How to Set a List Price for Your Home? Setting the list price for your home involves evaluating various market conditions and financial factors: · Pricing considerations · Comparable sales · Market conditions · Offering incentives · Estimated net proceeds Pricing Considerations, a Balance Between Too High and Too Low If you set the price too high, in today's market, your house won't be picked for viewing as buyers who shop by comparison might bid on another property, lengths marketing time and the fact that an appraisal is required for financing will make it a hard sale. If you price too low, you'll short-change yourself. Your house will sell promptly, yes, but you may make less on the sale than if you had set a higher price and waited for a buyer who was willing to pay it. Never say "asking" price, which implies you don't expect to get it. Comparable Sales in Your Neighborhood No matter how attractive your house, buyers will be comparing its price with everything else on the market. Your best guide is a record of what the buying public has been willing to pay in the past few months for property in your neighborhood. Ultimately the decision is always yours. Competitive Market Analysis (CMA): Is the list of comparable sales along with data about other houses in your neighborhood that are presently on the market. To help in estimating a possible sales price for your house, we will also include data on nearby houses that failed to sell in the past few months, along with their list prices. A CMA differs from a formal appraisal in several ways. One major difference is that an appraisal will be based only on past sales. Also, an appraisal is done for a fee while the CMA may include properties currently listed for sale and those currently pending sale. For the average home sale, a CMA probably gives enough information to help you set a proper price. Formal Written Appraisal: A formal written appraisal, which may cost a few hundred dollars, can be useful if you have unique property, if there hasn't been much activity in your area recently, if co-owners disagree about price or if there is any other circumstance that makes it difficult to put a value on your home. TIP: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report, i.e., the kind that's complete with photos of the house and neighborhood. Floor plans and a site map is sufficient in most cases. Market Conditions – Is it a Buyer's or a Seller's Market? A CMA often includes a Days on the Market (DOM) value for each comparable house sold. When real estate is booming and prices are rising, houses may sell in a few days. Conversely, when the market slows down, average DOM can run into many months. In a buyer's market, if you really need to sell promptly, offer an attractive realistic price. If you have the luxury of time and really would like to try high price, Set a Schedule for Lowering the Price, before emotions takes over. Cash incentives are sometimes as effective as lowering the price, especially in the lower price range. You may offer to pay some or all of a buyer's closing costs and discount points required by the buyer's lending institution.
Who pays and how much are the typical fees attached to the home purchase? Closing costs are the costs associated with processing the paperwork to buy a property. Closing costs which you will pay at settlement average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs in advance. Some fees are negotiable between buyer and seller but in general
Buyer pays for: Appraisal Credit Report Discount Points Escrow Payments Homeowner's Association Fees Insurance Impounds Interest Adjustment Mortgage Insurance Impounds One-time MIP (FHA only) Origination Fees Prepaid Insurance Recording Fees Tax Impounds Title Policy VA Funding Fee (VA only)
Seller pays for: Discount Points Escrow Fee Home Warranty Program Interest Adjustment Title Policy Pest Inspection Real Estate Commission Tax Service
Why Buying a Home is a Good Idea?
The Best Investment As a general rule, homes appreciate over long period of time. Some years will
be more, some less and even loses in a recession. The figure will vary from
neighborhood to neighborhood.
Even five percent may not seem like that much at first. Stocks (at times)
appreciate much more, and you could easily earn over the same return with a
very safe investment in treasury bills or bonds.
But take a second look at this example Presumably, if you bought a $200,000 house, with twenty percent down – that
would be an investment of $40,000.
At an average appreciation rate of 5% annually, a $200,000 home would increase in value
$10,000 per year. That means you earned $10,000 with an investment
of $40,000. Your annual "return on investment" would be a whopping
twenty-five percent (25%).
Of course, you are making mortgage payment and paying property taxes, along
with a couple of other costs. However, since the interest on your mortgage and
your property taxes are both tax deductible, the government is essentially
subsidizing some of the costs on your home purchase. Not to mention that if you are paying rent,
there are no tax benefits as for owning a home.
Your rate of return when buying a home is higher than
most of any other investment you could make and for the long term probably safer.
Is it the right time to buy? Yes, it is a buyer's market. There are good times when the economy is brisk and
everyone feels confident about his or her future. As a result, they spend
money, buying expensive items, go on vacations and…They buy houses and
commercial properties.
Then, for one reason or another, the economy slows down. Companies lay off
employees and consumers are more careful about where they spend money. As a
result, the economy decelerates even further. If it slows enough, we have a
recession.
During such a time, fewer people are buying homes and unfortunately some
homeowners find themselves in a situation where they are unable to make
mortgage payments and must sell or even give it back to the banks.
In the business cycle of real estate, there are buyers' markets and sellers'
markets...and some mix markets in between. It is all based on supply
and/or demand.
Should I buy for resale value? Yes. There are important factors besides price on where you are buying a home.
It should be desirable for others as well in order to resale.
Location, Location, Location- Local Community, Area, Town or City
Economic Stability- Check to see if the city and county are economically stable. Shopping,
manufacturing, look for pride of ownership in the area.
Local Government Services Check schools in the area. Are they close by? Overcrowded? What is the average
score in tests?
Look for health services, emergency respond, libraries, sponsors of youth
sport, sponsor of community events, parks and recreations and other services by
local government in order to improve your quality of life.
What is an escrow account? An escrow account is an account that is established by your lender to pay your real estate taxes, homeowner's insurance and mortgage insurance on your behalf.
What are some tips or general rules to prepare for first-time home buying? Save, prepare and research. In today's market, it pays to go in with your best offer, which requires some careful financial planning. Some tips: · Have enough savings for down payment, closing costs and emergency funds. · Check your credit report for possible errors and send letters to credit bureaus for corrections. · Apply for a pre-approved mortgage so you know your spending limit. · Ask us to get you recent real estate transactions to find out how much buyers have paid for comparable homes in the area.
Can I bring a personal check to a property closing? No, you will need a cashier's check or wire the funds for closing. This is to insure that the funds are equivalent to cash.
What is earnest money? Earnest money is the deposit you make on the home when you submit your offer and it varies. Earnest money proves to the seller that you are serious about wanting to buy the house. When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you.
Who chooses the Title Company? This is negotiable between buyer and seller.
Should I apply for a loan before a home is found? Yes! You have the opportunity to get pre-approved for a mortgage today. A pre-approval will take into consideration your personal information such as income, debt and credit history. If you receive a pre-approval, we will use this information to determine your maximum loan amount and an advantage point in presenting an offer to seller.
Do I need to sell my existing home before you apply for a new mortgage loan? No. You can apply for a new mortgage loan before you sell your current home. However, depending on your income and debt levels, you may be required to sell your current home before you can close on your new loan.
Have you ever wondered when you should start the mortgage process and how much of a loan you can afford? The best time to look for a mortgage is before you look for a house. This enables you to determine the amount of money you can borrow and how much house you can afford.
What other costs do I need to consider in addition to mortgage payment? You will be responsible for paying your monthly utilities: water, sewer, trash removal, electricity, and gas. In addition, you might have homeowner association (HOA) for condominium or gated communities. You will also have property taxes, consisting of school board, city and county taxes.
What are ARM Loans? With Adjustable Rate Mortgages (ARM), the interest rate can change, so your monthly payment may increase or decrease. The interest rates are usually lower for ARMs than for fixed rate loans during the first few years. Usually there are caps to regulate the rates.
What are FHA Loans? The Federal Housing Administration (FHA) insures some mortgage loans so that more lenders are willing to make loans to borrowers who might not be able to qualify for other loan types. With a FHA insured loan, a homebuyer can make a down payment of as little as 3 percent. The FHA charges the borrower an upfront mortgage insurance premium fee, plus a monthly charge on all loans.
What are fixed rate loans? With a conventional fixed rate loan, the interest rate charged remains fixed throughout the life of the loan and the monthly payments do not change. Fixed rate mortgages are usually 15 or 30 years, but some lenders have a 40 years program.
What are points? One point is equal to one percent of the loan amount. Lenders usually will give a lower interest rate depending on the number of points a borrower is willing to pay in advance.
How much title insurance do you need? The amount of title insurance needed is based on the value of your home and the amount of your mortgage. Title insurance guarantees the lender and/or the owner against the possibility that there may be an unknown lien or discrepancies in ownership on the property they are purchasing. There is a one-time fee for the policy that is paid at closing. You can obtain a separate home owner's insurance policy to cover the full value of your home.
What is a short sale? "Short Sale", also known as "Short Pay" or "Pay Off", is when the lender agrees to settle a loan for lesser amount then owed in exchange for the sale of the property to a third party.
Usually there is need to work with the following factors to get the short sale deal · The homeowner financial circumstances. · The property's conditions. · The current Real Estate market.
This is a "Win Win" situation for the lender as well. The lender might loose more at the auction or down the road with REO that he will have to sell anyway. High costs of going through foreclosure, owning and managing the property. Strict regulation by federal laws stipulating the ratio of bad loans on the books VS cash. The less bad loans, the more liquid cash the bank has or able to get.
How to Set a List Price for Your Home?
