FSBO Worse Than Foreclosure?

13 Reasons Why For Sale By Owner (FSBO)  Can Be Worse Than Foreclosure

Even though foreclosure is one of the most catastrophic events any home owner can face, a For Sale By Owner (FSBO) can be much worse. With a foreclosure, the potential loss for a family is limited to their home or the amount owed to their lender, whereas an FSBO gone bad can leave a family in even bigger distress.

  1. The liability is often not limited to the value of the home:

In the case of false advertising, the liability is not limited to the value of the product. This is because the buyer can claim an opportunity cost associated with the purchase as well as that he or she was promised a certain return for their purchase. The liability can be as high as 300% of the purchase price. This could become a tremendous liability to someone trying to sell a home by themselves.

  1. You’re not saving money:

While it may seem like you’re pinching pennies by cutting out the Realtor from the selling process, that is not actually the case. Professional agents help in finding the best deal possible.

  1. Scams are more common:

When you are selling a home by yourself, it is hard to spot warning signs of potential scams. Realtors will be able to spot these for you.

  1. You’ll save time:

The process of selling a house takes a lot of time and energy. Hiring an agent will save you a lot of precious time and stress throughout the process.

  1. You may resort to an agent anyway:

Many For Sale By Owner situations turn into agent-seller transactions anyway. FSBO clients more than likely will inevitably realize how difficult the process is and seek out help before they are able to close a deal.

  1. You may not be aware of the details:

It makes sense that people seeking to sell their home may not be aware of all the details that go into it. It is much harder for clients to research the procedure on their own than it would be to simply to hire a trained agent.

  1. Paperwork may be troublesome:

If paperwork is not properly filled out, it may be cause for a potential lawsuit on the seller’s part. With any loopholes at all, a buyer may be able to legally target the FSBO seller.

  1. You may not be well-versed in inspections:

Inspections are an important part of selling a home, and someone trying to sell their home themselves may not be equipped to handle them. There is a lot that goes into home inspection, and only an agent can make sure it is done efficiently.

  1. There isn’t any marketing:

When hiring a Realtor, homes are able to be marketed across various real estate platforms, and thus can be sold faster. FSBO does not allow for any marketing strategies, and thus homes do not get sold as quickly as they would otherwise.

  1. There isn’t any representation.

Many people who are selling homes are drawn to big-name Realtors whom they feel they can trust. With FSBO, home buyers do not have that same security and therefore may be less willing to consider buying the home.

  1. Buyers want the best deal imaginable:

Home buyers are looking for the most affordable option when searching for a home, and chances are FSBO is not the cheapest choice. Only an agent will be able to provide a fair, affordable deal for all parties involved.

  1. Each party will benefit:

Both sellers and agents net more money when selling through a Realtor, than through FSBO. At the end of the day, it is the most obvious choice for that very reason. While it may seem like more sense to cut out the middle man, hiring a trained agent will help save time, money, and energy in the long run – all while helping you gain the best profit for your home, as well.

  1. Agents know what they’re doing:

Agents can not only save sellers time, money, and headaches, but also liability that in many areas can go beyond the property value.

Elizabeth Stone  – July 11, 2017 12:09 pm

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Appraisal & Home Owners Agree!

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate  by another 5% (or more) over the next twelve months. One major challenge in such a market is the bank appraisal.

When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the same neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.

March 2015 marked the first month of a three-year gap between what an appraiser and a homeowner believed a home was worth. That gap widened to 2.65% in September 2015 and had consistently hovered between 1.0% and 2.0% through November 2017.

The chart below illustrates the changes in home price estimates over the last three years:

Home Value and Appraisal

In the latest release, the disparity was the narrowest it has been since March 2015, as the gap between appraisers and homeowners was only -0.33%. This is important for homeowners to note as even a .33% difference in appraisal could equate to thousands of dollars that a buyer or seller has to come up with at closing (depending on the price of the home).

Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand: 

“The appraisal is one of the most important, although sometimes least predictable, parts of the mortgage process. The Home Price Perception Index is a way to illustrate the differences of opinion, and these differences affect everything from the type of mortgage a borrower can get to the expectations a seller has about the proceeds available upon sale of their home.”

Bottom Line

Every house on the market must be sold twice; once to a prospective buyer and then again to the bank (through the bank’s appraisal). With escalating prices, the second sale may be even more difficult than the first. If you are planning on entering the housing market this year, meet with an experienced professional who can guide you through this and any other obstacles that may arise.

As reported by Keeping Current Matters, 6/9/18

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4 Things NOT to Do When Selling

So you’ve decided to put your home on the market. Congratulations! Hopefully, you’ve brought a rockin’ REALTOR® on board to help you list your spot, and together you’ve done your due diligence on what to ask for. As you start checking things off your to-do list, it’s also important to pay mind of what not to do. Below are a handful of things to get you started.

Don’t over-improve
As you ready your home for sale, you may realize you will get a great return on your investment if you make a couple of changes. Updating the appliances or replacing that cracked cabinet in the bathroom are all great ideas. However, it’s important not to over-improve, or make improvements that are hyper-specific to your tastes. For example, not everyone wants a pimped out finished basement equipped with a wet bar and lifted stage for their rock and roll buds to jam out on. (Okay, everyone should want that.) What if your buyers are family oriented and want a basement space for their kids to play in? That rock-and-roll room may look to them like a huge project to un-do. Make any needed fixes to your space, but don’t go above and beyond—you may lose money doing so.

Don’t over-decorate
Over-decorating is just as bad as over-improving. You may love the look of lace and lavender, but your potential buyer may enter your home and cringe. When prepping for sale, neutralize your decorating scheme so it’s more universally palatable.

Don’t hang around
Your agent calls to let you know they will be bringing buyers by this afternoon. Great! You rally your whole family, Fluffy the dog included, to be waiting at the door with fresh baked cookies and big smiles. Right? Wrong. Buyers want to imagine themselves in your space, not be confronted by you in your space. Trust, it’s awkward for them to go about judging your home while you stand in the corner smiling like a maniac. Get out of the house, take the kids with you, and if you can’t leave for whatever reason, at least go sit in the backyard. (On the other hand, if you’re buying a home and not selling, then making it personal is the way to go, especially when writing your offer letter. Pull those heart strings!)

Don’t take things personal
Real estate is a business, but buying and selling homes is very, very emotional. However, when selling your homes, try your very best not to take things personally. When a buyer lowballs you or says they will need to replace your prized 1970s vintage shag carpet with something “more modern,” try not to raise your hackles.

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Interest Rates Affect Buying Power

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 4.61%, which is still near record lows in comparison to recent history!

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows the impact that rising interest rates would have if you planned to purchase a home within the national median price range while keeping your principal and interest payments between $1,850-$1,900 a month.

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.

Act now to get the most house for your hard-earned money. #HomeBuyingPower #InterestRates #GerardiGroup

Courtesy of Keeping Current Matters

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Household Mortgage Debt

Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.

These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.

Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.

Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).

Bill McBride of Calculated Risk recently commented on the ratio:

“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”

Bottom Line

Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.

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