Make Your House FHA-Loan Friendly

Learn the basics of FHA loan rules and you stand a better chance of selling your house or condo.  If your house passes the FHA rules, it will appeal to buyers who plan to use an FHA-insured mortgage. If your house doesn’t qualify for an FHA loan, you’re cutting out 30% of potential buyers.

FHA is especially important to first-time homebuyers and those with small downpayments because it allows borrowers with good credit to make a downpayment as low as 3.5% of the purchase price.

Here’s how to make your home appealing to FHA borrowers:

Know the FHA loan limits in your area

Start by calling Prello Realty to see if your home’s listed price falls within FHA lending limits for your area.  FHA mortgage limits vary a lot.  In Cook County, FHA will insure a mortgage of up to $410,000 on a single-family home.  

Home inspections

Most buyers will ask for a home inspection, whether or not they’re using an FHA loan to buy the home. You must give FHA buyers a  form explaining what home inspections can reveal, and how inspections differ from appraisals.

How much do you have to repair?

If the home inspection reveals problems, FHA will not give the okay to buy the home until you repair serious defects like roof leaks, mold, structural damage, and pre-1978 interior or exterior paint that could contain lead.

Dealing with FHA appraisers

Help the lender’s appraiser by providing easy access to attics and crawl spaces, which usually must be photographed.  Your buyer can hire his own appraiser to evaluate your home.  But FHA only relies on reports by its approved appraisers.  If the two appraisals conflict, the FHA appraisal preempts the buyer’s appraisal.

Help with FHA closing costs

Most FHA buyers need help with closing costs, says Robert Picciariello, Broker Owner Prello Realty, Inc.  So a prime way to make your house FHA-friendly is to help with those costs.  FHA currently allows up to 3% of the sales price to help cover closing costs.  

If you’re selling a condo

FHA also has to approve your condo before a buyer uses an FHA loan to purchase your unit. Be sure your condo is FHA Approved.  The list has been updated, so if your association was approved a year ago, check again to make sure it’s still on the approved list.  If you need help in determing if your condo qualifies, go to PrelloRealty.com and let one of our agents help you.   

FHA generally won’t insure loans in condo associations if more than 15% percent of the unit owners are late on association fees. Ask your property manager or board of directors for your association’s delinquency rate.

Other rules cover insurances, cash reserves and how many units are owner occupied and the types of condos that can be purchased with an FHA mortage.

FHA sometimes issues waivers for healthy condominiums that don’t meet the regular rules. If your condo isn’t FHA-approved, it doesn’t necessarily have to meet every single rule to gain approval.  Ask Prello Realty, Inc. to consult with local lenders about getting an FHA waiver for your condo if it doesn’t meet all the requirements.

FHA also limits its mortgage exposure in homeowners associations. With some limited exceptions, no more than 50% of the units in an association can be FHA insured.

FHA loans for planned-unit developments

FHA no longer requires lenders to review budgets and legal documents for planned-unit developments.

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Home Sellers Guide To Success

Step 1: Plan/Prepare

Some 5 million existing homes are sold each year, and while each transaction is different every owner wants the same thing – the best possible deal with the least amount of hassle and aggravation.

Unfortunately, selling your home “by owner” has become more difficult and complex than it used to be.  There are new seller disclosure forms required, longer and more formal sales contracts, and a wide range of environmental concerns that have all emerged in the past decade.  More importantly, the home-selling process has changed.  Buyer brokerages – where REALTORS® represent only home buyers – is now common nationwide.  

Selling in today’s real estate world requires experience and training in such fields as real estate marketing, financing, negotiation and closing – the very expertise available from local REALTORS®.

Are you ready?

The home-selling process typically starts several months before a property is made available for sale. It’s necessary to look at a home through the eyes of a prospective buyer and determine what needs to be cleaned, painted, repaired and tossed out.

Ask yourself: If you were buying this home what would you want to see? The goal is to show a home which looks good, maximizes space and attracts as many buyers and as much demand as possible.

While part of the “getting ready” phase relates to repairs, painting and other home improvements, this is also a good time to ask why you really want to sell.

Selling a home is an important matter and there should be a good reason to sell, perhaps a job change to a new community or the need for more space. Your reason for selling can impact the negotiating process so it’s important to evaluate your needs and wants.

When should you sell?

The marketplace tends to be more active in the spring and summer months. The summer is also typically when most homes are likely to be available.

Generally speaking, markets tend to have some balance between buyers and sellers year-round. In a given community, for example, there may be fewer buyers in late December, but there are also likely to be fewer homes available for purchase. So, home prices tend to rise or fall because of general demand patterns rather than the time of the year. Owners are encouraged to sell when the property is ready for sale and there is a need or desire to sell. 

Step 2: What Type of REALTOR® Should I Use?

Before placing a home on the market you should identify REALTORS® in your community who can assist with the sale.  There are many options to choose from in todays market place.  Listing your home with a Flat Fee REALTOR® is a great option for those experienced sellers that want to save up to 50% in commissions.  If you’ve tried selling “for sale by owner” a Flat Fee REALTOR® may be the next logical step.  Choosing a  traditional Full Service REALTOR® may be a better option for you if you’re a first time home seller or you’re simply too busy to handle the details of marketing your own home.   

A Full Service REALTOR® typically visits your home to assist with preparation and initial pricing, arranges for required inspections and helps the owner prepare for closing while a Flat Fee or Limited Service REALTOR® is not directly involved in these activities.

Why you need the MLS (multiple listing service)?

In todays tough market, advertising in your local MLS, Realtor.com and other popular websites is a must, gone are the days where a simple “for sale by owner” sign in the yard was enough to generate a sale.  According to the NAR approximately, 75% of home buyers worked with a real estate agent in 2010, real estate agents use the MLS.  Using a Flat Fee REALTOR® can save you thousands in commissions while providing you with the critical MLS exposure you need to sell in todays market place.    

How do you choose a REALTOR®?

Whether you’re a first-time seller or someone who has sold many homes, there are several ways to find a local Flat Fee or Full Service REALTOR®:

  • Search the web using Google or one of the other popular search engines.
  • Get a referral from a friend or relative
  • Look for REALTOR® signs in your community.
  • Check the classifieds in local newspapers and “shopper” publications.
  • Look at the listings in local real estate magazines and on websites such as Realtor.com. 

Step 3: Set the Price

Every reasonable owner wants the best possible price and terms for his or her home. Several factors, including market conditions and interest rates, will determine how much you can get for your home. The idea is to get the maximum price and the best terms during the window of time when your home is being marketed.

In other words, home selling is part science, part marketing, part negotiation and part art. Unlike math where 2 + 2 always equals 4, in real estate there is no certain conclusion. All transactions are different, and because of this, you should do as much as possible to prepare your home for sale and engage the REALTOR® you feel is best able to assist you in selling your home.

What is your home worth?

All homes have a price, and sometimes more than one. There’s the price owners would like to get, the value buyers would like to offer and a point of agreement which can result in a sale.

In considering home values, several factors are important:

  • The value of your home relates to local sale prices. The same home, located elsewhere would likely have a different value.
  • Sale prices are a product of supply and demand. If you live in a community with an expanding job base, a growing population and a limited housing supply, it’s likely that prices will rise. Alternatively, it’s important to be realistic. If the local community is losing jobs and people are moving out, then you’ll likely have a buyer’s market.
  • Owner needs can impact sale values. If owner Smith “must” sell quickly, he will have less leverage in the marketplace. Buyers may think that Smith is willing to trade a quick closing for a lower price and they may be right. If Smith has no incentive to sell quickly, he may have more marketplace strength.
  • Sale prices are not based on what owners “need.” When an owner says, “I must sell for $300,000 because I need $100,000 in cash to buy my next home,” buyers will quickly ask if $300,000 is a reasonable price for the property. If similar homes in the same community are selling for $250,000, the seller will not be successful.
  • Sale prices are NOT the whole deal. Which would you rather have: A sale price of $200,000, or a sale price of $205,000 but where you agree to make a “seller contribution” of $5,000 to offset the buyer’s closing costs, pay a $2,000 allowance for roof repairs, fund two mortgage points, re-paint the entire house and leave the washer and dryer?

 Step 4: Market It

Each home is unique, the marketplace is always in flux, interest rates constantly change and new buyers search for homes each day.  Therefore marketing can entail a variety of different strategies.  Once listed by an agent, your home will be entered into the local MLS (Multiple Listing Service) and within 24 hours appear on many other popular websites.  Having open houses, allowing easy access to your home via the use of a lock box and networking with both local and out-of-town agents are all proven ways to increase the likelihood of a sale.

Experienced REALTORS® base their marketing efforts on previous transactions and ongoing research.  For instance, according to the National Association of Realtors (NAR), 70 percent of all buyers use the internet as their first source when searching for a home.  NAR numbers also show that most households move within 10 miles of their current location while 20 percent move at least 50 miles.

If you look at a typical transaction you can see that there are five general areas where a Full Service REALTORS® can assist in the home-selling process. 

  • Preparation: Before being placed on the market, homes must be in “show” condition. REALTORS® can explain what repairs and upgrades are required for individual homes which are most likely to produce the best results.
  • Pricing: REALTORS® do more than price homes for sale, they also construct sale terms designed to speed the selling process.
  • Marketing: REALTORS® will execute strategies and programs to get the home sold. Typically this includes placement on the local MLS and RAARnet.com as well as related marketing, advertising and networking.
  • Negotiation: REALTORS® assist owners in the bargaining process, offering advice and counsel as offers are received and by working closely with legal counsel, tax specialists, appraisers, lenders and inspectors as required.
  • Closing: Once a contract for the purchase of a home has been accepted, a series of inspections and checks are typically required to satisfy buyers and lenders. REALTORS® can help owners complete the transaction process by assisting with the many requirements found in a typical sale agreement.

If you feel you can handle most of these areas yourself and/or are tired of selling “by owner” then a Flat Fee REALTOR® may be an good option for you.

Step 5: Sell It

What’s an acceptable offer?

The goal of every seller is to have a line of buyers outside the front door, each clutching higher and higher offers. And while this has been known to happen, in most markets there is some balance between the number of buyers and sellers. A number of factors determine whether a buyer’s offer is acceptable. They include:

  • Is the offer at or near the asking price? Is the offer above the asking price?
  • Has the buyer accepted the asking price or something close? Has the buyer then buried thousands of dollars in discounts and seller costs within tiny clauses and contract additions?
  • What is the alternative to the buyer’s offer? If a home has not attracted an offer in months, then sellers need to determine if a better deal is possible — recognizing that each month costs are being incurred for mortgage payments, taxes and insurance.
  • Does the owner have enough time to wait for other offers?
  • What if no other offers are received?
  • What if several offers are received? Do you choose the high offer from the purchaser with questionable finances who may not be able to close, or a somewhat lesser offer from a buyer with pre-approved financing?

In each case, owners with assistance from a REALTOR®, will need to carefully review offers, consider marketplace options and then determine whether an offer is acceptable.

What is a counter-offer?
A counter-offer is nothing more than a new offer. And just as the buyer had three options in response to the owner’s original price and terms, the seller can now choose one of three reactions: accept the offer, decline the offer or make a fresh counter-offer.

Offers and counter-offers reflect the back-and-forth activity of the marketplace. It’s an efficient and practical process but also one that may contain tricky clauses and hidden costs. The REALTOR® who lists your home can explain the local bargaining process in detail and assist in the actual negotiations.

How do you negotiate?
It’s sometimes argued that negotiation must produce one “winner” and one “loser.” Others suggest that a “win/win” situation is possible where each side gets something of value.

Real estate bargaining typically involves compromises by both sides. It’s not war; it’s not winner-take-all; and it’s not the time to take personally any comments made by purchasers.

Instead, negotiating should be seen as a natural business process; buyers should be treated with respect; and owners should never lose sight of either their best interests or their baseline transaction requirements. These are the standards unique to each owner, which must be met before the home can be sold.

Step 6: Close

It might seem as though once a sale agreement has been signed that the selling process is complete. Not only is it not over yet, but some of the most complex aspects of a real estate transaction now begin.

A sale agreement not only sets a purchase price for the home, but also a series of terms and conditions. For instance:

  • Contracts routinely depend on the ability of a buyer to obtain financing, which is why most sellers prefer buyers with pre-approval letters from lenders.
  • A growing percentage of transactions involve a home inspection, or a physical review of the home by a trained and independent observer.
  • Lenders will establish numerous conditions before granting a loan. They will want a title exam, title insurance to protect against title errors, termite inspections, surveys and an appraisal to assure that the home has sufficient value to secure the loan.
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Fielding a Lowball Purchase Offer on Your Home

Before you ignore or outright refuse a very low purchase offer for your home, consider this, more times then not, a counteroffer and negotiation will turn that low ball purchase offer into a sale.

Check your emotions

A purchase offer, even a very low one, means someone wants to purchase your home. Unless the offer is laughably low, it deserves a cordial response, whether that’s a counteroffer or an outright rejection. Remain calm and discuss with your real estate agent the many ways you can respond to a lowball purchase offer.

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How to Sell Your Home in a Slow Market

Even though the real estate market has slowed down in recent months, there are still plenty of homebuyers eager to make a purchase. Knowing how to prepare your home for sale, when to allow access for showings, and how you can offer buyer incentives will help you find the right buyer, even in a declining market.

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