FSBO (For Sale By Owner) – Do you really save?

Before you sell your own home consider the following:

Saving the Commission – The principal reason FSBO make is that they can save the commission by cutting off the middle man by selling their home on their own. Experience proves that this usually is not always the case. Buyers nowadays are knowledgeable. They search on the internet, they prepare their own research, they often talk to realtor for advice and they feel, whether the asking price is true or not, that a.) Owners overprice their homes and b.) That what the owner really expects and wants to get for his home is inflated by the amount of the commission in order to cover advertising and other expenses required in the sale of a home.

Qualifying Buyers – The owner, unless a former real estate salesperson, or with specially applicable experience, has had neither the training nor experience in qualifying buyers from all aspects, including financial ability of the purchaser to buy a home. Experience shows that real estate market are driven by the first time home buyers. If there are no first time home buyer entering the real estate market there will be no movement in the market. First time home buyer unless experience, will choose to work with a realtor to guarantee their safety.  Therefore, a loss of first time home buyer market share. Afterall, it is free for them anyway!

Inviting “Lookers” vs “Buyers” – FSBO advertisement bring many “lookers” as suppose to “buyers” who are not really qualified to buy, or real estate salesperson fishing for a client wasting owner’s time and perhaps losing a real prospect for him. Brokers bring people to view and inspect homes, people who are qualified financially and had already gone through the pre-qualification process. A serious buyers who often works on their own schedule accompanied by a real estate salesperson that sometimes book an appointment in odd hours. By not having registered lock box at the door can cause loss of opportunity for the seller.

Safety Concern – Real estate salesperson who brings client for showing brings serious buyers that already had gone through background checks by the brokerage. It is the salesperson’s responsibility to ID a buyer and hold accountability of the entire home showing. Most of the time the listing brokerage verifies the buyers appointment by contacting the buyer’s brokerage first for verification and to retrieved a key to the lockbox. It is hard to imagine what would happen if a home were to be left unattended open for public access without accountability. Any strangers have access to your home – the “For Sale By Owner” sign in the yard is an invitation to anyone to ask to see the home. While such occurrences may be infrequent, it has happened, and can happen, that undesirable strangers gain access to the home when the wife is alone. There also have been instances when thieves have posed as prospective buyers to learn what might be of value in the home, which they can later steal when no one is home. If the sign is home only when the husband is home, this means that good “drive-by” prospects may be missed. The real estate representative , on the other hand, pre-selects those who will be shown the home, making as certain as possible that the people are legitimate home buyers. Those with felonious or criminal intent do not take the risk of being accompanied by a licensed representative, who later could be a witness against them.

Difficulty in Purchaser Negotiations – Owner, inexperienced in real estate transactions, can and frequently does encounter difficulties in negotiations on possible concessions, price and other matters, specially when it comes down to disclosing material facts such as renovation that has been done in the house which might lose a qualified prospect. The broker as the “impersonal, professional go-between” is in a far better position to handle negotiations that will lead to a sale.

Prospects Hidden Objections – Prospects often are reluctant to bring out and discuss objections with the owner because of the personal element involved. They do not want to put the owner in the position of defending his own home. A home that is for sale using a realtor must disclosed any renovation or additional component made in the house. This is one of the main reason why a buyer use a realtor to protect themselves from any latent problem that an owner failed to disclosed. Thus, FSBO can’t represent himself because of a buyer’s high expectation. 

The Urgency Situation – When the time in which a home must be sold is limited, it is very unwise for an owner to take any of that time to try to sell the home by themselves, when they fail, which is often the case and a broker is finally brought in to sell the house, a broker does not have enough time to market the home properly to get it sold, depending on the market condition , as it was already suffered a negative impact by being on the market for far too long. A “looker” or a “prospect buyer” who had previously looked at that same property would want to bargain for a lower sale price.  Over exposing a property for far too long in the market can cause a principle of regression in it’s resale value.

Problems on Financing – Even though the buyer is theoretically supposed to secure his own financing for the purchase of a home, the financing normally is arranged by the selling broker. Most of the time a problem arise due to a lack of knowledge in relation to mortgage contract by the home seller. A listing broker will advise a home seller if there are any penalty a seller may have to pay if he breaks a mortgage contract. A buyer’s broker’s responsibility is to protect a client from entering into a sticky situation and therefore will impose different condition on the agreement of purchase and sale. Any breach of the condition can result in a brokerage suing each other. 

Lack of Advertising Exposure – The owner is advertising one home  –  his own. The broker on the other hand is advertising many homes by comparison. It is frequent that a prospect will call a broker on one ad but buy a home other than the one he called on first. Thus, through advertising, the broker provides many possibilities for qualified prospects. Owner’s needs to do the open house on their own time while realtor search and visit properties on clients given timeframe. Putting a lock box at the door for

Owner Expense – The owner may incur considerable expense in even succeeding in selling his home at a somewhat reduced price. Such expenses can include newspaper advertising, cost of sale sign, legal fees, etc. When the amount of the price reduction and the expenses are added up, the owner has netted little if anything, over what he would get from a broker sale. When he fails to make a sale these costs are pure loss. On the hand a broker assumes, as a part of his services, the expense for advertising a property on MLS, and can improve the chances of selling a property faster because other real estate sales people have an incentive of selling it. An experience realtor can also answer real estate transaction questions with assurances such as real estate contracts that FSBO might have to take up with a real estate attorney. Remember a closing attorney only deals with transferring deeds and ownership and ensuring that there are no liens against a property and will refuse any question related to any real estate transaction as they are not train realtor.

Don’t Know How to Justify Selling Price – Most prospects do not make buying decisions until they feel the selling price is right and justified. Rarely does a FSBO have a record of sales of closely comparable homes in a general area as one justification for the selling price. Nor does the owner know how to “build up” facts and features about the home. There are different method a train realtor can use to justify market price and market value. Direct comparison approach, cost approach or method of substitution just to name a few to quantify and justify a market price a buyer must pay. 

The Settlement Problem – Once a contract is signed by seller and buyer, a complicated process starts which leads to the date of settlement when the owner gets his payment for the home. The process involves loan processing in which “snags” or more serious problems can arise, the legal aspects of title and deeds and the possible easements and other factors involving the final transfer of property from the old owner to the new owner. These and other maters must be coordinated on a time schedule that will assure completion of the various steps in time for the settlement date. A buyer who only relies on the rules of the jungle may find himself in a disadvantage situation for example a seller contract falls through, mortgage financing were not approve or even a seller backing out of a deal specially in the seller’s market. A broker can protect both the seller and the buyer against this problem.

Pre-Mortgage Financing - Before You Seek Out Mortgage Financing

Let's take a look at several issues that should be considered before seeking financing. I am not suggesting that you need to have all of the answers before speaking with one or more trusted mortgage advisors, but you should do your best to equip yourself with good questions and position yourself to have meaningful conversations about your wants and needs. Before you even speak to an advisor, think through the following questions and focus on your objectives. There are other good, important questions that you will think of, and these will get you started:

What do I want?

What do I need?

(If refinancing) what do I have?

Do I know what I qualify for?

If I don't know what I qualify for, how do I find out?

How do I find a credible mortgage professional, and how do I know whom to trust?

What questions should I be asking?

How does this process work?

What do I need to get in writing? And, when?

How do I get the “best” deal for me?

How long do I anticipate being in this loan?

What do closing costs represent? Where is that money going?

If comparing lenders, rates, fees, etc., how do I go about it?

How do I make sure I get what I am being promised?


Also, you will need to figure out, with or without the help of a trusted advisor:

What amount, and/or percentage, do you want to borrow?


If a purchase:

a) how much do I need for a down payment?

b) how much would I like to put toward a down payment?

c) is there an amount or percentage I should put toward a down payment?

d) how much will I need for “reserves” and how much do I have available?


If a refinance, what are my objectives? Lower payment? Cash-out? Rate/term? What loan type best suits my needs? An “ARM.”? A fixed rate? Interest Only? An “exotic”? What “PITI” payment am I comfortable with on a monthly basis? PITI = principal + interest + taxes + insurance. (If you have an HOA, the dues will usually include your insurance payments). Will I have a prepayment penalty? If yes, why? How does it work?


If you are considering an Adjustable Rate Mortgage (ARM):

How do ARM's work?

How long is the start-rate fixed for before the rate and payment can adjust?

What index is the ARM pegged to?

What are adjustment periods?

What are “caps”?


If you want to borrow more than 80% (LTV) of the property value: What is mortgage insurance?

Do I have to have it? Does it last forever?

What is a piggyback loan?

What is a blended rate?

What is expanded LTV with no mortgage insurance?

These are just some of the many questions that you could, and should, ask. A good Loan Representative (LR) should beable and willing to answer all of your questions patiently and thoroughly. Please don't be embarrassed or too proud to ask questions. You were not born with this knowledge and nobody would expect you to know everything. But if you don't ask when you have the chance you do so at your own peril. A good LR will explain the process.

A good LR will give you a Good Faith Estimate (GFE) fully disclosing All fees and costs. A good LR will put everything in writing. A good LR welcomes transparency, full disclosure, and accountability. A good LR wants to compete on a high level and provide you the service you deserve. A good LR wants to give you good reason to choose him over unethical practitioners. A good LR wants to do the right thing, and be reasonably compensated for helping you with what may be the most important financial decision you will make in your lifetime.

As mentioned in another section, think about what you are willing and able to document. I have discussed financing with rate-shoppers whose first question is “What's your rate?”. I tell them that of course the rate is important, so in order to beaccurate and professional I'll need to ask a few questions. So the first thing I ask is “What are you willing and able to document?”. When the answer to that question is “What do you mean?”, which happens too often, I know that this person is headed for trouble. I don't know whether it's ego, or laziness, or wishful thinking, or what drives that behavior. But think about this; bad rate-shopping amounts to asking the same question until you find someone willing to lie to you. I have written a yet-to-be-submitted article pertaining to documentation, because understanding how this factor impacts your financing is crucial. For now, please remember that even if you think your documentation might be light, go for what you want. You can find a good LR to give you a free consultation and not charge you an application fee, so there is nothing to lose. As a mortgage professional, if I can try to help you then I welcome the opportunity. I am looking for ways to make your deal work as long as it is suitable, not for reasons to kill the deal. I amyour ally, not an adversary. A good LR is not judging you; we want to put your profile as a borrower in the best possible light (while staying compliant) and secure for you the most suitable financing that serves your best interests. What you should focus on is taking the appropriate steps to select a trusted advisor, be completely honest with that person, and participate andcooperate throughout the loan process to help expedite the closing of your deal.

In conclusion, I am not going to attempt to ask and answer every conceivable question at this time, because the purpose of the report is a “heads-up”, and not to write a textbook. However, there is an extensive amount of information available on-line and at your local bookstore. You should be able to easily get answers to the questions I have posed, and you'll probably think up some more good and important things to ask.

Real Estate Investing - Ways to Get Started

If you are planning of real estate investing, there are several things you will need to consider. The first thing you need to determine as a real estate investor is what you plan to do with the property once you have acquired it, an “exit strategy”.

You can flip houses (or more commonly known as the usual buying and selling of “as is” property), fix old properties, or to purchase property and rent them out. Knowing what you plan to do with the property can give you options on how you can finance the deal. It is also a good idea to make an investment plan so you know just how much you will allot to a certain property and how long you are going to keep it. Some real estate investors choose to sell the property immediate so that the money they originally invested can be added to the cash flow while there are others who fix up old property and sell it to higher value. Other real estate investors also prefer to purchase commercial property and rent it out as office spaces, or they acquire residential properties and rent it out to individuals. Each of these strategies have different return rates but the profit that an investor can get depends on how efficient his investment plan is. Real estate programs are a must if you plan to buy investment property and be successful.

When investing in real estate property, your main goal is to maximize your profit so you need to find a good buy – a property sold to you at a low price and can be sold at a higher price. So how can you find properties sold at below market value? In today’s market the majority of profitable deals can be found in foreclosure properties, sometimes called Real Estate Owned (REO) properties. An advisor is there to help the investors and provide them with their expert advice in the form of a real estate investment program.

In order to make your investments in real estate a success, you need to know how and when you should use the help of professionals in order to meet your goals. Some of the professionals who are of value to your business include mortgage brokers, real estate agents, and real estate lawyers. By getting the help of a professional at the right time can give you insights while choosing a property to acquire and they also help you save time since you won’t have to do your own time consuming research. While planning real estate investments, one must avail the services of a real estate program.

There are also many methods used for real estate investing and each one is dependent on what you want to achieve. Fortunately, these methods can be summarized into two:

1. Buy to Sell: this is geared for profit and is usually short term.

2. Buy to Rent: this is beneficial for long term income. Leasing the property while accumulating equity is usually done for mid to long term

Knowing what approach you want to take can help in planning for the right goals and  which properties are much suitable. Aside from this, you can also make a plan based on your goals, and you can customize the methods so you can meet your goal much faster and in a more effective way.

Choosing a Lake Tahoe Realtor

When it's time to sell your Lake Tahoe home, one of the first things you should consider is who is going to help you through the process. Choosing a realtor in Lake Tahoe is one of the most important decisions you will make during the selling process, and it isn't a decision to be made lightly.

Too many house sellers make their choice of realtors a hasty one. Calling the first number in the yellow pages is not a good idea, and neither is using the first realtor whose signs you see in front lawns around the lake. Just because a realtor is established here in Lake Tahoe does not necessarily mean they are a good fit for you. As with any major financial decision, this is a time to do your homework.

The first factor in choosing a realtor is looking for one with experience. In this sense, signs around town can be good, but only if all the other factors fit, too. Look for a company that has been in business successfully for a number of years, and ask about properties they have handled in the past. Chances are an experienced Lake Tahoe realtor will know just what to do with you and your home's particular situation. Use this as a chance to get references from people who have used this realtor in the past- many realtors keep a list of satisfied clients who are willing to supply information to potential sellers- and do your research.

Another important factor is education. It's becoming easier and easier these days for just about anyone to get a real estate license in California and Nevada. Unfortunately not a great deal of education is required for a person to be allowed to deal in real estate. So ask about credentials. Look for special certifications and degrees that prove your realtor has actually studied the business beyond simply filling in test blanks.

Finally, go with your instinct. If your potential realtor says things that just don't sound right to you- for example, claiming they can sell your house for much more than it its appraisal value - think twice before investing time and money with this person. If you don't trust them, you're not going to be happy during the selling process and things can go badly very quickly. Look for a Lake Tahoe realtor who is able to match your style and respond to your needs. Each sale is important to the realtor, as well as the seller, and if you're made to feel like a number, it's time to look somewhere else.

A realtor can be a major benefit during the house selling process... or they can create major problems. So choose wisely. You (and your money) will be involved with this person for some time to come.


Is Lake Tahoe Housing Too Expensive?

The face of Lake Tahoe's population is changing by the day. With the onset of many lower-income jobs and the flux of workers in the job force who are making the federal minimum wage, the financial situation of the region's population has been shifting. Along with this shift comes the inevitable shift in the housing situation. With incomes and housing rates in flux, Lake Tahoe's housing situation has been steadily worsening and may very well reach a crisis point in the near future.

And it's not just here in Lake Tahoe. In many areas of the US, a recent study finds, the average minimum-wage worker cannot afford the rent and utilities on an average apartment. This study assumes that no more than 30% of a worker's income goes towards rent and utilities- the government considers a percentage higher than that to be too much. In a country where owning a home is a major status symbol, it is a cause of real concern when a large segment of the population cannot even afford to rent one. Are real estate costs getting out of control?

For an average two-bedroom rental apartment in the United States, the average worker must earn, according to the government, in the area of $15 an hour. With the minimum wage currently at about a third of that amount, the fact is that many families cannot afford to keep the roofs over their heads, much less save money to someday buy a home. The fact remains that wage increases have simply not kept up with the booming costs of real estate rentals and utility costs here in Lake Tahoe.

While rent costs are climbing, utility costs are climbing faster still. And it's also worth noting that in areas where housing costs are lower, wages are on average also lower, so there is not much benefit to be gained by relocating. The minimum wage has not changed in the United States since 1997, while the costs of housing continue to rise.

The US government has also fallen behind on their spending towards Section 8 rental vouchers, which help low-income people pay their rent. More landlords than ever before, particularly in metropolitan areas, accept Section 8 vouchers; but since government spending towards these vouchers has not kept up with demand, they are becoming more and more difficult to get. As housing costs increase in and around Lake Tahoe, those who depended on Section 8 can no longer do so.

Not surprisingly, rent in rural areas is the most affordable, and California is at the top of the list when it comes to hourly income needed to afford a typical apartment. It's a difficult situation for anyone who is having trouble making their rent: The option to move somewhere cheaper, but make less money, is not much of an option.

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