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What should you know before bidding on that house

6/5/2012

Warming trends in the housing market have more buyers out strolling into open houses especially first-time homebuyers. But how many of these first-timers are ready to make an offer? Not as many as you might think. Before shopping for a home, homebuyers must shop for a loan so they know if they can swing payments on that two-story Colonial.

In this installment of Buying Advice, we'll take buyers through a quick mortgage-shopping primer and provide resources to help them navigate the often confusing world of home financing. We'll also check in on the latest housing statistics and answer a reader's question about how to help your bid come out on top when several offers are on the table.

Mortgage shopping 101
Before you get in the car with a real-estate agent, you need to know that you have the financial firepower to make a deal. How much are banks willing to lend you, and what will it cost you?

If you figure this out ahead of time, you'll have a better idea of the homes you should look at. You'll also feel more confident about making an offer, says Erin Lantz, director of Zillow Mortgage Marketplace.

"A lot of people think about mortgage shopping at the very last minute," Lantz says. Then they don't have time to choose a lender that they're comfortable with or that gives them the best deal. "Do your shopping upfront."

Especially if you're a first-time buyer, here's where you should start:

Find out how attractive you are to banks. We've said this time and time again: The best place to start is by pulling a copy of your credit report.

Once a year, consumers can request a free copy of their credit report from AnnualCreditReport.com, which gathers its information from the three major credit-reporting companies: Equifax, TransUnion and Experian. For $9, you can get a copy of your credit score, which is how lenders will judge you.

Talk to different lenders. Once you have your credit report and score in hand, see what a  handful of lenders will offer you. Don't just take one person's advice, Lantz says. Shop around.

Try reaching out to several different types of lenders, including a credit union, a national bank and a regional lender or mortgage broker about which you hear good things.

You can also shop for loans online. Just keep in mind that many of these websites make money by generating leads for lenders. While many initially screen the lenders on their sites and occasionally "mystery shop" their services, they aren't monitoring all transactions to ensure the lenders are offering you superior service or deals. They also can't recommend one lender over another.

Read these sites' frequently asked questions thoroughly so you know what to expect. Be prepared to receive as many as 20 quotes from lenders once you submit a loan request.

You can keep track of the rates and fees from different banks on the Federal Reserve Board's mortgage worksheet (PDF).  

Make sure you understand the different types of loans, from fixed-rate loans of 15 or 30 years to variable-rate loans, in which the rate changes after a certain time. Given that interest rates are at or near historic lows, experts say, it may be best to lock in the longest term you can.

Obtain all cost information. This is where it gets a little tricky. Not only do you want to find out what interest rates banks are prepared to offer you, but you also want to find out about all of the related fees.

Expect appraisal and application fees, as well as third-party closing costs such as title and escrow fees. Space for these fees is included on the Federal Reserve's mortgage worksheet.

Educate yourself about private mortgage insurance, as well. If you're not paying 20% of the purchase price as down payment, your lender will require this additional monthly cost to help cover its costs should you default on your loan.

Ask each lender to break out the interest rate, PMI and all other fees, including estimates on those from third parties, on a worksheet. "Show that to another lender and ask them to beat it." Lantz says. And know that many of these fees are negotiable.

Get preapproved for a loan. Once you have narrowed down your lending choices, get preapproved. This is different from being prequalified, which just means lenders have taken a quick look at your income and credit score and decided that you look like an acceptable risk.

You want to be preapproved so you that when you make an offer, you have a document in hand that says your loan will be funded, as long as the property appraises as expected. Typically, you lock in a mortgage rate for a certain time, ranging from 45 to 90 days. When you think you're within three months of buying a home, make sure you get this letter.

Now you're ready to go home shopping.

Housing snapshot
Existing-home sales rose 3.4% to 4.62 million in April, from 4.47 million in March. At this pace, sales are 10% higher than they were in April 2011, according to the National Association of Realtors.

The U.S. median existing-home price jumped 10.1% to $177,400 in April from a year ago. Price increases were reported in March and April a good sign.

"It is no longer just the investors who are taking advantage of high affordability conditions," says Lawrence Yun, the NAR's chief economist. "A return of normal homebuying for [owner] occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices."

FNC's national Residential Price Index, which excludes foreclosures, showed a 0.5% increase in March from February, the first increase since July 2011.

Home-value gains will be modest this year, for sure. Yun expects them to cap at 1% to 2%. However stronger spikes in prices are expected in 2013.

By Melinda Fulmer of MSN Real Estate

Find the right home? Find the right lender

5/30/2012

It's not always easy to find a mortgage lender. Your selection should be based on more than just the lowest rate. Gather a few rate quotes and then follow up with some research and interviews before you choose the lender who is right for you.

"You want to sit down with two or three lenders to make sure you find one who's a good fit, the right match for you as a borrower, rather than a product pusher," says Michael Jablonski, executive vice president and retail production manager for BB&T Home Mortgage. "Mortgage lending should be a collaborative process."

A good lender can qualify you for a loan and offer advice on ways to improve your credit. The lender also should talk to you about mortgage payments in context with your financial plan.

Asking friends, family members and co-workers for lender referrals can help, along with checking with a local bank, says Arlene Allert, vice president and regional manager of Wells Fargo Home Mortgage in San Francisco. Reputable real-estate agents can give recommendations, too.

Brian Martucci, a senior loan officer with GetLoans.com in Washington, D.C., says consumers should check a lender's experience and reputation for completing loans, in addition to comparing mortgage rates.

If you are happy with your bank or credit union, you might want to check on its mortgage programs. but Martucci says you shouldn't expect special treatment, such as a lower mortgage rate or discounts on fees. Some banks offer incentives to their customers and others don't, Allert says.

Lender interviews
"You don't have to apply for a loan to ask questions," says Cindy Tessier, assistant vice president at Navy Federal Credit Union in Vienna, Va. "You can find out a lot by simply calling to ask about loan programs. If the loan officer is hard to reach or gives you a hard sell, you may not want to work with that lender."

Allert says: "Ask if (lenders) can explain in language you understand what each option means for you, not just today but for the long term. You also need to find someone who will agree to set expectations upfront, including how long the loan process will take, how often you'll communicate and how you'll communicate such as by email or phone."

One of the most important questions, Martucci says, is about turnaround time, because so many loans today are delayed.

Tessier recommends asking who will service your loan, because if your loan will be sold, it might be harder to track down someone who can help you with any issues.

Michael Astorino, field mortgage manager at Navy Federal Credit Union, says, "You should ask what happens if the appraisal comes in too low or your rate lock expires before closing or there are other problems at the last minute, because your lender should be able to help you set expectations and commit to getting you to settlement."

Astorino says consumers should expect the lender to ask questions about their long-term plans for homeownership and overall financial goals.

"You want someone who focuses on you, not on your loan," he says.

Comparing loans
"Every lender handles things slightly differently," Allert says, "but you should be able to get a written statement or spreadsheet that gives you a side-by-side comparison of different loan programs."

To simplify loan comparisons, Martucci suggests asking only about the interest rate and points on a loan, along with the lender fees.

"You don't need to ask about taxes and insurance because you can do that later, and that isn't likely to vary from lender to lender," he says.

Astorino says he suggests that consumers focus first on goals such as paying off the loan in a certain time or keeping monthly payments as low as possible, then zeroing in on the lender's fees and the annual percentage rate.

The goal getting to the settlement table with your financing in place should be met as long as you have chosen a lender who communicates well and offers a consultative approach, Allert says.

By Michele Lerner of Bankrate.com

6 tips for a painless closing

4/24/2012

You finally found the house of your dreams. You signed a contract and got approved for a mortgage. You've even hired the movers. Now comes the most important part: the closing.

In an ideal world, closing should be a mere formality, where homebuyer and seller sign on the dotted lines, exchange checks for the keys and shake hands. But this isn't an ideal world, which means that if you and the professionals you hired don't prepare, your closing could be a disaster.

Here are six tips for ensuring your closing goes smoothly.

1. Ask questions
Knowing what to expect and communicating with all parties involved in the deal are key to a successful closing, says Neil Garfinkel, a real-estate attorney at Abrams Garfinkel Margolis Bergson LLP in New York.

A week before closing, "talk to the people who are representing you, and tell them you'd like to spend a couple of minutes to discuss what to expect," Garfinkel says.

Don't be afraid to bother your loan officer or your real-estate agent, says Jeff Richardson, a real-estate agent at Alliance Bay Realty in Newark, Calif.

"Stay on them," he says. "Ask them 'Do you have everything you need?' Don't assume everyone knows what they are doing."

2. Anticipate human error
Richardson says he recently represented a buyer whose closing failed because of missing loan documents. The buyer was a co-signer on his brother's mortgage, and the lender had requested 12 canceled checks showing that the brother, not the buyer, was paying the old mortgage. The buyer could come up with only eight checks, and the loan officer said that would be enough. That was weeks before closing.

"I kept saying that wasn't going to work," says Richardson, who also has worked as a mortgage broker. "The requirement is 12 checks. How can eight checks be sufficient?"

Three days before closing, the lender said it couldn't issue the loan without the 12 checks, and the deal was canceled.

"Sometimes people don't know as well," Richardson says. "I asked his loan officer, 'How can you give someone an approval letter when you don't have all the documentation?' And his answer was, 'Well, now I learned it.'"

3. Review loan documents in advance
One way to ensure all is going as planned is to tell the lender that you want to review the documents before closing, or ask your attorney to do so.

By law, you have the right to review the closing-settlement statement, or the HUD-1 form, at least 24 hours before closing. Compare that form to the good-faith estimate you received when you applied for the loan.

"You should have everything you are going to sign before you sign it," Richardson says. "A lot of people don't do that. When they get to closing, they are nervous, and they just want to sign and get the keys. That's how people get in trouble."

4. Take a check
Another reason to review the loan documents in advance is so you know how much money you must bring to closing. And yes, you will need a check at closing, most likely a certified one.

Many buyers are so anxious and excited that they forget they need to stop at the bank to get the check.

Using a wire transfer is an option, but it may delay the closing, says Rafael Castellanos, a managing partner at Expert Title Insurance Agency in New York.

"Some people think a wire transfer is faster, but the closing won't happen until they have actual confirmation that the wire hit," Castellanos says. "Depending on the time the transfer was made, it could be a huge problem."

The buyer must also bring photo identification and a copy of the homeowners-insurance policy, as well as the good-faith estimate, the HUD-1 statement or both, in case there are discrepancies.

5. Take the day off
A smooth closing may take less than 30 minutes, but you won't know for sure if your closing will go as planned until it's done.

"There may be delays, especially if you are closing at the end of the month," says Rob Nunziata, president of FBC Mortgage in Orlando, Fla. "Sometimes, people have to sit there for hours and say, 'I've got to get back to work.'"

Trying to close during your lunch break is a bad idea, Castellanos says.

"Imagine you get these delays, and you are on your lunch hour," Castellanos says. "Now you're hungry, you're frustrated and you're late. That's a pretty bad combination."

6. Expect the unexpected including typos
You're at the closing table. You're told everything is good to go. All you need to do is sign.

You must double-check the numbers on the mortgage note you are signing, even if you have received the HUD-1 form before closing.

"One of the biggest holdups in closing is when the mortgage documents are incorrect," Castellanos says. "Sometimes, you have to correct the interest rate, or the amount is wrong and you need to fix it."

Because of a simple typo, your loan documents may need to be sent back to the lender to be redone.

To prepare for these unexpected delays, borrowers should try to schedule their closings for earlier in the day. And don't wait until the last day on the contract to close.

"You shouldn't get to that line, especially when you are buying a foreclosure or short sale," Richardson says.

By Polyana da Costa of Bankrate.com

6 home-photo tips to draw buyers

4/11/2012

Selling a home used to be all about "curb appeal," or the first impression a property conveys to potential buyers as they pull up in front. A house that looks unattractive from the street won't sell, the mantra goes.

These days, a property's "pix appeal," or attractiveness in photos posted in online listings, is equally important. Eighty percent of homebuyers used the Internet last year to search for a home, and nearly 25% reported that the Internet is where they first found the property they purchased, according to a National Association of Realtors survey.

"Without pictures I am much less likely to go see a house," says house hunter Dan Dillbeck, of Grand Rapids, Mich. In most cases 85% of the time online photos are his first view of a home, he says, adding that poor pictures tend to turn him away.

Photographs are powerful bait. Good ones can lure buyers; poor ones can do the opposite. Follow these tips to create flattering photos of your property. 

1. Lighten up. For exterior shots, shoot in the middle of the day when the sun is shining and the sky is blue, says Gregory Haberstick, who trains professional photographers for Foxtons, a real-estate company serving New York and New Jersey.

For interior shots, Bill Bayless, a real-estate photographer in Damascus, Ore., suggests turning on all the lights and using a flash. "The flash adds in all of the correct colors and fills in the shadows, making the room look brighter," he says.  

2. More is better. Homebuyers want to see more than just the front of the house. Buyers also want to get a look at the living room, kitchen, dining room, family room, master bedroom/bathroom and the backyard, Bayless says. He suggests including your residence's best features, such as a home theater or an exercise room.

Most Multiple Listing Services allow several photos in their online listings, and classifieds sites such as Craigslist let sellers post up to four pictures. You can make additional shots available by using free photo sites such as Shutterfly, Snapfish or Picasa.

For condos and apartments, include shots of amenities such as a pool, tennis court or gym, says Kevin Grolig, a real-estate agent with Llewellyn Realtors in Rockville, Md.

If your home has a spectacular view, say of a beach, lake, mountains, park or golf course, by all means post photos of it, says Ron Luxemburg, a photographer in Pasadena, Calif.

Home seller Dzung Nguyen, 40, of Germantown, Md., posted 35 photos of his home in an online slide show. When sites limit the number of pictures that can be posted, he links to it. "There are a lot of houses out there, and people don't have time to go to all of them," he says. His property has received more feedback from buyers, he says, than it did when it was listed with a real-estate agent who took only one or two photos.

3. Get a clear shot. Remove clutter from an area before photographing it. Clear counter space and remove fridge magnets, children's toys, dirty dishes and other distractions, says Haberstick.

"I've been known to spend a few hours moving things around," says Grolig. He relocates appliances and makes beds to get the best photo.

For outside shots, put away garbage cans and remove the car from the driveway, he says. Try not to include telephone poles, wires and other homes in the scene.

4. Go pro. If you're planning to use a real-estate agent, ask to see his or her photography first. Find out whether the agency uses professional photographers. Some companies use pros at no additional cost to the seller.

If you are selling without a real-estate agent or aren't handy with a camera, hiring a professional real-estate photographer may be the way to go. Examine samples from photographers and ask about their experience before making your choice, Luxemburg says.

Photographers' fees can range from a few hundred dollars to $500, he says. Aerial shots are more expensive, but Nguyen used Live Maps at no cost to show buyers a bird's-eye view of his community.

5. Give it your best shot. Quality counts when taking photos, and cell-phone cameras don't cut it. A camera with a wide-angle lens is ideal, but "point and shoot" digital cameras also can do the job.

For a clear photo, place digital cameras on a tripod or something solid so the camera is steady when the shutter goes off, says Luxemburg.

Set the camera on its highest resolution. If you decide to just use the photos online, you can always decrease the resolution, Luxemburg says. Never use fewer than 72 dots per inch for online photos, Bayless says.

6. Edit. Improve a shot using basic photo-editing software. Crop out ceilings or unnecessary background, says Luxemburg, and adjust the brightness or contrast.

A number of free Web sites make editing a snap. Some to try are Snipshot.com, Picnik.com and Pixenate.com, says Stephen Jagger, co-founder of Ubertor.com, a Vancouver, B.C., real-estate company that creates Web sites for real-estate agents.

By Dana Mattioli of The Wall Street Journal

5 reasons you still need a real-estate agent

4/2/2012

The proliferation of services that help homebuyers and sellers complete their own real-estate transactions is relatively recent, and it may have you wondering whether using a real-estate agent is becoming a relic of a bygone era. While doing the work yourself can save you the significant commissions that many real-estate agents command, for many, flying solo may not be the way to go and could end up being more costly than a commission in the long run. Buying or selling a home is a major financial and emotional undertaking. Find out why you shouldn't discard the notion of hiring an agent just yet.

1. Better access/more convenience
A real-estate agent's full-time job is to act as a liaison between buyers and sellers. This means that he or she will have easy access to all other properties listed by other agents and will know what needs to be done to get a deal together. For example, if you are looking to buy a home, a real-estate agent will track down homes that meet your criteria, get in touch with sellers' agents and make appointments for you to view the homes. If you are buying on your own, you will have to play this telephone tag yourself. This may be especially difficult if you're shopping for homes that are for sale by owner.

Similarly, if you are looking to sell your home yourself, you will have to solicit calls from interested parties, answer questions and make appointments. Keep in mind that potential buyers are likely to move on if you tend to be busy or don't respond quickly enough. Alternatively, you may find yourself making an appointment and rushing home, only to find that no one shows up.

2. Negotiating is tricky business
Many people don't like the idea of doing a real-estate deal through an agent and think that direct negotiation between buyers and sellers is more transparent and allows the parties to look after their own interests better. This is probably true assuming that both the buyer and seller are reasonable people who are able to get along. Unfortunately, this isn't always an easy relationship. What if you, as a buyer, like a home but despise its wood-paneled walls, shag carpet and lurid orange kitchen? If you are working with an agent, you can express your contempt for the current owner's decorating skills and rant about how much it'll cost you to upgrade the home without insulting the owner. For all you know, the owner's late mother may have lovingly chosen the dcor. Your real-estate agent can convey your concerns to the sellers agent. Acting as a messenger, the agent may be in a better position to negotiate a discount without ruffling the homeowner's feathers.

A real-estate agent can also play the bad guy in a transaction, preventing the bad blood between a buyer and seller that can kill a deal. Keep in mind that sellers can reject a potential buyer's offer for any reason including just because they hate his or her guts. An agent can help by speaking for you in tough transactions and smoothing things over to keep them from getting too personal. This can put you in a better position to get the house you want. The same is true for the seller, who can benefit from a hard-nosed real-estate agent who will represent his or her interests without turning off potential buyers who want to niggle about the price.

3. Contracts can be hard to handle
If you decide to buy or sell a home, the offer-to-purchase contract is there to protect you and ensure that you are able to back out of the deal if certain conditions aren't met. For example, if you plan to buy a home with a mortgage but you fail to make financing one of the conditions of the sale and you aren't approved for the mortgage you can lose your deposit on the home and could even be sued by the seller for failing to fulfill your end of the contract. (Keep in mind that the details of any contract may vary based on state law.)  An experienced real-estate agent deals with the same contracts and conditions on a regular basis and is familiar with which conditions should be used, when they can be removed safely and how to use the contract to protect you, whether you're buying or selling your home.

4. Real-estate agents can't lie
Well, OK, actually they can. But because they are licensed professionals, there are more repercussions if they do than for a private buyer or seller. If you are working with a licensed real-estate agent under an agency agreement, such as a conventional, full-service commission agreement in which the agent agrees to represent you, your agent will be bound by law to a fiduciary relationship. In other words, the agent is bound by law to act in his clients' best interest, not his own.

In addition, most real-estate agents rely on referrals and repeat business to build the kind of client base they'll need to survive in the business. This means that doing what's best for their clients should be as important to them as any individual sale. Finally, if you do find that your agent has gotten away with lying to you, you will have more avenues for recourse, such as through your agent's broker or professional association or possibly even in court if you can prove that your agent has failed to uphold his fiduciary duties. When a buyer and seller work together directly, they can and should seek legal counsel, but because each is expected to act in his or her best interest, there isn't much you can do if you find out later that you've been duped about multiple offers or the home's condition. And having a lawyer on retainer any time you want to talk about potentially buying or selling a house could cost far more than an agent's commissions by the time the transaction is complete.

5.  Not everyone can save money
Many people eschew using a real-estate agent in order to save money, but keep in mind that it is unlikely that both the buyer and seller will reap the benefits of not having to pay commissions. For example, if you are selling your home on your own, you will price it based on the sale prices of other comparable properties in your area. Many of these properties will be sold with the help of an agent. This means that the seller gets to keep the percentage of the home's sale price that might otherwise be paid to the real-estate agent.  However, buyers who are looking to purchase a home sold by owners may also believe they can save some money on the home by not having an agent involved. They might even expect it and make an offer accordingly. However, unless buyer and seller agree to split the savings, they can't both save the commission.

The bottom line
While there are certainly people who are qualified to sell their own homes, taking a quick look at the long list of frequently asked questions on most for sale by owner websites suggests the process isn't as simple as many people assume. And when you get into a difficult situation, it can really pay to have a professional on your side.

By Tara Struyk of Investopedia

Prep your yard for home-buying season

3/25/2012

Last year, 30% of all U.S. households did some kind of landscaping project themselves, with the average annual bill coming in at $356, according to the National Gardening Association. Many of these projects can be a disaster, says Sacramento landscape architect John Nicolaus, especially if buyers go to their local big-box garden center and just start grabbing attractive plants and pavers.

Go to a local nursery that has a knowledgeable staff that can tell you which plants will work best in your area. Do some planning first, then talk to these pros about what you want to achieve, how much you have to spend and how much time you're willing to put into watering, pruning and fertilizing. You can even take pictures of your yard and bring them along to help visualize specific plantings.

Here our panel of experts shares six landscaping tips to boost the value of your house without breaking the bank.

1. Lay the groundwork for successful landscaping. Make sure your property has proper drainage so water doesn't slosh back to the house and make the foundation unstable or conversely, erode backyard slopes. Make sure sprinklers aren't hitting the house. Water lines or mold on the bottom of your property can signal a bigger problem with the structure itself and point out expensive grading projects ahead, says Nicolaus.

2. Create a focal point. The yard doesnt have to be filled with amazing beds of color. But it's nice if you can create a focal point with flowers or unusual shrubs along a porch or an area of architectural interest. Lacking that, Nicolaus recommends grouping bigger items to the left of the house and checking your placement of big shrubs and trees from inside the windows to make sure it enhances the view.

3. Create an atmosphere and then take it with you. Joe Stoffregen, owner of Homewood Nursery&Garden Center in Raleigh, N.C., suggests planting some of your flowers, shrubs, herbs and vegetables in beautiful containers. They can lend charm to your backyard when you're showing it, but then you don't have to leave your investment behind.

4. Plant for privacy and shade.
Some of the biggest payoffs in landscaping are those that provide a sense of distance from your neighbors. Tall shrubs planted to screen a bank of windows on the side of your neighbor's house almost always pay off, landscape architects say. And borders that block the sights and muffle the sounds of busy streets are equally valuable. In the backyard, different plantings can create the feel of separate "rooms," such as a shady meditation garden or outdoor dining area.

5. Phase out undesirable or sick trees gradually. Instead of ripping out a centerpiece tree and leaving a front yard bare, Bee will plant another tree 15 to 20 yards away with some nice smaller shrubs underneath. When the new tree gets a little bigger and the two come in conflict, she takes the bigger one out.

6. Choose a wide array of plants that look good even when they're not blooming and in cold weather. "I rely a great deal on shrubs with interesting foliage that has good color or texture. They are a lot lower-maintenance than flowers," says Cynthia Bee, of Solscapes Landscape Design in Salt Lake City. She tends to put flowers in only one focal area and mixes shrub plantings up, so owners won't get stuck with a huge gap if one in a row of the same type of plant dies.

By Melinda Fulmer of MSN Real Estate

3 reasons not to overprice your home

3/10/2012

A new study by property website Zillow.com shows that many home sellers are unrealistically optimistic, asking considerably more than they're likely to get. As a result, they risk long delays in finding buyers, which means a lot of lost revenue while the house sits idle on the market.

What's more, homeowners who bought after the housing bubble peaked in 2007 were even more unrealistic than those who bought before or during the bubble, perhaps because post-bubble buyers thought they got better bargains than they actually did.

"We found sellers who bought after the housing bubble burst, in 2007 or later, price their homes 14% above market value," said Zillow, which used sales of comparable homes to figure market value. "Those who bought before the housing run-up, prior to 2002, overprice by nearly 12%. Somewhat surprisingly, sellers who bought during the run-up, from 2002-2006, seem to be the most realistic, pricing their homes 9% over market value."

Market value is a tricky number, because comparable-sales data do not always provide a good guide to a home's value. Nearby homes that have sold in the past six months or so may be quite different from yours in appearance or condition, and there may be too few recent sales to get a proper valuation. That being said, you won't have much chance of getting a premium price on a cookie-cutter condo if identical units have sold for less.

As a seller, you have a right to ask for whatever price you want, which you can drop if no one bites. You may get lucky, but asking too much involves a number of risks, even if you're just "testing the market" for a few weeks or months.

On the pro side, you might get your high asking price. Selling a house is not like a dealer selling cars or McDonald's selling Big Macs, because the home seller needs only one buyer. It's possible that someone will find your home so perfect that it justifies a premium price. For example, a home with a garage converted into a shop may be a turnoff to most buyers because most of them have cars, but a nondriving tinkerer may love the extra work space.

More often, though, pricing your home too high works against you in some important ways. Here are three of them:

1. Agents react. Real-estate agents yours and the buyers' may not want to waste time with a home that's unlikely to sell. Though a higher price means a bigger commission, agents might figure they can move two or three homes in the time it would take to sell yours, earning more even if each offers a smaller commission than your property does.

2. Buyers react. Buyers who like your house but pass on your property because of the price may find something else and close a deal before you drop your asking price to a level they'd accept.

3. You need that money. Even if you get your full asking price, the time it takes to get it may cause you to miss out on the house you want to buy. You may have to settle for something that's not as suitable. Even worse, you may end up spending more than you had planned, offsetting the premium you got on your sale.

Setting a proper sale price is both an art and a science. A key step is to shop carefully for an agent who can help you, looking for one who is very familiar with your community and comes with good references. Steer clear of dabblers who sell only a few homes a year. You want a pro who is on top of the market and will value a good reference from you.

Drive around to look at the "comparable" homes used to set your asking price, and look for others if necessary. If you're on a hill, don't use a comparison from a home down in the less desirable floodplain. Make sure the house's curb appeal matches yours. Keep in mind that a computer that spits out comparable sales isn't likely to know that your home has a new kitchen and the others don't.

Finally, keep an eye on the "traffic" - the number of potential buyers who come through your property. A good agent will have a sense of how many buyers are looking. If you are not getting your share, it's a sign you are reaching on price. If dropping your price is inevitable, it's better to do it sooner than later.


By Jeff Brown of MainStreet

How to choose the right house for the right reasons

3/1/2012

Just as most of us have a list of traits that are non-negotiable in a spouse, every house hunter has a list of things he or she wants in a house. Of course, these features and amenities won't necessarily ensure a match that stands the test of time.

We asked our readers to tell us what they love most about their current home and what, in hindsight, was clearly just a passing fancy. In this month's Buying Advice, we'll look at the real-estate love letters they wrote and compare them with what buyers are shopping for today.

We'll also check in with the latest home-sales data that hint at a bottoming market and answer a question that many first-time homebuyers have: "Where do I start?"

Finding the perfect house
It doesn't take a mansion to satisfy most of our readers over the long haul. Indeed, for many of those responding to last month's query, it was the small conveniences a laundry area near the bedrooms or a spacious closet that helped ensure long-term love.

However, the one thing that seemed to bring the most satisfaction was a bright open space, no matter the square footage:

"Of all the houses that I have built/purchased/leased, the one issue that stands paramount is openness large windows and an open-concept interior home plan," said reader Alan Sadler via email. "There is nothing more depressing than walls, walls and more walls."

Jane Curkendall agreed, putting at the top of her list for her next home an "open floor plan" where the kitchen and family room are together, "lots and lots of light" and "lots and lots of windows." Maybe that's because she wound up spending so much time in her current home's sunroom addition. "This is where our office is, and where we hang out," she said in her email.

Large windows with a nice view can make up for a home's shortcomings, readers said.

"Our home is flooded with warm light for most of the day," said reader Ralph Banks from New York, via email. "We also still enjoy the water views out of some of the windows of our home after living here for 27 years."

Carrie Douglas, a buyer, said she is looking for "pleasant outdoor vistas visible from the windows" in her next home, as long as it also includes an up-to-date kitchen and plenty of storage space.

Also high on our readers' lists were comfort-adding features such as central air conditioning and heat.

"Of all the improvements we have made to our house throughout the nine years in it, this has been by FAR the best investment," said Carmen Munoz, a reader from the New York area. "Our home is always at comfortable temperatures and there is so much less maintenance involved with this system than with our old gas boiler/window A/C."

Also high on our readers' lists of must-haves were generous kitchen cabinet storage, large closets, good-sized bedrooms and a level backyard that's easily accessible for entertaining.

One thing Munoz said was a mistake in retrospect was the mother-in-law suite she was determined to have when she bought her home. "It has created strife within our family because people think it is OK to come stay there for extended periods of time," she said. This rarely used space has raised her heating and cooling bill, she said.

Housing-market snapshot: Sales continue to rise; prices continue to dip. But is there light at the end of the tunnel?
Existing-home sales continued to rise in December, swelling 3.6% to 4.61 million, from a downwardly revised 4.39 million in December 2010, according to the National Association of Realtors. The median existing-home price dipped 2.5% from the previous year to $164,500.

While that may not sound that encouraging, economists see a glimmer of hope in the numbers. December marked the third straight month of sales increases and a 5% uptick from November.

"The pattern of home sales in recent months demonstrates a market in recovery," said Lawrence Yun, the NAR's chief economist. "Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market."

The total housing inventory at the end of December dropped 9.2% from November to 2.38 million homes for sale a 6.2-month supply at the current pace down from a 7.2-month supply in November.

Economists such as Mark Fleming from CoreLogic are now saying that 2012 should be the year the housing market starts to turn the corner as the prices for nondistressed homes begin to stabilize.

Housing sales could see a further boost this year, analysts say, as homeownership begins to look better than renting. A recent report from Capital Economics shows that the median monthly mortgage payment of about $700 is close to even with the median monthly rent, making the move to homeownership much more attractive especially in the face of rising rental rates.

However, at least one market watcher says talk of a recovery is still premature. Lance Roberts, CEO of StreetTalk Advisors, said he doesn't believe the market correction is over, given the high levels of debt that some consumers are still struggling with; the high number of owners who have negative equity in their homes and therefore have little ability to move; and the combination of unemployment and underemployment that is making it impossible for many to save for a down payment or qualify for a loan.

"The bottom line is that until we see a substantial REAL recovery in employment there will be no recovery in housing," Roberts said in his X-Factor Report.

By Melinda Fulmer of MSN Real Estate

5 reasons you still need a real-estate agent

2/14/2012

The proliferation of services that help homebuyers and sellers complete their own real-estate transactions is relatively recent, and it may have you wondering whether using a real-estate agent is becoming a relic of a bygone era. While doing the work yourself can save you the significant commissions that many real-estate agents command, for many, flying solo may not be the way to go and could end up being more costly than a commission in the long run. Buying or selling a home is a major financial and emotional undertaking. Find out why you shouldn't discard the notion of hiring an agent just yet.

1. Better access/more convenience
A real-estate agent's full-time job is to act as a liaison between buyers and sellers. This means that he or she will have easy access to all other properties listed by other agents and will know what needs to be done to get a deal together. For example, if you are looking to buy a home, a real-estate agent will track down homes that meet your criteria, get in touch with sellers' agents and make appointments for you to view the homes. If you are buying on your own, you will have to play this telephone tag yourself. This may be especially difficult if you're shopping for homes that are for sale by owner.

Similarly, if you are looking to sell your home yourself, you will have to solicit calls from interested parties, answer questions and make appointments. Keep in mind that potential buyers are likely to move on if you tend to be busy or don't respond quickly enough. Alternatively, you may find yourself making an appointment and rushing home, only to find that no one shows up.

2. Negotiating is tricky business
Many people don't like the idea of doing a real-estate deal through an agent and think that direct negotiation between buyers and sellers is more transparent and allows the parties to look after their own interests better. This is probably true assuming that both the buyer and seller are reasonable people who are able to get along. Unfortunately, this isn't always an easy relationship.

What if you, as a buyer, like a home but despise its wood-paneled walls, shag carpet and lurid orange kitchen? If you are working with an agent, you can express your contempt for the current owner's decorating skills and rant about how much it'll cost you to upgrade the home without insulting the owner. For all you know, the owner's late mother may have lovingly chosen the dcor. Your real-estate agent can convey your concerns to the sellers agent. Acting as a messenger, the agent may be in a better position to negotiate a discount without ruffling the homeowner's feathers.

A real-estate agent can also play the bad guy in a transaction, preventing the bad blood between a buyer and seller that can kill a deal. Keep in mind that sellers can reject a potential buyer's offer for any reason including just because they hate his or her guts. An agent can help by speaking for you in tough transactions and smoothing things over to keep them from getting too personal. This can put you in a better position to get the house you want. The same is true for the seller, who can benefit from a hard-nosed real-estate agent who will represent his or her interests without turning off potential buyers who want to niggle about the price.

3. Contracts can be hard to handle
If you decide to buy or sell a home, the offer-to-purchase contract is there to protect you and ensure that you are able to back out of the deal if certain conditions aren't met. For example, if you plan to buy a home with a mortgage but you fail to make financing one of the conditions of the sale and you aren't approved for the mortgage you can lose your deposit on the home and could even be sued by the seller for failing to fulfill your end of the contract. (Keep in mind that the details of any contract may vary based on state law.)

An experienced real-estate agent deals with the same contracts and conditions on a regular basis and is familiar with which conditions should be used, when they can be removed safely and how to use the contract to protect you, whether you're buying or selling your home.

4. Real-estate agents can't lie
Well, OK, actually they can. But because they are licensed professionals, there are more repercussions if they do than for a private buyer or seller. If you are working with a licensed real-estate agent under an agency agreement, such as a conventional, full-service commission agreement in which the agent agrees to represent you, your agent will be bound by law to a fiduciary relationship. In other words, the agent is bound by law to act in his clients' best interest, not his own.

In addition, most real-estate agents rely on referrals and repeat business to build the kind of client base they'll need to survive in the business. This means that doing what's best for their clients should be as important to them as any individual sale.

Finally, if you do find that your agent has gotten away with lying to you, you will have more avenues for recourse, such as through your agent's broker or professional association or possibly even in court if you can prove that your agent has failed to uphold his fiduciary duties.

When a buyer and seller work together directly, they can and should seek legal counsel, but because each is expected to act in his or her best interest, there isn't much you can do if you find out later that you've been duped about multiple offers or the home's condition. And having a lawyer on retainer any time you want to talk about potentially buying or selling a house could cost far more than an agent's commissions by the time the transaction is complete.

5.  Not everyone can save money
Many people eschew using a real-estate agent in order to save money, but keep in mind that it is unlikely that both the buyer and seller will reap the benefits of not having to pay commissions. For example, if you are selling your home on your own, you will price it based on the sale prices of other comparable properties in your area. Many of these properties will be sold with the help of an agent. This means that the seller gets to keep the percentage of the home's sale price that might otherwise be paid to the real-estate agent.

However, buyers who are looking to purchase a home sold by owners may also believe they can save some money on the home by not having an agent involved. They might even expect it and make an offer accordingly. However, unless buyer and seller agree to split the savings, they can't both save the commission.

By Tara Struyk of Investopedia

7 crucial tips for first-time buyers

2/7/2012

With the nationwide median home price at a five-year low and mortgage rates near record lows, too, you might be tempted to buy a home now before the housing market rebounds. But this is one decision you don't want to rush into.

That's especially true if you're relocating, like my husband and I did in July 2003. We were living in a one-bedroom apartment in Washington, D.C., before buying our first house in Bowling Green, Ky., where my husband accepted a teaching job. And even though I was intimately acquainted with the process, we still ran into plenty of snags and surprises.

When buying a home ...

1. Lay the groundwork. Our first step was figuring out how much house we could afford and how much we could borrow. If you're moving to a new community, be sure to find out what home prices are there. Housing prices can change dramatically from state to state and even city to city. You might also want to talk to friends or colleagues in the area about neighborhoods and other considerations only a local might know.

2. Take your time. We thought we were ahead of the game by looking on the Web for homes. But every house we found online that we really liked was snatched up before we had a chance to go to Kentucky to check them out. I started to worry that if we didn't move fast enough, all the "good" houses would be gone.

By the time we actually went to Kentucky to look at homes, we had only two months before my husband had to start his new job. I was determined to find something anything. My husband, the levelheaded one, urged me not to rush. Did I listen? No. As a result we settled for a house that had only a few of the things I wanted and many of the things I didn't want.

In retrospect, I realize homes constantly come on (and off) the market. You might not find your dream home, but you don't have to settle for any old house just because you feel under the gun to buy something. Consider renting to give yourself time to find the right home.

3. Realize you won't find the perfect home. Forget the idea of finding your dream home. It doesn't exist. You will not find a house that has everything you want, and none of the things you don't. Real-estate agents tell you to make a list of what's important to you size, condition, location, style and price. That way you can zero in on a home that comes closest to suiting your wants and needs.

We wanted an old home with hardwood floors, a small yard, a garage that didn't face the street and a basement. We got a newer home with wall-to-wall carpeting, a big yard, a garage in the front of the house and a crawl space. That's because we had to give up some things to get others like a big kitchen and plenty of bedrooms.

4. Accompany the inspector. Most stories on homebuying advise you to have a home-inspection clause in your contract, giving you the right to have the property inspected and to withdraw your offer if the inspection report isn't satisfactory to you for any reason. What these stories often neglect to mention is that you should be present during the inspection. We weren't because we didn't want to spend the money on a flight to Kentucky. Now we know it would have been money well spent.

Sure, you'll get an inspection report. But it can be difficult making heads or tails of it. If you're present during an inspection, you can see problems with your own eyes, get an idea of how serious they are and ask the inspector how much he might think it will cost to repair them.

5. Pay attention to the little things. Because I thought I needed to rush to buy a home, I wasn't as objective during our home search as I should have been. When we finally walked into a house that met many of our requirements, we turned a blind eye to some things we should have paid closer attention to. And because the inspection didn't turn up any major problems, we decided to look past the minor ones. Well, it's the little things that can become big headaches once you move into a home.

  • Pay attention to how a home smells. A strong odor especially a musty one can be an indication of a bigger problem such as mold.
  • Look at small details, not just the big picture. If there are cobwebs in the corners, dirty windows, weeds in the lawn and leaves in the gutters, the sellers obviously didn't do a good job of keeping the property clean. If they haven't taken the time and money to maintain the little things, there's a chance they've let big things, such as plumbing or the heating and cooling system, fall into disrepair.
  • Don't think just because the house needs a few minor repairs or new paint on the walls, it will be cheap, quick and easy to tackle. Before you know it, the costs add up, it's taken a lot more time than expected and you've had to call in the experts to finish the jobs you couldn't handle on your own.

6. Be ready to negotiate. We got the sellers to lower their price by $7,000 and throw in a one-year home warranty, which will cover the cost of repairing or replacing the home's mechanical systems and major appliances. And we got a good deal on our homeowners insurance, with guaranteed replacement coverage at no extra cost.

7. Don't spend all your money on the down payment. If you're moving into your first home, you'll have to buy things you never needed before, such as lawn mowers, yard tools and major appliances. You'll need cash for these purchases unless you're planning to mire yourself in credit card debt.

By Cameron Huddleston, Kiplinger.com

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