If Your Home Is Too Smart, Buyers Might Think Twice

On June 1, 2014   /   Real Estate News, Tips for Selling your House  
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smart home

By: Anne Miller for Realtor.com

While the market for Internet-connected appliances and systems for the home continues to grow steadily, the value that such technology contributes to a home sale remains to be seen.

The industry for so-called smart homes “will reach $71 billion by 2018,” driven mostly by entertainment systems, but smart appliances will pay a big role too, according to a Juniper Research report published in February.

A smart home typically has computers, televisions, lighting, heating-ventilation-air conditioning (HVAC), and home security systems, among other elements, linked to a centrally controlled network.

The industry has grown so fast that it’s hard to quantify how much this kind of technology plays a part in the market. Homebuyers who find such technology important are more likely to have enough cash to install their own devices.

Is It Easy to Use?

The relative newness of this wired-home world means appraisers don’t have much to go on when determining connectivity’s added value.

“I think you will enjoy a difference in marketing times. If you are building, it could equate to an increase in profit, but we don’t have enough historical data to do a comparable analysis,” said Randy Roberston, an investigator with the Alabama Real Estate Appraisers Board in Montgomery, AL. He spoke several years ago, but his comments hold true today.

Real estate agents agree. They say connectivity can add to the desirability of a home for some prospective buyers, which can make it a good marketing tool. But as an investment it remains hard to quantify.

Real estate agents caution buyers to consider connectivity’s practical value, and not actual cost. In other words, what will you really use, and do you care about a fridge that tweets?

“All these items add value,” said Richard Calhoun, a real estate investor and broker-owner of Creekside Realty in San Jose, CA. “People should order these features if they are important to them, and they shouldn’t order them if they are not going to use them.”

“We need to make it simple,” said Paul Carter, vice president of Sears, Roebuck and Co. “It has to be like the phone. These connected homes have to work like that, otherwise they become somebody’s wretched nightmare.”

Broderick Perkins contributed to this article.

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How Much Money Will You Walk Away With From Your Home Sale?

On May 26, 2014   /   Real Estate News  
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home seller fees

By: Angela Colley for Realtor.com

As the seller of your home, you are bound to face a parade of taxes, commissions and other fees that could cost 4% to 7% of your sale price.

So how will you know how much money you will walk away with? Your REALTOR® will give you a worksheet itemizing all of the charges you are responsible for. The amounts vary by state, but most sellers will see several, if not all, of these common fees:

Commissions

Real estate agents work on commission. When you sell your home you will pay a commission—typically 6%—to your agent’s brokerage and the buyer’s agent’s brokerage. The agents are then paid from their brokerages.

Managing Your Mortgage

If you have a mortgage when you sell your home, you will face a few charges such as:

  • Mortgage balance payoff: The cost of repaying your home loan, second mortgage and any home equity line of credit is deducted from the sale price of your home.
  • Loan payoff fee: Some lenders charge an administrative fee when you pay off your mortgage or home equity line of credit.
  • Prepayment penalty: If you have a prepayment penalty clause in your mortgage, you will have to pay a fee to pay off your loan when you sell your home.

Working With the Buyer

Depending on the real estate market in your area and your buyer, you may have to negotiate and cover certain costs for the buyer, such as:

  • Closing cost concession: After you and the buyer agree on the final sale price, it isn’t uncommon for the buyer to ask for a closing cost concession to cover their closing costs. This fee—typically 3%—is added to the price of the house and then returned to the buyer after closing.
  • Repairs: Depending on the condition of the house, the buyer or the lender may ask you to cover the cost of repairs before closing.
  • Home warranty: Sometimes a seller will agree to foot the bill for a home warranty that offers a protection plan for the buyer’s first year in the home.
  • Termite letter: A document stating your home is termite-free may be required in some areas.

Fees Paid at Closing

Once you have struck a deal with a buyer, you will have other fees to pay before you can finalize the sale. For example:

  • Lien release document: If you owed money to a contractor, for court judgments, or for property taxes, a lien may have been placed on your property and you must pay that money before the sale can close.
  • Recording fees: If you owe money on the property, you will need to pay this fee to show your debts have been fully paid.
  • Notary fees: A fee charged by a notary to verify your identity and to make sure the documents are executed properly.
  • Escrow fees: The escrow company acts as an intermediary between you and the buyer, ensuring the money is handled properly. Escrow agents receive money from the lender, pay off your mortgage and closing costs, collect deposits and give the proceeds to the lender. You may be able to split these costs with the buyer.
  • Title search fees: Title companies search public records and give you a title insurance commitment. This document proves you have a legal right to sell your home.

Updated from an early version by Diana Lundin.

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Full Disclosure: What You Need To Tell Buyers About Your Home

On May 17, 2014   /   Real Estate News, Tips for Selling your House  
Tags:
sell house

By: Michele Lerner for Realtor.com

Whether you have owned your home for a few years or a few decades, you know its quirks, best features and flaws. When you morph from homeowner to home seller you need to be aware that your experience with your home is something you may have to share with potential buyers.

Most buyers opt to have a home inspection before they finalize their purchase, but you as the seller must also follow state and federal regulations regarding disclosure of known facts about your property’s condition.

As a seller you may feel uncomfortable revealing problems in your home that could discourage potential buyers, but it’s best to be open about issues before your home goes under contract. A home inspector is likely to find problems and the buyers will be less favorably inclined to negotiate with you if they feel you have withheld information. If a flaw is found after the sale is complete and the buyers have reason to believe you were aware of the problem, you could face a lawsuit.

Federal disclosure Rules

The majority of disclosure issues are handled by state regulations, but federal laws apply to one area: lead paint. If your home was built prior to 1978, it may contain lead paint. Your home must be checked for lead paint and a disclosure form completed unless your home was built after 1978.

State Disclosure Rules

State regulations vary and often change, so rely on your REALTOR® to be up-to-date on disclosure requirements for your area. Some states allow sellers to complete a disclosure form listing information about their home, or a disclaimer form that says the sellers don’t have any information about issues in the property.

In some areas you need to disclose what you know about natural hazards such as whether your home is in a flood zone or in an area known for earthquakes; other required disclosures can involve pollution issues, prospective zoning changes or the fact that a home is located within a historic district.

Another issue that sometimes causes problems is when a home has been a crime scene or if someone died on the property. Sellers may not want to disclose this for fear of stigmatizing the property, but if the buyers find out later they can sue if they believe the property’s history will hurt its resale value.

Sellers should be aware that some issues are particularly important, such as previous problems with mold; the foundation; termites; and electrical, plumbing or roof issues. If you have made repairs to your property, it’s usually best to disclose the information when you list your home for sale, even if local regulations don’t require you to do so.

Impact of Disclosure

Most sellers are aware of the benefit of letting prospective buyers know about positive features of their home such as new appliances or a new roof, but there can also be a benefit in disclosing defects in your home. Any issue that you have addressed during the years in your home can provide proof that you’ve kept up with maintenance. You may want to provide a binder with receipts and insurance claim information to show buyers what work has been done on your home.

If there’s an ongoing problem that buyers will need to handle, it’s better for them to hear about it from you so you can negotiate about when repairs must be made and who will pay for them. In fact, if you have a particular concern about your home, you may want to hire a home inspector yourself to get to the details before you put your property on the market.

Openness about your home’s condition is the best way to avoid lawsuits, even if it’s not required in your state.

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How to Fulfill Your Fantasy With a Custom Home

On May 12, 2014   /   Real Estate News  
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custom home

By: Michele Lerner for Realtor.com

If you dreamed as a child of someday owning a home with your own dance studio and ballet barre, or a personal game room with a Skee-Ball machine alongside an indoor putting green, then a custom home may be your best option to making that dream come true.

While buying a home fulfills a big part of the American Dream, building a home to your specifications elevates the experience. Before you begin to make decisions about your future home, you will need to spend significant time learning about the custom-home building process.

Organize Your Financing

Building a custom home isn’t necessarily more expensive than buying a newly built or existing home since it’s possible to build a small custom home, but sourcing all materials on an individual basis rather than in bulk can raise the price above production homes. The important thing to understand is that your decisions about the land you buy, and the design and quality of construction you choose will impact the final price.

Financing a custom home requires a construction loan, something not all lenders offer. If you don’t already own land, you will have to finance the land purchase and then the construction. Often you will have two closings, each incurring settlement fees.

Since building a custom home is considered risky by lenders, you typically need excellent credit and a down payment of at least 20% to 25% to qualify for a construction loan. In addition, lenders typically require more cash reserves for borrowers who are building a custom home to ensure that they have funds in place for any glitches that extend the construction period.

Make sure you check into appropriate insurance, too, during the construction period.

Interview Architects and Builders

If you already have a sense of the type of home you want to build, you can begin searching for architects in your area who design similar residences. Some custom-home buyers opt to find a builder first who can then recommend an architect, while others choose to hire an architect first. There are also design/build firms that handle the entire project. No matter which route you choose it’s important to check references, interview potential partners and visit examples of their work to see the quality before you finalize your choice.

Start With Land and a Plan

If you already own land, you should meet with potential builders and architects at the site so you can discuss potential issues and plans. If you don’t own land, some builders can help you find a site or they can direct you to a REALTOR® who can help. It’s essential that your home design and land plan match: You wouldn’t want to design a residence and then find that the site you’ve purchased can’t accommodate it.

Your builder should walk the property with you and determine how much preconstruction work is required, such as the placement of utilities, a septic system and a driveway.

Consider the Neighborhood

Most people who build a custom home believe they will never sell it, but eventually you may want to move to a different area or even build another custom home. It’s always wise to consider resale value when building a home. In particular, you want to match the price range and general size of your custom home to others in the neighborhood so that your house doesn’t stand out as oversized or overpriced.

Avoid Delays and Cost Overruns

Planning your home from the foundation to the roof and every single item in between can save you time and money when you are building a custom home. Your decisions about every detail in your home should be made before construction begins so you can reduce the possibility that materials won’t be available when needed, or that you will need to rip out things already built to accommodate a change order.

Good planning and hiring a good team can make the custom-home experience as easy as dreaming.

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Can I Take Over a Seller’s Loan?

On May 3, 2014   /   Home Finance, Mortgage, Real Estate News  
Tags: ,
assuming mortgage

By: Angela Colley for Realtor.com

Traditionally, when you buy a home, you apply for a mortgage through a lender, find a home for sale, and use a combination of your down payment and the loan amount to purchase the home. It is a tried and true method, but what if you want to skip the buying and selling process and simply take over another homeowner’s loan?

With certain loans you may be able to do that, but there is a lot to consider before assuming a loan.

The Basics

“In days long past, some mortgages were fully assumable with no qualifying required by the new borrowers at all,” said Ron Bork, senior loan officer for EverBank. Today, things are different. “Conventional mortgages are typically not assumable,” he said.

Some government-backed loans, such as Federal Housing Authority loans, are assumable, but you will have to meet the lender’s requirements and you may have to “come up with the difference between the existing balance and the purchase price,” Bork said.

What to Consider

You should start by comparing the loan amount to the value of the home.

“The balance of the loan needs to match up with the amount available for the remainder of the purchase price,” Bork said. Otherwise, you will have to pay to cover the difference.

You should also consider the current interest rates. If the interest rate on the assumed loan is close to or lower than current interest rates, it may make sense to assume it. If the interest rate is much higher, you may end up paying more in the long run.

Finally, make sure you completely understand the terms of the loan. Is the interest rate adjustable? Are there any surprise fees or balloon payments? Don’t take on a loan unless you know the terms.

Meeting the Lender’s Qualifications

When you take over a loan, “Lenders will undoubtedly use the same underwriting guidelines that they normally do,” Bork said. Meaning, you will have to be able to qualify for the loan before you can take it over.

The lender will look at your credit history and scores. While different lenders have different requirements for credit, having good scores with no delinquent accounts will give you the highest chance of approval.

Lenders will also look at your income and debt-to-income ratio. If you are carrying too many other debts, or if your income isn’t high enough to safely cover the mortgage payments every month, you may not be approved to take over the loan.

Exceptions

If you co-own a property with someone else, you may not need to go through the process of assuming the loan. For example, if you and your spouse get a divorce, you can continue to live in the home and make payments as long as your name is on the loan and title before the divorce.

If you co-own a home with a spouse or family member and that person passes away, you may also be able to simply keep the loan and home the way they are. However, ask an attorney or lender to look over the documents and facts with you to make sure.

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