How to Handle a Home Seller’s Counteroffer

On April 6, 2014   /   Real Estate News  
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counter offer

By: Michele Lerner at Realtor.com

When you have found a home you want to buy and submitted a purchase offer to the sellers or the sellers’ agent, the sellers have the right to accept it or make a counteroffer.

The likelihood of your receiving a counteroffer depends on several factors, including whether your local market is skewed in favor of buyers or sellers, how long the home has been on the market, how eager the sellers are to move, and whether your offer comes close to the sellers’ expectations.

Typically, a counteroffer will include a higher price and/or a larger earnest money deposit, a different closing date, a change in the contingencies or the timing of the contingencies, or an exclusion of specific fees. You can accept it, reject it, or make a counteroffer in return.

A counteroffer will always include an expiration date. If you don’t respond by the seller’s expiration date, the offer is void and the seller can accept an offer from someone else.

What to Do With a Counteroffer

Your decision about how to handle a counteroffer will depend, in part, on how much you want this particular house.

If you’re fine with the sellers’ conditions in their counteroffer, you can simply accept the offer by signing it.

If you don’t like the counteroffer, you and your REALTOR® should discuss the specifics of the offer and see if there are parts of it that you can accept. You can make a counteroffer to the sellers with a new price or a different set of contingency dates or a larger earnest money deposit—anything that’s acceptable to you and that you think could sway the homeowners to sell their property to you.

Keep in mind that you need to stay within the confines of your pre-approved mortgage and that the house must appraise so that its value is equal to or larger than the sale price.

Once you make a counteroffer to the sellers’ counteroffer, you will be obligated to go through with the deal if the sellers accept it. So, make sure you are comfortable with your offer.

The sellers may not respond to your offer. If they don’t and you still want the house, you can make another counteroffer within a week or so to see if you can nudge them into negotiating.

Your best resource during this stage of buying a home is your REALTOR®. Ask your REALTOR® to talk to the listing agent and find out what is most important to the sellers—such as, the move-out date, the price, or perhaps avoiding having to make repairs. The more you know about the sellers’ motivations, the easier it is to tailor your offer so that it’s acceptable to them.

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How to Handle Homebuyer’s Repair Requests

On March 29, 2014   /   Real Estate News, Tips for Selling your House  
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homebuyers repairs

How to Handle Homebuyer’s Repair Requests

By: Michele Lerner at Realtor.com

If you are selling your home and have gotten an offer, you may concerned about the prospective buyers asking you to make costly repairs that potentially could cut into your profit.

Repair requests can be negotiated under most circumstances, but it’s important to recognize that your ability to negotiate depends on the contract proposed by your buyers. You and your listing agent need to carefully read and understand the implications of that contract.

Home Sale Contract Options

Standard real estate contracts vary by location, but all of them are completely negotiable.

As a seller, you should never sign a contract until you fully understand its obligations, particularly where it concerns your responsibility for repairs. The best contract for a seller would be for the buyer to agree to purchase your home “as is” or to request an “information only” home inspection, thus absolving you of any need to pay for any repairs.

In most cases, though, your contract will include a clause that says the purchase is contingent upon a home inspection. Some contracts will expressly state that the buyers cannot request any cosmetic repairs to be made and can only ask for fixes to structural defects, building code violations or safety issues. State laws may also impact your liability as a seller for any issues uncovered during an inspection, so it’s important that your REALTOR® understands these regulations. If you are uncertain about the contract, you can also consult a real estate attorney.

Market Conditions

While buyers are always advised to have a home inspection so they know what they are buying, when there are a limited number of homes for sale and buyers need to compete for homes, they are more likely to waive their right to ask a seller to make repairs. In a buyers’ market, though, sellers may find that buyers are more aggressive in asking for work to be done on the home.

Repair Negotiations

Your ability to negotiate depends on the way your contract has been written. In most cases you don’t have to agree to make cosmetic repairs. If a home inspection finds other problems, though, you are typically better off making repairs rather than having the buyers walk away from the transaction. For one thing, the next home inspection is likely to find the same problems so you may not be able to sell your home without fixing the issue.

Most contracts stipulate that the home inspector will provide a free copy of the report to the sellers as well as to the buyers. If you receive a copy of the report and it describes defects in your home, you’ll need to disclose those defects to the next prospective buyers.

Before you jump into negotiating requested repairs with the buyers and their agent, you should discuss the home inspection report with your REALTOR®. You can get bids from several contractors to find out how much a repair will cost and then decide what to offer the buyers.

Some buyers prefer to request a credit at the closing to pay for repairs that they will handle themselves after the settlement, rather than have the sellers make the repairs beforehand. Another option to consider is to offer to pay for a home warranty for the buyers that will cover future issues with the home’s systems and appliances. However, a warranty only covers features that are working, so if you have a broken water heater, you will probably have to pay to have it fixed before your transaction can be completed.

Whether you get a minor or major repair request, rely on the professional advice from your REALTOR® or real estate attorney to help you handle the issue.

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7 Tips to Stage Your House for Selling

On March 23, 2014   /   Tips for Selling your House, Uncategorized  
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7 tipse for selling your home

7 Tips to Stage Your House for Selling

By: HouseLogic

The first step to getting buyers to make an offer on your home is to impress them with its appearance so they begin to envision themselves living there. Here are seven tips for making your home look bigger, brighter, and more desirable.

Time allotted: 2-3 weekends

 1. Start with a clean slate.

Before you can worry about where to place furniture and which wall hanging should go where, each room in your home must be spotless. Do a thorough cleaning right down to the nitpicky details like wiping down light switch covers. Deep clean and deodorize carpets and window coverings.

2. Stow away your clutter.

It’s harder for buyers to picture themselves in your home when they’re looking at your family photos, collectibles, and knickknacks. Pack up all your personal decorations. However, don’t make spaces like mantles and coffee and end tables barren. Leave three items of varying heights on each surface, suggests Barb Schwarz of Staged Homes in Concord, Pa. For example, place a lamp, a small plant, and a book on an end table.

3. Scale back on your furniture.

When a room is packed with furniture, it looks smaller, which will make buyers think your home is less valuable than it is. Make sure buyers appreciate the size of each room by removing one or two pieces of furniture. If you have an eat-in dining area, using a small table and chair set makes the area seem bigger.

4. Rethink your furniture placement.

Highlight the flow of your rooms by arranging the furniture to guide buyers from one room to another. In each room, create a focal point on the farthest wall from the doorway and arrange the other pieces of furniture in a triangle around the focal point, advises Schwarz. In the bedroom, the bed should be the focal point. In the living room, it may be the fireplace, and your couch and sofa can form the triangle in front of it.

5. Add color to brighten your rooms.

Brush on a fresh coat of warm, neutral-color paint in each room. Ask your real estate agent for help choosing the right shade. Then accessorize. Adding a vibrant afghan, throw, or accent pillows for the couch will jazz up a muted living room, as will a healthy plant or a bright vase on your mantle. High-wattage bulbs in your light fixtures will also brighten up rooms and basements.

6. Set the scene.

Lay logs in the fireplace, and set your dining room table with dishes and a centerpiece of fresh fruit or flowers. Create other vignettes throughout the home — such as a chess game in progress — to help buyers envision living there. Replace heavy curtains with sheer ones that let in more light.

Make your bathrooms feel luxurious by adding a new shower curtain, towels, and fancy guest soaps (after you put all your personal toiletry items are out of sight). Judiciously add subtle potpourri, scented candles, or boil water with a bit of vanilla mixed in. If you have pets, clean bedding frequently and spray an odor remover before each showing.

7. Make the entrance grand.

Mow your lawn and trim your hedges, and turn on the sprinklers for 30 minutes before showings to make your lawn sparkle. If flowers or plants don’t surround your home’s entrance, add a pot of bright flowers. Top it all off by buying a new doormat and adding a seasonal wreath to your front door.

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Student Loans Can Affect a Mortgage Approval

On March 20, 2014   /   Mortgage, Real Estate News  
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student loans

Student Loans Can Affect a Mortgage Approval

By: Michele Lerner at Realtor.com

Student loans are not necessarily an obstacle to homeownership, but your payments will be taken into consideration when you apply for a mortgage.

The decision of a lender to offer you financing when you apply for a mortgage is based on a variety of factors that are used to evaluate your likelihood to repay the loan. While your credit score, income, assets and job history are all elements of your credit profile, lenders must also check that your debt-to-income ratio falls within their loan programs’ guidelines.

Student Loan Repayment

If you have student loans and want to buy a home, you will need to be vigilant about making your loan payments on time. A delinquency on a student loan will not only damage your credit score, it could also stop you from qualifying for a home loan. This is particularly true if you have a government-backed student loan and apply for a loan from the Federal Housing Administration, Veterans Affairs, or the U.S. Department of Agriculture Rural Development, because your lender will check the federal Credit Alert Verification Reporting System database to make sure you are not in default on any government obligations.

If you can consolidate your student loans or refinance them into a longer repayment term, you may be able to reduce the size of your monthly payments, which will make it easier to qualify for a mortgage. Better yet, pay off your student loan as quickly as possible by reducing other expenses and paying more than the minimum payment.

Mortgage Qualifications and Student Loans

Many young people lack a long credit history, so on-time student loan payments can actually add to a positive credit report. On the other hand, student loan payments are part of the debt-to-income ratio, which compares all recurring minimum monthly payments to your gross income. Most lenders require a maximum debt-to-income ratio of 43%, although FHA lenders are sometimes a little more flexible if you have compensating factors such as a high credit score, a solid job history or additional assets in the bank. For example, if your monthly income is $4,000 and you have a monthly student loan payment of $400, your other monthly bills, including a car payment, credit card payment and mortgage payment including principal, interest, property taxes, homeowners insurance and a condo or homeowners association fee must be less than $1,320 to stay within the 43% debt-to-income ratio.

If your ratio is too high, you will either have to reduce your debt or increase your income or, ideally, do both. It may be possible to pay off your credit card debt or your car loan or negotiate with your student loan provider for a lower monthly payment. Remember, though, that if you reduce your loan payment, you will be paying more in interest over the life of the loan.

Other options to consider include bringing in a co-signer on your home loan or finding a way to make a bigger down payment to reduce the amount of money you need to borrow to finance your home.

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How a Short Sale Can Impact Your Credit Score

On March 9, 2014   /   Home Finance  
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short sale

How a Short Sale Can Impact Your Credit Score

While the United States housing market improved in 2013, at the end of the year 19% of homeowners with a mortgage owed more on their mortgage than the value of their home.

For homeowners with no plans to move and who can comfortably afford their mortgage payments, being underwater certainly can be frustrating. However, those homeowners have the option of waiting until the combination of rising home values and their continued loan repayment brings them back “above water.”

Homeowners who are struggling financially and can’t make their payments or who must relocate for employment face a bigger issue if they’re underwater on their home loan because they cannot sell their home for a profit and move. Some of these homeowners can qualify for a government refinance program or a loan modification from their lender, but others face a choice between letting the mortgage lender take their home in a foreclosure and negotiating a short sale.

A short sale simply refers to the situation when a borrower asks the lender to accept a loan repayment for less than the full amount. The amount offered depends on the sales price negotiated between the lender, the seller and a buyer. You’ll have to provide proof of a hardship such as a change in your finances that makes the payment unaffordable or mandatory job relocation.

If you’re able to get your lender to agree to a short sale, you may or may not be responsible in the future for the gap between the balance you owe and the amount actually repaid. This depends on the state where you live and your lender’s decision about seeking recourse.

Short Sales and Your Credit

Many homeowners prefer a short sale to a foreclosure because they believe there’s less of a stigma attached to a short sale and that it won’t necessarily damage their credit as much. However, both a foreclosure and a short sale can lower your credit score and will stay on your credit report for seven years. Over time, though, you can improve your credit score through credit rebuilding techniques such as paying all your bills on time, reducing your debt, and, if necessary getting a secured credit card and making regular payments.

The impact of a short sale on your credit depends on several factors, including the way your lender reports the short sale to the credit bureaus. Most lenders will use the term “settled” for a short sale, which indicates that less than the full debt was repaid. If you can negotiate with your lender to use the word “paid” your credit won’t be as badly damaged, but lenders rarely agree to that.

Your credit score could drop by anywhere from 85 to 200 points depending on whether you have been paying your mortgage on time and your previous credit score. If, for example, you had good credit of 700 or above, your score might drop even more than someone who already had a low credit score of 620 or so because of a short sale is an indication of potential future defaults on other credit, especially if the borrower with low score had been making on-time mortgage payments. If you had months of non-payment, partial payments or late payments on your mortgage, your credit score will also be lower because of the combination of the short sale and a bad mortgage history.

In spite of the impact on your credit, a short sale may be the best option if you can’t stay in your home because you can move on from your current situation and begin to rebuild your credit for the future.

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