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5 Credit Myths - BUSTED!


When it comes to credit, sometimes the largest challenge is the most difficult to surmount: we simply don't know what we don't know, so our assumptions and inaccurate beliefs run wild and free through our mental real estate. Most of the time, there's no harm; following finance fundamentals like paying every bill on time, every time, keep us out of credit danger zones.

But when it's approaching the time to buy, refi or even rent a home, relatively small credit score differences can stop you from getting your dream home, and can cost (or save) you thousands of dollars in interest over the life of your loan.

If you're at a time in your life where it makes sense to invest some time and effort into optimizing your credit score, here are five common credit myths we'd like to help you bust without further ado:

Myth #1: Having lots of cash, a great income, or tons of equity, makes your FICO score less relevant.

Fact: No matter how much cash you have, if you want a mortgage, you must meet the lender's FICO score guidelines. Of course, if you're flush with cash, it should be relatively easy to make your monthly payments on time. But if you have come into cash relatively recently or you're coming off a rough financial patch, lenders don't not look at your credit score on the theory that your other assets diminish your credit riskiness. Most lenders want nothing more than to avoid having to foreclose on a home, even if the homeowner has other assets.

And the best predictor of whether you'll default on a loan in the future is how you've handled your credit in the past, so your credit score will drive whether you qualify for a home loan and what interest rate you're charged, no matter how much you make.

Two exceptions: if you buy a home with all cash, or take a hard money loan, which usually requires a much larger-than-average down payment and interest rate, you might be able to bypass credit score scrutiny, but you'll pay for it.

Myth #2:  Having no debt or no late payments means you have great credit.  

Fact:  Financial responsibility and good credit are two different things. Your FICO score is meant to be a measure of your responsibility when it comes to managing debt, as proven by the fact that you have credit accounts, use them regularly and don’t abuse them.  

Having no credit accounts or debts doesn’t give you good credit - it gives you no credit.  And on the other end of the credit usage spectrum, being maxed out on various credit accounts all the time, submitting lots of credit applications and other credit moves that indicate you may abuse your credit can actually depress your score.  Best practice is to have several credit accounts (student and car loans count!) that you actively and responsibly use on a monthly basis.

Tip: FICO gives a top score to accounts with balances that are 30 percent of the credit limit, so if you can keep your credit card or loan account balances at or around that mark, even better.

Myth #3:  Checking your own credit score in advance prevents surprises when you apply for a mortgage.

Fact:  Your mortgage originator (broker or banker) must pull their own version of your report from their own provider, and it might have a very different score, rating scale or even different line items than the free or paid report you pulled online.  This is why it’s imperative to start working with a mortgage professional as early as possible - a year in advance is not overkill - so you can detect any errors or issues and get their recommended fix in the works with plenty of lead time.

Myth #4:  If you’ve had a foreclosure or short sale, your credit report will be damaged for 7 years.
Fact: Derogatory credit items, like late mortgage payments, foreclosures and short sales, appear on your credit report for 7 years, but your credit score can be rehabilitated enough to buy a home or obtain other credit in less time, depending on your circumstances. Your post-short sale or foreclosure waiting period depends on a number of things, including what type of loan you’ll be seeking to buy your next home with, how much cash you’ll have to put down and whether there were any extenuating circumstances involved in losing your home in the first place; some loans allow for an immediate purchase, others require a waiting period of 2, 4 5 or even 7 years after the loss of a home.

Of course, your FICO score is also a key criteria in a post-home loss “buy,” but interestingly enough, the length of time it takes to get your FICO score back up depends on how high it was beforehand.  Earlier this year, the New York Times reported that it would take a consumer with a 680 FICO score three years after a foreclosure to bring their score back to that level, while it might take someone with a 780 FICO score (near-perfect) seven years for full score recovery.  

And keep in mind that as your foreclosure or short sale ages, its impact on your score will decrease, too.

Myth #5:  Short sales have much less impact on your credit score than foreclosures.

Fact: Hear ye, hear ye - short sales and foreclosures have the same impact on your credit score, according to the FICO folks themselves. (The only exceptions are for short sales or deeds-in-lieu of foreclosure where the property was not upside down, which are few and far between, if they’re not just a real estate urban legend!)

However, the number of missed payments you had before your home was lost to foreclosure or short sale might weigh on how gravely injured your FICO score is in the process. At the going rate at which banks are foreclosing on homes - clocking roughly 2 years of missed payments before a home is repossessed - your FICO score could take an even greater hit than if you were able to divest of it via a short sale in 1 year’s time.

Top 5 Characteristics Home Buyers Want in a Real Estate Agent


1. Honesty and Credibility

Win them over with the truth!
When these buyers talked about honesty and credibility, it often came with stories about past negative experiences with agents. The stories were about agents trying to push them towards a more expensive purchase and a strong dislike for the false sense of urgency they feel agents create when it comes to placing an offer on a house. Buyers have expressed how hard it is to trust anyone in today’s real estate market so it’s even more important for agents to help them feel comfortable.

2. Area Familiarity

Do your neighborhood homework!
These buyers place a high importance on finding an agent who not only sells homes in a specific neighborhood, but also knows that neighborhood well. They want an agent who knows all about the schools, local parks, safety, restaurants and even the secret gems the neighborhood has to offer.

3. Good Follow Through

You say it, you do it.
During the conversation our buyers constantly verbalized their frustration with agents who didn’t do what they said. Email me, call me and send me the things you say you will. It seems like such a small thing to ask for. Do what you say, combine it with some honesty, and you’ll be an agent buyers feel comfortable working with.

4. Organization

Keep it in order.
You’re honest, you know the area like the back of your hand, and you try your hardest to follow through but it’s just so hard to keep track of your to-do lists and return every phone call. Buyers are expecting agents to be organized and put together. There are a ton of tools out there to help with this. (We love Evernote!)

5. Good Listener

Everyone is unique. Treat them like it!
Users want an agent to listen to them with a blank mind. I heard phrases such as “pigeon hole”, “judge”, “they aren’t listening”, “tell me what I want”…etc. come up in our discussion. Users don’t want an agent to assume they need A just because they hear B. They want an agent who listens to what they want and will ask as many questions as required to really understand who they are and what they are looking for.

Make sure you get those references too- recommendations and testimonials followed closely in the 6th position.

These characteristics come straight from prospective home buyers searching on Trulia. We hope these tips help you communicate what matters most to homebuyers to further your relationships and connect with more prospects.

10 Dos and Don'ts for Summer Open Houses


I often joke that I spent the first few years of my kids’ lives just trying to keep them alive.  While this is a (slight) exaggeration, the reality is that most of our parents do spend our formative years teaching us the do’s and don’ts of everyday life.  Chances are, though, that this did not include a list of Open House faux pas; things that can get between you and your dream home, or your dream sale.  

‘Tis the season for Open Houses, though, so we thought we’d pick up where Mom and Dad left off, tipping you off to a list of pointers for both buyers and sellers about what to do – and what not to do – at this summer’s Open Houses.

Do:  Use Open Houses as a convenient time for touring homes with your agent.  I’m sometimes surprised by how many buyers write in to ask whether it’s appropriate to meet up with their agent at an open house, as though they’re concerned that it might be offensive to the listing agent or agent who is holding the home open.  Well over 80 percent of serious buyers - people who are actually qualified to buy a home - are represented by agents, and listing agents know this!

Given that very few unrepresented buyers walk into an Open House off the street and buy that house, I submit that using the few weekly open house hours as a regular time to meet up with your agent and tour homes that are being held open is a very efficient way to see homes you’re interested in, without having to make scattershot appointments with individual sellers - and that savvy listing agents will welcome your attendance as a represented, qualified buyer and their agent at their Open House.

Do:  Open every door.  If you’re seriously interested in a home you’re touring at an Open House, make sure you open every door - even doors that look like they might just be hall closets.  I’ve had buyers come back and realized that all the closets were a couple inches deep, or that the home had multiple walk-in closets they weren’t even aware of.  Once, I even had a buyer miss an entire little room, because we all thought the narrow door was just another closet.  Since storage is such an elemental consideration when you’re homebuying, it’s important to know what’s behind every door.

Don’t: Open every drawer.  I’m specifically talking about drawers to furniture, rather than kitchen drawers and other drawers that are built into the property itself.  Why do you need to see what’s inside someone’s bureaus to decide whether or not you like the home?  You don’t - I know that some people find the voyeuristic aspect of Open House hunting (i.e., seeing how others live) to be fun and compelling, but there’s certainly a line beyond which it’s rude to cross.  

Opening the owners’ underwear drawers is definitely on the wrong side of that line.

Do:  Offer hospitality to buyers.  If you want prospective buyers to attend and enjoy your Open House, it’s critical that you remove all the friction involved with attending it. It should be very clear and simple for visitors to discover that your home is being held open, then to navigate to, park at and access your home.  If your home - or even your front door - is hard to find, make sure signs clearly point the way.  If your neighbors park in front of your house or you normally park your cars in the driveway, ask them to move, and move your own cars, too.

Don’t: Overdo the hospitality.  Unless the property is Candy’ Spellings $150 million listing (which sold at the low, low price of something like $85 million, according to reports) there’s really no reason to have an espresso bar with baristas, a catered lunch with waiters passing hors d'oeuvres, or chair massages - all of which I have actually seen at Open Houses. Here’s the problem, no one will complain. People will take the shrimp balls, order their dirty chai lattes and get their deep tissue neck rubs.  What they won’t do is pay attention to your house!  Have a plate of cookies and some cool bottles of water - that’s just nice manners, especially on a hot day.  But when you overdo the perks, you distract the buyers from the real matter at hand.  Even if they like your home, they’re much more likely to recall the cute waiter or the dim sum than your upgraded kitchen and the dining room.   

Note: I’d say there’s an exception for brokers’ open houses - sometimes the excessive hospitality works just to get brokers to attend, which is huge; many a broker has had an a-ha/light bulb moment standing in a house they only went to for the champagne, when they realized which of their clients (or their colleagues’ clients) would love this place.

Do:  Intensively clean and de-odorize the place.  Start way in advance, and either clean or hire someone to clean your home so that the word “immaculate” applies.  This is not the time to cut corners.  And understand that at an Open House, people - including the most serious buyers - will open doors, drawers, cupboards, explore your garage, open the garden shed - so there’s really no place to shove and hide a messy pile of clothes or dishes. Heck, there are some who’ll scope out your dog house, if they want their own precious pooch to park there.

This is your opportunity to start eliminating things you don’t need and packing things you’ll want to move that are excess to the neat-and-clean version of your home’s space you want to showcase at the open house.

Don’t: Overdo the sensory staging.  Some people are highly sensitive, even allergic, to fragrances or scented oils - these types can run screaming from an overly “air freshened” open house. Music on low is fine, but it should be a very neutral, non-objectionable type - and you’d be surprised what some folks object to.  Also, skeptical buyers might suspect you’re trying to cover something up with aggressive air fresheners, cookies in the oven, music on the stereo and white noise playing in every room.  

Look to your agent and your home’s stager (if you have one) for direction here, and don’t overdo it.  Serious buyers will want to see, smell and hear what the experience of the home is actually like, without all that artifice.

Don’t:  Underdo the home prep/curb appeal, landscaping, exterior prep. I cannot tell you how many times, when I was selling homes, I would pull up to an Open House with my buyer clients and see them roll their eyes, sigh or even veto the visit once they saw the state of the home’s exterior.  And on the flip side, I can’t express the number of times I witnessed buyers minimize or overlook wonky rooms or funky annoyances on the inside of a home (for better or for worse) because the place had overwhelmingly charming or breathtakingly chic appeal from the curb.

Before you host an Open House, it’s equally - maybe even more - imperative that you make sure your landscaping, sidewalks, front doors and exterior paint are immaculate and maxed out on their attractiveness as it is to make sure the inside is pristine.
Do:  Make sure there are smart print-outs and flyers for buyers to take away, and basic documentation buyers will want to see. Check in with your agent in advance about what handouts will be available for prospective buyers that visit your home.  At the very least, there should be a property flyer listing out the home’s basic characteristic, offering a few color photos and providing the agent’s contact information; if you’re offering any incentives like closing costs or paying a year's worth of the buyer's HOA dues.  Additionally, it can be helpful to have a friendly mortgage broker prepare some financing scenario flyers.

If you’ve had home or pest or roof inspections, or your home favorably compares to recently sold nearby properties, make sure those inspection reports and comparables are out at the Open House.

Do:  Take the take-aways. Buyers, hanging on to the property flyers of the homes you’ve seen (and using them to note your reactions to them) can up your house hunting and offer-making game significantly. If your agent isn’t with you, it makes for easy communication about what you saw and how you felt about it, which can minimize the number of homes you don’t like that your agent shows you going forward. Also, a home that you think you’ll pass on while you’re in it might grow on you, or might even become the comparable for another property you’re interested in in the future.  

If you’re in active house hunting mode, it can only help you to have a collection of flyers from the properties you’ve seen.

5 Need-to-Knows Before You Move Into the Neighborhood


Buying a home can feel like the most intense research project ever - to make a smart buy, you’ve got to get educated about mortgages, learn how to read a contract, do a deep dive into property condition issues or homeowner’s associations and pay attention to what’s going on in the economic news and the real estate market.  But there’s at least one more area wise buyers don’t neglect: neighborhood research.  

We know, at a gut level, what kind of neighborhoods we like - tree-lined streets, convenient shops, etc. and so forth. But what specific details should you investigate before you buy or move into an area?  Here are 5 items you definitely need-to-know before you move into a neighborhood:

1. Details on Shady Dealings.  Most of us think we know which sides of the railroad tracks, so to speak, have high crime rates and which are supposedly safe.  But before you buy a home or move into a neighborhood, it behooves you to actually do the research and see whether or not your beliefs are accurate.  Check out the Megan’s Law databases to see where registered sex offenders may live, especially if you have young children or other reasons to be particularly worried.  Google your address, which might pop up details such as whether your intended home has ever been a meth lab, among other things.

And, whatever you do, don’t forget to tap into Trulia’s new Crime Maps – in a number of metro areas (which will be constantly expanding), you can view uber-detailed (and sometimes surprising!) crime data that is uber-relevant to you.  If you’re trying to decide between two homes in different parts of town, you can even toggle back and forth between the neighborhoods to compare them! For example, some neighborhoods have a spike in car break-ins after people leave for work.  Or maybe one side of your street-to-be has a significantly higher rate of violent crimes than the other.

That’s the kind of thing you should find out before you move in, don’tcha think?

2. How Recession-Resistant it is.  Let’s face facts: some neighborhoods, cities and states have fared better than others over the course of the recession.  An area’s proximity to job opportunities, saturation with troubled subprime loans and the amount of housing supply (vs. demand) all have something to do with whether prices plummeted or have held up over the last few years.

Sometimes, a neighborhood’s recession-proofness (or -proneness) is obvious:  if the street on which you’re house hunting is riddled with ‘For Sale’ signs (and foreclosure riders on top of them), or you know for a fact that the home you’re buying is a short sale for which the sellers paid double your price just 5 years ago, you might be in an area that has been hard hit. Also, if your neighborhood has a sky-high rate of price reductions or it is much less expensive to buy than to rent a home in your area, these are other indicators that the recession might have hit your district pretty hard.

The fact of the matter is, some of the hardest hit neighborhoods are where the best deals are to be found, so I’m not necessarily suggesting that you shy away from buying in such an area.  But do know that the harder hit areas might take longer to see an uptick in home values, too, so the harder hit your neighborhood was by the real estate recession, the longer you should plan on staying put before you buy, to make sure you don’t end up needing to sell and stuck in an upside-down home.  While a 5 to 7 year plan might make sense in an area where the real estate market has been pretty robust over the last few years, you might want to be okay with planning to hold your home upwards of 10 years before buying in a foreclosure-riddled area (and you might also want to make absolutely sure you’re very happy with the deal you’re getting).

On the flip side, the more recession-resistant your area has been, the more likely you are to encounter sellers with less flexibility on pricing or even, gasp!, multiple offers!

3. The Neighborhood’s Flavor.  Is the area you’re considering a hot spot for outdoor adventures and family events at the park, or chi chi restaurants and wine tastings at the museum? Find out by pulling up some listings on Trulia and scrolling down the see how others who have lived in the area have rated and reviewed it.  

Also, take a look at NabeWise - it’s only available for about 10 large cities right now, but it’s got a super useful function where you can search by city and what’s important to you (like being in a trendy neighborhood, or one that’s got ample public transportation) and it’ll surface neighborhoods which might be a good fit for your values.Neighborhoods are even ranked based on prestige and how beautiful residents are (the latter of which I find fascinating - but more as a measure of where the raters’ heads are at than of anything you must include in your neighborhood fit equation!).

4.  Where are the hot spots?  Before you buy or move into an area, equip yourself with a knowledge of where all the stores, farmer’s markets, parks, restaurants and other hot spots your family will want to use are located vis-a-vis your home-to-be. (Hint: your local real estate agent is a fabulous source for this kind of information - they are especially gifted at knowing where the good food and shopping is!) Your Trulia Mobile App will alert you to nearby haunts that have Yelp! reviews; also, your neighbors-to-be can be a great source of this sort of information - knock on doors and ask for their recommendations.     

It also makes sense to search the web for the various sorts of things your family is into, and your new neighborhood’s name.  An internet search for running trails in my neighborhood is how I found out my house was just a couple of blocks away from a largely hidden lake we now visit regularly.  Then, drive around and see what you can see - or find someone to drive for you.  Once, when I moved to a new town, I marched myself onto a city bus, sat behind the driver, told them I was new in town and asked them to point out things they thought I needed to know.  I got an hour long tour through three neighboring towns - for $1.25!  

5.  What the neighborhood looks and feels like at different times of day/different days of the week.  Have you ever visited a Sunday afternoon open house when the sun was shining, birds were singing, and charming neighborhood rugrats were rolling their hoops up the street?  (Okay - that was a century or two ago, but you get the gist.)  Then, you come back a couple of weeks later for your inspections at dusk and find those same rugrats (or their parents!) spraying graffiti all over “your” garage, the neighbors’ underpants flapping on the line in the front yard and the other neighbors’ music blaring?  File that under disappointing.  

The nature of a neighborhoods changes - sometimes dramatically - before and after the sun goes down.  Also, if you visit a home during the week or when it’s cold and rainy out, the street will undoubtedly be busier and noisier - more reflective of the extremes you should be aware of - on the weekend or when the weather is grand.  So, before you buy, go see the place in sunlight and after dark, during the week and on the weekend. And, again, there’s nothing wrong with knocking on the neighbors’ doors, telling them you’re thinking of buying, and seeing what kind of insider information you can glean from them!

5 Ways to Add Luxury to Your Regular Home


Real estate eye candy is everywhere. And if you love window shopping for homes online, there's a seemingly endless influx of massive mansions listed in the tens of millions of dollars. While their trillion square feet might not tempt you, and their manicured grounds seem like an eco-nightmare requiring a lifetime of landscaping, the luxury amenities and highly customized features do make the living seem easy, right?

Whether you're buying, prepping to sell or simply trying to live the good life in your current home, here are 5 inexpensive ways to add some luxury to your regular home:

1.  Spa bathroom upgrades. I’m not saying you have to have a toilet like Whoopi Goldberg’s or anything.  Her flusher has been featured on the View, Oprah and all over the web - one site even made up a song about it (the ditty is a bit blue, though, so I won’t link here. The curious can find it online.) But her toilet - yes, the toilet - runs around $7,000!! (No typo, folks.)

In all seriousness, though, spas tend to have a clean, bright look and feel and luxurious stress-busting features that just flush the tension right out of you (pardon the pun)  - many of which can be installed in your own home for a fraction of what the dreadlocked one paid for her porcelain potty.  For example, pedestal sinks instantly - and inexpensively - open up a bathroom, especially when replacing a dark vanity and wall-to-counter mirrors. I recently put a new pedestal sink in my bathroom for less than $600 - top of the line, including faucets and installation!

Similarly, you can get more of the spa look and experience at home, with a relatively modest investment - especially compared with the lifestyle upgrade for your buck - by installing granite counters (the tiny slab most bathrooms take can run a few hundred dollars), a basic bathtub with jets or river-rock shower floors for under a thousand dollars!

2.  Custom, decorative paint treaments.  Sponge painting?  Très 1990.  Murals in your kids’ rooms, entry hall inspirational mantras that greet your guests - paint is one of the least expensive “edits” you can make to your home, and homeowners are upleveling their home’s aesthetics with custom paint in lots of luxe-ey ways.

From harlequin diamonds to chair rails, crown moldings and wainscoating, decorative paint treatments are a simple, cheap and chic method for upping the luxury in your home life.

3.  Built-in anything. Part of what makes uber-luxury homes, well, uber-luxurious is the fact that it seems like living life in them would be so neat and clean and easy. One way to get that feel in your very own home is to build in some of the necessities, optimizing the way you use your space and takes great advantage of otherwise unusable areas, generally creating what the feng shui set would deem free-flowing chi.

Consider building in:

  • Storage systems. From shelved nooks to closet organizers to garage grids for sports equipment, storage systems eliminate clutter and make sure there’s a place for everything, and that everything has a place. If you can afford a custom cabinet installation or custom closets, they certainly offer the fancy moldings and modules that create luxury appeal.  But many home improvement stores now offer much less expensive versions of these systems that look and work great.
  • Desks and bookshelves.  Like storage, but activity-specific, built-in office equipment maintains order and can turn a dead corner of a room into a highly useful workstation.  To replicate this functionality on the cheap, find a corner or nook and put in an armoire-style workstation that closes and folds up when you’re not working.  And built-in bookshelves are a time-tested selling point when your home is being sold, by the by, so, if you have an empty area from old-school built-ins which were removed, installing inexpensive shelving might be a great way to go.
  • Wine storage. Dead space under the stairs can easily be transformed into a wine cellar or storage space. My own personal wine cellar is where I store my kid’s chocolate milk, my electrolyte water and a bottle or two fish sauce, but it’s a great feature to have at home, no matter what you’ll use it for!
  • Recycling/compost/trash centers.  Try as we might to minimize it, we all generate trash. Built-in centers with clearly marked waste receptacles make this dirty part of life less messy and more manageable.

4.  Dedicated spaces for anything.  There’s no need to go all Candy Spelling and dedicate multiple rooms to gift wrapping.  But space is a luxury in and of itself, so dedicated space for your film-watching (a theater room), gardening materials, crafting supplies or even the kids’ homework is an extra-special, super-duper luxury, especially if it’s equipped with the right equipment for the activity to which the room, half-room or even corner or nook is dedicated.

5.  Automation.  Remember the Jetsons?  The vision for this century was a fully automated, robotic home that did all the work of life for you, so your time would be free to shop at Mooning Dales or work for Mr. Spacely building sprockets.  Most of that hasn’t happened, and that’s probably for the good.  But injecting small touches of automation into your home can give it a decidedly high-end feel - for very, very little cash.

(And they're also gadget-ally delicious!)

I personally just put a couple of these  automated trash cans- $60 each! - into my own kitchen. They’re hands free, so eliminate the germiness and clunkiness of opening a lid with your hands or feet, and they were the hit of a recent dinner party!  (Okay, it was the food, then the trash cans that guests admired.  But still.)  Many hands-free or automatic household items are available at very low prices, like automatic soap pumps, paper towel dispensers and robotic vacuum cleaners.  

And if you want a built-in recycling center with a techie feel, here’s one that should really float your boat - $100 bucks for in-home, eco-chic luxe!

5 Steps to Deciding How Much to Offer – or Ask – for Your Home


One of the hardest, most important decisions homebuyers face is how much to offer for their home.  And the glut of information on the web about real estate only makes buyers even crazier than the decision itself does.  Supply, demand, foreclosure rates, mortgage rates – buyers think they need to run spreadsheets and do fancy math to make a smart offer.  And THAT can be super intimidating.

But the fact is, there is a pretty short list of steps you need to take to make a smart offer – one that gets you a great value, but is also likely to be successful at getting the property. (A low offer does not make for a great deal if you don’t get the house!)  And most of the same steps apply to sellers trying to set the list price that will lure the most buyers (and net them the most cash)!

Step 1: What do the “comps” say?  First things first. When it comes to pricing a home, or making an offer to buy one, the ‘first thing” is the home’s fair market value. Both buyers and sellers should work with an experienced, local agent to understand what the home’s value is. Most agents will do this by offering you a look back at similar properties that have recently sold in the neighborhood – i.e., the  comparable sales, or comps.

HINT: You can also find comps for a home listed on Trulia by scrolling down to the section labeled Sold Homes near 1234 Merriweather Lane on the property's Trulia listing page.

Ideally, look for comparables that are very recent sales (3 months or less before you’re listing or buying), very similar properties (i.e., same number of bedrooms, bathrooms, square footage; and similar style, condition and amenities). If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can:

(a) provide factual support for a lower-than-asking offer or for the asking price, in a negotiation, and

(b) result in a sale price at which the property will actually appraise, later on - avoiding the common glitch of the deal falling through because the appraisal comes in way below the agreed-upon price.

Also, looking at comps is the first step for locating a home’s seller and prospective buyer in the reality-based universe of current home values.  The fact that you bought or refinanced the place at a given value 5 or 6 years ago is entirely irrelevant to what it’s worth today, as is the buyer’s belief that the place was worth $100K less at the trough of the market, in 2009.

Step 2:  What can you afford?  This step is much more critical for buyers than for sellers. (Unfortunately, sellers, the facts that you need to net a particular amount to buy your next home or pay your existing mortgages or credit card bills off has no relationship whatsoever to the price at which you should list or will sell your home.)

Buyers – it’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you.  This includes offering a price within the range for which your mortgage was preapproved, but also includes making sure that the monthly payment and cash you’ll need to close the deal (down payment + closing costs) are affordable in light of the particular house. If, for example, the property will require repairs for which you’ll need to conserve cash, or has HOA dues you hadn’t planned on, you may need to rejigger your offer accordingly.

Step 3: What’s your competition? (And what’s theirs?)  This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face – whether you are a buyer, or a seller.  As a seller, you can find this out by looking at things like how many comparable homes are listed in your town or your neighborhood in your general price range (your agent will brief you on this).  Sellers should also consider what type of transactions their home will be up against – the more distressed properties (foreclosed homes and short sales) with which your home must compete, the more aggressive you must be with your pricing to get your home sold.

The more competition you have, as a seller, the lower you should tweak your list price to attract buyers to come see your home. (And the more buyers come to see your home, the more likely you are to get an offer!)

Buyers should also be cognizant of the competition level they will face for homes.  Believe it or not, even on today’s market there are properties and neighborhoods in which multiple offers are the name of the game. Work with your agent to understand the list price-to-sale price (LP:SP) ratio , which lets you know how much under or over the asking price properties are selling for in your target home’s neighborhood; the higher the LP:SP ratio, generally speaking, the less competition there is among buyers. 

Your agent can also brief you on:

    1. The number of offers – if any - that have been presented on “your” property (which the listing agent will usually, gladly tell).  If there are other offers, you’ll want to make a higher offer to compete successfully against them; and
    2. The number of days the home has been on the market, relative to how long an average home stays on the market before it sells – the longer it has, the more pressure is on the seller, price-wise, and the less competition the buyer is likely to have.  (One exception is the sweet spot scenario, when a property that has been on the market for a long time has a price reduction and gets a bunch of offers as a result! )

4.  How much do they need to sell (or buy) it?  Buyers: Has the listing in which you’re interested been reduced at all?  By how much?  Has the listing agent informed you that her clients are highly motivated, flexible or have an urgent need to sell?   

Sellers – most buyers are not in a high state of urgency to buy these days, given the long-term, high affordability of homes and interest rates, except when they have an urgent personal reason for moving, e.g., buyers who are relocating for work.  Of course, all of real estate is hyperlocal, so it’s important to understand how motivated buyers are in your local market, generally speaking, before you set your list price.

    • How many homes in your target property’s area have had at least one price reduction?
    • How likely a home in the area is to have multiple price reductions?

The higher these numbers are, the stronger of a buyer’s market it is, and the more bargaining power buyers likely have.   And if you’re the seller, the higher these numbers are for your area, the lower you may need to price your home to be successful at getting it sold.

5.  How much do you want to buy, or sell, the place?  Step #4 was about taking the motivations of the folks on the other side of the bargaining table into account when formulating your offer and your list price.  This step is all about you – what’s your level of motivation?  Now, buyers, you certainly shouldn’t offer a price way above what the place is worth (see Step #1) just because you really, really want it, unless you have the cash to throw around.  But within the range of the home’s fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property.

Sellers: think of your list price as the most powerful marketing tool at your disposal. if you really want or need to sell, get aggressive about setting your price as low as makes sense for your your home's value and local market dynamics to attract qualified buyers and help your home stand out against all the competition.

10 Pieces of Paper You Must Round Up
to Buy (or Sell) a Home


Home buyers and -sellers alike often bristle with anticipatory irritation at the mere thought of all the paperwork they expect they’ll have to come up with to do their transaction, above and beyond the basic loan application, contract, disclosures and closing docs. And these worries start way in advance; it’s as though, before they even start visiting open houses, buyers begin to visualize - and dread - spending hours upon hours in the dank catacombs of the Vatican (à la Da Vinci Code) combing through ancient files, seeking some rare and precious artifact documenting their childhood dental history or genealogy.

In some respects, this vision of the experience of obtaining a home loan might not be far off - there are oodles of hoops through which to jump and, occasionally, the loan underwriter requests something sort of bizarre. But more commonly, there’s a pretty finite universe of documents you’ll really need to scrounge up to get your home bought - or sold. Here they are:

  1. ID (e.g., driver’s license, state-issued ID, passport).  Who must produce it?  Buyers and sellers.  Why?  Uh, hello!?!  Lender wants to know that you are who you say you are, buyers, and the title insurance company wants to make sure, sellers, that you actually have the right to sell the home.  Funny enough, this commonly goes unrequested until you get to the closing table, when the notary requests to see it before signing, but some mortgage brokers and even some real estate brokers and agents may ask to see it earlier on.
  2. Paycheck Stubs.  Who must produce it?  Any buyer financing their purchase with a mortgage.  Sellers, usually only in the case of a short sale.  Why? Buyers’ purchase price ranges are determined, in part, by their income. And short sellers have to prove an economic hardship.
  3. Two months’ bank account statements. Who must produce it?  Buyers getting financing; sellers selling short. Why? Buyers’ lenders now require proof of regular income and proof that the down payment money is your own.  Short sellers?  It’s all about the hardship.
  4. Two years’ W-2 forms or tax returns. Who must produce it?  Mortgage-seeking buyers and short selling sellers. Why? Banks want to see a stable, long-term income. They also limit you to claiming as income the amount on which you pay taxes (attn: all business owners!). And in short sales, again, they want documentation of every single facet of your finances.
  5. Updated everything. Who must produce it? Buyer/mortgage applicants. Why? Because things change, and because the time period between the first loan application and closing can be many months - even years! - on today’s market. During the time between contract and closing it’s not at all unusual for underwriters to demand buyers produce updated mortgage statements, checks stubs, and such - and its quite common for them to call your office the day before closing to request a last minute verification of employment!
  6. Quitclaim deed. Who must produce it?  Married buyers purchasing homes they plan to own as separate property.  Married sellers selling homes that they own separately, or joint owners selling their interests separately.  Why? With the Quitclaim Deed, the other spouse or owner signs any and all interests they even might have had in the property over the the selling owner, making it possible for the title insurer to guarantee clear, undisputed title is being transferred in the sale.
  7. Divorce decree.  Who must produce it? Buyers and sellers who need to document their solo status or the property-splitting terms of their divorce. Why? Again, to ensure that the seller has the right to sell.  Recently single buyers might need to prove that they shouldn’t be held to account for their ex’s separate debts or credit report dings.
  8. Gift letters.  Who must produce it? Buyers using gift money toward their down payment.  Why? The bank wants to be sure the gift came from a relative, and is their own money to give.  They also want the relative to confirm in writing that it’s a gift, not a loan - a loan would need to be factored into your debt load.
  9. Compliance certificates. Who must produce it? Usually sellers, but sometimes buyers, by contract. Why? Some local governments require various condition requirements be met before the property is transferred, like some cities which require a sewer line be video scoped and repaired, cities which require a checklist of items be met before a certificate of occupancy be issued (usually relevant to brand new and really old homes, the latter of which are often subject to lead paint concerns) and energy conservation ordinances which require low-flow toilets and shower heads to be installed. Ask your real estate pro for advice about which, if any, such ordinances apply in your area.
  10. Mortgage statements. Who must produce it?  Any seller with a mortgage. Why? the escrow holder or title company will need to use them to order payoff demands from any mortgage holder who has to get paid before the property’s title can be transferred.

By no means is this an exhaustive list.  Agents: what documents do you see buyers and sellers struggle to scrounge up during their home buying transactions?

5 Things Home Buyers Do That Turn Sellers Off (and Kill Deals)


On today’s market, every savvy seller wants to know what turns buyers off, so they can get their homes sold as quickly as possible, for as much as possible.  But buyers, take note – there is a minefield of seller turn-offs you can trigger that hold the potential to keep you from getting the home you want at the best price and terms, or to unnecessarily complicate dealings with your home’s seller.

Lest you think all of today’s sellers are under the gun and will just put up with whatever behavior buyers dish out, be aware that there are still many multiple offer situations in which buyers have to compete with each other to get a home – buyers who trigger these turnoffs tend to lose in those scenarios.  Also, avoiding these seller turnoffs can create a transactional environment of cooperation and avoid things turning adversarial.  That, in turn, can empower you to score a better price, get extra items you want thrown into the deal, and even negotiate more flexibility around your escrow and move-in timelines – all perks that can make your life easier and your budget go further.

For sellers, these turnoffs pose the potential of irritating you out of an otherwise good deal – maybe even the only deal you have!

Here’s a few of the most common buyer-perpetuated seller turnoffs, with tips for sellers on how to keep an emotional (and economic) even keel, even if your home’s buyer makes some of these waves:

1. Trash-talking. Trash-talkers are the home buyers who think they’re going to negotiate the list price down by slamming the house, telling the sellers how little it is really worth, how the house across the street sold for nothing, why the school on the corner should make them desperate to give the place away, etc. This strategy never works; in fact, when you attack a seller and their home, you only cause them to be defensive, and think up all the reasons that (a) their home is not what you say it is, and (b) they shouldn’t sell their home to you! 

Sometimes this happens with buyers who actually love a house and just walk around it fantasizing about all the ways they would customize it to their tastes while a seller is there.  Sellers: avoid being at home while your home is being shown.  Buyers: save your commentary for your agent; if you do encounter the seller in person keep your conversation respectful and avoid critiquing the house or the list price.

2. Being unqualified for mortgage financing
. When a seller signs a buyer’s offer, most often the seller agrees to effectively pull the home off the market, forgoing other buyers who might be interested.  As such, the only thing worse than getting no offers on your home is getting an offer, getting into contract, then having the whole thing fall apart when the buyer’s loan falls through – especially if that could have been predicted or avoided up front.

Sellers: Work with your agent to vet your home’s buyers’ qualifications, including their loan approval, down payment and earnest money deposit – before you sign a contract.  It’s not overkill for your agent to call the buyers’ mortgage pro before you sign the contract and get a level of comfort for how robust their qualifications are.  Buyers:  Get pre-approved.  Seriously.  And make sure that you don’t buy a car, quit your job, deposit lottery winnings or do any other financial twitchery between the time you get loan approval and the time you close escrow on your home.

3. Making unjustified lowball offers. No one likes to feel like they are being taken advantage of.  And sellers generally know the ballpark amount that their home is worth, as well as what they need to sell it for to get their mortgage paid off.  Yes – the price you pay for a home should be driven by its fair market value, rather than the seller’s financial needs, and deals are more available in a market like the current one, in which supply so vastly outpaces demand. But just throwing uber-lowball offers out at sellers hoping one will hit the spot is not generally a successful strategy, especially if you really, really want a given property.

Sellers:  Don’t get overly emotional about receiving a lowball offer; counter at the price you and your agent decide makes sense based on the total circumstances, including your motivation level, recent comps and the interest/activity level your listing is receiving. Buyers:  Work through the similar, nearby homes that have recently sold (a/k/a comparables) before you make an offer to factor the home’s fair market value into your offer price – also factor in how much you want the place, too.  Don’t be amazed if you make an offer far below asking, and don’t get a response.

4. Renegotiating mid-stream. Sellers plan their finances, moves and  - to some extent – their lives around the purchase price a buyer agrees to pay for their home.  If you get into contract to buy a home, find out during inspections that costly repairs need to be made, then propose a lower sale price, repair credit or even actual repairs to the seller, that’s sensible and fair.  But if you were aware that the property needed a lot of work before you made an offer on it, then you come back asking for beaucoup bucks’ worth of credit or price reductions midstream, expect the seller to cry foul.  And holding the seller up two weeks into the transaction because you caught a case of buyer's remorse? Not cool, and not likely to foster the spirit of cooperation you may need to get your deal closed.

Sellers: avoid mid-stream price renegotiations by having a full set of inspection reports and repair bids at hand when you list your home. Buyers: try to avoid renegotiating the entire deal unless you get some major surprises at your inspections or inflating small repairs to try to justify a major price cut.

5. Misleading or setting the seller up.  Remember when we talked about buyer turn-offs?  Being misled by listing photos or very fluffy property descriptions was high on the list.  The same goes for sellers.Offering way over asking with the plan to hammer the seller for a reduction when the house doesn’t appraise at the purchase price?  #LAME  Making an as-is offer planning the whole time to come back and ask for every penny ante repair called out by the inspectors?  Lame squared.

Sellers:  If you get multiple offers and are tempted to take a sky-high one or one that claims to be all cash, consider requesting proof that the buyer has sufficient funds to make up the difference between what you think the home will appraise for and the actual sale price, and statements showing the cash truly exists.  Buyers: Don’t be lame. I’m not saying you have to tell the seller exactly what your top dollar is, but making offers with terms designed to intentionally mislead is really, really bad form – and can result in losing the home entirely if and when your bluff gets called.

5 Real Estate and Mortgage Urban Legends


Entire feature films, websites and hour-long cable specials have been devoted to debunking  urban legends, those modern fables that circulate at the speed of the internet. And real estate is not immune; modern-day myths of easy-peasy seller financing, distressed sellers practically throwing their properties at buyers, and cosmetic fixers that can be had for pennies are just that - fairy tales which, if believed, can result in some not-so-happy endings.

The real deal is that real estate is much more affordable than it used to be, but the barriers to entry are higher, and the days in which you could get something for nothing are over.  Here are five real estate and mortgage urban legends, and the truth which lies beneath.

Urban Legend #1: Got bad credit? Get seller financing.  Does seller financing exist?  Of course.  Is it as easy to get - or desirable - as they make it seem in the infomercials? Not even close.

Here's the real deal: most sellers who have a mortgage they obtained in the last 10 years or so also have a due on sale clause which requires them to pay it off when they sell the property. Financing the sale themselves, vs. requiring the buyer to obtain mortgage or other financing to pay for the property, prevents them from having the cash to pay their mortgage off, as required.  And the vast majority of those who don’t have a mortgage of recent vintage need the proceeds from the sale of their homes to buy their next home or invest in their next property. 

What’s more, even the few sellers who don’t need the cash often don’t want to take on the long-term risk and hassle involved with having to collect payments from a buyer for 10, 15, or 30 years.  The sellers who can and will agree to seller financing usually want a premium price and interest rate for it - and the smart ones will require some type of credit check and a deeper down payment than a traditional lender.

And seller financing, as sweet as it sounds, poses risks for buyers, too.  If the seller keeps a bank mortgage on the property and fails to make the payment, the seller-financed buyer could end up losing the home they’ve paid for to foreclosure. Best targets for seller-financing are investor sellers who are looking to avoid capital gains, and best practice is to get a local real estate attorney involved in drafting and recording the transfer and financing documentation.

Urban Legend # 2: Buyers save big bucks on cosmetic fixers.  Sellers aren’t stupid - and neither are their agents.  There might have been a day and time in which you could find listings that were deeply discounted because they needed a little cosmetic refresh.  But those days are long gone - even in today’s down market, sellers expect to invest a little cash into paint and carpet to stage and spruce up their biggest asset and get as much as humanly possible for it.  Today’s sellers also know that homes not  in tip-top shape may not sell at all these days, so they go to great lengths to do make their homes shine.  (And those who can’t afford to aren’t slashing tens of thousands off their homes’ list prices, though some will offer buyers a credit at closing.)

That’s not to say you can’t get a discount on a place that needs some work.  But the meatiest discounts are on the places that need the most work; roof leaks, old windows and laundry-list long pest inspection reports are much more likely to get you a big price break than scuffed walls and grungy carpeting on a home in otherwise sound condition.

Urban Legend #3: 100 percent financing for first-time buyers.  Most of the national first-time buyer programs are mere figments of our collective mortgage memory.  But during the subprime mortgage era, 100 percent financing was available to pretty much everyone, not just first-timers.  And the post-bubble first-time buyer programs tended to be tax credits that could defray some of the up front investment required to buy a home, rather than zero-down home loans.  

FHA loans, which are extremely popular with first-time buyers, are available to any buyer who can qualify, whether or not they have owned homes before or own one now.  Most of the state and local first-time buyer programs that still exist involve some level of down payment or closing cost assistance, but the vast majority also require that the buyer put some of their own cash into the transaction. The prevailing theory today is that homeowners who have put their own hard-earned cash into their homes are less likely to walk away from it later, whether or not they are first-time buyers.  It has also become clear that the financial management skills and discipline it takes to save up for a down payment or closing costs are skills and habits that stand prospective buyers in good stead for the rest of their lifetimes as homeowners.  

Long story short, while virgin homebuyers can and should seek out the assistance programs available to them (local real estate and mortgage pros often know the ins and outs), they should also tuck their pennies away and expect to have to put some of their own financial skin in the game.

Urban Legend #4: Nearly free foreclosures. We've all heard the line that banks don't want to be in the business of owning homes.  That may be true, but they are in that business, whether or not they want to be.  As a result, they're not giving houses away at pennies on the dollar.  In fact, bank-owned homes, as a rule, must be sold at as close as possible to their fair market value. Banks and their Wall Street mortgage investors do this by exposing the property fully to the market, rarely accepting lowball offers, and only lowering list prices in fairly small increments after a listing fails to sell after 60 or 90 days (plus) at the pre-reduction price.

While foreclosed homes do sell for less, on average, than their "regular" sale counterparts, they are also often in worse condition.  And banks are virtually always less negotiable on pricing, repairs and other terms than individual sellers.  The fact of the matter is that some of the best deals on today's market are to be had via negotiations with realistic owners of non-distressed properties who are ready, willing and able to make a deal.

Urban Legend #5: Distressed owners who will sign their home over to you, gratis. This one is fantasy of the highest level.  First off, very few assumable home loans even exist anymore; most mortgage are due on sale, which means that new buyers have to qualify for and secure their own loans.  Secondly, many mortgages that ARE assumable have much higher interest rates than today's home loans. Third, most homeowners who are in a distressed position on their home are in that position because their home has declined in value and they now owe more on it than it's worth, which stops them from pulling off a traditional sale or refinancing it at today's lower rate. 

Ask yourself: why would you, a buyer, want to assume a mortgage balance vastly greater than the property is worth, even if you could?  It's just not worth it, even if you think you're getting a shortcut around the mortgage qualifying rigmarole.

Add to that the fact that many states have consumer protection laws dramatically limiting the sort of 'bailout' that is even legal to propose to a homeowner who is in some stage of the foreclosure process. In addition, many homeowners who have received foreclosure notices are in the process of trying to work out their distress with their lender or staying put without making payments as long as possible before losing their homes.  These folks might be slightly miffed at your intrusion, to put it politely, if you ring them up, send them a note or knock on their door trying to pitch yourself (and your signature) as their mortgage distress solution.