Real Estate Q & A
| Real Estate Answers and Question |
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Our site is about the "real" world of real estate, so some of the answers may not be the "pat" answers you find elsewhere. |
What is the difference between a real estate agent and a real estate broker?
Most states require real estate sales professionals to be licensed by the state, so that they can control education and experience requirements and have a central authority to resolve consumer problems.
The terminology used to identify real estate professionals varies a little from state to state. Brokers are generally required to have more education and experience than real estate salespersons or agents.
The person you normally deal with is a real estate agent or salesperson. The salesperson is licensed by the state, but must work for a broker. All listings are placed in the broker's name, not the salesperson's.
A broker can deal directly with home buyers and sellers, or can have a staff of salespersons or agents working for him or her.Why should I use a real estate salesperson?
A real estate salesperson is more than just a "sales person." They act on your behalf as your agent, providing you with advice and guidance and doing a job - helping you buy or sell a home. While it is true they get paid for what they do, so do other professions that provide advice, guidance, and have a service to sell --such as Certified Public Accountants and Attorneys
The Internet has opened up a world of information that wasn't previously available to homebuyers and seller. The data on listings available for sale is almost current - but not quite. There are times when you need the most current information about what has sold or is for sale, and the only way to get that is with an agent.
If you're selling a home, you gain access to the most buyers by being listed in the Multiple Listing Service. Only a licensed real estate agent who is a member of your local MLS can get you listed there - which then gets you automatically listed on some of the major real estate web sites. If you're buying or selling a home, the MLS is your agent's best tool.
However, the role of an agent has changed in the last couple of years. In the past, agents were the only way home buyers and sellers could access information. Now agents are evolving. Because today's home buyers and sellers are so much better informed than in the past, expertise and ability are becoming more important.
The real estate agent is becoming more of a "guide" than a "salesperson" -- your personal representative in buying or selling a home.
I
have a family friend who is a Realtor. She suggested a price for my
home for that seems too low. Another agent suggested a price more in
line with my expectations. Who do I choose?
You might want to consult a couple more Realtors on the market value of your home. Most of the estimates should be in the same ballpark.
It could be that your friend is being more honest with you about the value of your home and the other Realtor gave you a higher number because he already knew you expected it. This is called "Buying a Listing" and is the subject of an article on our web site.
Or it could simply be that your friend is a good friend, but not that great of a real estate agent.
Mixing business and friendships is always risky to the friendship. On the other hand, if your friend is truly competent and was providing wise advice, she may be offended if you ignore the advice and choose another agent.
I want to buy a
house. I know the property and the
seller has an agent. Do I need my own
agent or can I negotiate a lower fee
if I act as my own agent?
If you have to ask this question, you probably don't have the necessary knowledge to properly represent yourself.
The seller pays the real estate commission, not the buyer, and real estate commissions are already set in the listing contract. It doesn't cost you anything extra to have your own agent represent you because the seller is already paying for it.
If you don't have your own agent, the seller's agent will often represent both you and the seller as a "dual agent" or just represent the seller. This means the agent either has divided loyalties or is working for the seller, not you.
In this situation, since there is only one agent to be paid, sometimes you can get a reduction in price by getting the agent to accept a lower commission from the seller. However, you have to realize that you are interfering in what is essentially an agreement between the agent and the seller -- and something that has already been negotiated and agreed upon.
The seller can net the same gain on a lower price if they have to pay less commission. At the same time, the agent is not going to be willing to cut the commission totally in half because - since you don't have an agent - they are going to be doing some of the work that your agent would normally be doing (whether you realize it or not).
And you'd better know what you're doing – because the listing agent isn’t going to be on your side. If your offer causes them to reduce their commission from what the seller has already agreed to -- that agent isn't going to be real happy with you.
What is a buyers agent, what does this specifically do for a buyer and who usually pays this "buyers agent"?
On most transactions, there is usually a listing agent and a selling agent. The selling agent is sometimes referred to in media as the buyer's agent, because he works on the buyer's behalf and it easier than explaining each time that the "selling agent" is not the listing agent and is actually the buyer's agent.
However...
There are some agents that market themselves as "buyer's agents," "exclusive buyer's agents," buyer's representatives," and so on. Mostly it is just marketing. At the same time, part of it is because they want to accentuate the reasons a buyer should not go directly to the listing agent when they purchase real estate. This has to do with agency.
See, if a buyer goes directly to the listing agent, they are dealing with an agent that has conflicting responsibilities. Their job is to get a good price for the seller and they may not zealously represent the interests of the buyer. Those who market themselves as "Buyer's Agents" indicate the
I looked at a property
yesterday with a realtor who quite obviously has no clue what he is doing.
Can I switch agents and still buy that house?
If you want to purchase that property, the only ethical thing is to purchase it through that Realtor. Otherwise, you could set up potential conflicts between your previous agent and whatever new agent you may choose.
You see, if your previous agent finds out you purchased the home with a new agent, he may want to claim all or a portion of you new agent's commission. This could develop into a "battle royale" involving real estate agents, offices, managers, brokers, and attorneys.
You may be able to resolve the issue by letting your current agent know you have misgivings about their expertise and ask if a more experienced Realtor from his office can be aboard as your advisor, too.
That is the only ethical way I can think of to handle your situation. It isn't "your" ethics I mean, but the ethics of the two agents. One agent isn't supposed to make an offer on a property you have already previewed with another agent. It happens, but it isn't ethical without some sort of disclosure and agreement between the parties.
I
approached two different real estate agents to help me buy a home. One
was very informative, providing brochures about real estate law and the
responsibility of the agent. The other was very informal, made a lot of
gestures, and presented nothing in writing.
Agents are all different in their style and how they
deal with people. Some are formal and some are informal. That doesn't
necessarily have anything to do with their knowledge and ability. Go with
who you like and who you trust.
My home
has been listed with an agent for over three months and I’m not happy.
What options do I have?
All listing contracts have expiration dates. When is yours?
If it is not coming up soon, tell the agent and/or his manager that you want to cancel your listing. Often they will let you cancel easily, since they do not want to build ill will in the community.
If they won't, you can always pull your home off the market until the listing contract expires.
If a 6
month listing agreement was signed last month and an argument occurred
and I don't want to use that agent, can the listing be cancelled?
Before you sign a listing agreement you should first ask the agent to research the average selling time in your neighborhood. If a listing contract is for more than ninety days, it should not exceed double the average selling time.
As for canceling the contract, a lot depends on whether the agent works for a larger office with management, etc. Usually, the office or company wants to retain your good will, and will usually let you out of a listing agreement. It would be best to broach the matter in a calm pleasant way instead of getting hot and excited. Simply explain that you can no longer work with that agent or company any longer and you wish to cancel your listing.
Initially, they will (of course) try to talk you out of it. Just keep repeating that you want to cancel and your reason for doing so. If you do it calmly, they won't get defensive.
Most of the time, this works. Make sure to get the cancellation in writing.
If it doesn't work, then you have two options. First, take your home off the market during those six months. Second, consult an attorney. I always hesitate to bring attorneys into things because you can never tell when that will get messy. Once things get messy, fees go up. Plus, real estate companies usually have attorneys already on retainer. You don’t.
I signed a listing agreement, but am having second
thoughts about selling. How do I cancel and will it cost me anything?
It should be pretty simple. Just tell the agent you have changed your mind and decided not to sell after all.
Since your cooperation is required to sell the house, most agents won't give a hard time about canceling. Their hope is that when you later do decide to sell, you will get back in touch with them. However, if you attempt to put it back on the market during the contracted listing period using another agent, your original agent will attempt to enforce their contract.
Just listed
with a realtor for 3 months but decided I would like to change to another.
Is that allowed or legal?
Since you have a contract for 90 days, you would have to get your agent's permission to be released from the contract so you can go with the other agent.
Most of the time they will attempt to dissuade you from making the change, but will release you because they don't want to engender any bad will. The agent will be reluctant of course, especially since you just "changed your mind," and cannot point to any lack of performance problems with your present agent.
The agent can refuse to release you from the listing agreement and there are various reasons they may do so. In that case, you're either stuck or you have to simply take your home off the market for the rest of the listing period.
I'm not sure if you can assist me but I would like to know how I can go about obtaining a real estate license.
Call up the biggest real estate office in your town, ask for a manager, and they will know the answer to your question. They almost always have a program to get you licensed, hoping you will come to work for them once you do. However, once you get licensed, you can always work for anyone you want to.
I am interested in finding out where I can take practice exams before I take the real estate sales exam.
There are real estate training schools all over the place, and you will probably find one nearby in the yellow pages of your phone book. You could also call the largest real estate office in your area, speak to a manager and ask for their recommendation. Not only do these schools have sample tests, but the tests quite often have the actual questions from the exam. They can provide the tests in written format or on CD-ROM.
Where can I find free information on how to become successful in real estate? Business things I need to know, etc.?
Real Estate Training is a huge industry and most like to offer only basic information for free and charge for more details. However, you can get free information all over the web and you can buy books at the local book store (or in our on-line bookstore). The best thing is to know as much as possible, then learn sales techniques that will help you serve clients better.
On our site there are lots of links to other web sites that provide information about real estate, too (click here). The only "real" way to become successful is to put in time actually doing it and gain some experience. There is no teacher like "on the job" training.
I have to make a choice between an updated home in an older neighborhood or a newer home in a more modern neighborhood. The home in the older neighborhood has almost everything I want and is much larger, but which makes the most sense as an investment?
If your goal is to buy a home for it's resale value and the one you are thinking of buying in the older neighborhood is at the upper end of values for that neighborhood, then it may not be the wisest choice. If it is similar or lower in price to the others, then there should be no problem, because pricing should be considered in relation to the local neighborhood and not compared to homes in other neighborhoods (for the most part)
Plus, is it a neighborhood on the decline, or are others going to be fixing things up, too, so that it is a neighborhood that is improving? It could turn out to be a very good deal as long as you don't "overpay" because of the recent improvements.
Remember that you also buy a home for it's value to you as a "home," and that is something else you should consider. Which neighborhood would you AND your family feel most comfortable in?
For general information on buying a home for its resale value, click here
When buying a new home, what upgrades should we go for? What holds the most value? Do we upgrade the lot? Pick more square footage in the house? Add an extra bedroom?, etc.
A lot depends on why you are buying the house. Are you buying it mostly as a home or mostly as an investment? There is a difference.
For the most part, upgrades are high-profit items for builders. They aren't designed to enhance the value of the house, but make you happier with the house you do buy.
If you are looking at your home as an investment, then you buy from the smaller to medium size in the tract and spend only a minimal amount on upgrades. If you are looking at your purchase as a home, then you select upgrades that will enhance your quality of living.
One rule of thumb is to always upgrade the carpet and padding.
For specific information on what to look for in a house when resale value is a consideration (click here).
I need to buy a house with a good resale value. How do I determine if my house will increase in value within the next five years so that we can upgrade? I can buy a smaller house in a great location or get twice as much house in a good location. Which is a wiser decision?
It's like buying stocks. How do you really know which ones will increase most in value over the next five years? As with any investment, there are risks.
The most often quoted rule is that location is the most important factor.You want to make sure that the house does not back to busy streets and is as close to the interior of the tract as possible. Avoid corners and intersections. Choose the middle of the block or a cul de sac. You'll want to be sure it has at least two bathrooms (if you are buying in an older area).
Sometimes it is just timing that works out best for you. For example, if you buy a home before a major surge in local prices.
My house recently went into escrow that was supposed to last 60 days. One week before closing we were notified by the real estate agent that the house did not appraise for the amount agreed upon in the sales contract. The buyers are refusing to obtain another mortgage company or another appraisal at my cost. Do they forfeit their 2500.00 that is in escrow to me, or is it a technicality and they get their money back?
First, look at your purchase contract. Most Realtors put deadlines in the contract during which certain things must occur, such as appraisal or loan approval. Review the contract to see if they lived up to those types of terms in the contract. Second, press to find out why it took 55 days to get an appraisal. This just seems wrong. Request the name and phone number of the appraiser so your agent can make inquiries.
You’re probably not being given the true reason for cancellation.
Escrow normally cannot release the deposit money without the permission of both sides. Continue to press until you feel you are being given the real reasons for not closing the transaction.
Keep in mind that if you are asking for legal advice, that can only be obtained from a lawyer.
We were set to close and the seller now wants to set up new closing date. Can I get them to come down off the price of the house and anything else you think that would help me?
The seller may have had legitimate reasons or perhaps not. You can attempt to renegotiate the price if you choose to, and this can be looked at several ways. Once you make your offer to purchase the house at a lower price, this can be looked at as a new offer, which can nullify your original offer.
Most likely, you are going to just have to decide whether you like the house enough to go ahead with the purchase.
The seller is unable to find a replacement property by the time the sixty day escrow closes. They have requested an extension of thirty days. If we do not agree to that extension, will we lose the appraisal fee, the home inspection fee, and our deposit?
You'll probably get your deposit back, minus a small cancellation fee. However, the appraisal and home inspection have been done and those guys don't work for free, so that money is gone. Since both the appraisal and home inspection were done for that specific property, if you choose not to extend and buy a different property you will have to pay those fees again.
Suggestion:
Do you want to extend and wait around another thirty days and find the seller still has not purchased something? Remember in your purchase contract that you had time conditions placed upon you. For example, it may have been two days to apply for a loan, seven days to review the disclosures, fourteen days to get a home inspection, and so on.
One hour before closing I signed an addendum to remove tires from the property. There were about 6 to 8tires that I had removed. Mysteriously, about 30 tires have appeared on the property. Am I responsible for their removal? I have witnesses that can state they were not on the property on settlement day.
It just goes to show you how crazy real estate can be, doesn't it?
Most real estate contracts detail exactly when you are to turn over possession of the property to the seller. Turning over possession usually occurs sometime after the transaction actually closes. Often this is three days after closing. If the tires showed up before the transfer of the property (as stated in the contract), you should probably remove the tires.
I have a contract to purchase a house, but the three owners are having a "family feud" and cannot agree on anything. The sale of my own house closes soon and the lock-in on my loan is up in a few days. What can I do?
You may have to rent a motel or move in with friends or family until the issue is resolved. There is risk in buying real estate, especially when you make your own moving plans very firm. No one can guarantee a sale will close on an exact day because situations can come up unexpectedly, just as it happened to you.
Fortunately (June 2000) rates have declined since you locked in your interest rate. Most lenders will extend a lock (once it expires) at the higher of the current market rate or the rate you originally locked the loan. So most likely, you will not be hurting any on your interest rate because of the delay.
In short, you're pretty much stuck and you have to hope the sellers can work out their problems.
I agreed to buy a house and now I’ve changed my mind. How do I cancel?
This may not be the answer you were expecting...
For the answer to this, you have to look at your contract. The contract is the legal agreement you have made with the seller. Most contracts have certain contingencies where a cancellation is acceptable. To cancel for reasons other than that, there are often consequences and such a decision should not be taken lightly.
Keep in mind that while you have been preparing to close the transaction, the seller has taken his home off the market and may have entered his own contract to purchase a home. This can create a chain of sales and purchases, all depending on you to fulfill your obligation. If you do not fulfill the contract, your decision may affect many more people than just one seller.
For the legal consequences of canceling a contract, you may have to consult an attorney.
The buyer now wants out of the contract to buy my home. The contract has been signed by both parties. What are my rights, and do I have to keep my home?
When people break contracts, you can't generally force them to go through with the transaction. What you can do, if you can prove damages, is try to recover the damages in court or through arbitration.
You can attempt to talk to the buyers and find out what the problem is and try to resolve it. It may be something easily you can easily resolve, but maybe not.
My husband and I have already signed a contract to sell our home. However, we have since changed our minds and no longer want to sell. Can we get out of selling our home?
First, look at the contract and see if there are any contingencies that allow you out of the contract.
You can always decide not to sell.
You just don't know exactly what the buyer's reactions are going to be. You don’t know if they will attempt to enforce the contract. You don’t know if there will be legal repercussions. You might want to get an attorney's opinion at some point, since we do not provide legal advice.
If you do cancel, think about ways to soften the blow to the potential buyer who has put up an earnest money deposit, may have already paid for a credit report and appraisal, and may be charged a cancellation fee by the settlement agent. They may have already given notice (if they rent) or sold their own house, too.
If you reimburse them for some of their hard costs, maybe they will not try to enforce the contract.
When buying a home, if there has been flooding that results in damage and it has not been fixed, must that be disclosed to the buyer? Does this need to be disclosed if 1. The buyer does not ask about flooding. 2. the Buyer does ask about flooding?
Disclosure rules vary from state to state, but most require the seller to disclose any problems he knows about. However, the rules on disclosure vary according to whether the seller is an individual or a bank, and whether they are represented by an agent or not. Rules on disclosure are not as strict for bank-owned properties and FSBO's.
If you received a "Transfer Disclosure Statement" from the seller, then you probably live in a state that requires disclosure. Go back through your documents and see if you have such a form. Whether the buyer asks about flooding should be immaterial - if a seller knows about a problem, they should disclose it.
If the real estate agent representing the Buyer knows of a flooding problem, must they disclose this information to the buyer? Is it unethical if they do not?
Real estate agents are not going to be as familiar with a property as the seller. If you received a Transfer Disclosure Statement and either the listing agent or the selling agent knew of a problem not listed by the seller, they should have added it to the form. It is generally required that they do so. However, they may not have known - and they cannot disclose problems they don't know about or that were concealed by the seller.
In addition, there are several safeguards that should help you determine if there was water damage or not - termite inspections often point out areas of wood rot caused by water damage - almost all Realtors recommend that a buyer order his own professional home inspection by a professional - and if there was roof damage, an appraiser sometimes can point that out in the appraisal - though it is not their job to perform a full inspection.
Where can I find a Real Estate Agent "Code of Ethics," if there is such a thing?
Some real estate agents are members of the National Association of Realtors, which does have a code of ethics for their 720,000 members. It is located at http://www.realestateabc.com/codeofethics/
I have reason to believe that the seller's agent was not truthful about the opposing bids for a property. I'm suspicious he made up bids to drive up the price I eventually offered. Do I have the right to demand proof of the opposing bids?
An agent or a seller is not obligated to divulge details of competing offers. You can ask for it in a counter-offer, but you may be taking a risk on losing the property altogether. If you feel you were a victim of fraud, you should consult with an attorney and ask him or her for advice.
Can a broker sign an Exclusive Buyer Representation Agreement with a buyer when that broker is representing the seller as a dual agent? Isn't this a conflict of interest?
There are a few different forms with similar sounding names. The form you signed probably means you agree to use that agent exclusively and will not go out looking for another agent.
The other form with a similar name does what you suggest. It means the agent will only represent you in the particular transaction.
Read what you sign. Get copies.
I am an out of state owner and made a deal to sell my vacant lot. The buyer was a licensed real estate agent who within a week (and before we closed our transaction) had sold it to someone else for $50,000 more than what they paid me. Is this legal or ethical?
It sounds like you are asking if you have a legal case to sue the individual. For that you need to consult with an attorney. If I were you, I would certainly be talking to an attorney.
Is it legal for an agent representing the buyers in a deal to lend money to their client for the down payment on a home?
This is not legal advice, so don't take it as legal advice.
Most mortgages don't allow the borrower to borrow money for the down payment. If the borrower conceals the fact that they are borrowing money for the down payment, then the borrower is committing fraud against the lender.
Is the Realtor doing anything illegal? From the lender's point of view, the borrower is the client, not the Realtor. The application specifically asks if any part of the down payment is borrowed.
But this is supposed to be a forum about the 'real' world of real estate, and the truth is that things like this do happen without any consequences. If every loan and every purchase was done strictly according to the rules, many fewer homes would be sold and fewer loans would be originated. No one is supposed to say that, but it is true.
This is not to say that such a practice is "okay" - just to say that it occurs.
If it is brought to the attention of the lender in some way, however, they may "call" the loan, which means the borrower would have to refinance the loan and get a new mortgage.
If the borrower gets into serious financial trouble because they took on too many obligations (including the borrowed money from the agent) - and they blame their Realtor - lawsuits could begin flying and sometimes have disastrous consequences.
I listed my house with an agent with the understanding that if one of two friends buy my property, she would be compensated at 3% commission. One of my friends has made an offer. When my agent sent me the estimated pay out from the transaction, she put in her commission as 6%. Her explanation is that the original deal was only good until she listed the house in MLS. Is this ethical? Or legal?
Sounds like...well, it doesn't sound ethical, does it? Since agents generally list a property in the MLS immediately, it doesn't sound like a genuine explanation. You should have made sure the listing contract contained this stipulation, but that is looking backward. One explanation is that she found it difficult to tell her manager of her agreement with you, and now that she is stuck, doesn't know how to fix it.
I would call the Realtor's manager and start out very nicely and tactfully about your verbal agreement with the agent, and how that seems to have become "confused." Normally, the desire to build good will in the community will convince the manager to acquiesce and adjust the commission appropriately.
Can you negotiate the price of a bank owned home?
Everything in real estate is negotiable. However, banks are more sophisticated about pricing than they were years ago. So those "Get a great deal on a foreclosure!" days aren't what they used to be. Lowball offers generally don't go very far.
How would I go about finding someone to finance a sheriff sale property?
You don't.
You have to show up with a cashier's check or certified funds. I suppose if you had another asset that you could borrow against AND you could get a loan large enough using that asset as collateral, you could do it that way. But you're actually financing the other asset and not the foreclosure property.
I’m selling my home "by owner," and a real estate agent who wants to show my home to a buyer said something about "agent protection." What does this mean?
This probably refers to the agent wanting to protect their right to a commission should you elect to sell to their client. In our home selling library, we have an article on types of listings. One of those is a "one time show." This is something the agent will probably come in and get you to sign before bringing in their clients. It identifies the client, the commission, and prevents you and that buyer from negotiating directly at a later time, with the intent to cut the agent out of the deal and not pay a commission.
On a FSBO (for sale by owner), what is financial obligation, if any, to sell to client with buyer agent?
When a buyer's agent has a client who makes an offer to buy your home, the offer will also ask you to cover the agent's commission - either directly or indirectly. Since the traditional arrangement usually includes two agents and the customary commission is approximately six percent of the sales price, the commission asked for in this transaction should be approximately half. There is only one agent involved.
On the one hand, you save money over traditional agent marketing. On the other hand, you don't make as much as if you sold the home at its full market value. Then, on the other hand again, sellers working with agents usually get a higher price for their home than seller who work by themselves. It is a difficult decision for you to make.
Anyway, the offer will ask you to either pay the commission directly to the agent and their broker, or apply a "credit" to the buyer so that the buyer can pay the commission. Either way it comes out of the proceeds of your sale.
We are thinking about selling our home on our own. If a buyer comes in with a Realtor do we still have to pay their agent the 3% commission?
That depends on whether you choose to "cooperate" with agents or not. If you do not, agents will not bring buyers to your house. If you do cooperate, some agents will bring buyers, but if their client makes an offer and closes the deal, they will expect to earn a commission. A three percent commission is customary, but you can attempt to negotiate, too.
Before an agent brings a client to your house, they will probably stop by and ask you to sign a "one time show" agreement. This prevents you and the buyer from negotiating directly in an attempt to not pay the agent’s commission.
Where can I find information on selling my own home?
My favorite place is the local bookstore rather than on-line. However, reading through our Home Selling Library will give you lots of tips, too. Most FSBO (for sale by owner) books are quick reading and Robert Irwin is an author who has covered it a couple of times. I recommend you buy a couple of books so that you cover the topic thoroughly.
How do I make an offer on a "for sale by owner" home? I have already received pre-qualification, and am ready to buy, but need the specifics for buying from an owner, not an agent.
The owner of the FSBO should have prepared for this contingency and have the proper forms available. You can also obtain forms from your local stationery store. Plus, there is a form available on line, but they charge a $4.95 fee. The URL is below.
How do I sell my house by owner?
You want a quick answer? People write entire books on this topic and one of the better ones is "Sold by Owner," by Robert Irwin.
It's like golf - it sounds easy. You just whack the ball a bunch of times until it goes into the hole. You may land in a sand trap or go out of bounds, but if you keep whacking at it, the ball eventually goes in the hole.
Buying and selling real estate is the same way. If you are willing to do all the work, you can muddle through and get it done.
How can I find out how much my house is worth? There are no comparable homes in my area.
This may be a bad sign for you, especially if you think your house is worth more than other houses in your neighborhood. Homes maintain their value better if the neighboring properties are fairly similar.
In your situation, you may actually have to talk to several Realtors, get their opinions, and come up with some sort of consensus. Without knowing why there are no comparable properties in your area it is difficult to give another suggestion. If your lot or home is over-improved for the area, that means the value will most not likely be what you think it is. If your home is much larger, you might not get the same cost per square foot as other homes in the area.
So I would talk to a bunch of Realtors and get their opinions. I would not recommend hiring an appraiser, however, even though a lot of books recommend this. Appraisers are better at "justifying" a price than in determining market value.
Where can I get information about the asking prices of properties that have sold during the last six months? I have found information on the selling prices, and would like to compare them to the asking prices.
The only place I can think of where you can obtain that information is the Multiple Listing Service. For that, you need to be a member, but you could ask an agent to obtain the information for you. I cannot think of any reason why an agent would not be willing to give you that information, so just ask one.
There really is not a concrete value in knowing the asking prices. There are different strategies in developing an asking price, plus a lot of properties start out over-priced to begin with. Comparing properly priced houses to over-priced houses, then lumping them together in some sort of analysis would skew your figures.
I can see how you could intend to use such knowledge for the purposes of negotiation, but with an informed listing agent, it should be a fairly ineffective strategy.
For example, recently I saw a web site where the agent was hawking his ability as a listing agent. He said the average home in his area sold for 93% of asking price, but his average listing sold for 97% of asking price. The implication was that he got more money for his sellers.
The truth is probably just that he priced his homes correctly to begin with.
How do you know whether the price of a home per square foot is reasonable or if you are about to make a bad decision?
Though this seems like an easy question, it is not as simple as it sounds.
Keep in mind that much more goes into the market value of a house than it’s square footage. For example, two houses next door to each other can have the same square footage, but if one has two bathrooms and the other has only one, guess which one will probably be worth more? It will also cost more per square foot.
However, if you compare recent sales of similar homes, the cost per square foot should be similar to those properties. You can ask your agent to provide you with comparable sales data.
What is a land contract and what are the dangers involved for the buyer?
Land contracts vary widely from transaction to transaction.
In most cases, no grant deed is recorded. The buyer rarely obtains a new mortgage loan at the time of purchase. Instead, the new owner makes payments to an intermediary, who then makes payments on the seller’s mortgage, which is still in place.
Keep in mind that such an agreement usually violates the lender's guidelines. If the lender becomes aware of a transfer of title on the property (which is why you usually don't record the grant deed), they can exercise the "due on sale" clause of the note. This would require you to refinance the loan or sell the property. Since many who buy on land contracts have problems qualifying for a mortgage, you can see how this can lead to problems.
At the same time, lenders generally only check for transfers of title if the loan becomes delinquent.
Within a certain number of years, it is expected the buyer will be able to qualify for a loan. At that time, they will obtain a new mortgage and pay off whatever amount the land contract requires. Then a grant deed is recorded and full ownership is conveyed.
What is a lease option?
This basically means you are leasing or renting a property with an option to buy it at a future date. The future price of the property should be fixed at the time the lease-option is signed.
Usually there is an up-front payment of some amount to purchase the option. The amount can vary. Sometimes the monthly payment is larger than normal and the excess is used to purchase the option. In some cases, the option money can be applied toward the down payment for the later purchase of the home.
Lease-options are usually done during a slow real estate market. During a hot market, the seller can simply sell the home in the regular manner.
What risks do a lease option hold for the buyer?
Individuals who attempt to buy homes on a lease-option rarely end up buying the home. This often has to do with the reason they try to buy on a lease-option. They usually cannot qualify for a home loan and expect that they will be able to qualify after a period of time. Later, they find they still cannot qualify - whether it is because of poor credit, lack of income (documentable income), or lack of savings to have a large enough down payment.
If this happens, you lose any option money you might have paid up front or as part of your monthly payment.
What benefits do a lease option hold for the buyer?
I'll give you one recent example:
A couple got involved in a lease-option some time ago, just before the real estate market turned. As a result, by the time the option was about to expire the home was worth much more than the option price. They exercised the option to buy and sold the house in a double-escrow, pocketing a tidy sum. Of course, they could have simply bought the home, but they still could not qualify for the home loan.
It would have been much easier if the lease-option had a clause allowing the couple to "assign" the option to a third party, but most sellers are savvy enough to include a "non-assignable" clause in the lease-option contract.
What benefits do a lease option hold for the seller?
- They often get to sell the house at a higher price than they could sell it in a normal transaction.
- They can sell the house during a slow market.
- By being able to collect a larger monthly payment than they could obtain in a normal lease, the property "cash-flows" and they don't have to come up with money out of their own pocket each month to make the mortgage payment.
- They get some up-front option money and when the buyer cannot exercise the option, they get to keep it.
I would appreciate knowing how a contract is worded in a "rent with option to buy" situation. Or is there a site I could download such sample forms?
I found a place where you can buy such a form for $14.95 on line. The URL is http://kaktus.com/opt/opt4.html.
The lease part of the form is pretty straightforward most of the time and is just like any other lease. The option just means that you have an "option" to purchase the home within a specified period of time. It makes sense to specify the option price in the lease/option contract.
I’ve seen these "No Down Payment" plans on late night television and want to know if they are real or just a scam?
The guys in the infomercials make a lot of money, but not in real estate. They are in the business of selling books, plans, seminars, etc. It's easier selling you those crazy schemes than it is for them to actually do what they are advocating in their programs.
If it was so easy, they would be buying real estate that way, not putting out infomercials.
Consistently making money in real estate requires a lot of hard work and a lot of hours. It isn't a "get rich quick" scheme, though sometimes the market turns at just the right moment and you can get lucky enough to make a quick buck.
Sometimes you hear about the "late night gurus" being charged with fraud. Those telling their "success stories" are often just actors.
Is there a percentage a seller will mark up the price of a home? For example, if the asking price is $114,000 is an initial offer of $95,000 too low?
Although you can always offer whatever you want, yes, $95,000 is generally too low too offer for a home priced at $114,000.
It's like buying a car. You want to dicker with the salesman a little, but there is more room to dicker on a more expensive car than if you were going in and buying the least expensive car.
Sellers usually mark up the price a little because they realize most
buyers aren't going to make a full price offer (though in different
markets you can get offers ABOVE the listing price). In your example
above, you were offering almost 15% below the listing price. They don't
mark it up that
much, just a few percent.
Before you make an offer, get your Realtor to go over the comparable sales of other similar homes in the same neighborhood. That is the same data the seller looked at when he priced his house, too. Make certain allowance for whether houses are selling briskly or slowly, and make an offer based on that data.
Note: When you look at comparable sales, you don't know for sure if the seller paid closing costs for the buyer or provided some other financing incentive, so keep that in mind.
I am looking at putting an offer in on a house listed for $134,900. The house is vacant and I believe it has been on the market for over 6 months. My realtor is saying is should bid 134,00 with the seller paying my closing cost and paying for a 2/1 buy down. I want to try and offer less. What do you think?
Your closing costs should be approximately $4000 or so (depending on what type loan you get, how many points, etc.). The 2/1 buydown (assuming it is an annual buydown) will cost the seller about $4000, too. By paying for these costs, if you offer a price of $134,000, the seller is netting the same as he would on if he accepted an offer of $126,000 and paid no costs.
If you think the house is worth less that $126,000, then make a lower offer. If you think it is worth more than $126,000, then you would be getting a deal with your Realtor's suggestion.
Your Realtor provides advice. You decide what to offer based on that advice.
If you make an offer on a house and the owner comes back with a counter offer and you agree to it can the owner still change his mind and sell to someone else?
A seller is free to withdraw the counter-offer any time prior to your acceptance of it. The communication method for acceptance is usually described in the contract. If your acceptance was communicated to the seller in the method required by the contract (prior to the seller withdrawing the offer), the seller should honor the contract with you and not entertain other offers.
But people don't always do what they should.
The problem then becomes whether you try to enforce your contract or not, which requires legal advice and expenses. For that, you have to consult an attorney.
Although you could probably technically enforce the contract, you have to reach a decision on whether it makes sense to expend the time and money to do so. Or does it make more sense to realize the seller is unethical and just move on to buy something different?
Can you negotiate when making an offer on a new home?
Making an offer on new construction is not the same as making an offer on a resale. Most of the time, the margin for profit is so small on new construction (per unit) that there is basically little or no negotiating. You can try, of course, because "everything in real estate is negotiable," but do not expect too much.
Can you negotiate the price of a bank owned home
Everything in real estate is negotiable. However, banks are more sophisticated about pricing than they were years ago. So those "Get a great deal on a foreclosure!" days aren't what they used to be. Lowball offers generally don't go very far.
If the purchase contract states that the seller is paying for the hazard report and a buyer's home warranty, who is responsible actually ordering them?
Probably, you'll both have to agree. But home warranties don't vary that much in price, so the seller shouldn't mind if you order it. The seller will probably want to order the hazard report, assuming that you mean checking for radon gas and things like that.
New Construction: If a walk-through inspection reveals a problem, but I choose to go through with closing anyway, can I retain a percentage of the down payment (or mortgage amount) - - not to be paid until the repairs are made?
If you want to go through with closing, you will not be able to hold any of your money back or the lender will not fund the loan. You just have to trust that the builder will make the changes, and they normally do.
What are the terms of the pest inspection? If after a few years you are living in the home, are the sellers responsible if termites are found?
Assuming you had a pest inspection performed when you bought the house, the terms of the guarantee would be with the pest inspection. You will probably find it with your other documents from when you bought the house.
Expecting the seller to be responsible for something a couple of years after the fact is not really sensible. The only way a seller should be liable is if they knew of an infestation, but did not disclose it.
What should I be aware of that the house inspector should be doing during the inspection of the house I am interested in buying?
The Inspector should be
checking the following things:
- Drainage
- Foundation
- Roof & Water Leaks
- Paint
- Plumbing
- Wiring
- Heating
- Fireplace
- Tile
I am interested in buying a home which the seller is listed "as is." Will a bank require a home inspection before approving a loan? Will a bank approve a loan on a home needing repairs?
A bank doesn't require you to get a home inspection in order to obtain a mortgage. If there are obvious major problems that affect value, the appraiser may note it in the appraisal report. However, their job is not to inspect the home, just to determine value.
Although the bank doesn't require a home inspection, if your purchase contract mentions a termite report, the lender will require that to be performed and pass before you close.
A termite report lists more than pest infestations. It also mentions obvious structural defects, such as wood rot, etc. These are classified into two groups - category 1 and 2. All items in category 1 must be repaired prior to closing. However, the lender does not stipulate who must pay for those repairs.
What, precisely, can be claimed as a tax deduction when you buy a home?
This is really a question you should ask a local CPA or whoever does your taxes. We encourage you to follow up with a professional tax advisor as we are not qualified or authorized to give advice in two areas - legal matters and tax matters.
Briefly put, providing you itemize deductions, own and occupy the home, you can deduct both property taxes paid on the home and interest paid on your mortgage. You can deduct the points and prepaid interest you make during the actual purchase, whether you pay them or the seller pays them on your behalf.
There are certain limits and restrictions which do not affect most people, but this is another reason you should contact a tax professional regarding your question.
New Construction: If a walk-through inspection reveals a problem, but I choose to go through with closing anyway, can I retain a percentage of the down payment (or mortgage amount) - - not to be paid until the repairs are made?
If you want to go through with closing, you will not be able to hold any of your money back or the lender will not fund the loan. You just have to trust that the builder will make the changes, and they normally do.
We put our home up for sale and the square footage is way off! Is a garage usually considered in the square footage in a home? It is attached to the home.
Although a garage is attached to the home, it is not considered part of the home's square footage. That is because only livable space is considered in the square footage calculation.
Calculating the square footage of a home is not as easy as it sounds. Neither real estate agents nor homeowners should attempt the calculation (at least not if you want a reliable figure). Rarely are houses perfectly square, which is one reason for the difficulty. Appraisers map out the house on a piece of graph paper, calculate all the edges, come up with "mini-areas" for each rectangle - then add them all together.
Plus, there are other intricate rules. If there has been an addition to the house and the owner did not receive a building permit, then that section of the house may not be allowable as part of the square footage. The same with attic and basement conversions, lofts, and so on.
It is best to rely on a licensed appraiser to recalculate the square footage of a house.
When a home's square footage is advertised, the figure usually comes from previous sales, perhaps as far back as the builder. Homeowners and real estate agents don't usually recalculate the square footage. Like we said, it is very very difficult to calculate the square footage of a home.
