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Listing and selling real estate is a complex task that can, at times, seem overwhelming and complicated. We know this all too well, we work with sellers and buyers every day! We know there are a lot of questions and concerns you might have. After all, buying and selling real estate is likely the largest financial decision most people will ever make. If you have any questions – don’t wait around! Drop us an e-mail or give us a call. How much should Escrow be? Escrow, aka Good Faith Deposit or Earnest Money, is a deposit given from the buyer to the seller along with an offer made for the sale and purchase of a property. There is no specific rule as to how much money should be escrowed. Some of my collegues even say escrow isn’t even needed. Others believe an offer isn’t valid if there is no escrow deposit. You can see that escrow can be a tricky thing and this is only the beginning. Escrow deposits have one function, they are a gesture from the buyer to the seller saying “I’m serious about purchasing your home!” At the time of closing, escrow deposits are being deducted accordingly as they are part of the money you will received in exchange for your house. As a general rule of thumb, and this is our own way of doing business, we will not accept anything less than at least $1,000 in escrow on behalf of our sellers. If possible, we like to see a higher amount. Why? We are not happy to take the seller’s property off the market for a buyer that isn’t actually serious about purchasing it. It does happen that buyers make offer but aren’t really sure whether or not they actually WANT the property. While the property is off the market, the seller might be missing out on other buyers that would purchase the property, maybe even for a higher price. We do not hold escrow accounts. We deposit escrow checks with the title company that will facilitate the closing. If you receive an escrow check, we suggest you do the same and make sure you and the buyer are in agreement of how the money is being disbursed if the contract falls through. When you are dealing with First Time Homebuyers, make sure they do understand the difference between the escrow deposit to you and the down payment they might have to make in order to get loan approval. Both are two different things but are often refered to as “down payment”. While escrow is a down payment (sort of), it has nothing to do with the buyer’s mortgage. Things that could go wrong Aside from listing and marketing a home for sale, our job as licensed professionals doesn’t end when there’s an offer on the table. To the contrary, this is where the actual work begins. Let me explain on a case study: We received an offer with regular financing terms on one of our listings. The buyer is a young woman, it is her very first home. The offer isn’t exactly a full price offer but the seller decides to accept because the property has been on the market for a while and he would like to move on. We contact the loan officer to open a line of communication. The buyer is being represented by another agent, but we want to make sure the loan process goes smoothly so we can close on time as per contract. After a few days, the conventional loan turns in an FHA loan. The seller raises the question whether or not the buyer is actually qualified to purchase the home. We get in touch with the buyer’s loan officer to get details. Turns out everything is going fine, they are good to go even with FHA. We right up an addendum to the contract because the loan terms have changed. Then they want to add the buyer’s boyfriend to the contract because they get better loan terms with him in the picture. We write up another addendum adding her boyfriend to the contract. Then the buyer’s grandfather wants to be on the deed because he’s helping them out with the down payment. In order to do that, the loan papers have to be changed and the contract has to be changed, once again. All addendums are being written and all changes are made. Then the grandfather decides it’s too much hassle and he wants to be added to the deed after closing. Again, we amend the contract and addendums…………you see where this is going, right? 1. When you receive an offer on your property, make sure you have contact information for the buyer’s mortgage company. You want to make sure the loan process is going the way it should go. 2. Make sure your buyer is actually qualified for the loan and it will close on time. 3. Look out for any changes the buyer wants to make to the original offer and consider how these changes would affect your bottom line or the probability of closing the transaction. 4. Make sure you and buyer agree on how to resolve escrow disputes that might arise. Home Warranty Coverage for Sellers Whenever we list a home for sale, we ask our client about purchasing a home warranty for the buyer to go into effect at the time of closing. Why? Especially with older homes, thing can and WILL go wrong and for some reason mostly soon after the purchase. From experience we know that buyers will be more reluctant to make a full price offer or make an offer at all once they find out the A/C is 15 years old or the kitchen appliances are original. With a home warranty, the buyer can be more confident making a full price offer because if the A/C breaks, it will be either repaired or replaced. In the past, we have used home warranties successfully to get a higher sale price for our sellers and give buyers peace of mind. So, why is additional Seller’s coverage beneficial? Imagine your A/C breaks while your home is on the market. Your home is shown frequently and the buyers wonder why there is no A/C running when it’s 95 degrees outside. Instead of having to pay for a costly repair or a new unit altogether, it will only cost you a small service fee and have the A/C taken care of. Imagine your home is under contract and the inspections come up with all kinds of issues and things that should be fixed. Again, for a small service fee you can have noted repairs done and don’t have to worry about losing a buyer. If your home is older but you are looking to get top dollar for it, it might be worth checking into a home warranty for the buyer and yourself to be covered during the listing period. Sell Your Neighborhood, too! When you are trying to sell your home on your own, keep in mind that you must sell the neighborhood as well. In order to do so, start compiling information about your neighborhood. What are the average home values? Are there many tenant occupied properties? Is it far to schools? Are there parks? Does the area have many foreclosure filings? What about the crime rate? Is the neighborhood popular with buyers? If so, why? How far is it to WalMart? How far to the mall? These things are important to buyers and the more of their questions you are able to answer the better are your chances of selling your home. Our advantage is that we are in different neighborhoods every day. We know the average age of homes in Sebring Hills, we know the older parts of Sun’n'Lake are mostly tenant occupied, we know that some streets in Avon Park Lakes are not paved but the county is working on catching up. When we list a home for sale, we like to include a little summary about the neighborhood with our marketing materials. Check out our ”Neighborhood Special” about River Greens Golf Course in Avon Park. OPEN HOUSE – things to consider Holding an Open House does involve some planning and consideration: Advertising: We know from experience that the least effective form of advertising an Open House is an ad in the newspaper. In fact, we have never had anyone attend any of our Open Houses because they saw our ad in the paper. So, how to you get people to attend? Send invitations! The people that live in your neighborhood have friends and family that might want to purchase your home. Make sure your invitation gives a date, time, driving directions and send them out a week prior to your Open House. Another great way to get some traffic to your Open House is using directional signs. Use plenty of them and make sure they are highly visible. You can place the signs a day prior if the date of the event is visible on the sign. We find that Saturdays are best for Open Houses as most people are out and about running errands and shopping garage sales. What’s in it for me? In order to get people to do anything you have to give them something of value. For an Open House, offer snacks and refreshments. We have done hot dogs and chips or assorted cheeses with summer sausage. We keep a basket with items such as plastic cups, cocktain napkins, plastic silverware etc. handy so when the big day comes, we’re ready to go. Make sure you have plenty of brochures ready to give to your guests to take home. Sign-In sheet: You want to make sure all your guests sign in and at least their name and phone number, if possible an email address. We like to send all our guests a personalized Thank You card and follow up with a phone call to see if there are any questions. For your convenience, we are providing sign-in sheets for you to download here. What is your assessed value? What is your assessed value and what does it have to do with selling your home? You may have noticed that your annual property tax bill has either gone up or down. Annual property taxes are based on a properties assessed value. If you are homestead exempt, you can generally take $50,000 off the assessed value to arrive at your taxable value. However, the assessed value might be a key player for buyers when considering making an offer on your home. Let’s say you are asking $130,000 for your home. Tax records reveal that the Highlands County Property appraiser only values your home at $80,000. Now the buyer will probably think “They want me to pay $130,000 for a home that’s taxed as a $80,000 home?” While the Highlands County property appraiser doesn’t dictate sale prices for Highlands County real estate, the assessed value of a home is still an indicator many buyers will take into consideration before making an offer. You can check your property’s assessed value and taxable value right at the Property Appraiser’s website: http://www.appraiser.co.highlands.fl.us/index.shtml Simply click on the “Search Property Records” link on the top of the page. Title Insurance – Owner’s and Lender’s Policies Owner’s Policy: it assures a purchaser that the title to the property is vested in that purchaser and that it is free from all defects, liens and encumbrances except those which are listed as exceptions in the policy or are excluded from the scope of the policy’s coverage. It also covers losses and damages suffered if the title is unmarketable. The policy also provides coverage for loss if there is no right of access to the land. Although these are basic coverages, expanded forms of residential owner’s policies exist that cover additional items of loss. The liability limit of the owner’s policy is typically the purchase price paid for the property. As with other types of insurance, coverages can also be added or deleted with an endorsement. There are many forms of standard endorsements to cover a variety of common issues. The premium for the policy may be paid by the seller or buyer as the parties agree; usually there is a custom in a particular state or county on this matter which is reflected in most local real estate contracts. Consumers should inquire about the cost of title insurance before signing a real estate contract which provide that they pay for title charges. Title insurance coverage lasts as long as the insured retains an interest in the land insured and typically no additional premium is paid after the policy is issued. Lender’s policy: This is sometimes called a loan policy and it is issued only to mortgage lenders. Generally speaking, it follows the assignment of the mortgage loan, meaning that the policy benefits the purchaser of the loan if the loan is sold. For this reason, these policies greatly facilitate the sale of mortgages into the secondary market. That market is made up of high volume purchasers such as Fannie Mae and the Federal Home Loan Mortgage Corporation as well as private institutions. The American Land Title Association ("ALTA") forms are almost universally used in the country though they have been modified in some states. In general, the basic elements of insurance they provide to the lender cover losses from the following matters: 1) The title to the property on which the mortgage is being made is either.
2) There is no right of access to the land. 3) The lien created by the mortgage:
As with all of the ALTA forms, the policy also covers the cost of defending insured matters against attack. Elements 1 and 2 are important to the lender because they cover its expectations of the title it will receive if it must foreclose its mortgage. Element 3 covers matters that will interfere with its foreclosure. Of course, all of the policies except or exclude certain matters and are subject to various conditions. There are also ALTA mortgage policies covering single or one-to-four family housing mortgages. These cover the elements of loss listed above plus others. Examples of the other coverages are loss from forged releases of the mortgage and loss resulting from encroachments of improvements on adjoining land onto the mortgaged property when the improvements are constructed after the loan is made. Accepting an Offer – Pay Attention to Legal Details! The legal aspect of the sale is very critical. Be sure you get any offer in writing, along with a substantial earnest money deposit. While a verbal offer might be binding, it must be in writing in order to be enforcable. We recommend that you contact your real estate attorney and have a contract prepared that you can have on hand. If you find a buyer, you want to get his name on the dotted line without any delay. If you have to wait until you meet with an attorney later, there is too great a probability the buyer might cool off in the meantime. And that couldn’t do anything but hurt your price, could it? Your attorney can also provide you with the required disclosures and information on the legalities of handling the earnest money deposit. There are several versions of a bill of sale available in office supply stores and even downloadable online. When using these forms, there are several things you should keep in mind: Does the buyer have an inspection period? If so, what are the terms? Will you be making any repairs? If so, to which amount? Who will hold escrow? If you decide to hold escrow yourself, make sure you and the buyer are clear about any interest on the amount. How will you handle a possible escrow dispute? How is the buyer to to pay for your property? If the buyer is financing the purchase, will the offer be contingent upon financing? Was your house built before 1978? Think lead-based paint! Lead is a highly toxic metal that may cause a range of health problems, especially in young children. When lead is absorbed into the body, it can cause damage to the brain and other vital organs, like the kidneys, nerves and blood. Lead may also cause behavioral problems, learning disabilities, seizures and in extreme cases, death. Many homes and apartments built before 1978 have paint that contains high levels of lead. Lead from paint, chips, and dust can pose serious health hazards if not taken care of property. Sellers have to disclose known information on lead-based paint and lead-based paint hazards before selling a house. Sales contracts must include a disclosure about lead-based paint. Buyers have up to 10 days to check for lead. We have a FREE downloadable brochure available for you to give to potential buyers as well as a FREE generic lead-based paint disclosure form for you to use in your transaction. Assisting your buyer to obtain financing Most buyers will need financing and many buyers are more concerned about how much down payment they must make and what their monthly payments will be than they are about the price itself. If attractive financing terms are availalbe they can, and often will, pay a higher price. So for you to get the best price, buyers will need to be shown financing terms that they can afford. There are dozens of financing alternatives available today and this can be confusing to the average buyer. The more knowledgable you are about available financing, the better your chance of making a sale at the best price. You may want to spend some time visiting with several local lenders to learn what financing options would be available for your house. That way you can tell a prospect exactly what kind of down payment and monthly payments would be required. The lenders could also acquaint you with their underwriting guidelines so you could attempt to prequalify the buyer financially before accepting an offer and avoid taking your house off the market for a buyer that isn’t qualified to purchase it. Of course, another way of creating more attractive terms would be to hold part of the mortgage yourself or to assist in the financing cost. |