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"how To Never Overpay For A Home Or Real Estate"
By John Davis, Fri Dec 9th
Recently I have noticed that there are a lot of people outthere overpaying for property and I can help but to ask myselfwhy. The reason that I have come up with is lack of educationthat is given to prospective buyers. As a buyer, you rely onyour realtor to protect you. In Webster’s dictionary it definesthe word client as: 1: one that is under protection of another: DEPENDENT 2 a: aperson who engages the professional advice or services ofanother b: customer c: a person served by or utilizing theservices of a social agency As buyers, we look to professionals such as lawyers, realtors,title companies, appraisers, and banking officers to look afterour best interest because we trust that they are looking out forour own well being as their client. Now clearly we feel that istheir job, their responsibility to look after us, don’t youagree?
Well, under some state laws buyers are considered buyer bewarestates. What does this mean to you? Well, it is simple – Let theBuyer Beware. In other words, your realtor cannot tell you thatyou are paying too much for a property. If they did, they puttheir job at risk. So in this report we will discuss steps youcan take to insure that you are not paying too much for yourproperty. We start by explaining the appraisal process. Appraisals Explained Now before you get a loan, your lender will require an appraisalon the property. This is simply to check the value of the hometo make sure that the lender is protected with the money thatthey lend you. The lender will send the sales contract to theappraiser to get the appraisal done. Here is what the appraiserwill do: they will look for sales that are in your neighborhoodthat are similar in size and style. Then they will give theiropinion on what the homes are worth. Now, an appraiser can lookfor homes that have sold for less, for more, or about what youare paying. They will look for homes that support your price onthe sales contract. After all, they want the loan to go throughso that they can get paid, the loan officer is pushing for theloan to go through so they can get paid. So where does this leave you? Just for a moment, imagine that you are in the market for ahouse. You have been looking, then you find one that is what youwant. The seller is asking $100,000, you tell your realtor thatyou are going to offer $95,000. But in actuality the homes inthe area that are similar to the one you are buying are sellingfor $85,000, but you are not aware since you are relying on yourrealtor for protection. Now you buy the home at $95,000 feelinggood about your purchase. Now, in one year, imagine you lostyour job and was forced to relocate and sell the property. Ifthe homes in the area have been selling for $85,000, guess what?You now owe more than what your property is worth. For theaverage home in America, there is a 4-6 month time that it takesto sell the property and sellers typically get 95% of the valueof the home. This is not a make-believe scenario. Just last week I hadsomeone to call me wanting me to purchase their home. They hadbought it only 1 year ago for $38,000. They were 4 months behindon their house payment. The house was falling apart and neededserious repairs. So, I check the comps to see what has sold inthe area and the homes that did not need any repairs wereselling for $20-$30K. She paid $38K for one that needed seriouswork! She overpaid by at least $20K. Now, in 1 year the home isnot suddenly going to be in need of all these repairs. If shehad done her homework she would have not overpaid. Now the bank is threatening to foreclose, here is what willhappen if they foreclose: The bank will hire an attorney toforeclose, thus running 3 - 4 ads in the newspaper to auction ofthe house. In most cases the bank will take the home back. Now,everyone knows that there are people looking for foreclosedproperty that they can pick up cheap- right? Now if the banktakes an amount less than what was owed, then you (thehomeowner) are still responsible for the remaining debt. The bank will then seek for a deficiency judgment. If they get ajudgment, they can then possibly garnish your wages and thejudgment will attach to anything you own for up to 10 years.After that they can re-file for another 10 years. The bank can also forgive the debt that you owe. You arethinking this would be
great – right? Well there is a catch- ifthey do this they will send you a 1099 for the difference forunearned income. I witnessed a seller get a 1099 for unearnedincome for the remainder of the debt that was owed for over $67K! Many of these scenarios would not happen if people would justnot overpay for their property to begin with. What about theRealtor? I hear you ask. The realtor’s job is to sell houses.That is what they are there for, they sell. They will rely onyou and your inspector to look things over. When you go get aloan, the loan officer’s job is to sell the loan to you. Whenthey call the appraiser, their job is to see that the appraisalcomes in enough to support the purchase price. In some States,the Law requires for appraisers to even see the contract. So,the appraiser knows up front what the house should appraise atand they will search for the comparable home sales that willsupport your purchase price. This does not mean that your houseis worth what they say. I have seen 2 appraisals on the samehouse come back with a difference of over $90K! So how can you know? Here are the steps that I would take:1.Drive the neighborhood that you are looking in. 2.Write downall the names, addresses, and phone numbers of all theproperties that are for sale. 3.Find out the following: ·The ageof the home ·The condition ·The price that they are asking ·Howlong it has been listed on the market ·Feature of the home 4.Goto the courthouse and look at the tax assessor’s value. This isusually a little low but will give you a ballpark figure. Lookat the other properties tax value and compare them all with theamount of land, square footage, buildings, etc. 5.Compare thehomes to the one you are looking at. 6.Go in and look ateveryone of the homes that are listed 7.Make note of everythingthat the other homes have that yours don’t. 8.Look at how manydays the home has been listed. This part can be tricky. On allthe data sheets of the homes that realtors list there is asection in the top for DOM (days on market) that tells you howlong it has been listed. Now, if the seller only signed a 90-daycontract with the realtor to sell the home, after the 90 daysthis number is reset. Point blank ask the realtor to find outhow many TOTAL days has this house been listed. If you see thatthe home has been listed for over 120 days, there may be achance that they are asking a little too much for the property.So keep this in mind when making an offer. 9.When making youroffer, you want to figure in, if you were forced to sell in 6months, what would you be able to get out of the home? When youcalculate this figure consider the following expenses: a.4- 6months of mortgage payments b.4-6 months Utility c.4-6 months ofinsurance d.6 % commission to a realtor e.Closing Feesf.Advertising Cost if you do not list with a Realtor g.5% - 10%discount. Rarely do people pay full asking price, so count ontaking at least a 5% discount. 10.You can also hire another realtor to do a BPO. This standsfor Brokers Price Opinion, very similar to an appraisal withoutthe expense. You typically can get a realtor to do a BPO for$50- $75. When you do this, get a realtor from a totallydifferent organization. Usually Realty companies have 1-2 peopleallocated to do these BPO’s. 11.Now make your offer according toyour research that would support you and your family. I onceheard that when you make an offer if you are not embarrassed bythe offer, you may be offering too much. I don’t know if this istrue, however it is something for you to consider and thinkabout when you are constructing offers. The reason that I wrote this is because I felt obligated,compelled, and duty-bound to offer the advice that I havelearned from years of buying and selling homes. I have seen goodmarkets and bad markets; these are the same methods I use tomake sure that I am not overpaying. After I met with the ladythat over-paid for her property that I mentioned earlier, I feltresponsible to educate the market on how anyone could easily getinto this situation and how you can avoid it with a little bitof research.
About the author:Now you can stop your homeforeclosure. Free Report Tells you "How to Win The War Against Your Lenderand stop Foreclosure!" at http://www.48hourclose.com John Davis owns 48hourclose.com: a websitedevoted to helping families that are facing foreclosure.
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