Sellers Information

Are there standard ways to determine how much a home is worth?

Yes. A comparative market analysis and an appraisal are the two most common and reliable ways to determine a home's value.


Your real estate agent can provide a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Reviewing comparable homes that have sold within the past year along with the listing, or asking, price on current homes for sale should prevent you from overpaying.


A certified appraiser can provide an appraisal of a home. After visiting the home to check such things as the number of rooms, improvements, size and square footage, construction quality, and the condition of the neighborhood, the appraiser then reviews recent comparable sales to determine the estimated value of the home.


Lenders normally require an appraisal – which runs between $200 to $300 – before they will approve a mortgage loan. This protects the lender by ensuring the home is worth the money you want to borrow.


You also can check recent sales in public records, through private firms, and on the Internet to help you determine a home’s potential worth.

 

Are agents responsible for disclosing material facts?

They can certainly be held accountable, particularly if they had prior knowledge of a material fact or should have known about it.


For example, if the seller has to use pans to collect water after a heavy rain, it is the agent’s responsibility to question the seller about the integrity of the roof, and then relay this information to potential buyers. However, if the seller deliberately hides a defect from the agent for which the agent had no prior knowledge, then the agent is not accountable.


Experts say agents are not home inspectors, but they are expected to use their best judgment when something appears suspicious.

 

How does the seller determine what rate to provide?

The interest rate on a purchase money note is negotiable, as are the other terms in a seller-financed transaction. To get an idea about what to charge, sellers can check with a lender or mortgage broker to determine current rates on mortgage loans, including second mortgages.


Because sellers, unlike conventional lenders, do not charge loan fees or points, seller-financed costs are generally less than those associated with conventional home loans.


Interest rates are generally influenced by current Treasury bill and certificate of deposit rates.


Understandably, most sellers are not open to making a loan for a lower return than could be invested at a more profitable rate of return elsewhere. So the interest rates they charge may be higher than those on conventional loans, and the length of the loan shorter, anywhere from five to 15 years.

 

Can a home be sold for less than its mortgage?

Sometimes. But it is a complicated process and a lot will depend on the lender. This process is called a “short sale,” which occurs when a lender agrees to write off the portion of a mortgage that's higher than the value of a home. But, usually, a buyer must be willing to purchase the property first.


A short sale may be more complicated if the loan has been sold in the secondary market.


Then the lender will need permission from Freddie Mac or Fannie Mae, the two major secondary-market players.


If the loan was a low down payment mortgage with private mortgage insurance, the lender also will need to involve the mortgage insurance company that insured the low down payment loan.


The short sale can keep the homeowner from landing in bankruptcy or foreclosure. But it is not an easy procedure to approve, and it involves as much, if not more, paperwork than an original mortgage application.


Instead of proving your credit worthiness and financial stability, you must prove you are broke. And any remaining difference between your home's value and the balance on your mortgage is considered a forgiveness of debt, which usually means it is taxable income.


How do I select a home inspector?

Begin by only hiring one who is qualified and experienced, someone who belongs to an industry trade group, such as the American Society of Home Inspectors (ASHI). This organization has developed formal inspection guidelines and a professional code of ethics for its members. Also, membership in ASHI is not automatic; members must have demonstrated field experience and technical knowledge about structures and their various systems.

 

How long do bankruptcies and foreclosure stay on a credit report?

They can remain on your credit record for seven to 10 years.


However, a borrower who has worked hard to reestablish good credit may be shown some leniency by the lender. And the circumstances surrounding the bankruptcy may also influence a lender's decision. For example, if you went bankrupt because you were laid off from your job, the lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, it is unlikely the lender will readily give you a break.

 

Are there tips for selling a vacant home?

Yes. Once furniture is removed from the home, you will notice all kinds of imperfections you never paid attention to before – rips in the carpet, holes in the walls, and dinginess. In an empty house, everything stands out. What you see is what potential buyers will also see. So you may need to paint, tear up old carpet, and replace the kitchen floor.


To get rid of the “empty house” feeling, leave a few pieces of furniture behind – simple things like a lamp, chairs, and a table will do.


Pay special attention to maintenance. Someone will need to dust and vacuum, leaves will need to be raked, and the grass cut.


In the winter, consider having the heating system shut down and drained to save money. But keep the electricity running because lights will be needed to show the house.


Watch out for that musty smell, particularly during the summer months, that settles in from having the windows sealed and locked. And beware of pests such as mice, squirrels, ants and bats.


Do I need an attorney to sell a home?

Although most sellers can handle routine real estate purchase contracts, some experts say it is a good idea to be represented by an attorney, particularly if you are selling on your own. You should choose one with expertise in real estate transactions. Before hiring someone discuss all the details of the transaction, including all legal costs you will incur.


A good attorney will assist you in completing the deal swiftly and with confidence.

 

How does a lease option work?

A landlord agrees to give a renter an exclusive option to purchase the property. The option price is usually determined at the outset, but not always, and the agreement states when the purchase should take place – whether, say, six months, or a year or two down the road. A portion of the rent is used to make the future down payment. Most lenders will accept the down payment if the rental payments exceed the market rent and a valid lease-purchase agreement is in effect.


Before you opt to do a lease option, find out as much as possible about how they work. Talk to real estate agents, read published materials, and, in the end, have an attorney review any paperwork before you sign on the dotted line.


What is a lease option?

It is an agreement between a renter and a landlord in which the renter signs a lease with an option to purchase the property. The option only binds the seller; the tenant has a choice to make a purchase or not.


Lease options are common among buyers who would like to own a home but do not have enough money for the down payment and closing costs. A lease option may also be attractive to tenants who are working to improve bad credit before approaching a lender for a home loan.

 

Any advice on negotiating?

Be patient, know your home’s worth, adopt a positive attitude, and do not let emotions – anger, pride, greed, or prejudice – get in the way of negotiating the best deal.


Your home obviously means a lot to you, but you have already made the decision to move on, so begin to think of your home as “the house” or “the condo,” instead of “my home.”


When reasonable offers come along, take them seriously. You can always counter any offer made by the buyer that comes near your asking price. Do not spoil a good deal over a few hundred dollars.


Can the seller also include contingencies in a contract?

Yes. For example, if you decide to sell your existing home first before buying another one, you can make the sale of your home contingent on finding a replacement home.


Some sellers opt for this contingency to avoid a double move, such as moving to a hotel or rental until a new home is found and made available.


However, there is one problem with this type of contingency: it can inconvenience the buyer, particularly if his own home is in escrow. He may not be willing to wait for you to move.


This strategy has a better chance of working when the market is relatively strong, your home is a rare find, the price and terms of the transaction are very favorable for the buyer, or the buyer is in no hurry to move.

 

Are home selling costs deductible?

If you sell your home and realize a taxable gain even after the exclusion, you can reduce your gain with selling costs.


Your gain is defined as your home’s selling price, minus deductible closing costs, minus your basis. The basis is the original purchase price of the home, plus improvements, less any depreciation.


Real estate broker’s commissions, title insurance, legal fees, administrative costs, and inspection fees are all considered to be selling costs.


Are seller-paid points deductible?

For the buyer, yes, but not the seller – even though the seller pays them. Since January 1, 1991, homebuyers have been able to deduct points paid by the seller whereas, previously, they could only deduct the actual points they paid on the home loans themselves.

 

Do I really need an agent?

Most home sellers hire real estate agents to list and sell their homes. Most of those who do not are known as For Sale By Owners, or FSBOs. They market and sell their homes themselves.


However, a small number of people sell without marketing their homes. They include homeowners who transfer property to family members or landlords who directly offer tenants the first right to purchase property before they place it for sale on the market.


In the end, most FSBOs eventually hire an agent because the agent will handle all the details of a successful home sale – including the contract, forms, and disclosure statements – and expose the home to the widest range of prospective buyers through the local Multiple Listing Service (MLS).


How do I find the right agent for me?

To begin with, think local. Select someone who is very familiar with your neighborhood and the properties for sale in it. Then, if you are selling, say, a condominium, choose an agent with expertise selling apartments to potential homeowners.


Because you will want the widest possible exposure for your home, you also will want a real estate firm that works with other agencies to get your property sold. The Multiple Listing Service (MLS) used by REALTORS® , licensed members of the NATIONAL ASSOCIATION OF REALTORS®, is still the most common and effective form of cooperation used today. Beyond these parameters, select an agent who is competent, efficient, and ethical.


Perhaps the agent who first sold you your home would be a perfect candidate. If not, ask family, friends, and neighbors for recommendations, or choose a firm headed by an individual who is known in your community.

 

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