ForSaleByOwner.com: Blog

The May issue of Money magazine is out, and it’s all about how to get your house sold in a stubbornly resistant real estate market.

Money’s conclusion:  Yes, of course, your house has to be in top condition. And staged. But guess what works best?

The right price.

Here’s ForSaleByOwner.com’s Matt Brown, director of business development, as quoted in the Money story:

"Incentives can perk buyers' interest just as much as price cuts, says Matt Brown, director of business development at ForSaleByOwner.com. In fact, many buyers will agree to a higher price if their upfront costs are lowered, since they often run short on cash. 

If you can afford it, offer to cover the buyer's closing costs or pay the first year's property taxes or condo or homeowner association dues. However, those freebies may be practically standard, particularly in areas rife with distressed properties. "

Implied: cut your transaction costs so you can free up money for buyer’s incentives. How can you cut your transaction costs? We think we know: the less commission you have to pay, the more negotiating room to play.

Relief might be in sight for those teetering on the edge of foreclosure. Regulators are closing in on a plan forcing lenders – and more importantly – their servicing arms – to adopt orderly and – dare we hope? – logical processes for working with folks who can’t afford their houses any more.

As reported by our sister publication, the Federal Housing Finance Agency announced last week that servicers will be required to contact homeowners earlier, more often and to actually make decisions…or else.

The hoped-for outcome: that homeowners won’t be stuck having two contradictory conversations at once with their lender – one conversation about walking away from the house and the other promising to work things out so the homeowner can keep the house.

Here’s the official quote:

"The updated guidelines ... address the so-called 'dual track' by requiring servicers to contact borrowers as soon as they become delinquent and focus solely on remediating that delinquency," the agency said. "The foreclosure process may not commence if the borrower and servicer are engaged in a good-faith effort to resolve the delinquency. The servicer must conduct a formal review of each case to ensure a borrower has been considered for foreclosure alternatives before the loan is referred for foreclosure. Even after foreclosure processing begins, financial incentives are provided to encourage servicers to continue to help borrowers pursue a foreclosure alternative."

What does this mean for you? If you have little to no equity, and you need to sell, it might be worthwhile to wait for a few weeks. Then, choose a low-transaction-cost sales channel (yes, like selling by owner!) and you might be able to squeak out with minimal additional financial damage.

Image courtesy of Morguefile contributor jdurham.

• Buyers factor in the slide in value they figure they’ll have to absorb in the next few months
• New houses just coming on the market are smaller and less fancy, priced to compete with existing houses – especially bigger, amenity-rich houses built in the last decade. That sets up sellers of existing houses for a no-win scenario competing with builders.
• Even well-qualified buyers can see deals crumble as lending standards change daily.

We love regal red as much as anyone, but royal blue makes your front door pop, too. Just take a look at this  eyecatching entry.


Nothing says 'Gothic" like a rich cereulean, especially when paired with a pointed arch. This weathered blue door has undertones as cool as the gray cobbled stone it is set into.

Gray and blue are a subtle combination. Imagine a red door popped into this stone wall: the contrast would be jarring.

Other colors that work well with slate and weathered stone: lavender and green.


Image courtesy of Morguefile contributors  Eduardo.

Home values are down by about a third. Millions are scarred by foreclosure.  The cost of homeownership is rising. So why do most Americans still think that their homes are sweet investments?

The latest from the Pew Research Center is that 47% of homeowners have seen their houses lose value in the past five years. Another third think that their house values  have held steady. And an unshakably optimistic 17% think that their houses are worth more than they were five years ago.

Homeowners don’t expect things to get better soon. Of those who say their homes have lost value:

•  86% say they expect it to take at least three years for values to recover to pre-recession levels
•  42% say it will take at least six years
•  10% say it will take more than 10 years

So what? A huge majority – 82%  -- of the homeowners who say that their houses have lost value have not lost heart in homeownership as a wealth building tool.

• 37% believe strongly
• 45% agree

 that homeownership is the best long-term investment a person can make.

Logic indicates that the definition of ‘investment’ must have changed, because the numbers have gotten worse. The intangible attributes of homeownership – the solidity of owning the place that anchors your life – defies economic reality. Sometimes, common sense trumps charts. This is one of those times.  It’s home. And it’s an asset that delivers in ways that can never show up on a spreadsheet.

Image courtesy of Morguefile contributor jetolla.

Watching HGTV the other night, it was painful to observe a young couple absorb the realities of their situation: if they accepted an offer on their townhouse – an offer for the same amount they had paid to buy it –they would bring $8,000 to the closing table after the euphemistic ‘transaction costs.”


Their agent sat on their sofa, her face carefully neutral, waiting for them to not cry. They’d been in the townhouse for about five years. They’d had two babies while they were there. They had maintained it, even improved it. Were it not for the ‘transaction costs,’ they would have gotten back what they put into it.

The agent’s commission cost them dearly. It wiped out any shred of equity they might have eked out.

Did she earn it? Hard to tell from the show. But in our experience, agents rarely do.

Agents like to say that they only get paid when they sell the house, the implication being that that aligns their economic self-interest with that of their clients. That’s not so.

The entire ForSaleByOwner.com business model is built on the premise that homeowners should be first in line to claim the equity that they built. That’s the theme of our new television advertising campaign, which juat just went live in the Chicago area.

It’s yours for a reason. Why wouldn’t you fight to keep it?

Image courtesy of Morguefile contributor dtl.

Just a couple months ago, the Harvard Joint Center on Housing issued a rosy forecast for the U.S. remodeling industry. Barely into spring, the bloom is off that rose. This week, the center pulled back on its forecast. Citing gloomy reports from contractors, the center now predicts that home remodeling will be essentially flat for the year.

What’s up with the downgrade?

Home values. People aren’t willing to spend on houses that aren’t appreciating.

But if you are planning to be in your house for the forseeable future, this could be déjà vu all over again for remodeling bargains. Contractors like to see a plump pipeline of work. That’s not happening – hence the adjusted center forecast. That means that if you postpone your spring project to the summer or even fall, you might get a terrific bargain.

You’ll have to negotiate, of course. But everyone from architects to painters are likely to be willing to work for last year’s rates. Also watch for late-season bargains on materials, especially upgraded materials that might mean more to you than to the flipper down the street.

Flippers – or, as they like to be called, investors – are back in force. Their projects have buoyed activity as measured by municipal construction permits.

By definition, flippers are putting in plain-Jane materials – good enough to call the house improved, but not fancy enough to impress a move-up buyer. That means that you can likely get higher-grade finishes and materials at a discount. But remember –it’s only a a good deal if it’s something you want for your own enjoyment. Don’t count on getting any kind of payback from a granite countertop.

Image courtesy of Morguefile contributor dancerinthedark.

Worried about what your house is worth?

Your neighbors are too. The Rasmussen polling outfit just released the latest homeownership confidence stats: barely half of Americans – 52% -- are confident that they are above water on their mortgages. (That means, that the house is worth more than the loan.)

Two-thirds of those who bought during the bubble – three to five years ago – figure they are underwater. (That means that they owe more on the mortgage than the house is worth.)

Yikes.

As spring emerges and we finally get to stroll our neighborhoods, it’s too tempting to note which houses are for sale and how much those homeowners want. Then, we draw our own conclusions – good, bad and depressing.

Only an appraiser knows for sure what your house is worth. Wouldn’t it be great to read an appraiser’s mind?

You can! Well, vicariously. Check out  the latest article in our Education section, which walks through a house with an appraiser. Then review the tips from experienced appraiser Sharon Bagby. At the very least, you’ll get some perspective on the likely value of your house. And at the very best, you might – just might – be pleasantly surprised.

Image courtesy of Morguefile contributor Dave.

 Congress is wading through the implications of the proposal to require a 20% down payment and a perfect credit history to get the best deal on a mortgage.  
Requiring 20% down to get the most favorable mortgage rate isn’t being fiscally responsible. It’s punitive. And it’s disrespectful to American families that have managed their finances responsibly so they could take advantage of this rare moment in the real estate market.

Image courtesy of Morguefile contributor gracey.

Feeling taxed?

Aren’t we all.  By the time those tax returns are done,  we’ve had more than enough of receipts, forms and math.

But don’t chuck all that paper into a boot box and throw it back into your file cabinet. While you’ve got the IRS on your mind,  take a step back and think about your real estate goals for the next 12 months.

• If you’ll be counting on the still-available mortgage interest deduction to get you into a new house or a vacation home, it’s essential to review the IRS guidelines for the deduction.
• Can you capture a thousand dollars or more by claiming the home office deduction? It’s a clear cut case if you are self-employed and have a dedicated space. You still might be able to get the deduction if you telecommute, but check the IRS guidelines first. The last thing you want do is convert precious space to an office only to find out that the IRS doesn’t think you do enough work in it to let you write off the cost of setting it up.
• If you are counting on the  mortgage deduction to make a home purchase affordable, be sure you understand some of the little-known tax implications. These days, seller financing is popular, but be sure the deal you strike squares with mortgage deduction fine print.

Image courtesy of Morguefile contributor Dr. Bob.

The spring selling season is trying – really trying hard – to get going. But lending complications are sprouting already, rather like dandelions crowding out the first spring daffodils.

Did you know that you get socked with an interest penalty simply for paying off your FHA (Federal Housing Administration) loan when you sell?

And did you know that the Feds are moving rather rapidly to require a 20% down payment to get the best mortgage rates? The same proposal also caps the debt-to-income ratio at 28%, and totally monthly household debt of only 36%.

(We gleaned these showstopping developments from stories just published at the websites of the Los Angeles Times and the Hartford Courant, which are, like ForSaleByOwner.com, owned by Tribune Corp.)

Both policies will derail home sales this spring. With equity shrunk and shrinking, sellers need every scrap to roll over to their next home purchase. (See the new ForSaleByOwner.com pricing guide for more about home value trends.)  And what’s the point of the 20% down payment threshold to capture the best mortgage rate? Gauging your ability to pay back the loan is the entire point of credit scores. Sure, a higher downpayment means you have more skin in the game. But it’s downright punitive to link it to lower mortgage rates.

Image courtesy of Morguefile contributor haligi.

In an era of free and abundant real estate information – like the brand-new ForSaleByOwner.com Pricing Guide -- the CMA has been rendered nearly moot. With public records databases online and a wide menu of free or low-cost tools for thumbnailing the value of your house, there is no reason to beg a real estate agent to wave her magic wand over secret multiple listing reports and come up with a CMA.

Agents like to talk about the CMA as though it is a rare prize. The truth is that the CMA was, is, and always will be, a marketing tool. Once you sign with an agent, agents immediately start amassing evidence that your house really shouldn’t be put on the market for a price at the upper end of the CMA…the CMA that, remember, was the gospel truth just a week or two earlier. Suddenly, the CMA becomes a CYA: the agent starts to push you to the lower end of the spectrum because that ensures her an easy, quick sale.

Let’s pause for some agents to pipe up about how they don’t get paid unless the house sells, therefore they are paid for results.

Nice try. As we outline , agents’ business models are severely misaligned with what’s best for their clients. That’s why they are so quick to abandon their carefully crafted CMA: it’s not their own A that they ultimately strive to C.