For Sale By Owner (FSBO): The Drawbacks of Going it Alone on a Home Sale

With housing on the upturn, multiple offers and rising sales prices are being reported in our market. Some potential home sellers might think that selling their home simply requires placing a “for sale” sign in their front yard. Many sellers have learned the hard way that selling a home in today’s marketplace is much more difficult than they imagined; their efforts to save money on commissions may have been more costly than they anticipated.
Before venturing into doing the do-it-yourself option of being a for-sale by owner (FSBO), you need to fully understand what is involved in the selling of real estate and then compare the perceived advantages and the actual disadvantages of trying to sell your property on your own.
Here are seven good reasons why hiring an experienced professional REALTOR® may actually net you more money on the sale of your home when all is said and done – as well as save you countless hours, headaches and stress in the process:

Being a FSBO may not actually save you as much as you think. While you might save some of the cost of hiring a professional real estate agent to represent you, you may still need to pay 2 percent or more to the buyer’s agent in order to attract a larger pool of buyers. Additionally, the true “savings” may be far less after you add all the other costs associated with selling – advertising, brochures and flyers, for-sale signs, attorney fees to draw up documents, etc.

You may get less for your home. The National Association of REALTORS® found that the typical FSBO home sold for $174,900 compared to a sales price of $215,000 for agent-assisted sales. That equates to an 18 percent loss for those do-it-yourselfers hoping to save a 6 percent commission. In addition, prospective buyers of a FSBO property, looking for a bargain, may automatically reduce their offer by the amount of the real estate commission the seller is attempting to avoid paying.

A LOT goes into selling a home. Less than 10 percent of sellers sold their home on their own last year, according to NAR®. Novice sellers may think you just stick a for-sale sign in the front lawn and buyers will beat a path to your door. Guess again! Professional agents develop comprehensive marketing plans, take professional photos, manage inspections and appraisers, oversee staging, hold open houses, place print and online ads, seek out potential buyers and negotiate with the buyer’s agents to get the best price possible for their seller. Homeowners need to ask themselves if they are ready and capable to do all of that work on their own.

FSBOs limit their potential pool of buyers. FSBO properties are usually not listed on as many of the home search engines and websites as listings handled by real estate agents. This is problematic given that 90 percent of buyers use the Internet to commence their home search, according to NAR®. Also, FSBOs typically can’t put the advertising, marketing and networking resources into reaching as many potential buyers as real estate professionals do. And with commissions reduced or even eliminated for buyer’s agents, there’s little incentive for real estate agents to show your home to their clients.

Setting the right listing price is hard to do. Real estate professionals review comparable sales and local market conditions, as well as the pluses and minuses of your home as they suggest the list price. As an owner, you may not have a clear or objective sense of what that price should be. The right price may get your home multiple offers and perhaps even bids over the asking price. However, if the list price too high then many potential buyers may not even look at your home, let alone make an offer. On the flip side, you could undervalue your home’s features that may justify a higher sale price.

It’s not always easy to be a “closer.” Getting a potential buyer to make an offer isn’t the end of the process. It is not uncommon for agents representing buyers and sellers to negotiate back and forth on many of the terms in the purchase contract, including price, occupancy requirements and other conditions of sale – and there are often additional negotiations regarding credits and repairs during the escrow process. FSBOs may find themselves sitting across from an experienced “closer” looking to drive a hard bargain and cut the best deal for themselves rather than working to reach a “fair” compromise between both parties. This is a critical part of the transaction; FSBOs should ask themselves who is looking out for their best interests? Working with a professional REALTOR® could help sellers avoid several of the pitfalls during the negotiation and closing processes.

Legal landmines in selling a home. There are a myriad of potential legal landmines for FSBOs. Who will write the purchase contract? What if a buyer’s contract proposal has clauses and other terms that could be detrimental to you? Sellers are obligated to disclose all material facts about their property and any omission or incorrect information could later be grounds for a claim or lawsuit. A REALTOR® can help you through that process by providing you with the correct advisories and disclosure forms.

Selling a home is a lot harder than most people realize, even in a good market. And it’s very easy for non-professionals to make mistakes along the way that will end up costing them in the long run. With the sale of a home being the single biggest transaction most of us will ever make, this is the time to use an experienced REALTOR® to manage the process. I’m ready to help. Visti me at  www.RealtorLisaWu.com

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The Downsides of Cash Purchase Offers

Source: The Wall Street Journal 

June 14. 2013

All-cash offers usually trump all others because the seller can be sure that the lender won’t kill the deal by not approving the buyer’s financing or appraisal. Since cash buyers can close quickly, sellers who are ready to move on with another home purchase find that a plus, too. So cash buyers often can buy a house for less money than someone who must get a mortgage. However, there is a downside. Without a bank as a backstop, one can easily make a mistake, and the consequences will be the buyer’s responsibly alone.

• Most buyers find getting a mortgage to be a nail-biting hassle because they have to go through various levels of approvals. They must make a down payment, meet loan-to-value ratios, and pay for independent  appraisals, title insurance, and homeowner’s insurance. These precautions are done for the bank’s protection and not the buyer’s. But they have the ancillary effect of protecting buyers who may be swept away by emotion after finding their dream home and making a purchase they shouldn’t.

• Consider appraisals: Lenders always require them, but cash buyers rarely get them. Instead, cash buyers rely solely on comparable sales supplied by their agents, or plucked from websites such as Trulia or Zillow, to give them an idea of what to pay for a house.

• In some cases, cash buyers don’t carefully compare the square footage, number of rooms, quality of construction, and other factors that appraisers do when they rule on a house’s worth. So the possibility that cash buyers could pay more than market value for a home is very real.

• Ironically, there is a possibility that a cash buyer could lose a house in a bidding war because they bid too low, assuming that sellers will automatically choose cash over a mortgage. That is not always the case, especially if the buyers are prequalified and the sellers don’t need a quick closing.

• In rapidly heating markets, some cash buyers may forego inspections to make their offers irresistible. That is one of the worst mistakes any buyer can make, since serious flaws can be hard to detect for untrained eyes.

• Cash buyers also may be tempted to forgo getting title insurance, which protects them from claims made by previous owners, and even homeowner's insurance, which could have devastating consequences should the home be involved in a fire or other disaster.

So remember: Cash may be king, but it also may make you careless. Think like a bank, and protect yourself.

Home Builders Building Homes that Young Buyers Want

Source: NAHB - National Association of Home Builders Home Builders Building Homes that Young Buyers Want, Says NAHB

June 3, 2013 - During National Homeownership Month in June, the National Association of Home Builders (NAHB) is telling young people that the time is right to buy a home, and the nation’s builders are building the homes they want.

“As the economy recovers and young people who had to live at home with their parents move forward with their lives and achieve their dreams of homeownership, home builders are delivering homes that cater to the floor plans, features and affordability that this generation desires,” said NAHB Chairman Rick Judson, a home builder and developer from Charlotte, N.C.

More than 80 percent of Generation Y home buyers—people born in 1977 or later—said in NAHB’s 2012 consumer preference survey they prefer a highly energy efficient home that results in lower utility bills during the home’s lifetime over a lower-priced home without energy efficient features. Today’s new homes feature ENERGY STAR-rated appliances; windows, doors and insulation that better control the home’s interior climate; and other modern components such as tankless water heaters and HVAC systems that save costs on utility bills.

And cost-conscious young buyers will be happy to hear that a new home actually costs less to maintain than an older home. An NAHB study found that homes built before 1960 have average maintenance costs of $564 a year, while a home built after 2008 averages $241. Plus, mortgage rates are still very low, bolstering affordability for home buyers.

Generation Y buyers favor media and game rooms more than any other specialty rooms for their next home. New homes today not only contain these spaces, they are outfitted with the state-of-the-art electronic and wiring components that can accommodate high-definition televisions, full-house sound systems, hard-wired fire and security alarms and more.  

Young buyers can check out many of the outstanding designs and features being included in homes built by NAHB members at our social media communities facebook.com/homebuildrs, pinterest.com/nahbhome and google.com/+nahb. They can also access home buying and home building information and resources on NAHB’s website at nahb.org/forconsumers.

“The time has never been better for young people to become home owners, whether it be a new home or existing,” said Judson. “There are outstanding opportunities in the current market, with near record low interest rates, competitive prices and new homes being built that include open layouts, energy efficient components and other features that cater to young buyers.”

Housing Market Summer 2013

Source: The Los Angeles Times

Better times for home buyers will take a few years, experts say...

Low inventory and rising home prices are frustrating to many buyers, but unfortunately would-be buyers may have to wait a few more years for relief, according to experts.

Making sense of the story

• Institutional investors, who have been driving the market with their all-cash purchases and buying houses for rental income, need to be in and out in two to three years, according to one real estate analyst. Otherwise they cannot make a profit.

• For housing to normalize, individuals will need to come back to the marketplace and that will be driven by employment.

• Among the signs that investors are buying up swaths of homes in a specific area are the lack of bank-owned properties coming on the market despite high foreclosure rates.

• Consumer understanding has been a step behind what’s happening in the housing market. When the prices started going down, sellers were the last ones that got the memo. Today’s buyers may have to be willing to look in different locations, while prices continue to appreciate.    

•                                                  www.RealtorLisaWu.com

Home Prices in California - March 2013

Home prices in U.S. cities post big increase in March
Source: Los Angeles Times

Tight housing supply and strong demand continued to fuel a robust market recovery in March, with the Standard & Poor’s/Case-Shiller index of 20 U.S. cities recording a 10.9 percent year-over-year increase.

Talking Points

• Distressed home sales continued to decline in April, as previously underwater homes rose in value, and the share of REO sales registered in the single-digits for the first time in more than five years, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported

• The combined share of all distressed property sales registered its lowest level since February 2008, dropping to 24.4 percent in April, down from 27.9 percent in March and down from 45.8 percent in April 2012. The share of all distressed sales in most counties also declined significantly from the previous year, with Alameda, Contra Costa, Marin, Orange, San Diego, San Mateo, and Santa Clara registering in the single- or low double-digits in April.

• The share of equity sales – or non-distressed property sales – now make up more than three-fourths of total sales, the highest share since February 2008. The share of equity sales in April increased to 75.6 percent, up from 72.1 percent in March.  Equity sales made up more than half (54.2 percent) of all sales in April 2012.

• The available supply of homes was relatively unchanged from March but remained tight. In April, the Unsold Inventory Index for REOs dipped from 1.8 months in March to 1.7 months in April.  At 2.7 months, the supply of short sales remained unchanged in April.  The April Unsold Inventory Index for equity sales was 2.9 months, down from 3 months in March.

How Much Mortgage Loan You Can Qualify?

Fixed-rate jumbo mortgages make a comeback
Source: The Wall Street Journal

Just a year ago, 30-year, fixed-rate jumbo mortgages were hard to find in some high-price markets. Now, many lenders are offering fixed jumbos – with very competitive rates.

Making sense of the story

• A jumbo mortgage is a home loan with an amount that exceeds conforming loan limits imposed by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy mortgages from lenders. The conforming loan limit is $417,000 in most parts of the United States, but is $625,500 in the highest-cost areas, which includes California.

• During the mortgage crisis, the vast majority of jumbos were adjustable-rate mortgages and hybrid adjustable-rate mortgages, which started at low fixed rates and switched to adjustable interest rates at the end of a set time period – typically of five, seven, or 10 years.

• With the renewal of the secondary market for jumbo mortgages, more lenders today are willing to offer fixed-rates. Packaging the loans into mortgage-backed securities that are sold to investors can lessen the risk to lenders.

• While interest rates for jumbo mortgages are significantly lower than a year ago, hybrid ARMs remain attractive to borrowers with other financial priorities.

• The general wisdom when deciding between an ARM and a fixed jumbo is the same as with any mortgage. Borrowers should consider the length of time they plan to live in the house. If the length of time is near or less than the length of the ARM, then borrowers will save money with the ARM.

• Still, borrowers should keep in mind that some lenders will push hybrid ARMs because the lender stands to reap a higher return on investment. Additionally, lower ARM interest rates and monthly payments can free up cash to purchase stocks and other assets.