Submitted by Kim Lewis:
With the recent change of Mortgage opportunities, the Reverse Mortgage market is showing another option available to the senior segment of America. These loans are customarily used to allow the homeowner to convert a portion of the equity in their home to cash. They may need to use this cash for living expenses, or the borrower may need to defer the payment of their mortgage to lower monthly expense. The borrower remains in their house as long as possible, while the mortgage will not require any payments during this period. Repayment of the loan will occur when the borrower is no longer resident of the house, when it is sold, or refinanced by the borrower.
Reverse Mortgages offer financial freedom for many reasons:
A more comfortable retirement
Plans to travel
Help your grandchildren pay for college
Medical bills or other expenses
Home Improvements
Worry less about money
If you own your own home, as long as you live in it, you will maintain ownership, with no time limit. You will never make a payment on this loan, as long as you live in the home. You will never owe more than the value of your home at the time of loan approval. You can refinance whenever you want with no penalty. The cash you receive from this loan is tax-free.
To qualify for a Reverse Mortgage loan, you must own your own home, you must be 62 or older, and you should have a good amount of equity built up in your home. The homes that are eligible are single-family homes, condominiums, townhouses, manufactured homes, and 1-4 family owner-occupied residences. There are no medical or income requirements, no risk of default, and no restrictions on how you use your money.
You can choose payment options that suit you:
A lump sum upfront payment
Tenure- equal monthly payments
Term- equal monthly payments for a fixed period of months selected
Line of Credit- unscheduled payments or installments, at times and in amounts of
borrower's choosing until the line of credit is exhausted.
Modified Tenure- combination of line of credit with monthly payments for a fixed period
period of months selected by the borrower.
The amount of the loan is based on the appraised value of the house, the current interest rate, and the age of the borrower, or FHA mortgage limits in your area; whichever is less. The older the borrower and the longer you have owned the house, allows for a larger amount of cash available.
Surprisingly, the value of the house and the monthly payments are not adjusted during the course of the loan. The monthly payout does not stop, and the repayment of the loan is never more than the value at the time the loan is due. The “Tenure” payout seems to be the choice which allows continuous cash monthly as long as you reside in the home. The other payout options have limits on the time payout occurs. There is no obligation for the borrower to have the property re-appraised or a requirement of repair in future years.
The FHA Insured products are the most secure. These federally secured loans assure the borrower that changes in the home value, over the course of time, will not fluctuate the payout amount the borrower receives. Nearly 99% of the loans are based on adjustable rates of interest. The actuarial goal is to average 5.5% interest rate over the length of the loan. These changing rates are not directly affecting the borrower, as there are no payments required during the course of the loan.
But, be aware that as the loan ages, the interest will continue to accrue over time. When you no longer occupy your home as your principal residence, the loan becomes due. The amount due will be the total funds you received from the mortgage, the initial fees and closing costs financed as part of the loan, plus accrued interest. The repayment amount will never be more than the value of your home at the time the loan is due, for your protection. Should any equity remain after the debt is paid, this amount would become part of the estate for beneficiaries.
There are a few concerns you may want to consider:
The borrowers must be age 62 or older. If the qualifying spouse passes away, the younger spouse will not have the benefits of the loan. This means, the loan will become due. For security, you may want to wait until both are age eligible, before applying for the loan.
The fees charged for this type of loan could be up to 2x greater than normal loan closing costs, due to FHA Insurance and other factors. In most cases, the fees and costs are capped.
The equity in your home gradually disappears due to the accrued interest on the loan. So, as you receive payouts from this loan, you are charged interest on this obligation, which will be due at the end of the loan period.
The amount of cash you may draw from this loan may be greatly limited by your age, current interest rates, appraised value of your property, FHA mortgage limits in your area, and any current mortgage obligations outstanding on the property.
Many homeowners who have been conditioned to pay their debts, find that the obligation of this loan is uncomfortable for them. Those who have satisfied their original loan on their home, now have burdened their property with another debt.
The Federally insured reverse mortgages offer safeguards:
Advanced counseling to ensure that you understand fully about reverse mortgages and
your other options
Limits on the interest rate and origination fee
A ceiling on the repayment amount – it can never exceed the value of your home
Federally mandated consumer disclosures
The National Reverse Mortgage Lenders Association ( NRMLA) can provide information on where to find a Lender: Web site, http://www.reversemortgage.org. or call
NRMLA, 1-866-264-4466.
"For all things Real Estate!"
Tuesday, November 11, 2008
Wednesday, November 5, 2008
Common Mistakes Home Seller Make
Submitted by Lorrie Pierce
Selling a home is an experience many people look forward to with about as much enthusiasm as a root canal or an IRS audit. Perhaps it is because they know that with such an important investment, one misstep or wrong turn could be more than a “learning experience.” Making a mistake in selling a home can be a costly blunder that not only jeopardizes the sale, but also can mean hundreds or thousands of dollars in lost profit.
What many people do not know is there is an easy way to avoid making the mistakes most commonly involved in selling a home. In fact, many homeowners make some of the same errors when selling their home, no matter how many homes they’ve sold in the past. In some cases, the mistakes just make the selling process more tedious. In others, they are fatal to the sale. By understanding these mistakes, home Sellers can arm themselves with information and gain a better chance of achieving a profitable sale.
1. Using a “Convenient” Realtor instead of an “Experienced” Realtor:
When working with a real estate Agent, it's critical that you have full confidence in that Agent's experience and education. A skilled, knowledgeable Agent should be able to explain to you exactly why your home needs to be priced at a certain level - compared to active listings and recent sales of homes similar to yours. Experienced Agents also know exactly what the current pool of Buyers are looking for in relation to particular styles and price ranges of properties. A skilled Agent can recommend changes that will enhance the salability of your home, thus increasing the price - and/or decreasing the length of time before a sale.
2. Asking Too Much by Basing Asking Price on needs or emotion rather than market value:The single biggest mistake folks make is setting their asking price too high. In today’s down market, homeowners need to price conservatively or they risk turning off potential Buyers. Gone are the days when you can expect to sell your home for as much as your neighbor did just six months ago. Many Sellers base their pricing on how much they paid for their home. If your home is not priced competitively, home Buyers will prefer larger or better homes in the same price range, increasing your time-to-sell. When your price is later lowered, Buyers may be wary because they suspect other reasons the house has remained unsold so long.
3. Forgetting about health and safety issues:
Be upfront and disclose to your Realtor any problems with the property. The problems are going to be discovered anyway. A decade ago, health and safety issues were rarely a part of the typical real estate transaction. Today, however, it's common for inspections relating to health, safety, and even environmental concerns to be a part of most sales contracts. Moreover, in many states, the Seller must disclose to the Buyer any knowledge of existing property problems. In many cases, these issues have been or can be factored into the home's listing price.
4. Failing to Prepare Your Home for the Buyer's Eye:
Buyers look for homes, not houses. Buying a home is an emotional decision and they end up buying the home that makes them most comfortable. Often times, Buyers walk in through the front door and gasped "Ah-ha," and immediately fall in love with the house. Owners who fail to make necessary repairs, who don't spruce up the house inside and out, who don't do all the little things that make a house show like a million bucks will suffer from lower offers and longer market time.
5. Paying for a Home Stager:
In a depressed market, it's more important than ever that your property stands out from the competition. But unless you're trying to sell a multimillion-dollar mansion, you don't need to pay a professional to stage your home. There are a number of free or inexpensive things you can do on your own to get your house into show-room condition. Most importantly, paint the walls. Next, get rid of all the clutter, excess furniture and family knickknacks. Finally, make all the necessary repairs before your first open house. If a Buyer sees a small problem, say, a leaky faucet, he's likely to wonder about larger issues like the furnace or roof.
.
6. Complacent marketing when selling a home:
When selling your home there are no guarantees that the ultimate buyer of your home will have simply walked through the front door. In many cases you may have to bring your home to the Buyer. Effective marketing will help ensure that your property receives maximum exposure to attract a ready, willing and able buyer in the shortest period of time. Ask your Realtor to list for you all of the ways he/she intends to market your home and on what time-line. Also, be sure to ask about the home being advertised on the Internet.
7. "Hard Selling" During Showings:
People buy homes on emotion, not logic. Buying a home is always an emotional decision. People like to get a feel for a house to see if it is comfortable for them. It's difficult for them to get comfortable in a home if you follow them around, telling them all of the things that you've done to the house and pointing out every improvement that you've made. It may even have the opposite effect that you want to accomplish by making the prospective buyer feel that they are intruding into your private space. Another good idea is to have a photo album on the kitchen counter with photos of the home during other seasons.
8. Questioning the First Offer:
Too many sellers reject their first offer, even if it's close to or at full asking price. Holding out for more money is a strategy that rarely works, especially at a time when credit is tight, lending requirements for mortgages are in flux and potential buyers have less purchasing power. The reality is that in any market a home's first offer is often its best.
9. Failing to Respond to All Offers
What if you get an offer that's simply too low? Don't reject it outright. See if you can negotiate. First of all, you can't blame someone for testing the market — after all, in today's market, many buyers are confident that they have the upper hand. Secondly, by entering into negotiations with one party, you'll gain leverage with other potential buyers.
10. Picking the Wrong Buyer
Now more than ever, Sellers need to select their Buyers carefully. As we mentioned earlier, thanks to all the defaulted loans in the sub-prime market, Lenders are tightening their lending practices, making it more difficult for consumers to qualify for mortgages. So it's critical to find a Buyer with a recent prequalification letter (issued no later than four to six weeks ago) for a loan.
11. Not knowing your rights and obligations:
The contract you sign to sell your property is a complex and legally-binding document. An improperly written contract can allow the purchaser to void the sale, or cost you thousands of unnecessary dollars. Have your Realtor fully explain the contract or have your Lawyer review it before acceptance.
12. Not Using a Written Purchase Agreement:
Many Sellers think their home is sold, only to find out weeks or even months later that the Buyer was not able to obtain a home loan. Other Sellers find out too late that dozens of items such as surveys, title insurance contingencies, assessments, tax pro-rations, pest inspections, structural inspections, and a host of other details can come back to haunt them if not properly addressed right at the very beginning.
13. Not planning your move early enough:
Many sellers simply don't plan their move early enough and then feel totally overwhelmed at the time of moving out of the house. If you are able to move at any time of the year, don't wait until summer, the peak-moving season. Consider also that the first and last few days of the month are extra busy. If you plan to sell your house, get it on the market as soon as possible.
Selling a home is an experience many people look forward to with about as much enthusiasm as a root canal or an IRS audit. Perhaps it is because they know that with such an important investment, one misstep or wrong turn could be more than a “learning experience.” Making a mistake in selling a home can be a costly blunder that not only jeopardizes the sale, but also can mean hundreds or thousands of dollars in lost profit.
What many people do not know is there is an easy way to avoid making the mistakes most commonly involved in selling a home. In fact, many homeowners make some of the same errors when selling their home, no matter how many homes they’ve sold in the past. In some cases, the mistakes just make the selling process more tedious. In others, they are fatal to the sale. By understanding these mistakes, home Sellers can arm themselves with information and gain a better chance of achieving a profitable sale.
1. Using a “Convenient” Realtor instead of an “Experienced” Realtor:
When working with a real estate Agent, it's critical that you have full confidence in that Agent's experience and education. A skilled, knowledgeable Agent should be able to explain to you exactly why your home needs to be priced at a certain level - compared to active listings and recent sales of homes similar to yours. Experienced Agents also know exactly what the current pool of Buyers are looking for in relation to particular styles and price ranges of properties. A skilled Agent can recommend changes that will enhance the salability of your home, thus increasing the price - and/or decreasing the length of time before a sale.
2. Asking Too Much by Basing Asking Price on needs or emotion rather than market value:The single biggest mistake folks make is setting their asking price too high. In today’s down market, homeowners need to price conservatively or they risk turning off potential Buyers. Gone are the days when you can expect to sell your home for as much as your neighbor did just six months ago. Many Sellers base their pricing on how much they paid for their home. If your home is not priced competitively, home Buyers will prefer larger or better homes in the same price range, increasing your time-to-sell. When your price is later lowered, Buyers may be wary because they suspect other reasons the house has remained unsold so long.
3. Forgetting about health and safety issues:
Be upfront and disclose to your Realtor any problems with the property. The problems are going to be discovered anyway. A decade ago, health and safety issues were rarely a part of the typical real estate transaction. Today, however, it's common for inspections relating to health, safety, and even environmental concerns to be a part of most sales contracts. Moreover, in many states, the Seller must disclose to the Buyer any knowledge of existing property problems. In many cases, these issues have been or can be factored into the home's listing price.
4. Failing to Prepare Your Home for the Buyer's Eye:
Buyers look for homes, not houses. Buying a home is an emotional decision and they end up buying the home that makes them most comfortable. Often times, Buyers walk in through the front door and gasped "Ah-ha," and immediately fall in love with the house. Owners who fail to make necessary repairs, who don't spruce up the house inside and out, who don't do all the little things that make a house show like a million bucks will suffer from lower offers and longer market time.
5. Paying for a Home Stager:
In a depressed market, it's more important than ever that your property stands out from the competition. But unless you're trying to sell a multimillion-dollar mansion, you don't need to pay a professional to stage your home. There are a number of free or inexpensive things you can do on your own to get your house into show-room condition. Most importantly, paint the walls. Next, get rid of all the clutter, excess furniture and family knickknacks. Finally, make all the necessary repairs before your first open house. If a Buyer sees a small problem, say, a leaky faucet, he's likely to wonder about larger issues like the furnace or roof.
.
6. Complacent marketing when selling a home:
When selling your home there are no guarantees that the ultimate buyer of your home will have simply walked through the front door. In many cases you may have to bring your home to the Buyer. Effective marketing will help ensure that your property receives maximum exposure to attract a ready, willing and able buyer in the shortest period of time. Ask your Realtor to list for you all of the ways he/she intends to market your home and on what time-line. Also, be sure to ask about the home being advertised on the Internet.
7. "Hard Selling" During Showings:
People buy homes on emotion, not logic. Buying a home is always an emotional decision. People like to get a feel for a house to see if it is comfortable for them. It's difficult for them to get comfortable in a home if you follow them around, telling them all of the things that you've done to the house and pointing out every improvement that you've made. It may even have the opposite effect that you want to accomplish by making the prospective buyer feel that they are intruding into your private space. Another good idea is to have a photo album on the kitchen counter with photos of the home during other seasons.
8. Questioning the First Offer:
Too many sellers reject their first offer, even if it's close to or at full asking price. Holding out for more money is a strategy that rarely works, especially at a time when credit is tight, lending requirements for mortgages are in flux and potential buyers have less purchasing power. The reality is that in any market a home's first offer is often its best.
9. Failing to Respond to All Offers
What if you get an offer that's simply too low? Don't reject it outright. See if you can negotiate. First of all, you can't blame someone for testing the market — after all, in today's market, many buyers are confident that they have the upper hand. Secondly, by entering into negotiations with one party, you'll gain leverage with other potential buyers.
10. Picking the Wrong Buyer
Now more than ever, Sellers need to select their Buyers carefully. As we mentioned earlier, thanks to all the defaulted loans in the sub-prime market, Lenders are tightening their lending practices, making it more difficult for consumers to qualify for mortgages. So it's critical to find a Buyer with a recent prequalification letter (issued no later than four to six weeks ago) for a loan.
11. Not knowing your rights and obligations:
The contract you sign to sell your property is a complex and legally-binding document. An improperly written contract can allow the purchaser to void the sale, or cost you thousands of unnecessary dollars. Have your Realtor fully explain the contract or have your Lawyer review it before acceptance.
12. Not Using a Written Purchase Agreement:
Many Sellers think their home is sold, only to find out weeks or even months later that the Buyer was not able to obtain a home loan. Other Sellers find out too late that dozens of items such as surveys, title insurance contingencies, assessments, tax pro-rations, pest inspections, structural inspections, and a host of other details can come back to haunt them if not properly addressed right at the very beginning.
13. Not planning your move early enough:
Many sellers simply don't plan their move early enough and then feel totally overwhelmed at the time of moving out of the house. If you are able to move at any time of the year, don't wait until summer, the peak-moving season. Consider also that the first and last few days of the month are extra busy. If you plan to sell your house, get it on the market as soon as possible.
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