Selling Your Home in a Down-Market 

Metro Homes Market › Edit — WordPress So, the market stinks for sellers…and…it’s as good as it gets for buyers.  Buyers that have a stash of cash…or that have excellent credit and a low debt-to-income ratio.  And how many buyers like this are there?

The majority of buyers are in the $250k and under category.  The lenders, for the most part, have gone to a minimum down payment of 5%, with closing costs in the 3%range.  For a home selling for $200k, that means the buyer has to come up with about $16,000.  How many buyers like this are there?

A few years ago, using the same example, lenders were allowing buyers to get into a home in this price range and much higher - with no down payment, and they were allowing them to put the closing costs on top of the offer.  A huge amount of these deals were ARM’s and % only mortgages.  Here we are a few years later and…the adjustments cometh, adding $200 to $500 per month to the mortgage payments.  How many buyers in this price range are able to handle these increases?  Add to this that "0" down has gone away and no more adding the closings costs to the offer.

The lenders were salivating a few years ago and you can bet their actuaries were telling them that, although they’d have some deals go bad, they’d pick up the slack when the good ones started paying the higher rates?  (My opinion, of course.) What ever they were thinking was wrong.  Care to hear a sad story about what lengths  lenders would go to, in collusion with many, and I mean…many, mortgage brokers.

The story: A guy called me from "Callyfornia," who wanted to know if I could sell a home he bought, sight unseen, in the T/C area.  I went to check it out, did comps and called to tell him it might sell in the range of $250k - $275k.  It sounded like he fell off his chair…"what…I paid $430k for that house a year ago!"  (I knew that, as I had pulled up the tax record.  The sale was never recorded on the MLS.)

He bought the home through a mortgage broker, not a firm, an individual, after he attended one of this guy’s "get rich in real estate" seminars.  Hang in there…this gets much worse!

The broker tells him, "the present owner is in foreclosure, he owes $375k on it.  Here’s what we’ll do…it has a present value of $430k.  We’ll lend you all the money to buy it and we’ll give the owner $14k at the close…if he’ll rent back from you.  We’ll give you $16k in cash…so that if the owner falls behind on rent payments, you can kick him out and you’ll have money to run ads for new renters, and/or to make payments while there’s no income.  I’ll take $25k for helping you and the present owner get this done."  Where did I get this info from?  From the renter when I was there to evaluate the market price.  The renter showed me copies of the checks that were paid out.

Then, I learn that the buyer from Callyfornia bought a total of $4.5 million in property from this crooked mortgage broker.  I had the buyer send me a copy of the HUD (closing statement) for this sale.  None of the kick-backs were included on the statement.  I called the Callyfornia guy to tell him that; he, the mortgage broker and the prior owner had all committed bank fraud.  Oh, wait…there’s more!  The Callyfornia guy had $278k in the bank from kick-backs on all the deals together.  This, again, was to have money to run ads for new renters and make payments with…if he had to.  The properties were in 7 states.

I told the guy to contact the FBI and turn all of the money over to them.  To tell them he had just discovered his wrong doing and that he’d cooperate to get this mortgage broker.  Last I heard, he was working with an attorney to do just that.

Well, well, well…who’s the baddest guy in the bunch?  Here’s a clue; the buyer was a self-employed, "fast sign maker."  Can we guess what his annual income was?  He told me he made about $45k…if everyone paid their bill.  The lender, the mortgage broker…they didn’t know this?  Could the buyer or broker have over-stated the income?  If either or both of them did, wouldn’t the lender be suspicious…a sign guy makes how much?  What could you guess you’d have to be making to be qualified for $4.5 million in mtge payments?  Your answer is probably better than the lender’s was.

OK, if you’re still with me, what’s this got to do with you trying to sell your own home?  It has to do with the fact that these lenders, lenders the govt is trying to bail out now, have learned their lesson and the sellers and buyers are going to pay for it (again, my opinion of course), due to the more stringent credit standards.

Here’s some things you need to know before you sell your home: You have to price it right…right out of the chute.  The price is 80% of the marketing solution.

You have to make sure the prospective buyer is qualified, has an approval letter with the offer and gives you contact numbers for you to talk with the buyer’s lender.

You need to know that when it sells, the next hurdle is the appraisal.  Appraisals are coming in much lower these days.

Get as many "comps" as you can.  If you don’t like what you see, maybe you should pass right now, if you can, and let the market make it’s correction.  Might be a few more years before any real positive things take place.  Can you wait?

If you do go on the market, make sure your home shows much better than the homes you’re going to be competing with.  Those that sell are those that out-shine the competition.  Do what you have to here..you’ll be sorry if you don’t!

If you can’t, or if you don’t want to pay the 5-6 or 7% most realtors are asking for to sell it, contact us or other brokers who think it’s your equity and that you should keep most of it.

If you’re not good with a camera, you’re well advised to get a professional to take your pictures. This is another way to get in front of your competitors.  If you need a source for this, contact me and I’ll steer you to a Pro, it’s cheaper than  you think.

You also have to be in the MLS! Several sources say that when you’re in the MLS, you’ll land in over 400 websites.  I’ve seen other figures that say you’ll be in close to 700 websites.  That’s the kind of exposure you need.  We can help here as well.

In Minnesota, you have until about mid-Nov. to get sold before the holidays mess with your plans.  So if you want to sell this year, get on the market ASAP!

When you get an offer, watch for signals that indicate you have a weak buyer, one that may not be qualified, even though they have an approval letter.  Here are two signals to watch for; less than 1% of the purchase price for earnest money and no down payment (indicates a "0" down deal) or less than 5% down.  You need to learn more about this type of buyer.  If the offer comes via a realtor, challenge the realtor about the validity of the buyers ability to buy.

We love to hear from our readers.  What’cha got?  Have you had a good or bad experience selling your home yourself?  How’d it go?

Ed

This entry was posted on Saturday, September 13th, 2008 at 10:35 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.