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How Home Sellers Can Maximize Buyer Offers

Today’s market can be a difficult one for many sellers to navigate. While your real estate agent can advise you, the ultimate decision of what offer to accept is entirely up to you.

This decision can come with quite a bit of pressure. Even in the most favorable of markets this can be a difficult time. How do you know when to accept an offer?

maximize offers
Here are some questions to consider:

•  Is the buyer pre-qualified/approved? Selling will require an investment of time and money. You may need to find a new home or a temporary rental. There’s nothing worse than buying a new house only to find out the deal to sell yours has fallen through.

•  Do you need to move? The urgency of your move may dictate what offer you accept. Many sellers need to move quickly for a new job. You may need to sell to avoid foreclosure. If you are in a rush, you may need to accept an offer that is less than ideal.

•  How much do you owe? You don’t want to sell your home at a loss. And be sure to take closing costs into consideration. Many markets experienced high levels of depreciation over the last year. If you are underwater on your loan, now may not be the time to sell.

•  What is the market climate? Are you likely to get another offer? How long has your home been on the market? Have you had many showings? All of these are factors to consider when contemplating what offer to accept.

Above all, ask yourself if this offer was a reasonable offer. There are buyers that may attempt to low ball you. They may see that your home has been on the market longer than your competition. They may know that it’s a strong buyers market. In response they offer a much smaller amount for your home than it is worth. You are not obligated to accept these low ball offers. However, if you are in need of selling now, every offer warrants consideration or a counter offer.
In the end, you must accept an offer that works for you. You may be willing to accept a lower amount in exchange for a faster closing date. Or you may wish to hold out for the highest dollar amount.

Written by Carla Hill, RealtyTimes

Newton Real Estate Buyers

Do Home Buyers Pay A Commission in Newton MA?

Home buyers in Newton and the Greater Boston Area often ask me how do real estate agents get paid? It is a source of confusion and sometimes it prevents buyers from hiring an buyer’s agent.

Newton Real Estate Buyers

Here are answers to the most common questions around real estate commission home buyers often ask:

1. Do Home Buyers Pay a Real Estate Commission?
The price of the home reflects the full commission which will be paid to both the buyer’s and the seller’s agent. There is rarely commission to be paid to your agent above what is already included in the price of the home.

2. Are there exceptions?
There is an exception, though. If you have a buyer agency agreement with your broker, there are rare occassions when the commission paid through the price will not cover the full commission your broker charges. For example, your contract may have a 2.5% commission agreement, but the listing agent is only cooporating at a 2% commission.

How is this resolved?
When the commission included in the price does not cover the buyer agent’s commission, One of three things happen.
a. Your agent will demand the seller pays the full 2.5% out of the sale proceeds. This will be written into the offer which you sign.
b. Your agent may forgo the .5% commission.
c. You may have to pay the balance of the commission at closing.

Please note discount commissions are rare in Newton, MA. In my experience, I never sellers often agree to pay the full commission out of their proceeds.

3. If there is a chance I will pay additional commission, why sign a buyer agency agreement?
It is a rare occassion the buyer pays real estate commission beyond the purchase price. It usually happens when the sale is through a discount broker representing the seller or a for-sale-by-owner. Your buyer’s agent has much more work to do in either of these scenarios.

Furthermore, the buyer agency agreement is designed to protect the interest of the buyer. When hiring a excellent agent, the risk of possibly paying extra commission will be far outweighed by the risks of buying a home without representation in Newton MA.

Hiring a buyer’s agent will save you money, time, and a lot of energy. Having experienced representation will give you confidence in your decisions and guidance in your search. If you have hesitations and reservations about paying a commission, review your agency contract carefully and discuss with your agent. A highly qualified buyer’s broker will be well worth the commitment.

Do you have other questions about commission and how real estate agents get paid?  Contact me for a complete breakdown!

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Three Most Important Contingencies When Buying a Condo

Are you working with a Realtor on your home purchase in Boston? I certainly hope so!  If you are going at it alone, you may overlook the most important contingencies when buying a condo.  In Massachusetts there are two contingencies written into the offer to purchase paperwork.  But what’s not in the standard offer is the most important when buying a condo.  Row of brick houses in Boston

Here are the three contingencies you must have in your offer to buy a condo:

1. Inspection Contingency.  Conduct an inspection with a licensed inspector who comes highly recommended.  You will have 7-10 days (including weekends) to conduct this inspection. Ensure you receive the report in a timely manner, and if you need more time, file for an contingency extension.

2. Financing / Mortgage Contingency.  Unless you are paying cash, you will probably have a mortgage contingency in your offer.  The standard paperwork has it built into the offer.  Usually, roughly a month to six weeks after the offer is accepted.  If you are closing quickly, you’ll have to get it done sooner.  Don’t forget to submit your completed mortgage application in accordance with the deadline in the offer.  If you read carefully through the paperwork, you’ll find the buyer’s obligation to file an application by a specified day.  If not done on time you jeopardize the validity of the mortgage contingency.

3. Condominium Documents Review.  Although not included in the standard paperwork, the condo document review is in my opinion the most important contingency when buying a condo.  It allows you time to read through the condominium documents and financial statements, and pass them on to your attorney to look for anything out of the ordinary.

Why is this so important?  You will learn about the financial health of the building, rules and regulations, and a lot more detail about how the condo association functions.      If the building is in a dismal financial situation and poorly run, expect the value of the condo to deteriorate or the association to have large expenses in the near term.  Furthermore, the mortgage company may reject your application if the building has low owner occupancy or lack of funds.

When including the condominium documents review contingency, don’t forget to specify the documents will be provided within two business days.  The listing broker should have them ready before the condo goes on market, so this should not be a problem.

Writing an offer to purchase a condo requires thought and preparation. Learn the contingencies and don’t depend on standard paperwork alone to protect your interests.

 

contingency to sell home

Contingency to Sell Home: Selling a Condo and Buying a House in Boston

contingency to sell home

Caught Between Two Properties?

If you need to sell your condo in order to buy a house in Brookline, Newton and the Greater Boston area, you are not alone. With housing so expensive, not many can manage to keep both mortgages, or pay for the house without the proceeds from the condo.

A contingency to sell your home is a common way to protect you in this situation. You make an offer with a contingency on an accepted offer, purchase and sale, or closing of the condo you are selling.

Sounds like a plan, right? WRONG!

In today’s market you are competing with other buyers, and a contingency to sell a home is a great way to RUIN your chances of securing the property of your choice. Put your home-seller thinking cap for prospective for a moment.

An offer with a contingency to sell a home is a high risk offer. Regardless of the type of property to sell or how easily it will sell, it is far removed from the seller and the seller’s agent. Furthermore, such an offer is likely to have delays and it comes with too many unknowns. Why accept such an offer when there are better ones on the table, or will be coming?

It is worth it for the seller to wait for another offer while you work on selling your condo. From the seller’s point of view, you can come back after you sold and your offer will be accepted then. Why risk taking the home off market now?

So what do you do when selling a condo and buying a house in the Boston area, with our current market conditions?

1. HIRE AN AGENT who has done this several times and knows how to protect your interests while securing a property.
2. Work on selling first and prepare to buy quickly once you have a P&S in hand.
3. Sell first, with a flexible closing so you have time to find your new home.
4. Work with your agent and mortgage broker. You may be able to take a bit of risk and make an offer without selling and without a contingency. Learn all the facts and how it may work.
5. Present an offer with a very long closing giving you time to sell the condo first

The bottom line is that you will have to stay flexible. You may or may not have to take financial risk – it depends on the properties, finances and closing dates. Most importantly, hire a real estate agent who knows how to work under pressure and protect your interests.

Feel free to schedule a free consultation to learn how to best manage your risk while buying and selling a home.

Boston Real Estate Prices Going Up: Danger of Under Pricing Your Home!

When home prices pricing-brighton-ma-condoare going up, and going up fast, you should be concerned about under pricing your home.  Boston real estate prices have been coming out of the slump, most prominently in the last few months.  And as more sellers are getting ready to finally sell, under pricing can be a problem.

It is hard to imagine discussing the danger of under pricing just a couple months ago.  But then I saw it done to a condo in Brighton.  The condo, two bedrooms plus parking in an excellent building in Cleveland Circle, was barely on market before the seller accepted an offer.  Because it didn’t close, I don’t know the final sale price yet.

I am so sure this condo was under priced because two comparable condos were off market just as fast, even though they were priced 30K more – about 10%.

There are two reasons the condo could have been deliberately under priced.  First, the seller may have been under duress to sell quickly.  Second, the seller may have been advised an under-pricing strategy to encourage multiple offers and thbrighton-ma-condosus have higher bids.

I don’t know the seller’s motivation, frankly.  But I speculate a third reason the condo was under-priced – lack of knowledge on current market conditions.  Brighton condos have been flying off market as first time home buyers are ready to buy, and there is very little inventory.  The fast turnaround limits an agent’s ability to price accurately on recent sales.

The only way for an agent to know about this market pressure it to go to the jam-packed open houses with buyers writing offers on the steps of buildings.  If the agent didn’t come to see Brighton condos in open houses in the past two months, accurate pricing would be almost impossible.

I hope, and expect, the condo sold well over asking.  I’ll keep you posted.

For an accurate and free market evaluation of your home, click here.

real estate contract ripped

The #1 Deal Killer for Newton and Brookline Houses

Last Spring market, which ended roughly a week ago, looked something like this: buyers want to buy, sellers unsure they want to sell, plenty multiple-offer situations and many deals falling apart mid-way to closing.  This is the nature of a market with rising prices.

Homeowners, believing prices will rise, stay on the sidelines and don’t feel a need to sell their homes.  On the flip side, there are not enough homes on the market to satisfy all the buyers, who are bidding up the prices of homes.

But many of the home sale transactions don’t make it to closing, or at least not without some disappointments and fighting. The dreaded appraisal is the culprit!

The appraisal is a third party evaluation of the home which the bank requires for a mortgage approval.  An appraiser comes to the home and compares it to recent sales.  In our market, the appraiser has a difficult job because there may not be enough recent sales of similar properties, and the price buyers are willing to pay is higher than it was just a few months ago.

Because of the formulas, regulations and rules the appraisers must follow; their evaluation is often coming short of the offer price, which the buyer and seller already agreed upon.  What does this mean?  Here’s an example:

Four offers are submitted on a house in Newton, and the best offer was accepted at $800,000.  The buyer agrees to pay a 30% down payment, $240,000 and submits a mortgage application for a 70% loan, $560,000.

The appraiser uses the limited recent sales data for similar houses nearby, and comes up with an appraised value of $750,000. The mortgage company will still fund 70% of the appraised value, but now this number dropped to $525,000.

Once of several things may happen next:

  • The buyer may demand the price reduced to the appraised value.  Why should he pay more than that?
  • The buyer can make up the difference in cash.
  • The buyer and seller can negotiate a price between the $800,000 and $750,000.  The buyer will pay cash for anything over $750,000.
  • The buyer and seller may terminate the agreement, (if there is an appraisal contingency in the agreement, which I’ll discuss in another posting).

Whatever the decision, it is never a romantic time during a real estate transaction process.  Both parties are usually upset – buyer fearing he is over paying and dreading the added cash expenditure and seller annoyed she is making less than expected.  This is especially disappointing when there were several offers, four buyers is willing to pay more than the appraised value!

Five years ago appraisals were rarely a problem.  But are and will continue to be an issue everywhere prices are going up, inventories are low, and buyers are ready, willing and able to buy.

Buyers and sellers must prepare themselves for the appraisal.  I’ll discuss that in upcoming posts.

Real Estate Decisions: Use Your Head or Your Heart?

Last week I had a difficult decision to make.  My emotional side had to duke it out with my logical reasoning. I work through head versus heart wars with clients all the time, so this week was an opportunity to observe the decision making process and find ways to optimize difficult choices.

Residential real estate is a fertile ground for difficult decisions that employ both the logical and emotional.  So how do we make the best choices when buying a home and who to trust, the head or the heart?  The answer is that you’ll have to bring the two to a compromise for the optimal decision.

A purely logical decision

Three years ago I had a house on the market in Newton priced around $780,000.  A family came to see this house three times, and obviously loved it.  When they were ready to make an offer, the conversation was something like this. “We’ve done the analysis of all the sales in the past six months in the radius of .33 miles.  Using a formula taking into account square footage, age of house, etc etc…the house is worth $632,392.  Our offer is for $632,500.”

A purely analytical offer misses the variables that are not easily measured, or altogether intangible.  This family would have enjoyed this house, it was perfect for them in many ways, and they missed it.  The house was sold for $750,000 to another family.

A purely emotional decision

In the height of our condo market, around 2006, I worked with a buyer for only a couple of weeks before she was ready to make an offer on a very pretty one-bedroom in Brookline.  “I love it, I love it, I love it.”  When buyers don’t take longer to choose a home my reaction is usually, “Are you sure, are you sure, are you SURE?”

My buyer did not want to negotiate; she put in a generous offer, higher than what I had suggested.  All my explaining and advising was ignored, and my job was to represent her wishes.  Everything went pretty well up until the appraisal.  The bank’s appraisal was lower than the price my buyer was willing to pay.  This means the bank is not willing to finance the purchase at this price – a big problem.

Did I mention this is the height of the condo market?  I wasn’t new to the business but it was the first time I heard of a bank appraisal resulting in a lower price, (a commonplace these days).  She was overpaying even in a hot market.

Finding the balance

I believe we naturally find a balance and use both our rational and emotional sides.  A good real estate agent ensures this, and will hopefully balance your dominant decision making side.  The pros, the cons, the what-if’s, and the numbers.  It is a peace process between our heads and hearts because a home is all encompassing.

A house is both a financial investment and a home.  You must enjoy the house, find it comfortable, and be happy to enter it after your day at work.  But you can’t ignore that it will likely be your largest financial outlay ever.

 

How Landlords Save the World

The title of this entry is over-the-top, I admit, but I am just here to stick up for the landlords out there who are trying to do some good.  The word “landlord” in itself has some negativity associated with it, and the use of “lord” in this context is distasteful in our American sensibility.  In media, landlords are portrayed as misers ready to make a buck on the poor and take advantage of families.

Please!

Let me tell you about the landlords, the real estate investors, I know.

First and foremost, there is a commitment to maintain the property and keeping the tenant happy and comfortable, even with the high occupancy rate and the increasing rents.  I am not suggesting any altruism here, but it is cheaper to keep than replace tenants.  It only makes sense that tenants stay for a long-run, and take care of the property, as it is their home. Fostering that environment is essential for positive tenant-landlord relations, which is the relationship you want in between any consumer and supplier.

A rental property is a huge financial commitment and a landlord idiot enough to not take care of it and ensure it’s livability is ill suited for the job.

Yes, there are many terrible landlords out there.  The worse of them are the ones who neglect their properties, fail to keep up with safety codes, and don’t treat their tenants with the respect they deserve.  Just like in any occupation, in any aspect of humanity, there are some bad apples.

For more on tenant-landlord rights in Massachusetts, go to http://www.mass.gov/ago/docs/consumer/landlordtenant073007.pdf

Three Ways to Invest in Real Estate

Investing in real estate can seem overwhelming and reserved for the very rich.  In the current economic conditions and marketplace, it may even feel a bit too risky.  But if you’ve ever thought real estate investing may be right for you, this is a great time to learn about your options and how it can be done by almost anyone.

Before we learn about our options, though, let me say that I believe real estate investing can be a long a cumbersome process if you are new to it.  That is not a bad thing, and I think of a lengthy process as a series of checkpoints that will make me very sure of my decision at the end. But it does mean that you have to have a critical eye, some good research skills and an a greater-than-average supply of patience.  If this sounds like you, then let’s review how you can get into the lucrative business of real estate investing.

Whatever your budget, real estate can be your investment vehicle.

1.  All cash deal.  If you have lots of cash, you may be able to find an investment property in your area and buy it without a mortgage.  The advantage of this is that you will be a highly qualified buyer and you can probably secure a property for a bit of savings over a buyer who has to get a mortgage.  Another advantage of a cash buyer is that her expenses are much lower, as there is no monthly mortgage payment.  This enables her to be more flexible on the rent, giving her more options in choosing tenants.

The disadvantage of an all cash deal is that it is not taking advantage of very low mortgage rates.  Borrowing is pretty cheap, and if all your cash is in one place, you can’t use it elsewhere.  Leverage is a real estate investor’s friend.

2. Part cash, part mortgage.  The down payment minimum is 20-30%, depending on various circumstances and your financial qualifications.  My rule of thumb is that you should make money, or at least break even, with this kind of down payment.  If you lose money on a monthly basis, the property is not worth the price, (at least not not for an investor). Your mortgage payments, any association fees and taxes should be covered by the rent.

The advantage here is that you’ll be taking advantage of the cheap borrowing costs, and you’ll own a property with an income without the whole cash outlay.

The disadvantage is, obviously, the cost of borrowing money and the higher cost due to your mortgage payment – same as the mortgage on your home.

3. Pool of investors with little cash.  Gather a few friends and family, and pool your money together to buy one property.  It can even be a small property at first, but at least get into the market.  If ten friends get together with $15,000 each…you do the math.  The advantage is that you are in the real estate market, getting a piece of the pie, however small.  It is a start, or a great single investment you have.  You can hire a real estate broker and an attorney to help maybe for a stake in the property instead of commission and fees.

The disadvantage is finding like-minded individuals and putting it all together in a legally binding agreement.  To me, this is just a bit of leg-work, and not so much a disadvantage, but it does add to the complexity of the transaction.

Entering the real estate market as an investor is not simple at first, but once you are in, it gets easier and easier.  If you’ve ever considered investing in real estate, this is a great time to get in.  Just choose your strategy and do it!

Top Three Reasons Why Property Investment Is King

No one wants to hear this, but I’m saying it anyway.  Real estate is the best long-term financial investment.  Phew…that’s a relief.

With the real estate market in the dumps for several years now, it is not easy to get back into the pro-property mind-set.  But, it is exactly at these times that you should be considering expanding your real estate portfolio.

One reason I know this is because while the real estate market is dragging in most of the country, it is dominated by the professional real estate investors.  Don’t you want to learn a lesson or two from them?

The professional investor loves real estate above all other investments.  There are three main reasons for this.

First, real estate investing can come in many forms, just like any other investments.  There are small condos, multi-family buildings, commercial, residential, mixed use properties, different towns, neighborhoods, etc.  For every budget, preference and style, there is an investment instrument.

Second, real estate has a certain tangible value that you just don’t see in other investments.  Property investors love that there is an asset they can visit, fix and maintain.  There is a satisfaction in knowing that you have some control and responsibility in the relative value of the property.

Third, although real estate is illiquid – meaning it takes relatively a lot of time and effort to sell it – it is a versatile investment.  You can hold it, or resell it when the market turns your way. You can do extensive renovations and have a quick resell, or you can hold it with tenants for years to come.  Whatever it is, you have options and you can make decisions based on the best scenarios for your needs and the market conditions.

All of this assumes that you have sufficient funds for a down payment and that your expenses on the property are covered.  The major drawback in investment real estate are the unavoidable expenses in maintaining it and the difficulty of selling it if you need the cash.

But this said, it may be time to consider an investment property, especially in such a critical time in the market.  Opportunities and possibilities are present, and real estate investing can be a perfect fit for long-term financial goals.