A Brighter Note for Housing

While the Grinch may have had his way with housing this past year, better days are ahead. NAR Chief Economist Lawrence Yun tells us that the economy and housing will easily escape recession, but foreclosure rates will continue to rise in 2008. Some markets will do better than others, however on the whole, the national home sales and price situation will be very similar in 2008 to 2007.

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"Copyright National Association of REALTORS®, Reprinted with permission."

MONEY GROWS ON THIS TREE!

Let's plant two “money trees” and watch their growth. We'll plant the first by placing $20,000 in a savings account earning 5% interest, and leave it there for five years. After five years, we'll withdraw our initial investment ($20,000) plus the interest ($5,525). We invested $20,000 and received back $25,525, a 5% yield.

Now, let's plant the second tree. We'll buy a home for $100,000 and invest $20,000 (as the down payment). For the sake of argument, we'll assume that the home appreciates at 5% each year, just as the savings account earned 5% interest. At the end of five years, the home will be worth about $128,335, a $28,335 gain (that's at an annual rate of 5%).

We invested the same $20,000, and received back our $20,000 investment plus another $28,335 (the increase in value) for a total of $48,335. The rate of return is a sizable 19.3 percent! By purchasing the home, we were able to earn 5% appreciation on the entire $100,000, whereas on the savings account we earned 5% only on the $20,000 investment.

Incidentally, if we had invested only $10,000 in the same $100,000 home ($10,000 down payment - $90,000 loan), we would have received the same $48,335 in return for only a $10,000 investment - a whopping 37.04 percent return! Now you can see the obvious benefits of home ownership!

NO DEPOSIT, NO RETURN!

When buying a home, would you consider asking the sellers to "hold" their home off the market without offering to give them a deposit? As a seller, would you take your home "off the market" for purchasers who were unwilling to give you a sum of money as a deposit?

In both cases, the answer is probably "No!" A very important message is communicated from buyer to seller by the so-called "earnest money deposit." It is understandably common for homebuyers to want to offer as small a deposit as possible when signing an agreement to purchase a home, and just as common for the sellers to want as large a sum as possible to be placed on deposit.

Here's why the amount offered can be so important. For the buyers, one way to impress the sellers with their sincerity is by offering a higher than normal deposit. Their willingness to go beyond the minimum requirements is a positive indicator that they plan to complete the purchase on time and as agreed.

From the sellers' point of view, a solid offer to purchase from buyers - when accompanied by a substantial deposit - can quickly become an attractive offer, one which is easy to accept. In a nutshell, a larger than expected earnest money deposit can yield a positive return for both homebuyers and sellers!

MULTIPLE CHOICE!

Once you decide to list your home for sale, how long will it take to sell? How long should you give the agent to successfully market your home?

The best answer is to be reasonable. But what’s reasonable? 30 days? What about 300 days? Of course, there is no standard response.

Let's look at how to determine the right amount of time in your situation. With each real estate market being different, it takes longer to sell a home in some areas than others. A home that may sell in 15 days in one city may take 87 days in another, or even six to nine months in yet another.

Actually, the time needed to attract a buyer can be made longer or shorter by offering a higher or lower price, and better or less desirable terms and amenities.

Ask your agent to provide information relative to current selling times in your neighborhood. Discuss the factors that may help or hinder the sale of your home, and ask for your agent's best estimate of selling time for your home.

Then, allow the appropriate amount of time to properly market your home. By giving a reasonable length of time in which to perform, you will have the complete determination of your agent, and will no doubt be pleased with the results - the ultimate sale of your home.

Stay One Step Ahead!

As a seller, you'd prefer a nice clean, unconditional offer at full price, right? One way to encourage such confidence among potential buyers is to have an inspection report available during showings, as well as any receipts (or estimates) for repairs. Why order an inspection when the buyers will probably do so anyway? Because when you take the initiative and perform repairs before listing, you are basically presenting a clean bill of health for your home.

Prelisting inspections are becoming a popular way to give sellers an edge in competitive markets. Taking such action also provides a great opportunity to take care of problems that otherwise might come back to bite you. Buyers today are armed with more knowledge than in the past, and they recognize the security offered when the seller is forthright and demonstrating that there is nothing to hide.

These are the conditions that are more likely to produce that unconditional offer. While it's probably a given that the buyers' representative will encourage them to order their own inspection, you also have a greater sense of confidence knowing that there won't be any surprises.

If you have any doubts about whether a prelisting inspection will improve your chances for an early sale, discuss it with your real estate representative, who will also undoubtedly have many other suggestions for successfully marketing your home.

You're Not Alone!

Foreclosure. The very term strikes fear into the heart of any homeowner. Would you believe that one in every 1000 homes in the U.S. were in the process of foreclosure at the end of 2006? If you're facing such circumstances, first understand that you are not alone.

Most people got into this position by taking advantage of ridiculously low introductory rates on adjustable rate mortgages (ARMs). Now that those loans are resetting, consumers face dramatic increases in the interest rate, and consequently, the monthly payment. Even a reasonable rate like 7% becomes a burden to those who have grown accustomed to the 1 or 2 percent introductory rates.

Ideally, a short sale coordinated by a real estate professional provides the opportunity to satisfy all the motivated parties - seller, buyer, and lender. The seller wins by liquidating the property before foreclosure proceedings begin. The buyer benefits by securing property at a good value. Finally, the lender benefits by not having to initiate the foreclosure or take the property back.

A real estate agent may even have suggestions to help keep you in your home. Granted, it isn’t a sale, but agents appreciate the subtleties of building good relationships with loyal clients who will refer business to them in the future. Trust a professional to guide you through this difficult time with experience, courtesy and respect.