On-line home searches

It's no secret that today's home buyers begin their home search online. But it's not just anecdotal -

According to the latest release from the Pew Internet & American Life Project, 51% of all Internet users had taken an online home tour as of August of 2006. This is an increase from 45% just two years ago, in November 2004. With growth like this, it's no wonder that real estate brokers and agents are going online to promote themselves and their listed properties.

Pew found that age, not income, is the best indicator of who will go online to search for a home: 27% of Internet users age 50-64 have looked at homes online, while 43% of users age 30-49, and 51% of users age 18-29. This suggests that perhaps brokers and agents should target their websites to tech-savvy young adults rather than more mature homebuyers - even though it may be more likely that mature homebuyers will have the resources to buy the expensive properties. (Perhaps I knew that instinctively, and that's why my new website - coming soon! - will have a flash slideshow, a do-it-yourself mortgage calculator and home search tools.)

Education is another indicator of likely online homesearchers: 46% of Internet users who are college graduates have looked at homes online; 38% of those who have some college, and just 34% of high school graduates. Online experience also factors into the decision to look online for a home: Those with 6 or more years of online experience are 50% more likely (45%) than those with 4-5 years experience (30%), and nearly double those with less than 3 years experience (23%).

There are many more facts and figures in the full Pew Report published earlier this month by Senior Research Fellow Deborah Fallows. But this is not the last, or only, word on this topic.

Market Research finds buying power is hiding in empty nests, according to an article released on December 6 in Houston by The Media Audit. Among other things, the article reports that the Internet, along with newspapers, dominates the media interest of this group. So perhaps there is an online target market for real estate brokers and agents, after all, for more mature Internet users. As Tim O'Keefe says, in his real estate marketing blog, it's a little like "eggs are bad, then they are good for you type of thing."

The National Association of Realtors surveyed actual home buyers in 2003, rather than Internet users in general (as Pew did), and found that 71% began their home searches online. Given the growth in Internet use over the past 3 years, one can reasonably surmise that the number would be greater in a similar study today.

The bottom line, of course, is that online home searches are here to stay. It is my goal to make the most of this phenomena by developing a truly effectivce real estate website. I'd be very interested in hearing YOUR input about what you'd like to see in a broker or agent's website, so that I can incorporate it into my new and revised website which is now in development.

Other links:

• Lisa Phillips - Senior Analyst
• Talk about Online Real Estate - eMarketer.com

Feedback or more information:

• Email: mwoda@remax.net
• Website: www.MargaretWoda.com
• Crofton Real Estate

On-line home searches

Copyright 2006. All rights reserved. Margaret Woda

December Update - New real estate newsletter

If it seems to you like all the real estate economists are forecasting doom for the market, take a look at REAL TRENDS - DEC. 2006, which I'm sharing with you today. It may help you separate fact from fiction; it will, at least, provide some interesting reading for anyone who may be interested in real estate, whether you are a real estate professional, homeowner, investor or potential buyer.

I had intended to piggyback on some of these articles and insert my own 2 cents, but it's fairly lengthy. Why don't you take a look, send me your comments, and I'll decide from there which elements of the report to expand upon in future blogs.

This update is published by the Metropolitan Regional Information System (MRIS), a regional multiple listing service owner by local associations of REALTORS in the Middle Atlantic states.

REAL TRENDS - DEC. 2006

For feedback or more information:

• mwoda@remax.net
• www.MargaretWoda.com
• Crofton Maryland Real Estate

December Update - New real estate newsletter

All Offers Are Not Created Equal

After weeks of preparation, agonizing over the pricing decision, the inconvenience of showing your home… you finally get that phone call you’ve been eagerly waiting to receive. “There’s an offer on your home!” Now what, you ask yourself.

There are a number of issues to consider when you evaluate any offer on your property. For example:

Price

Price is always the first thing that homeowners want to know about an offer. How close is the offer to your asking price? Remember, the bottom line is actually more important than the sale price. For that reason, estimating your net proceeds is an essential element when considering whether to accept any offer. You may also wish to consider the strength of the market – ask yourself how likely it is that another buyer with a “perfect” offer is just around the corner. In a seller’s market, you can be more picky; in a buyer’s market, you’d better work with any offer you receive to reach an agreement.

Contingencies

Virtually every home purchase contract has some contingencies, and many of these are extremely reasonable. But it's important to consider the potential impact of these conditions. It may be advisable to accept a lower price with few contingencies over a higher figure with a large list of conditions.

Financing is a contingency that appears in nearly every contract – if the buyer cannot obtain financing for any reason, the contract will terminate. You will find an appraisal contingency in most contracts – if the property does not appraise at the agreed upon sale price, it’s back to the drawing board! Another common contingency is a home inspection; while this is a reasonable contingency, it can become a starting point for renegotiating terms of the contract.

Some contingencies can be very risky, such as a home-sale contingency. In this case, a home seller simply trades the risk of selling his own home for the risk of selling a different one - and with far less control over factors which impact the sale of the buyer’s current home. There must be a compelling reason (or two or three) for even considering a home-sale contingency, let alone accepting one as a condition of your home sale.

Buyer's Qualifications

Since it is unusual for homebuyers to have a suitcase full of cash for purchasing your property, a pre-approved buyer is the next best thing. It is important to distinguish between pre-approved and pre-qualified buyers, so let me explain the difference: Pre-qualification is simply an opinion of whether the buyer appears credit-worthy, as opposed to pre-approval which is based upon verification of the buyer’s income, assets, and other obligations.

Please keep in mind that even a pre-approval is not final, however, because it will always be subject to an appraisal of the property and possibly certain inspections.

Seller's Concessions

A buyer may ask you to pay some or all of their closing costs; to include some personal property such as window coverings; to make changes to the property such as restoring a finished garage to its original state; to allow the buyer to occupy the property prior to settlement. Concessions such as these could mean the difference between selling your property or keeping it on the market for several more days, weeks or months.

You will have to consider each request to determine how it impacts your home-selling goals. It’s possible that a buyer would ask for several concessions that you are more than willing to make in order to sell your home. However, you are not obligated to make any concession that isn’t offered in your initial listing for the property.

Multiple Offers

If you are fortunate enough to receive multiple offers, review each one carefully and rank them based upon pre-determined factors such as the bottom line, timing, buyers’ financial qualifications and the presence or absence of contingencies and concessions. Once you decide which contract offers terms most closely aligned with your priorities, begin negotiations with that homebuyer. If agreement cannot be reached, move on and negotiate with another homebuyer. Just be careful not to negotiate with more than one homebuyer at a time, because you only have one house to sell, and you don’t want to end up in court.

Your Response

You have three choices when you receive an offer: accept it, reject it, or make a counter-offer. Frankly, it is rare that home sellers receive a “perfect” offer than can be accepted without any negotiations, but it does happen occasionally. I’ve even had sellers who received thousands of dollars over the asking price, no contingencies (not even financing or appraisal), and perfect timing. But don’t count on this happening – especially not in a buyer’s market.

I rarely recommend rejection, even when an offer seems outrageous, and even when it’s a seller’s market. Some buyers and buyers’ agents use a strategy of testing the priorities of home sellers by offering an extremely low price and asking the seller to accept multiple contingencies and concessions. You have nothing to lose, except a few minutes, by making a genuine counter-offer that reflects the bottom line you will accept. At least this keeps the door open with this buyer for future more realistic negotiations.

Most buyers make an offer in good faith, asking only for concessions and contingencies that reflect the buyers’ priorities. More often than not, we can compromise and reach agreement. If you are my client, I will help you craft a counter-offer to satisfy your goals as well as those of your prospective buyer.

For feedback or more information:

• mwoda@remax.net
• www.MargaretWoda.com
• Crofton Maryland Real Estate

All Offers Are Not Created Equal

Source: Margaret Woda

The GoHomeNetworks, Inc.

Metropolitan Regional Information Systems, Inc. (MRIS)

How much house can you afford?

Throw out all those magic formulas you heard about for calculating what price home you can buy. The truth is that there are many factors which go into the answer to this question. You cannot rely upon the online calculators, either, because different lenders have different programs and criteria that the calculators do not take into account, and the criteria may be flexible.

The best way to find out how much house you can afford is to touch base with me and my financial partners – or an experienced loan originator of your choice. In the meantime, here are the factors that impact the answer to "How much house can you afford?":

Down payment

The amount of cash that you invest, together with your loan amount, will equal the price of the house. The larger your cash down payment, the more house you can buy, and vice-versa. That being said, housing is not a liquid investment; it is necessary to sell, or at least re-finance, to take cash out of your home once it is invested.

For this reason, most people make a down payment no greater than 20% of the purchase price. Some homebuyers put down as little as 5% or even no money at all. It is important to know that borrowers who put down less than 20% may be charged an extra closing cost and/or monthly fee known as Private Mortgage Insurance (PMI), which protects lenders against loss if a borrower defaults. My lender partners usually help my clients obtain a loan with minimum down payment and no PMI charge – but this is an exception rather than the rule in the mortgage market.

Generally speaking, the down payment should be your personal funds such as savings, insurance proceeds, investments, equity from a previous home, or a gift. As part of your loan application process, your lender will verify your assets to confirm that your down payment is not borrowed money; if your down payment is a gift, the donor will be asked to provide a letter stating that no repayment is required or expected.

Credit qualifications

It’s a good idea for you to obtain a credit report in advance of making loan application so you can identify any inaccuracies and report them to the credit bureau(s); it could take 30-45 days for any inaccuracies to be verified and corrected on your credit report. If you do this several weeks before you start shopping for a home and mortgage, you may save time in the mortgage loan processing, which could be delayed if inaccuracies are not discovered until the lender orders your credit. While doing this is desirable, it is not required, and most people do not have inaccuracies on their credit reports.

Your credit-worthiness is indicated by the FICO Score on your credit report; borrowers with higher scores will have more loan programs to choose from and a better interest rate than borrowers with a lower score. My lender partners have a knack for finding the best loan for each of my clients – whether they have a recent bankruptcy, no credit at all, or the best credit in the world. Don’t let concerns about poor credit stop you from pursuing home-ownership because I’ve helped many clients overcome this obstacle to buy a home!

Monthly payment

The monthly payment for which you qualify depends primarily on these factors:

• Monthly income and obligations are measured against your gross income to make sure your mortgage payment does not exceed your ability to pay. First, your housing expense (PITI) is calculated as a percentage of your gross income (before any deductions), and then your total debt obligations (including your housing expense) are calculated as a percentage of your gross income. For example, if the ratios required for a loan are 28/36, that means your housing expense (PITI) cannot exceed 28% of your gross income and your total debts cannot exceed 36% of your gross income. The ratios permitted will vary from one loan program to another – some are more liberal than others.
• Current interest rates will significantly impact the amount of your home loan because just 1% could make it harder to achieve the required ratios. As interest rates increase, more creative mortgage loan programs become available to help homebuyers cope with the situation. For example, adjustable rate mortgages (ARM) or buydown mortgages. You can trust my lender partners to work with you to obtain a loan that works for you, whatever the interest rates may be. Whenever interest rates come down, you can refinance at minimal cost to take advantage of an improving market.
• Taxes, Insurance and Condo/HOA fees will be included in your totally monthly payment. For that reason, it may be prudent to purchase in a community with lower costs, assuming the purchase prices are equal.

Generally speaking, I am not a fan of online mortgage mills which may have a fancy website, but may be operated out of someone’s garage in Iowa or Pakistan. Local lenders work every day with appraisers who know this market well, who provide prompt turnaround and can be counted on for all of the background information required by the firm’s loan underwriter. And local lenders work on a first-name basis with local title companies to handle all the paperwork for your settlement.

It has been my experience that working with a local lender is the best way to determine how much house you can afford. If any lender quotes you significantly lower closing costs or interest rate, you can be sure that the loan will come with hidden costs that more than make up for any savings. Disreputable lenders rely upon the fact that you may not know what questions to ask, and even some credit unions rely upon your loyalty over common sense.

Instead of relying upon the Internet, online do-it-yourself calculators, or obsolete “magic formulas” to determine how much house you can afford, obtain a reliable answer from a local lender, or contact me through my website.

For feedback or more information:

• mwoda@remax.net
• www.MargaretWoda.com

How Much House Can You Afford?
Copyright 2001. All rights reserved. Margaret Woda

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