied to the taxes owed. If you don’t owe anything, you get the full credit.
How it works now: A new federal program will let you use the tax credit immediately — during closing. This is an even sweeter carrot, because the down payment and closing costs are typically the biggest obstacles to overcome when buying a home.
In today’s uncertain economy, people would rather hold on to their cash. With lenders charging higher fees, this program lightens the burden of closing costs. Average fees for a $200,000 mortgage in 2008 with a 20 percent down payment were $3,118, according to Bankrate.
The catch or two…: How much your credit will be depends on your income, tax-filing status and home price. You have to get a Federal Housing Administration (FHA) mortgage and put down at least 3.5 percent of the purchase price. Of course it doesn’t hurt to use the credit to boost your down payment, which could help lower your interest rate.
Also it’s important to note that like conventional loans that require private mortgage insurance (PMI) when the down payment is less than 20 percent, FHA loans require what’s called a mortgage insurance premium (MIP). With the FHA loan, you pay an up-front premium (1.75 percent of the loan) which is financed into the mortgage and a monthly premium for at least the first five years (0.50 percent to 0.55 percent).
The bottom line: Any time you can get money upfront as opposed to waiting for it, it’s a good thing. Too bad I still own a condo in Knoxville, or else I’d be all over this.
Posted by Annalisa Burgos | June 3, 2009
Treasury Secretary Timothy Geithner’s job is to lead the United States out of the recession. Now he’s got another job — landlord.
Geithner assumed his new role the same way many homeowners in this market do: reluctantly.
The former head of the Federal Reserve Bank of New York listed his five-bedroom Tudor near Larchmont, a suburb north of New York City, for $1.635 million in February. The asking price was later dropped to $1.575 million, about 27K less than what he paid for it in 2004.
Unable to find a buyer, the Geithners opted to rent out the home for $7,500 a month and ride out the rough real estate market.
During a time when home prices are falling faster than a ton of bricks to the bottom of the Hudson, many sellers would rather rent out a home than lose hard-earned equity or do a short sale, where you sell the home for less than what you owe.
Being a landlord isn’t all that bad. Research the local laws and consult a local real estate attorney. If you move out of the city or don’t have the patience to find tenants and maintain the property, you can always hire a property manager.
The downside is that rent usually doesn’t cover all your costs as a homeowner, especially in high-priced markets like New York. Like other sellers put in this position, Geithner still has to cover part of the mortgage payments on $1.25 million in loans and $27,000 in annual property taxes. Ouch. Looks like the housing slump has really hit home for the nation’s top economic official.
SOURCE: Associated Press; Photo by Stephen Chernin
Posted by Annalisa Burgos | June 2, 2009
Every now and then, we’ll invite one of our Insiders, FrontDoor’s team of savvy real estate experts, to write a guest blog. Today, Rick Sharga, SVP of foreclosure data provider RealtyTrac, shares his tips for buying a foreclosure property and how to minimize the risk:
“Interest in buying foreclosure properties has never been higher. In a Harris Research study conducted for RealtyTrac and Trulia, over 55 percent of homebuyers expressed an interest in buying a foreclosed home or bank-owned property. A number of foreclosure-related Web sites, including www.realtytrac.com, are among the most frequently visited real estate Web sites.
And it’s no wonder: according to RealtyTrac research, a homebuyer will see an average discount of over 30 percent on a foreclosure property or bank-owned home across the country. In some of the harder hit areas, discounts are considerably higher, with homes selling for 70 percent or 80 percent less than what they sold for just a few years ago. Those lower prices, combined with historically low mortgage rates and an $8,000 tax credit for first time homebuyers make this an ideal time to be on the market.
Even with all of the interest in purchasing foreclosure homes, and the financial incentives to do so, many people have concerns about possible hazards. According to the Harris study, 71 percent of those surveyed were concerned about “hidden costs” and 46 percent were afraid that the process was “risky.”
In fact, the most common mistakes people make when buying a foreclosure property are overvaluing the property itself and underestimating the amount of money it will take to repair and refurbish the home. But there are simple steps that homebuyers can take to minimize risks and ensure a more successful purchase.
Avoiding “hidden costs”: Buying a bank-owned property is the safest bet. The bank will typically have cleared the title, meaning there are no outstanding liens against the property. If the bank is servicing a loan for Freddie Mac or Fannie Mae, they will generally have to bring the property up to a minimum level of repair as well. Smart homebuyers will engage the services of a professional contractor before purchasing the home, to get a formal estimate of how much work needs to be done, and what it will cost. Many contractors will prepare an estimate for free in the hopes of securing the job. Both Fannie Mae and the FHA also have loan products that allow a homebuyer to build the cost of some repairs into the actual mortgage, further minimizing out-of-pocket costs.
Taking the “risk” out of the process: Anyone concerned about the process being risky should avoid foreclosure auctions. Purchases are made without the opportunity to inspect the property and on an as-is basis. Auction purchases are almost always cash only, and there is no recourse if the property turns out to be a lemon. Buying a bank-owned property or a foreclosure home via a short sale conducted by a professional real estate agent minimizes risks considerably.
As with any other investment, there are trade-offs between risk and reward. But given the state of today’s market, and the enormous discounts available on foreclosure and bank-owned properties, the rewards are great and the potential risks can be managed. It’s a buyer’s market that may only come along once in a generation — time to get busy!”
Thanks for the tips, Rick. For more great advice, check out FrontDoor’s step-by-step guide to buying a foreclosure home, whether it’s in pre-foreclosure, at auction or bank-owned at http://www.frontdoor.com/foreclosures.
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