Archive for January, 2014

FSBO negotiations 103

Friday, January 31st, 2014

Quick steps to think about before entering a negotiation situation: 1. Be Prepared 2.Take Your Time 3.Don’t take it personal 4.Ask for more 5.Speak, then shut up 6. Be friendly & fair, but be firm and unyielding if necessary 7.Know the other parties motivation!!

For sellers, when the buyer shows interest in your property. They tell you they like most of what they have seen, but they have a few problems with some areas of the house, such as; bedrooms are too small, too far of a drive to work, power lines in the back yard, no garage, etc. These are items you can not change, so don’t try to. Instead, focus on what they like. In all cases, there is one item that they really like. They might like the open kitchen with lots of counter space (because they like having family over for dinner) or they like the extra room in the basement (because they need a workshop) or they like the flat back yard (for their kids to play), etc. You need to use this information as often as possible. Any time they mention a negative, remind them of the positive. Turn every comment into a reason to move forward.

For buyers, know the reason the seller is moving. It may be a job transfer or new job, it may be a new house already purchased, it may be a personal reason. Find out and use it. Also know, how they came up with the price. Most sellers know they will receive offers below asking, be prepared with why you are offering a lower price.

FSBO negotiations 102

Tuesday, January 28th, 2014

Handling a low appraisal. What happens next?  Either, the seller can lower the sale price, the buyer comes up with more money, the contract is cancelled and the house goes back on the market or you can negotiate. Where do you start? Write down all parties that have a stake in your property closing. There is the buyer, seller, maybe an agent, maybe a mortgage broker, closing company, etc. If the contract is cancelled nobody wins. Everyone with an interest in the closing needs to compromise. My most recent experience was a house ‘under contract’ for $115,000 had an appraisal come in at $112,000. The seller was initialling willing to put up $4,000 in closing costs and the buyer was taking the down payment of $3,300 out of his 401k. Who was going to give in? The seller refused to lower the price and the buyer had no more money available. Seemed pretty hopeless until the mortgage broker stepped up. Yes, the mortgage company has a lot at stake to get the property closed. The seller agreed to lower the price to the $112, 000 appraisal but only put up $1000 in closing costs so they came out the same. The buyer agreed to a higher interest rate on the mortgage, which made the payment slightly higher, but he was getting the property for $3000 less. And the mortgage company was able to sell the mortgage to a third party at a higher premium and came out about the same. Each case is different. You need to understand the motivation of all parties. You need to be prepared to walk away if necessary. Walking away is tough to do, because you become emotional about the situation. You must take ‘emotions‘ out of the equation when negotiating.

FSBO negotiations 101

Thursday, January 23rd, 2014

Keep control!! First, keep control by asking the questions. In a court room when the attorney is asking questions, who is in control? When your boss has you in his office asking questions, who is in control? When the police pull your car over and asks questions, who is in control? When your children walk in and you start asking questions, who is in control? During negotiations, the one asking questions is in control. Ever see a politician answer a question with a question? All the time. They are trying to reverse the dialogue and keep control. Next time you are looking for a new car, TV or home appliance and the salesperson starts asking you questions, well, they are trying to keep control. In real estate, either the buyer, seller or agent wants to have the control. Who is asking the questions and who is on the defensive coming up with the answers. It’s Okay to answer a question, but make you sure you complete your sentence with another question. This is not easy to do. Practice a little. Look in the mirror and role play. Professionals train by role playing all of the time. The attorney, police, your supervisor, an appliance salesman and the real estate agents all practice. Also, you need as much knowledge of the subject matter as possible. Whether discussing the sales price, market value, any improvements needed, the mortgage company, title company or closing information, you need to know everything. Ever hear the expression: “attorney’s never ask a question unless they already know the answer”. Avoid any surprises. Do some homework and be knowledgeable.

Negotiagte

FSBO negotiations - Easy or Hard ?

Wednesday, January 22nd, 2014

Mark Dantonio, the Michigan State University head football coach, after winning the Rose Bowl this year was told the University of Texas wanted to talk to him about coaching their team. When asked who his agent was, his reply: “Have them talk to my wife”. Even with million dollar contracts at stake not everyone uses an agent. Selling your home without an agent? Sure you can, but it takes work and negotiation skills. What does negotiation mean, according to Wikipedia: it is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcomes to satisfy various interests of two people/parties involved in negotiation process. Negotiation is a process where each party involved in negotiating tries to gain an advantage for themselves by the end of the process. Negotiation is intended to aim at compromise. There are several key words to understand, such as; dialogue, resolve, bargain, agreement, advantage, etc. I find that starting a negotiation means both parties need to understand the situation from the other side. You know what you want and you know why. Do you know what the other party wants and why? The buyer has plenty of houses to look at and the seller, at the right price, has plenty of buyers. But you only need one. You need to work with the best one, the one that fits your needs. Do you have to give a little? Usually you do. Will the other side give a little? They should otherwise you can just walk away. There are plenty of articles, books and courses on negotiation. One thing I learned with my first sale a long time ago, just because you have a contract signed does not mean the negotiation process ends. There are many variables that cause more negotiation. Things like the home inspection, the appraisal, the termite letter, the mortgage companies rules, etc.  In the next several blogs I’ll try to highlight important areas of FSBO negotiations.

#1 rule for buying with a mortgage “FICO score”

Wednesday, January 15th, 2014

How does a college determine who gets accepted? It starts with your grade point average, plus other factors. How do you get into the baseball Hall of Fame? It starts with your batting average, plus other factors. How do you get a mortgage to buy a house? It starts with your credit score, plus other factors.     Planning to buy a house in the next one to two years, then you need to know your FICO score. FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score. The Fair Isaac Corporation is a for profit, publicly traded company with a market value of $2 billion. Their sole purpose is to help financial institutions make decisions on who gets a loan and what interest rate you will be paying. The higher your credit score, the lower the interest rate. Scores can be between 300 to 850. It is a very complicated mathematical formula that uses your payment history, current indebtedness, types of credit used and length of credit history, and new credit to determine your individual credit score. Your score goes up and down monthly. Federal law allows you to check with any of the three main credit companies to see your score. They are Experian, Transunion, and Equifax. Here is a link to your credit score. Generally a score of 650 or higher is considered good and a score below 620 are bad. Your mortgage person can help you identify which mortgage loan program works best for you.

The latest news for the mortgage industry is that they are finally loosening their standards on who gets a mortgage. In 2012, the average credit score for a person approved for a new mortgage was 748. Last year the average score was 738. In December, 2013 it dropped to 727. This means the banks are lending to persons with lower scores. Remember in 2010 -2012 how tough it was to get a mortgage, well today it is much easier. It’s funny how the banks have loosened while the interest rates have risen. In other words, the higher rate the receive the looser they get. I expect rates to keep rising this year and the banks to keep loosening.

#1 rule for selling your house ‘PRESENTATION’

Friday, January 10th, 2014

PRESENTATION!! Starting with the end of the process. a)The buyer will not sign the Purchase Agreement if they look sloppy, haphazard, and unprofessional. FSBO contracts can help. b)The buyer will not look inside your property if the exterior does not look good. Have you ever gone to look at a house and you were standing at the front door and thought to yourself “I really don’t want to go in”. I always recommend, ‘Go out to the street and take a picture of your property”. Look at it. Study it. This is what the buyer sees and makes their first impression. You only get one chance at this. You want the buyer to be excited to look inside. c)The buyers will not call or email you if your marketing looks sloppy, haphazard and unprofessional. Marketing these days start with the Internet. Look at your property on Zillow.com. You need to claim the property and fix the information, plus add updated photos. You also get a chance to explain your sale price. Next, make sure the website you use can professionally display your property and photos. No one does this better than FSBO.com.  Unlimited photos, unlimited wording, no pop up/distracting advertisement, professional looking brochure, professionally/custom made yard sign, etc. Make ‘presentation’ your top priority in selling your property and keep the buyer excited throughout the process.

Curb Appeal

Increase your net worth slowly

Wednesday, January 8th, 2014

At the end of each year I figure out my net worth to see if it went up or down in the past twelve months. I fill out a personal financial form, you know, the same one you fill out for the bank when applying for a mortgage. You write down the value of all your assets then subtract the total of your liabilities. This helps me determine if it was a good year financially. Last year, the value of real estate and stocks went up, while bonds, gold, automobiles, and home furniture went down. This year maybe different, only that the real estate and stocks will go up slowly. Thus, I look for my net worth to go up slowly this year. I strongly suggest each reader do the same exercise. Next January we will look at it again.