Charlotte Real Estate

Selling Your Home - Appraisals & Market Value
  1. The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of….[+]

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    What is the difference between market value and appraised value?
    The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300. Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.

    What's a house worth?
    A home ultimately is worth what someone will pay for it. Everything else is an estimate of value. To determine a property's value, most people turn to either an appraisal or a comparative market analysis. An appraisal is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and landscaping into account. Most appraisals cost about $300. A comparative market analysis is a real estate broker's or agent's informal estimate of a home's market value, based on sales of comparable homes in a neighborhood. Most agents will give you a comparative market analysis for free. You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet.

    How is a home's value determined?
    You have several ways to determine the value of a home. An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house. A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business. You also can get a comparable sales report for a fee from private companies that specialize in real estate data or find comparable sales information available on various real estate Internet sites.

    What standards do appraisers use to estimate value?
    Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. For detailed information on appraisal standards, contact the Appraisal Institute at 875 N. Michigan Ave., Suite 2400, Chicago, IL 60611-1980; (312) 335-4458.


Tax Aspects of Home Ownership: Selling a Home
  1. Most home sellers don’t even have to report the transaction to the IRS. But if you’re one of the exceptions, knowing the rules will help you hold down….[+]

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    Profit on home sale usually tax-free
    Most home sellers don’t even have to report the transaction to the IRS. But if you’re one of the exceptions, knowing the rules will help you hold down your tax bill.

    This article will address some of the most common topics:

    * Do I have to pay taxes on the profit I made selling my home?
    * How do I qualify for this tax break?
    * How do I qualify for a reduced exclusion?
    * Deciding whether to take the exclusion
    * Do I have to report the home sale on my return?
    * Figuring the gain on the sale of a home
    * What is the original cost of my home?
    * What is the adjusted basis of my home?
    * Postponed gains under the old "rollover" rules
    * Converting a second home to a primary home

    Do I have to pay taxes on the profit I made selling my home?
    It depends on how long you owned and lived in the home before the sale and how much profit you made. If you owned and lived in the place for two of the five years before the sale, then up to $250,000 of profit is tax-free.

    If you are married and file a joint return, the tax-free amount doubles to $500,000. The law lets you "exclude" this much otherwise taxable profit from your taxable income. (If you sold for a loss, though, you can't take a deduction for that loss.)

    You can use this exclusion every time you sell a primary residence, as long as you owned and lived in it for two of the five years leading up to the sale, and haven't claimed the exclusion on another home in the last two years.

    If your profit exceeds the $250,000 or $500,000 limit, the excess is reported as a capital gain on Schedule D.

    How do I qualify for this tax break?
    There are three tests you must meet in order to treat the gain from the sale of your main home as tax-free:

    Ownership: You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous, nor does it have to be the two years immediately preceding the sale. If you lived in a house for a decade as your primary residence, then rented it out for two years prior to the sale, for example, you would still qualify under this test.

    Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.

    Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.

    If you're married and want to use the $500,000 exclusion:

    * You must file a joint return.

    * At least one spouse must meet the ownership requirement, and both you and your spouse must have lived in the house for two of the five years leading up to the sale.

    Special circumstances
    Even if you don't meet all of these requirements, there are special rules that may allow you to claim either the full exclusion or a partial exclusion:

    1. If you acquire ownership of a home as part of a divorce settlement, you can count the time the place was owned by your former spouse as time you owned the home for purposes of passing the two-out-of-five-years test.
     
    To meet the use requirement, you are allowed to count short temporary absences as time lived in the home, even if you rented the home to others during these absences. If you or your spouse is granted use of a home as part of a divorce or separation agreement, the spouse who doesn't live in the home can still count the days of use that the other spouse lives in that home. This can come into play if one spouse moves out of the house, but continues to own part or all of it until it is sold.
     
    2. If either spouse dies and the surviving spouse has not remarried prior to the date the home is sold, the surviving spouse can count the period the deceased spouse owned and used the property toward the ownership-and-use test.

    3. Members of the uniformed services, foreign service and intelligence agencies

    You can choose to have the five-year-test period for ownership and use suspended for up to ten years during any period you or your spouse serve on "qualified official extended duty" as a member of the uniformed services, Foreign Service or the federal intelligence agencies. You are on qualified extended duty when, for more than 90 days or for an indefinite period, you are:

    * At a duty station that is at least 50 miles from your main home, or

    * Residing under government orders in government housing

    This means that you may be able to meet the two-year use test even if, because of your service, you did not actually live in your home for at least the required two years during the five years prior to the sale.

    How can I qualify for a reduced exclusion?
    In certain cases, you can treat part of your profit as tax-free even if you don't pass the two-out-of-five-years tests. A reduced exclusion is available if you sell your house before passing those tests because of a change of employment, or a change of health, or because of other unforeseen circumstances, such as a divorce or multiple births from a single pregnancy. So if you need to move to a bigger place to find room for the triplets, the law won't hold it against you.

    Note: A reduced exclusion does NOT mean you can exclude only a portion of your profit. It means you get less than the full $250,000/$500,000 exclusion. For example, if a married couple owned and lived in their home for one year before selling it, they could exclude up to $250,000 of profit (one-half of the $500,000 because they owned and lived in the home for only one-half of the required two years). 

    Deciding whether to take the exclusion
    Would it ever make sense to turn down the government's generosity and not claim the exclusion?

    Although it's very unlikely, paying tax on a home sale can make sense if it preserves the exclusion to protect more profit on another home that you plan to sell within two years. Remember, although you can use the exclusion any number of times during your life, you can't use it more than once every two years.

    Do I have to report the home sale on my return?
    You generally can skip reporting your home sale on your income tax return, as long as you did not receive a Form 1099-S: Proceeds from Real Estate Transactions from the real estate closing agent -- a title company, real estate broker or mortgage company.

    To avoid getting this form (and having a copy sent to the IRS), you must give the agent some assurances at any time before February 15 of the year after the sale that all the profit on the sale is tax-free. To do so, you must assure the agent that:

    * You owned and used the residence as your principal residence for periods totaling at least two years during the five-year period ending on the date of the sale of the residence.

    * You have not sold or exchanged another principal residence during the two-year period ending on the date of the sale or exchange of the residence.

    * No portion of the residence was used for business or rental purposes by you or your spouse.
    At least one of the following three statements applies:

    * The sale price is $250,000 or less

    * You are married, the sale price is $500,000 or less, and the gain on the sale is $250,000 or less

    * You are married, the sale price is $500,000 or less, and:

    * You intend to file a joint return for the year of the sale or exchange.

    * Your spouse also used the residence as his or her principal residence for periods totaling two years or more during the five years ending on the date of the sale.

    * Your spouse also has not sold or exchanged another principal residence during the two-year period ending on the date of the sale or exchange of the residence.

    * Essentially, the IRS does not require the real estate agent who closes the deal to use Form 1099-S to report a home sale amounting to $250,000 or less ($500,000 or less for married couples filing jointly).

    You should not receive a Form 1099-S from the real estate closing agent if you made these assurances. If you don't receive the form, you don't need to report your home sale at all on your income tax return.

    If you did receive a Form 1099-S, that means the IRS got a copy as well. That doesn't necessarily mean you owe tax on the sale, though. It could be a mistake, or the closing agent might not have had the proper paperwork. If you qualify for the exclusion to make all of your profit tax-free, don't report the home sale. But make sure all your paperwork is in order to show the IRS if it asks.

    Figuring gain on the sale of a home
    You have a gain if you sell your house for more than it cost. Ah, but how do you calculate the real cost? For tax purposes, you need to pinpoint your adjusted basis to figure out whether or not you have gained or lost in the sale.

    The adjusted basis is essentially what you've invested in the home; the original cost plus the cost of capital improvements you've made. Capital improvements add value to your home, prolong its life, or give it a new or different use. They don't include expenses for routine maintenance and minor repairs, such as painting. Examples of improvements are a new roof, a remodeled kitchen, a swimming pool, or central air conditioning. You add these expenses to your original cost to increase your adjusted basis (which in turn decreases the amount of gain on a sale).

    On the other hand, you need to subtract any depreciation, casualty losses or energy credits that you have claimed to reduce your tax bill while you've owned the house. Also, if you postponed paying taxes on the gains from selling a previous home (as was allowed prior to mid-1997 for homeowners who used the profits to buy a more expensive replacement house), then you must also subtract that gain from your adjusted basis. Let's say you bought a house for $50,000 in 1993, sold it for $75,000 in 1996, and postponed the tax on the $25,000 profit by purchasing a new home for $110,000. The basis of the new home would be $85,000 (the $110,000 cost minus the $25,000 of non-taxed profit on the first sale).

    What is the original cost of my home?
    The original cost of your home, for most people, is the amount you paid for it.

    If you purchased your home from someone else, the price you paid is your purchase price (plus certain settlement and closing costs). Your closing statement should list all of these costs. Don't include items from your closing statement that are personal and routine expenses, such as insurance or homeowner association dues, and don't include the prorated amounts for property taxes and interest.

    If you built your home, your original cost is the cost of the land, plus the amount it cost you to construct your home, including amounts paid to your contractor and subcontractors, your architect fees, if any, and connection charges you paid to utility providers. 

    If you inherited your home, your basis in the home will be the number you use for "original cost." For death’s prior to 2010, your basis is the fair market value of your home on the date of the previous owner's death, or on the alternate valuation date if the executor of the estate elected to value the estate's assets as of six months after the owner's death. If the person died in 2010, special basis rules apply depending on your relationship to the deceased. Check with the executor of the estate, who should be able to provide you with information about the basis of your home.

    What is the adjusted basis of my home?
    The adjusted basis is simply the cost of your home adjusted for tax purposes by improvements you've made or deductions you've taken.

    For example, if the original cost of the home was $100,000 and you added a $5,000 patio, your adjusted basis becomes $105,000. If you then took an $8,000 casualty loss deduction, your adjusted basis becomes $97,000.

    Here's how you calculate the adjusted basis on a home:

    * Start with the purchase price of your home (as described above)

    * Or, if you filed Form 2119 when you originally acquired your old home to postpone gain on the sale of a previous home (back in 1997 or earlier), use the adjusted basis of the new home calculated on your Form 2119.

    To that starting basis add:

    * The cost of any improvements that added value to your home, prolonged its useful life, or gave it a new or different use

    * Any special tax assessments you paid

    * Amounts spent after a casualty (a disaster such as a hurricane or tornado) to restore damaged property

    * From that upwardly adjusted basis subtract:

    * Certain settlement fees or closing costs

    * Depreciation allowed for any business use portion of your home

    * Residential energy credits claimed for capital improvements

    * Payments received for easements or right-of-ways

    * Insurance reimbursements for casualty losses

    * Casualty losses (from accidents and natural disasters) that you deducted on your tax return

    * Adoption credits or nontaxable adoption assistance payments for improvements added to the basis of your home

    * First-time homebuyer credit

    * Energy conservation subsidies excluded from your gross income

    * Any mortgage debt on your principal residence that was discharged after 2006 but before 2013, if you excluded this amount from your gross income

    * The result of all these calculations is the adjusted basis that you will subtract from the selling price to determine your gain or loss. This adjusted basis is what's considered to be your cost of the home for tax purposes.

    * Basis when you inherit a home

    If you inherited your home from your spouse prior to 2010 and you lived in a community property state—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin—your basis will generally be the fair market value of the home at the time of your spouse's death.

    If you lived somewhere other than a community property state, your basis for the inherited portion of the home before 2010 will be the fair market value at your spouse's death multiplied by the percentage of the home your spouse owned. If your spouse solely owned the home, for example, the entire basis would be "stepped up" to date-of-death value. If you and your spouse jointly owned the home, then half of the basis would rise to date-of-death value.

    If you inherited your home from someone other than your spouse before 2010, your basis will generally be the fair market value of the home at the time the previous owner died. If the person you inherited the home from died in 2010, special rules apply. Your basis generally is the same as the person you inherited the property from. However, the executor has the option to increase the basis of property passing to a non-spouse by $1.3 million and property passing to a spouse by $3 million. To find out the exact basis of any property you inherit, check with the estate’s executor.

    Divorce and tax basis

    If you received your home from your former spouse as part of a divorce after July 18, 1984, your tax basis generally will be the same as your basis as a couple at the time of the divorce. So if your former spouse was the sole owner of the home, his or her basis becomes your basis. If the place was jointly owned, you now claim the full basis.

    If you divorced before July 19, 1984, your basis will generally be the fair market value at the time you received it.

    Postponed gains under the old "rollover" rules
    In the past, you may have put off paying the tax on a gain from the sale of a home, usually because you used the proceeds from the sale to buy another home. Under the old rules, this was referred to as "rolling over" gain from one home to the next. This postponed gain will affect your adjusted basis if you are selling that new home. The tax on that original sale wasn't eliminated, just deferred to some future date.

    You can no longer postpone gain on the sale of your personal residence. For sales after May 7, 1997, you normally must choose whether to exclude the gain on the sale of your personal residence or to report the gain as taxable income in the year it is sold. You no longer have the option to postpone paying taxes on the gain by purchasing a more expensive residence.

    To see how a rollover of gain prior to the change in the law can affect your profit, consider this example: Let's say you bought a house for $50,000 in 1993, sold it for $75,000 in 1996 and postponed the tax on the $25,000 profit by purchasing a new home for $110,000. The basis of the new home would be $85,000 (the $110,000 cost minus the $25,000 on non-taxed profit on the first sale).

    Converting a second home to a primary residence
    Although the rule that allows homeowners to take up to $500,000 of profit tax-free applies only to the sale of your principal residence, it has been possible to extend the break to a second home by converting it to your principal residence before you sell. Once you live in that home for two years, you have been able to exclude up to $500,000 of profit again. That way, savvy taxpayers can claim the exclusion on multiple homes.

    Note: Congress has clamped down on this break for taxpayers who convert a second home into a principal residence after 2008. A portion of the gain on a subsequent sale of the home will be ineligible for the home-sale exclusion, even if the seller meets the two-year ownership-and-use tests.

    The portion of the profit subject to tax is based on the ratio of the time after 2008 when the house was a second home or a rental unit, to the total amount of time you owned it. So if you have owned a vacation home for 18 years and make it your main residence in 2011 for two years before selling it, only 10 percent of the gain (two years of nonqualified second home use divided by 20 years of total ownership) is taxed. The rest would qualify for the exclusion of up to $500,000. Information Provided by: turbotax.com



Your Home Through the Eyes of a Buyer?
  1. What Does Your Home Look Like Through the Eyes of a Buyer?[+]

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    Living Area:

    * Fix all cracks, nail-pops, and visible seams in plaster.

    * Check ceiling for leak stains. Fix leak, repair and repaint ceiling.

    * Use conventional white and neutrals if re-decorating.

    * Clean out fireplace and stack logs inside to make it look inviting.

    * Wash all windows. Repair broken glass and windows that stick.


    * Replace all burned out lightbulbs. Use higher wattage bulbs.

    * Make sure all light swithces work.

    * Clean all floors and fix any creaking boards or stair treads.


    * Straighten closets of clutter so they appear larger. Oil squeaking doors.


    * Spray room deodorizer to eliminate musty smells.


    * Fix sticking doors and sliding doors by rubbing with paraffin or candle wax.


    Bathroom:

    * Repair leaking faucets. Unclog sink and bath drains so water drains quickly.

    * Display fresh towels, guest towels, and soap.

    * Remove stains from toilets, sinks and bathtubs. Keep mirrors and chrome shining.

    * Keep solid room deodorizer in the bath area.


    * Replace old caulking around tub.


    Basement, Attic & Garage:

    * Make sure basement stairs are well-lit.

    * Paint ceilings and walls of basement in a light color if they are gloomy.

    * Repair cracks in the basement or garage floor with ready-mix concrete.

    * Vacuum garage floor and rafters.

    * Neatly box all times you are keeping, dispose of others to make area seem larger.

    Kitchen:

    * Make room bright and attractive. Paint cabinets and put up new curtains.

    * Clean counters well. Store all countertop appliances to make counter space look larger. Scrub ventilating hood over stove.

    * Replace broken or missing tiles on floor. Re-affix loose tiles. Replace entire floor if badly worn.

    When Your Home is Being Shown:

    * Leave a delicious smell in the house (potpourri, cinnamon-apple tea, etc.).

    * Keep room draperies and shades open to let in light.

    * Keep rooms neat and uncluttered to appear larger. No dirty dishes.

    * Tag or remove items that will not be included in sale.

    * Turn on porch light and any outdoor lighting if house is being shown at night.

    * Keep children's toys stored away and pets outside during showings.

    * Turn off radio, stereo, or TV.

    * If possible, leave house when it is being shown. If not, stay out of the way. Do not question buyer. Answer questions candidly.

    * Refer any direct inquiries about the house to your real estate agent. Take advantage of his or her professional skills in selling houses.


Tips for Selling
  1. When we list your home, we will go through the house together. Meanwhile, here are some of my tips for you to think about. In doing this….[+]

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    "Get Ready to Move - Start Packing"
    When we list your home, we will go through the house together. Meanwhile, here are some of my tips for you to think about. In doing this, we will be ahead of most of the sellers (our competition) already on the market in the way your home shows...

    Inside:

    * Clear all unnecessary objects from furniture throughout the house. Keep decorative objects on the furniture restricted to groups of 1, 3, or 5 items.

    * Clear all unnecessary objects from the kitchen countertops. If it hasn't been used for three months, put it away! Clear refrigerator fronts of messages, pictures, etc. (A sparse kitchen helps the buyer mentally move their own things into your kitchen).

    * In the bathroom, remove any unnecessary items from countertops, tubs, shower stalls, and commode tops. Keep only your most needed cosmetics, brushes, perfumes, etc., in one small group on the counter. Coordinate towels to one or two colors only.

    * Rearrange or remove some of the furniture if necessary. As owners, many times we have too much furniture in a room. This is wonderful for our own personal enjoyment, but when it comes to selling, we need to thin out as much as possible to make rooms appear larger.

    * Take down, or rearrange certain pictures or objects on walls. Patch and paint if necessary.

    * Review the house inside room by room, and:
    a) Paint any room needing paint.
    b) Clean carpets or drapes that need it.
    c) Clean windows.

    * Make sure the closets and garage are not "too full". Rent a storage unit if necessary.

    * Leave on certain lights during the day. (I'll show you which ones). During "showings", turn on all lights and lamps.

    * Have stereo FM on during the day for all viewings.

    * Key Box - #1 Importance: "If we don't have it, they won't show us!"

    Outside:

    * Go around the perimeter of the house and move all garbage cans, discarded wood scraps, extra building materials, etc., into the garage.

    * Check gutters and/or roof for dry rot. Make sure they are swept and cleaned.

    * Look at all plants ... prune bushes and trees. Keep plants from blocking windows. "You can't sell a house if you can't see it". Plants are like children -- they grow so fast!!

    * Weed and bark all planting areas. Keep lawn freshly cut and fertilized. Remove any dead plants or shrubs.

    * Clear patios or decks of all small items, such as small planters, flower pots, charcoal, barbecues, toys, etc. (Put them in the garage).

    * Check paint condition of the house -- especially on the front door and trim. "Curb appeal really works"!

    In General:
    * Try to look at your house "Through the buyer's eyes" as though you've never seen it or been there before. Any time or money spent on these items will bring you back more money in return, and hopefully a faster sale. "We are making you money"!

    "Working Together, we make a Great Team!"


Home Owner Hints for a Successful Sale
  1. Home Owner Hints for a Successful Sale….[+]

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    Exterior:

    * Keep grass and shrubs trimmed. Consider a fast greening fertilizer such as ammonium sulfate (inexpensive) for a deep green lawn

    * If you have an outdoor pet, clean up any mess on a daily basis. Secure pets when the house is being shown.

    * Make any needed repairs to fences. A neat, well painted fence gives a positive impression.

    * Plant seasonal and blooming flowers, especially near the front door and in any patio area. A profusion of color can have your home half-sold before the door is even opened.

    * Hummingbird feeders and bird houses create a pleasant mood, especially when they are close to any patio area.

    * Front door should be refinished or painted if it shows excessive wear.

    * Check exterior paint. Often, only the trim or, depending on sun exposure, only one or two sides of the house need painting. Keep in mind the fact that paint is cheap compared to the extra dollars a home with a clean fresh appearance will bring.

    * Situate lawn furniture in a attractive, leisurely manner. A badminton net or croquet set-up gives a positive image as well.

    * If the roof needs to be repaired or replaced, it's best to have the work done. Otherwise, buyers will want to deduct the cost even if your price already reflects the required work.

    * Delaying repairs can actually cost you twice as much.

    Interior:

    * You are competing against model homes, so your home must look as much like a model as possible. Floors, bath fixtures, and appliances must be sparkling. Consider using a car wax on appliances. Make beds early in the day. Unmade beds and late sleepers create a very negative image.

    * Avoid using vinegar as well as heavy frying or cooking strong-smelling foods such as cabbage or fish. The odors last and work against the image you are trying to create. On the other hand, some smells have a positive effect on people. Baked bread, apple pie, chocolate cookies, and cinnamon rolls are examples of foods that can help in the sell of your home.

    * Consider keeping packaged cookie or bread dough in the refrigerator. The smell of these baking goods can be of great help to us just before a scheduled showing.

    * If you have left over paint, you can accomplish a great deal by touching up paint where needed. If the paint is dark, repaint with light colors such as off-white, oyster, light beige, or pale yellow. Light colors make rooms appear fresh as well as large.

    * Repair any leaking faucets. Make certain you do not have a gurgling toilet.

    * Replace any torn shades or blinds.

    * If drapes need cleaning, have it done. If they are old and worn, stained or dark, consider replacing them with light colors. (Large department stores or catalog house will generally solve the problem).

    * Dirty carpets should be either professionally steam cleaned (preferred), or you should rent a heavy-duty cleaner.

    * If any room appears dark, increase the wattage of your light bulbs. Before showing, open the blinds and drapes, and turn on the lights, even during the day. You want the house as light as possible. Make certain your light fixtures and windows are clean.

    * If closets appear crowded, remove items not needed and put in boxes. They can be stacked neatly in a corner of the basement, attic, or garage.

    * Many homes appear crowded, with too many pieces of furniture as well as bric-a-brac. Consider putting excess furniture in a storage building.

    * Spruce up your work area in the garage and/or basement. Consider a garage sale to get rid of excess items that are too good to throw away but of no use to you. Put excess items in boxes and stack them neatly in a corner. Consider using a commercial garage floor cleaner on excess oil and grease marks on the garage floor and driveway. You might consider a commercial steam cleaner (not carpet cleaner).

    * In cold days, a natural fire in the fireplace will help us sell your home. Start the fire before showing is scheduled. On hot days, consider turning the air conditioner four to five degrees cooler than normal. The contrast will seem phenomenol, giving a very positive reaction. In moderate weather, open windows for fresh air.

    You:

    * When your home is being shown, consider disappearing for a while. Buyers feel restrained with an owner present. If buyers will not voice their concerns, then their questions cannot be answered and their problems cannot be solved.

    * If you must remain in the house, try to stay in one area. Excellent places to be are working in the garden, on the lawn, or in the workshop. These activities create a positive image.

    * While soft music is fine, do not have a TV on.

    * NEVER, Never follow the agent around the house during the showing, volunteer any information, or answer questions the buyers may have. You have engaged professional real estate salespersons. We will ask you questions if necessary.


Selling Your Home - Pricing the House to Sell
  1. The list price is how much a house is advertised for and is usually only an estimate of what a seller would like to get for the property. The sales price….[+]

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    What is the difference between list and sales prices?
    The list price is how much a house is advertised for and is usually only an estimate of what a seller would like to get for the property. The sales price is the amount a property actually sells for. It may be the same as the listing price, or higher or lower, depending on how accurately the property was originally priced and on market conditions. If you are a seller, you may need to adjust the listing price if there have been no offers within the first few months of the property's listing period.

    What are the two most important factors when selling a home?
    Price and condition are the two most important factors in selling a home, even in a down market. The first step is to price your home correctly. Use comparative sales information from your agent, or pay for a professional appraiser (usually $200 to $300), to objectively evaluate your home's worth. Second, go through the house and repair any obvious cosmetic defects that could deter a buyer. In a down market, you may have to consider lowering your price and/or making a major repair, such as replacing the roof, in order to lure a buyer. Also, make sure that your home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage and a listing on the local multiple listing service or online listings provider. If this isn't happening, take it up with your agent or agent's broker. If you are still not satisfied you are getting the service you need, you may have to switch agents.

    What is the best time to buy?
    Because many buyers prefer to move in the spring or summer, the market starts to heat up as early as February. Families with children are eager to buy so they can move during summer vacation, before the new school year begins. The market slows down in late summer before picking up again briefly in the fall. November and December have traditionally been slow months, although some astute buyers look for bargains during this period.

    What is the difference between market value and appraised value?
    The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300. Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.

    What is the difference between list price, sales price and appraised value?
    The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area. The sales price is the amount of money you as a buyer would pay for a property. The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors.

    How does someone sell a slow mover?
    Even in a down market, real estate experts say that price and condition are the two most important factors in selling a home. If you are selling in a slow market, your first step would be to lower your price. Also, go through the house and see if there are cosmetic defects that you missed and can be repaired. Secondly, you need to make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage, and listings on the local multiple listing service (MLS) and on the Internet. Another option is to pull your house off the market and wait for the market to improve. Finally, if you who have no equity in the house, and are forced to sell because of a divorce or financial considerations, you could discuss a short sale or a deed-in-lieu-of- foreclosure with your lender. A short sale is when the seller finds a buyer for a price that is below the mortgage amount and negotiates the difference with the lender. In a deed-in-lieu-of-foreclosure situation, the lender agrees to take the house back without instituting foreclosure proceedings. The latter are radical options. Your simplest, and in many cases most effective, option is to lower the price.

    How is the price set?
    It's very important to price your home according to current market conditions. Because the real estate market is continually changing, and market fluctuations have an effect on property values, it's imperative to select your list price based on the most recent comparable sales in your neighborhood. A so-called comparative market analysis provides the background data upon which to base your list-price decision. When you prepare to sell and are interviewing agents, study each agent's comparable sales report (the data should be no more than three months old). If all agents agree on a price range for your home, go with the consensus. Watch out for an agent whose opinion of value is considerably higher than the others.

    What are the standard ways of finding out how much a home is worth?
    A comparative market analysis and an appraisal are the standard methods for determining a home's value. Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. Be sure you get listing prices of current homes on the market as well as those that have sold. You also can research this yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location. This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet. An appraisal, which generally costs $200 to $300 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.

    How do you prepare a house to sell?
    Doing whatever you can to put your house's best face forward is very important if you want to get close to your asking price or sell as quickly as possible. Short of spending a lot of money, here are several ideas for making your home show better:

    * Sweep the sidewalk, mow the lawn, prune the bushes, weed the garden and clean debris from the yard.

    * Clean the windows (both inside and out) and make sure the paint is not chipped or flaking. And speaking of paint, if your home was built before 1978, new federal law gives a buyer the right to request a lead inspection. If you think you might have some problems, do the inspection yourself beforehand and make any fixes you can.

    * Be sure that the doorbell works.

    * Clean and spruce up all rooms, furnishings, floors, walls and ceilings. It's especially important that the bathroom and kitchen are spotless.

    * Organize closets.

    * Make sure the basic appliances and fixtures work. Get rid of leaky faucets and frayed cords.

    * Make sure the house smells good: from an apple pie, cookies baking or spaghetti sauce simmering on the stove. Hide the kitty litter.

    * Put vases of fresh flowers throughout the house.

    * Having pleasant background music playing in the background also will help set your stage.

    Where do I get information on housing market stats?
    A real estate agent is a good source for finding out the status of the local housing market. So is your statewide association of Realtors, most of which are continuously compiling such statistics from local real estate boards. For overall housing statistics, U.S. Housing Markets regularly publishes quarterly reports on home building and home buying. Your local builders association probably gets this report. If not, the housing research firm is located in Canton, Mich.; call (800) 755-6269 for information; the firm also maintains an Internet site. Finally, check with the U.S. Bureau of the Census in Washington, D.C.; (301) 763-2422. The census bureau also maintains a site on the Internet. The Chicago Title company also has published a pamphlet, "Who's Buying Homes in America." Write Chicago Title and Trust Family of Title Insurers, 171 North Clark St., Chicago, IL 60601-3294.

    Is a low offer a good idea?
    While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer. Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:

    * Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition.

    * Is the offer made on the house as is, or does the buyer want the seller to make some repairs or lower the price instead?

    * Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.


Selling Your Home - Negotiating
  1. There are several cardinal rules to negotiating effectively. One is do your homework, and learn as much about the seller or the buyer….[+]

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    Is there a secret to good negotiating?
    There are several cardinal rules to negotiating effectively. One is do your homework, and learn as much about the seller or the buyer as you can. Another is to play your cards close to your vest and not reveal too much information to the other party or their agent. Don't let yourself get rushed into any decision, no matter how tempting it may be. Finally, if you have doubts about your negotiating skill, hire someone to help.

    What contingencies should be put in an offer?
    Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the sellers responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.

    How is the price set?
    It's very important to price your home according to current market conditions. Because the real estate market is continually changing, and market fluctuations have an effect on property values, it's imperative to select your list price based on the most recent comparable sales in your neighborhood. A so-called comparative market analysis provides the background data upon which to base your list-price decision. When you prepare to sell and are interviewing agents, study each agent's comparable sales report (the data should be no more than three months old). If all agents agree on a price range for your home, go with the consensus. Watch out for an agent whose opinion of value is considerably higher than the others.

    Are low-ball offers advisable?
    A low-ball offer is a term used to describe an offer on a house that is substantially less than the asking price. While any offer can be presented, a low-ball offer can sour a prospective sale and discourage the seller from negotiating at all. Unless the house is very overpriced, the offer will probably be rejected. You should always do your homework about comparable prices in the neighborhood before making an y offer. It also pays to know something about the seller's motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons.

    Do I have to consider contingencies?
    If you are a seller in a seller's market, in which there is more demand than supply, you probably won't have to entertain too many contingencies. But if you are selling in a buyer's market, when buyers are few, prepare to be very flexible. Granting contingencies also depends upon what kind of price you want to get and on the condition of your property, most experts agree. Remember, contingencies are written into the contract and are negotiable during the negotiation phase only.

    What is the difference between market value and appraised value?
    The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300. Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.

    Is a low offer a good idea?
    While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer. Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:

    * Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition.

    * Is the offer made on the house as is, or does the buyer want the seller to make some repairs or lower the price instead?

    * Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.

    What is the best time to sell your house?
    There is no "best" time to sell per se. Selling a house depends on supply, demand and other economic factors. But the time of year in which you choose to sell can make a difference both in the amount of time it takes to sell your home and in the ultimate selling price. Weather conditions are less of a consideration in more temperate climates, but most of the time, the real estate market picks up as early as February, with the strongest selling season usually lasting through May and June. With the onset of summer, the market slows. July is often the slowest month for real estate sales due to a strong spring market putting possible upward pressure on interest rates. Also, many prospective home buyers and their agents take vacations during mid-summer. Following the summer slowdown, real estate sales activity tends to pick up for a second, although less vigorous, fall market, which usually lasts into November when the market slows again as buyers and sellers turn their attention to the holidays. If this makes you wonder if you should take your home off the market for the holidays, consider the advice of veteran agents: You are always more likely to sell your house if it is available to show to prospective buyers continuously.


Common Q&A About Selling Your Home
  1. Consider these questions before making a choice between adding on to an existing home or moving up in the market to a bigger house….[+]

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    Should I add on or buy a bigger home?
    Consider these questions before making a choice between adding on to an existing home or moving up in the market to a bigger house:

    * How much money is available, either from cash reserves or through a home improvement loan, to remodel the current house?

    * How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?

    * What do local zoning and building ordinances permit?

    * How much equity already exists in the property?

    * Are there affordable properties for sale that would satisfy housing needs?

    Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value.

    What do all of those real estate acronyms in the ads mean?
    If you find yourself stumbling over weird acronyms in a real estate listing, don't be alarmed. There is method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section:

    * assum. fin. -- assumable financing

    * dk -- deck

    * gar -- garage (garden is usually abbreviated "gard")

    * expansion pot'l -- may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.

    * fab pentrm -- fabulous pentroom, a room on top, underneath the roof, that sometimes has views

    * FDR -- formal dining room (not the former president)

    * frplc, fplc, FP -- fireplace

    * grmet kit -- gourmet kitchen

    * HDW, HWF, Hdwd -- hardwood floors

    * hi ceils -- high ceilings

    * In-law potential -- potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first.

    * large E-2 plan -- this is one of several floor plans available in a specific building

    * lsd pkg. -- leased parking area, may come with an additional cost

    * lo dues -- find out just how low these homeowner's dues are, and in comparison to what?

    * nr bst schls -- near the best schools

    * pvt -- private

    * pwdr rm -- powder room, or half-bath

    * upr- upper floor

    * vw, vu, vws, vus -- view(s)

    * Wow! -- better check this one out.

    Resources:
    * "Real Estate's Ambiguous Language You Oughtta Understand," Glennon H. Neubauer, Ethos Group Publishing, Diamond Bar, CA; 1993.

    How long do bankruptcies and foreclosures stay on a credit report?
    Bankruptcies and foreclosures can remain on a credit report for seven to 10 years. Some lenders will consider an borrower earlier if they have reestablished good credit. The circumstances surrounding the bankruptcy can also influence a lender's decision. For example, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible.

    What are some tips on negotiation?
    The more you know about a seller's motivation, the stronger a negotiating position you are in. For example, seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called "motivated sellers" include people going through a divorce or who have already purchased another home. Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up.

    Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all.

    Do sellers have to disclose the terms of other offers?
    Sellers are not legally obligated to disclose the terms of other offers to prospective buyers.

    How do I prepare the house for sale?
    First and foremost, put it in the best condition possible, especially if you are in a market with few buyers and lots of homes for sale. That means taking care of any major repairs that could deter a buyer (such as replacing any broken windows or replacing a leaky roof) if you can afford it. Next, work on your home's curb appeal. Make sure your landscape is pristine. Mow the grass, clean up any debris and weed the garden beds. Plant a few annual flowers near the entrance or in pots to be placed by the door. Other quick fixes that don't cost a lot of money but can help you get top dollar for your home:

    Clean the windows and make sure the paint is not chipped or flaking.

    Be sure that the doorbell works.

    Clean and freshen up rooms, furnishings, floors, walls and ceilings. Make sure that bathrooms and kitchens are spotless.

    Organize closets.

    Make sure the basic appliances and fixtures work. Replace leaky faucets and frayed cords.

    Eliminate the source of any bad smells, such as the kitty box. Use air freshener or bake a batch of cookies before your open house to ensure that the house smells inviting.

    Invest in a couple of vases of fresh flowers to place around the house



Selling Your Home - Property Taxes
  1. Contact your local tax assessor's office to see what procedures to follow to appeal your property tax assessment. You may be able to….[+]

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    Where can I learn more about appealing my property taxes?
    Contact your local tax assessor's office to see what procedures to follow to appeal your property tax assessment. You may be able to appeal your assessment informally. Mostly likely, however, you will have to go through a formal tax-appeal processes, which begin with an appeal filed with the appropriate assessment appeals board.

    How is a home's value determined?
    You have several ways to determine the value of a home. An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house. A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business. You also can get a comparable sales report for a fee from private companies that specialize in real estate data or find comparable sales information available on various real estate Internet sites.

    Are taxes on second homes deductible?
    Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

    How do property taxes work?
    Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average 1.5 percent of the property's current market value. These annual local assessments by county or local authorities help pay for public services and are calculated using a variety of formulas.

    Are property taxes deductible?
    Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes.

    What is an impound account?
    An impound account is a trust account established by the lender to hold money to pay for real estate taxes, and mortgage and homeowners insurance premiums as they are received each month.


Selling Your Home - Disclosure
  1. In most states, it is the seller, but obligations to disclose information about a property vary. Under the strictest laws, you and your agent….[+]

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    Whose obligation is it to disclose pertinent information about a property?
    In most states, it is the seller, but obligations to disclose information about a property vary. Under the strictest laws, you and your agent, if you have one, are required to disclose all facts materially affecting the value or desirability of the property which are known or accessible only to you. This might include: homeowners association dues; whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as a dog that barks every night or poor TV reception; any death within three years on the property; and any restrictions on the use of the property, such as zoning ordinances or association rules. It is wise to check your state's disclosure rules prior to a home purchase.

    What are the standard contingencies?
    Most purchase offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. As a buyer, you could forfeit your deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the sellers responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.

    Do I need an attorney when I buy a house?
    In some states, you do need an attorney to complete a real estate transaction, but in others you do not. Most home buyers are capable of handling routine real estate purchase contracts as long as they make certain they read the fine print and understand all the terms of the contract. In particular, you should be clear on the terms of any contingency clauses that will allow them to back out of the contract. If you have any questions at all, it may be advisable to consult an attorney to avoid future legal hassles. In looking for an attorney, ask friends for recommendations or ask your real estate agent to recommend several. Call to inquire about fees and to check on their experience. In general, more experienced attorneys will cost more, but real estate fees as a rule are small relative to the cost of the property you are buying.

    What repairs should the seller make?
    If you want to get top dollar for your property, you probably need to make all minor repairs and selected major repairs before going on the market. Nearly all purchase contracts include an inspection clause, a buyer contingency that allows a buyer to back out if numerous defects are found or negotiate their repair. The trick is not to overspend on pre-sale repairs, especially if there are few houses on the market but many buyers willing to buy at almost any price. On the other hand, making such repairs may be the only way to sell your house in a down market.

    Do sellers have to disclose the terms of other offers?
    Sellers are not legally obligated to disclose the terms of other offers to prospective buyers.

    Will a neighbor problem reduce the value of my property?
    While it may not reduce the actual value, a cluttered landscape next door can detract from the positive aspects of your home. Review your local laws, which should be on file at the public library, county law library or City Hall. A typical "junk vehicle" ordinance, for example, requires any disabled car to either be enclosed or placed behind a fence. And most cities prohibit parking any vehicle on a city street too long. It also may be worthwhile to check into local zoning ordinances. An operator of a home-based business usually is required to obtain a variance or permanent zoning change in residential areas. In addition, if a neighbor's repair work produces loud noises, he may be breaking local noise-control ordinances, which are enforced by the police department. Before bringing in the authorities, you may want to make a copy of the pertinent ordinance and give it to your neighbor to give them a chance to correct the problem.

    How do I get the real scoop on homes I am looking at?
    Home inspections, seller disclosure requirements and the agent's experience will help. Disclosure laws vary by state, but in NC, the law requires the seller to complete a real estate property disclosure statement.

    Sellers are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems. The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property. Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides.

    People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions. It's important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.


Selling Your Home - Short Sales
  1. Lenders will initiate foreclosure proceedings when borrowers become delinquent in their mortgage obligations, usually after three payments….[+]

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    When does foreclosure begin?
    Lenders will initiate foreclosure proceedings when borrowers become delinquent in their mortgage obligations, usually after three payments are missed. The lender will then notify the borrower in writing that he or she is in default. The lender can request a trustee's sale or a judicial foreclosure, in which the property is sold at public auction. A borrower can cure the default by paying the overdue amount and the pending payment after the notice of default is recorded, usually no later than a few days before the property's sale. Some sales allow the successful bidder to take possession of the property immediately. If the former owner refuses to vacate the premises, the court can issue an unlawful detainer that allows the sheriff to come out and evict them. Borrowers should do everything they can to avoid foreclosure, which is one of the most damaging events that can occur in an individual's credit history.

    How long do bankruptcies and foreclosures stay on a credit report?
    Bankruptcies and foreclosures can remain on a credit report for seven to ten years. Some lenders will consider a borrower earlier if they have reestablished good credit. The circumstances surrounding the bankruptcy can also influence a lender's decision. For example, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. If, however, you went through a bankruptcy because you overextended personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible.

    Can a home seller sell a home for less than its mortgage?
    Yes, in some case you can sell your home for less than what you still owe on the mortgage, but this is complicated and depends on the lender. This situation is known as a "short sale." Sometimes a lender will be willing to split the difference between the sale price and loan amount, which must still be paid. A short sale may be more complicated if the loan has been sold to the secondary market, because then the lender will have to get permission from Freddie Mac, the two major secondary-market players. If the loan was a low-down payment mortgage with private mortgage insurance, then the lender also must involve the mortgage insurance company that insured the low-down loan.

    How does a home go into foreclosure?
    Foreclosure proceedings usually begin after a borrower has skipped three mortgage payments. The lender will record a notice of default against the property. Unless the debt is satisfied, the lender will foreclose on the mortgage and proceed to set up a trustee sale.

    How does someone sell a slow mover?
    Even in a down market, real estate experts say that price and condition are the two most important factors in selling a home. If you are selling in a slow market, your first step would be to lower your price. Also, go through the house and see if there are cosmetic defects that you missed and can be repaired. Secondly, you need to make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage, and listings on the local multiple listing service (MLS) and on the Internet. Another option is to pull your house off the market and wait for the market to improve. Finally, if you who have no equity in the house, and are forced to sell because of a divorce or financial considerations, you could discuss a short sale or a deed-in-lieu-of-foreclosure with your lender. A short sale is when the seller finds a buyer for a price that is below the mortgage amount and negotiates the difference with the lender. In a deed-in-lieu-of-foreclosure situation, the lender agrees to take the house back without instituting foreclosure proceedings. The latter are radical options. Your simplest, and in many cases most effective, option is to lower the price.


Selling Your Home - Selling at a Loss
  1. In some case you can sell your home for less than what you still owe on the mortgage, but this is complicated and depends on the lender. This situation….[+]

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    Can a home seller sell a home for less than its mortgage?
    Yes, in some case you can sell your home for less than what you still owe on the mortgage, but this is complicated and depends on the lender. This situation is known as a "short sale." Sometimes a lender will be willing to split the difference between the sale price and loan amount, which still must be paid. A short sale may be more complicated if the loan has been sold to the secondary market because then the lender will have to get permission from Freddie Mac, the two major secondary-market players. If the loan was a low down payment mortgage with private mortgage insurance, then the lender also must involve the mortgage insurance company that insured the low-down loan.

    When does foreclosure begin?
    Lenders will initiate foreclosure proceedings when borrowers become delinquent in their mortgage obligations, usually after three payments are missed. The lender will then notify the borrower in writing that he or she is in default. The lender can request a trustee's sale or a judicial foreclosure, in which the property is sold at public auction. A borrower can cure the default by paying the overdue amount and the pending payment after the notice of default is recorded, usually no later than a few days before the property's sale. Some sales allow the successful bidder to take possession immediately. If the former owner refuses to vacate the premises, the court can issue an unlawful detainer that allows the sheriff to come out and evict them. Borrowers should do everything they can to avoid foreclosure, which is one of the most damaging events that can occur in an individual's credit history.


Selling Your Home - Seller Financing
  1. Seller financing is when a seller helps to finance a real estate transaction by taking back a second note, or even financing the entire purchase if….[+]

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    What is seller financing?
    Seller financing is when a seller helps to finance a real estate transaction by taking back a second note, or even financing the entire purchase if the seller owns the home free and clear. Usually sellers do this when a buyer has difficulty qualifying for a conventional loan or meeting the purchase price. Seller financing differs from a traditional loan because the seller does not give the buyer cash to complete the purchase, as does a lender. Instead, it involves extending a credit against the purchase price of the home while the buyer executes a promissory note and trust deed in the seller's favor. These special circumstances must be acceptable to the lender who makes the first mortgage on the property. The necessary paperwork is prepared by the title or escrow company after the terms are worked out between the buyer and seller.

    If you are a seller considering such an arrangement, it is critical to thoroughly evaluate the creditworthiness of the buyer first. Fear of default makes many sellers reluctant to take back a second note. But seller financing can bring a higher price as well as complete the sale sooner in some situations. For more information, contact the Internal Revenue Service for a copy of its Publication 537, "Installment Sales." Order by calling (800) TAX-FORM.

    How are the rates set for seller financing?
    The interest rate on an owner-carried loan is negotiable. Ask your agent to check with a lender or mortgage broker to determine the current rate on institutional first (or second) loans. Seller financing typically costs less than conventional financing because sellers don't charge loan fees (points). Interest rates on an owner-carried loan will also be influenced by current Treasury bill and certificate of deposit rates. Sellers usually aren't willing to carry a loan for a lower return than they would earn if their money was invested elsewhere.

    What are the benefits of seller financing?
    Seller financing offers tax breaks for sellers and alternative financing for buyers who can't qualify for conventional loans. If you are a seller, the risks you face are the same as those facing any lender: Is the borrower a good credit risk? Will the property hold enough value over time to allow for the repayment of all loans made against it? You should run a full credit check on the borrower, require hazard insurance on the property, and include a due-on-sale clause. There also are financing, disclosure, and repayment-term requirements that need to be met. It is wise to consult a lawyer when putting together this kind of transaction.