Tag Archives: real estate agent

Understanding FSBO

Posted on by

US News & World Report quoted me in 3 Things to Know About Selling a House on Your Own. It opens,

The internet is full of sites that help homeowners sell property on their own, promising thousands in savings by avoiding commissions, but the National Association of Realtors says commission savings on a for-sale-by-owner transaction, or FSBO, are more than offset by lower sales prices.

The truth lies somewhere in between, according to most objective analysts. So for most sellers, deciding whether to go FSBO is a tough call.

Ali Wenzke, a Chicago writer with a blog called the Art of Happy Moving, says do-it-yourself transactions have worked well for her.

“My husband and I have sold two houses FSBO and purchased one home without an agent,” she says. “Be objective. Work hard. Be flexible to do showings at any time.”

“Anyone can do it and the average home is shown five times or less,” says Sissy Lappin, co-founder of the FSBO website ListingDoor.com.“The notion that no buyers or sellers can understand or manage what happens in a transaction is simply absurd.”

One thing is sure: the average seller’s experience does not necessarily apply in any specific case. What matters is whether you can succeed with a FSBO, regardless of whether your neighbor has.

Adjust your expectations. Experts do agree that FSBO novices should be realistic. Even if you get top dollar and avoid the agent’s commission, the process can be a time-consuming headache. And even if you don’t have an agent of your own, you may have little choice but to pay one representing the buyer, cutting the savings in half.

“While listing on your own seems easy, you are in fact replacing a job which you usually employ a broker to do full time,” says New York-based real estate agent Dylan Hoffman, who is not a fan of FSBOs. “You will need to organize showings, tours, previews and open houses. Plus all the back-end work, like maintaining photos and descriptions on websites, checking for a clear title, etc. An owner would also take on the role of marketing, both digital and print.”

The internet has made the process much easier, with many sites now offering listings, advice and services like printing signs. For a fee, usually several hundred dollars, some services will get your home on the multiple listing service used by real estate agents and buyers, though Lappin says it’s good enough to list on a site like Zillow.com, which is free. The goal is to save the agent’s commission, typically about 6 percent of the sales price, or $18,000 for a $300,000 home.

“FSBO has grown up and sellers don’t have to settle for a red-and-white generic yard sign,” Lappin says.

She says the seller of a $400,000 home with $60,000 in equity would spend 40 percent of that equity if they paid a real estate agent 6 percent commission, or $24,000.

What kind of homes sell without an agent? The National Association of Realtors says about 10 percent of home sales are conducted without an agent, though some critics say the figure is higher. The association says the average FSBO sells for 13 percent less than the average agent-assisted sale. Again, critics like Lappin disagree, with many noting the association’s studies do not look at comparable homes and lump in mobile homes and other inexpensive properties, as well as intra-family deals that tend to have low sales prices. Association figures do show that FSBO is less common with high-priced homes.

FSBO advocates generally agree that doing it yourself is more difficult for the seller, and can take longer. Though you might catch a buyer’s eye right off the bat, the FSBO approach is relatively passive, as you won’t have an agent steering buyers your way. Obviously, the seller must be available to show the house, and that can require weekdays, not just Sunday afternoons.

“It takes a lot of people skills to sell your own home,” says law professor David Reiss, director of The Center for Urban Business Entrepreneurship at New York’s Brooklyn Law School. “Can you engage with potential buyers even as they are criticizing your house and the choices you made about it? Can you distinguish serious buyers from window shoppers? Can you negotiate without giving away the farm or playing too hard to get?”

Anti-discrimination laws limit what you can tell buyers about issues like the ethnicity of neighbors, or even the number of school-aged kids or seniors on the block. And you have to be willing to show to all comers.

Going it alone also means you won’t have an agent’s advice setting the home up to it up to look its best, though you could hire a professional stager.

Negotiating Real Estate Fees

Posted on by

office-negotiationPolicyGenius quoted me in 5 Mortgage Loan Fees and Rates You Should Always Negotiate. It opens,

When it comes to making major purchases or financial decisions, we always hear that mantra, “Everything is negotiable.” You can haggle with the salesman when shopping for a new car, or with the hiring manager at a new job over your starting salary. It’s even possible to negotiate your tuition rates as a college student.

But a lot of the costs associated with buying a house can be difficult to negotiate down, according to mortgage advisor and author Casey Fleming.

“Appraisal, underwriter and processor are chosen by the lender, and the variation in fees is quite small,” he says. “Escrow and title services are typically chosen by the real estate agent of the seller in most areas, so the buyer has little say in what those fees will be.”

There’s also not much way around paying private mortgage insurance — you’ll need no less than a 20% down payment to avoid it.

But, you don’t need to let the non-negotiable items prevent you from bargaining for a better deal on other house-hunting costs. Here are a few fees and costs worth negotiating:

Real estate broker’s fees and commissions

From the outset, consider negotiating your real estate broker’s fees, according to Prof. David Reiss of the Brooklyn Law School, who teaches real estate finance and community development. “If 6% is standard in your community, you can look for brokers who will sell your home for 5% or less,” he says. “Be careful how low to go though, because you want your broker to be motivated enough to sell your property.”

Reiss notes that to gain the most advantage in negotiating their fees, your broker’s listing agreement should outline all the services they’ll provide you regarding advertisements, showing, and the plan in place to buy or sell the property in question.

Mortgage Broker v. Loan Officer

Posted on by

photo by https://401kcalculator.org

MagnifyMoney.com quoted me in Mortgage Broker vs. Loan Officer: The Best Way to Shop for a Mortgage (must scroll down). It opens,

When you need to take out a loan to buy a home, you generally have two options. You can work with a lender’s loan officer or hire a mortgage broker. Loan officers and mortgage brokers are not the same thing, although the terms are often used interchangeably.

Loan officers work for a bank or a lender and will only be able to show you mortgage options from that financial institution. In contrast, mortgage brokers are individuals or firms that are licensed by a state to act as middlemen between you and multiple banks or mortgage lenders. Because brokers aren’t beholden to a particular lender, they can shop around and try to find you a loan with terms that best fit your circumstances.

Why should you consider working with a mortgage broker?

One of the biggest benefits to working with a mortgage broker is that they take over the job of shopping for a loan. You might be able to do this on your own, and in some cases, you could find a better loan than the broker, but it can be a time-consuming and complicated process.

A broker can help collect and organize the documents you need to apply for a mortgage, such as your proof of employment and income, tax returns, a list of your assets and debts, and credit reports and scores. The broker can then use the information to look for loans, compare rates and terms, and apply for mortgages on your behalf.

Casey Fleming, a mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage,” says one of the big benefits is that brokers are generally “on your side,” while a loan officer represents the lender’s interest. Brokers are also incentivized to find you a loan that meets your needs and see the deal through closing because they don’t get paid until you close on the home.

Additionally, brokers might have access to lenders that don’t work directly with consumers, meaning you wouldn’t be able to get a loan from the lender even if you tried. And in some cases, brokers can leverage their relationship with a lender to get it to waive fees you’d otherwise have to pay.

Are there risks involved with using a mortgage broker?

While working with a broker could be a good idea, there are potential drawbacks to consider. “Not all brokers are created equal,” says Fleming. “Many have only a few sources for loans, and may not be able to find the best pricing.” There are also some mortgage lenders that don’t work with brokers and will only offer loans directly to consumers (through one of the lender’s loan officers).

Using a mortgage broker can also be expensive. Although you may find the services are worth paying for, consider the costs of using a broker:

Mortgage broker fees

Mortgage brokers are often paid in one of two ways. You may be able to choose how you’d like to pay the broker, or opt for both payment methods.

Some mortgage brokers will charge you a commission based on the loan you take out, often about 1% of the loan. For example, that’s a $3,000 fee on a $300,000 mortgage loan. You’ll pay this fee as part of your closing costs when you close on the home.

Other brokers may offer you a fee-free mortgage. However, what likely happens in this case is that the mortgage broker arranges a loan with a higher interest rate, leaving room for the lender to give the broker a cut. This route could cost you more over the lifetime of the loan but might be the better option if you want to minimize costs now.

Where to find a good mortgage broker

“Word of mouth is very useful when it comes to finding a good [mortgage broker],” according to Professor David Reiss, a real estate law professor at the Brooklyn Law School in Brooklyn, N.Y. You could ask friends or family members who’ve recently bought a home if they used a mortgage broker, as well as your real estate agent if he or she can recommend a broker.

However, don’t settle for the first recommendation you receive. The Federal Trade Commission recommends interviewing several brokers and trying to find one who’ll be a good fit for your home search.

Ask about their experience with buyers like you in the area, the fees they charge, and how many lenders they work with. “You want to know whether the mortgage broker can find competitive mortgage products, is well organized so that loans close in a timely manner, and whether it keeps away from bait-and-switch tactics that can be so difficult to deal with when buying a home,” says Reiss.

Firing Your Real Estate Agent

Posted on by

photo by m01229

USA Today quoted me in How (And When) To Fire Your Real Estate Agent. It opens,

Breaking up is hard to do. Add a house and tens of thousands of dollars into the mix, and it can get downright ugly.

Unlike romantic entanglements, though, breaking up with your real estate agent as a seller if you’re not getting the service or the results promised doesn’t have to be dramatic. Here’s what you can do early on to minimize the damage — and how to handle the situation if, alas, you do come to irreconcilable differences.

When you first enlist an agent

Review your contract closely. Many real estate agents require their clients to sign an exclusive representation agreement, which is essentially an employment contract, says Brian Pendergraft, a real estate attorney in Greenbelt, Md. These contracts spell out how the client and real estate agent will each uphold their end of the deal, and they tend to be worded to protect the agent’s interests, says David Reiss, a law professor at Brooklyn Law School in Brooklyn, New York.

As a seller, you’ll want to ensure the contract covers your rights, too. This includes outlining exactly how your agent will market your home, and a plan to generate enough showings within a set timeframe so that you’ll have a legal leg to stand on for early termination, Reiss says.

Understand your options for termination from the get-go. There are a few ways to call it quits with your agent, but the win-win situation is a no-penalty termination in which neither party is penalized if the relationship ends prematurely, says Bruce Ailion, a Realtor and attorney in Atlanta. Include this detail in your contract.

If things go sour

Consider what constitutes a fireable offense. If you’re upset with your agent about sales strategy, lack of communication or poor service, those are issues that are unlikely to be resolved easily, Ailion says. Or perhaps you’re worried that your agent is in murky legal waters, such as refusing to show your home to people from certain protected groups or failing to share a property disclosure with buyers. Report these issues immediately to the agent’s broker of record, who is responsible for the real estate agents in a brokerage, Ailion says.

Put it in writing. If your agreement is in writing, you have to get out of it in writing even if there’s no specific expiration date, Pendergraft says. Write a letter or email to your agent requesting to part ways. If you get no response, hire an attorney to write a demand letter for you, Pendergraft says. This shows you mean business — at a fraction of the cost to take the issue to court.

Home Mis-Inspector

Posted on by

photo by Mark Moz

REFinBlog has been nominated for the second year in a row for The Expert Institute’s Best Legal Blog Competition in the Education Category.  Please vote here if you like what you read.

Realtor.com quoted me in Yikes! What If Your Home Inspector Missed Something Huge? It opens,

Your offer has been accepted, and there’s just one more obstacle between you and your new home: the inspection. It can be a stressful event for both buyers and sellers as they wait for the report, hoping no major issues will surface that could sideline the deal.

But what if you make it through that day, let out a big sigh of relief, seal the deal, and then a few weeks or months later find an issue in your new home—a bat infestation, a leaky roof, a CDC-level mold problem—that the home inspector didn’t catch? Just how much peace of mind does a home inspection really buy you?

Find out how you can protect yourself.

Start by finding the right home inspector

Sadly, there’s no insurance home buyers can take out to protect themselves from a faulty inspection. As such, the most important step home buyers can take to prevent that scenario is to select a reputable inspection company.

Make sure you choose a firm that has been in the residential inspection business for a while and has a strong reputation (real estate agents and lenders often have recommendations).

But most important, your home inspector should have adequate insurance.

Keith Balsiger, president of Balsiger Insurance in Las Vegas, says buyers should ask for a current certificate of insurance that shows the inspection company has both general liability insurance and professional liability insurance (also known as errors and omissions insurance). This is what would potentially cover you as a buyer if there was a major “miss” on the part of the inspection.

If you want to be extra safe, you can call the insurance agency of the inspection company to confirm the coverage on the certificate is still valid.

You also want to closely examine the terms of the liability insurance. David Reiss, professor of law at Brooklyn Law School, says some contracts will state that the company is liable only for the cost of the inspection, which won’t be much solace if you find yourself on the hook for repairs that could cost hundreds of thousands of dollars.

“Ideally, you would not want there to be any limit on the inspector’s liability in case he or she was negligent in doing the inspection,” says Reiss. At the very least, make sure the limit exceeds the cost of the inspection alone.

Why buyers should attend the home inspection

As an added safeguard, buyers should be physically present during the inspection. If an inspector balks at this idea, that’s a red flag. Make sure to find out what is covered by the inspection, and if there’s anything you want the inspector to scrutinize in particular (say, you know the boiler is old or the basement has water stains, suggesting flooding issues), state that upfront.

“It’s a buyer’s job to make the most of the home inspection,” says Bryant Dunivan Jr., a real estate and consumer protection attorney in Brandon, FL. Here are some things to watch for during the inspection:

  • The inspector is working off a checklist of items that was in the contract.
  • Major systems (air conditioning, heating, water, etc.) are tested.
  • The inspector actually enters attic and crawl spaces.
  • A report complete with pictures is provided.

What to look out for in a home inspection

Robert Pellegrini Jr., president of PK Boston, a real estate law firm based in Boston, says a typical red flag disclaimer on the inspection report is a statement that there was a problem with “access” to roofs, eaves, and areas behind locked or blocked doors or crawl spaces.

“That serves to absolve the inspector of any liability,” Pellegrini says.

Urge the home seller to remove all barriers that might prevent an inspector from doing a thorough job. Some home buyers even take the process into their own hands and hire drones or robots to view inaccessible areas.

Uh-oh! You’ve closed, but there’s a problem

No matter how many precautions you take, the nightmare scenario does happen: You move in and then discover a problem. A big one. Can you bring it up with the seller? After all, sellers are required to disclose any known issues about the home.

Well, here’s the rub: Proving the seller knew about something after the fact is nearly impossible, and the legal cost involved in trying to prove it is often too steep to make an attempt.

Which brings us back to the home inspector. If you encounter a problem, bring it up with your inspector. As long as you used one with decent liability insurance that covers more than just the cost of the inspection, odds are decent you’ll be compensated for any damages. Again, you’ll have to prove it. For example, if the inspector said the roof was in good condition, but there was a leak months later during a big storm, you would have to prove that nothing happened in the intervening time that damaged the roof.

“Bottom line: You would probably need pretty clear facts on your side to win,” Reiss says.

Questions Your Broker Might Not Answer

Posted on by

zipper-306737_1280

Realtor.com quoted me in 4 Questions Your Agent Might Not Answer—and Why. It reads, in part,

Want to know how old the roof is on a house, or whether it uses gas or electrical heat? Your trusty real estate agent can tell you pretty much anything you need to know about a home you’re hoping to buy (or at least find answers for you). Yet if you ask your agent certain questions, you might be puzzled to hear nothing but an awkward silence. Why?

It’s not that real estate agents don’t know the answer; they probably do. It’s just that they’re correctly staying on the right side of the Fair Housing Act, which prohibits housing discrimination based on race, religion, sex, or family/economic status.

So that silence is actually a good thing—it means that your agent is conscientiously steering clear of the tinderbox issues hidden within your innocent questions.

Here are the top ones that leave them feeling tongue-tied—plus where you can actually find the answers you seek.

Question No. 1: Is this a good place to raise a family?

This question is often “a lose/lose/lose for the Realtor®,” says David Reiss, a professor at Brooklyn Law School who specializes in real estate. If an agent admits a certain area is not all that family-friendly, “it could imply that families with kids aren’t welcome.” Or, on the flip side, “if the agent says that the neighborhood is a good place for kids, that could be interpreted as saying households without kids aren’t welcome, which is another form of discrimination.”

Housing professionals who try to either encourage or discourage home buyers based on the kid question can, and do, face consequences in court.

Bottom line: Rather than get burned, a cautious agent refrains from presuming where you and your brood will thrive. So if you want to know this info, you’ll have to do your own research  (more on how to do that below).

*     *     *

Question No. 4: How are the schools here?

Because the racial divide can also run deep in U.S. schools, “a Realtor has to be careful not to let their answer be construed as a coded message about race,” Reiss says. Rather than risk a potentially offensive miscommunication, Realtors may very well introduce you to one of many websites that rank schools—such as Great Schools and School Digger.

Another option: If you have your heart set on your child attending a certain school, download realtor.com’s mobile app, which allows you to search for homes for sale by school district.

Why Houses Don’t Sell

Posted on by

photo by BriYYZ

I was quoted on Trulia in 8 Reasons Your House Isn’t Selling. It opens,

It’s a seller’s market in many cities across the U.S. If your home is in one of those cities, say Charleston, SC, or Colorado Springs, CO, and isn’t getting offers, something could be wrong. The good news? Knowing there’s a problem is the first step toward resolving it. However, there could be many reasons your house isn’t selling. We’ve asked real estate professionals and agents from all over the country what those top reasons might be — and they’ve provided some sound advice on how to remedy each situation.

1. You’re overconfident

Being in a seller’s market might mean that your home will get snapped up for premium price, no matter its condition. But that isn’t always the best strategy to count on. “Sometimes homeowners and agents get overconfident in a seller’s market and get lazy about ‘Home Selling 101,’” says Sep Niakan, broker and owner of HB Roswell Realty in Miami, FL.

Solution: Be realistic from day one. Although you may love your house, brace yourself for it to potentially sit on the market for quite some time. And no matter the market, it’s still important to “position your home to sell well,” says Niakan. “What does that mean? Staging, staging, and more staging.

2. The house is priced too high

Classic supply and demand conditions come into play in a seller’s market: There’s high demand, yet low supply. Therefore, you can usually expect to get more money for your home. But that doesn’t mean the sky’s the limit when it comes to your listing price. “In a seller’s market, a seller may feel comfortable pushing the asking price a bit higher, and this can be a huge mistake,” says Chase Michels of Brush Hill Realtors in Downers Grove, IL. “Determining the best asking price for a home is one of the most important aspects of selling a home. If your home is listed at a price that is above market value, you will miss out on prospective buyers.”

Solution: Make sure that you and your agent are certain of the value of your home in your market and price it right. “Get an analysis of the local market with a professional agent, solid comparables, and specific market trend data,” says Jill Olivarez, a Miramar Beach, FL, real estate agent.

3. The home needs some TLC

It can be a bitter pill to swallow to pay for home improvements that you may not enjoy for long. But if you want to sell for full asking price, you might need to get your house in a condition that warrants it — and not base this number only on price per square foot. “Retail buyers understandably still want the most house for their money,” says Barbara Grassey, author of How to Sell Your House Fast in a Slow Market and founder of the West Florida Real Estate Investors Association.

Solution: “The seller should have amenities comparable to other properties for sale in that price range and should really upgrade certain amenities,” says Grassey. Some upgrade examples, she says, include a pull-down gooseneck faucet, an upgraded ceiling fan, a double-bar towel rack, or upgraded door handles. They sound simple, but a few small changes can make a big impact.

4. There’s a problem with the title

“Title” in this case doesn’t mean the cute name you might have given your place (“The Laurels,” “The Conners’ Corner Cottage,” etc.). Rather, it’s the document that shows ownership. “One reason a house won’t sell is because there is a problem with the title to the house that spooks buyers,” says David Reiss, law professor at Brooklyn Law School in Brooklyn, NY. Here are some examples he gives of title problems:

  • Conveyance without a recorded deed (can sometimes happen in transfers between family members).
  • A paid-off mortgage that is still showing up as a valid lien on the house.
  • A mechanic’s lien that was filed for work done on the house by a subcontractor.

Solution: “Some [title] problems just require a little time to resolve,” says Reiss. Contact the title company to find out what you need to do to prepare for selling — then do it.