buyer Archives

What Is Earnest Money and Why you Need It

Handing over earnest money for a house he wants to buy.

When selling your house yourself you must understand what is earnest money and why you need it. Home sellers often overlook this in For Sale By Owner transactions. That is an enormous mistake and here’s why;

Bt providing money your buyer is showing that they are serious about buying your house. So how does that work?

What is Earnest Money

You put your house on the market with sites like Zillow for all potential buyers to see. Showings are scheduled and people view your home. When one of those people makes an offer, the two of you negotiate a contract. Once you’re in contract it’s important to understand the purchase is not yet complete. They have not paid you yet but your house in now off the market. It’s not showing up as for sale anymore.

That’s why you collect earnest money at the time of contract signing.

Earnest money is a good faith deposit your buyer puts down to hold the house in contract while they go through the closing process. The closing process can comprise:

Processing the buyers loan to get financing.
Doing a title search to clear the title.
The appraisal which will determine the value of the house.
Any inspections the buyer has done.

Having money on the line keeps the buyer from changing their mind. It keeps them in contract with you.

How Much Should You Get

How much earnest money to collect is determined by several factors like where in the country you live and the price of the house.

In Wichita KS where I work the sums are relatively small. Our average is $500 to $1000 which is not much of a deterrent.

In some parts of the country like California, for instance, earnest money demands are much higher. 1-3 percent of the contract price. With an average sales price of around $580,000 that can be an excellent reason to be sure about a contract before the buyer signs. They stand the possibility of losing $10,000 or more.

Every state is different, so you’ll want to do a little research to see what they expect where you live.

Provides Protection

Earnest money protects both you, as a For Sale By Owner, and your buyer.

You’re protected because now the buyer has skin in the game. They are less likely to walk away from the deal when they stand the chance of losing money. If they walk away, then you keep their earnest money.

There is nothing to prevent your buyer from continuing to look at homes for sale. Earnest money prevents the buyer from finding a new home and ditching your deal. If the buyer backs out for any other reason than contract contingencies, they give up the money to the seller.

Earnest money protects the buyer by showing you, the seller, that he is serious. In a multiple offer situation the amount of earnest money can be the difference between which offer is accepted.

If two offers are very similar, the one most likely to stick will have a better chance. The offer with the most earnest money at stake.

For example, if you list the house for $300,000 and one buyer is offering $500 and the other is offering $3000 the offer with $3000 at stake is more likely to close. They have more skin in the game.

What Happens With Earnest Money

Once the earnest money is collected from your buyer it’s deposited with the title company, real estate brokerage or law office. They hold the money in escrow until closing.

While not technically a deposit, they will apply the money towards the buyers down payment or closing costs.

The contract you and your buyer use will most likely have contingencies written in that concern earnest money. Those contingencies are there to protect the buyer.

Contingencies

Financing

When you’re looking at offers one thing you look for is a pre-approval letter from a reputable lender. This tells you your buyer can get the financing needed to buy your house. If your buyer’s financing should fall through for whatever reason it kills the real estate deal, You will then be obligated to return the earnest money and put your house back on the market.

That’s why when looking at offers financing is an important consideration. Your buyer’s financing matters.

Reasons the financing can fall through are;

Loss of job. If your buyer loses his job, the bank will not lend the money needed to buy your house.
Surprise medical expenses. If something serious medically happens costing a substantial amount of money, it could cause the financing to fall apart. Anything that changes the buyer’s debt to income ratio can affect their ability to get financing. Which brings me to the nest point.
Major purchases. If your buyer goes out and buys a car, or anything that requires a loan, it could kill the deal by canceling his pre-approval. A good lender will warn the client not to make any major purchases, take out any credit, deposit or withdraw sizeable amounts of money or do anything financially out of the ordinary. You should also reiterate this to your buyer. I personally have had more than one deal fall apart because a buyer did something that affected the ability to get a loan.

Most home sales are financed so your buyer’s financing is a very important part of the real estate transaction.

Inspections

A buyer has the option to preform any inspections they want to. That may include;

A general home inspection from by a home inspection company. This is an overall visual inspection of the property. Most home inspectors aren’t experts in any particular component like plumbing, electrical, roof ect. but have a basic limited knowledge of overall home construction.
A Radon test is a popular inspection as we know more and more about radon and its health consequences.
My favorite inspection on older homes is a sewer scope. I have a good idea of what’s a good investment and what is not, but I can’t see the sewer. A sewer scope can see inside the sewer. Sewer repairs or replacement is a major expense, so it’s important to know that the sewer is in excellent working condition.
Getting a roofing company to come out and inspect the roof. To have the roof replaced is another major expense. I don’t solely rely on a home inspector’s opinion about the age and condition of a roof.

What does all this mean to you? If an inspection turns up potential problems, the buyer can ask you to have those problems fixed. While it does not require you to do so the buyer may back out of the contract and get his earnest money back if you can’t come to an agreement.

Repair negotiations have a lot to do with market conditions. In a seller’s market, where there is limited supply and strong demand, you have the upper hand. In fact, in this seller’s market of the Summer of 2020 many sellers are putting their homes on the market as-is.

A preinspection prior to listing is always a good idea so you can solve these problems before you go into contract.

The Appraisal

The appraisal is the most anxious and important part of the transaction in any market. The bank will only loan as much money as the house is worth and that’s what the appraisal determines. If you have done the work and priced your house right you should be ok.

If the house appraises for at or more than the contract price, congratulations, you’re almost to the closing table. You did a good job of pricing your house, hopefully not leaving any money on the table.

If the house doesn’t appraise you and your buyer will need to renegotiate the contract. That means either you lower the price down to the appraised value or your buyer has to make up the difference in cash. If you can’t come to an agreement, the buyer can back out of the contract and get their earnest money back.

Time

Rarely a deal falls apart over time but that is a factor. There is a closing date on a contract and if the house doesn’t close by that date the buyer and seller must agree on an extension of the contract. If they can’t agree then the contract will expire and the earnest money will be returned to the buyer or retained by the seller depending on whose fault the delay was.

Change Of Heart

If you, as the seller, should change your mind and back out of the contract, the buyer will get their earnest money back.

Finally

Earnest money is a crucial component of the real estate transaction. While nobody wants to see a deal fall apart, having something to discourage it from happening is useful.

Selling a house by yourself without the help and expense of a real estate agent is possible and can be profitable. There’s a lot of moving parts to know and take care of. Knowing what to do is how to make it a profitable proposition.

I can show you how to have a successful and profitable home sale.

Why The Real Estate Industry Will Change

by Joel Weihe

aerial view of Neighborhood houses depicting coming changes in the real estate industry. — Disruption in the real estate industry.

There are a lot of industries being changed irrevocably by technology and entrepreneurs. It’s what they call disruption. So far the real estate industry has fought off outside intrusion and kept the status quo. Control of inventory and high commissions are the norm. But for how long? There are a number of reasons why the real estate industry will change and won’t last in its present form. One of those is you learning to sell your home yourself.

The Cost Of Doing Business Will Change

It’s expensive to sell a house. The biggest expense are the commissions but there’s also a host of taxes, fees, and other costs.

According to The Economist Americans paid out 75 billion dollars in real estate commissions in 2019. That’s with only about 7% of homes changing hands. It might not sound like a big number in the context of the entire country but when it’s $13,608 of your money it’s a different story. Zillow.com estimates the average cost of a house in the United States is $226, 800. Some states that cost will be much more, some states it will be less. The average price to hire a Realtor is 6% of the sale price.

Add to that cost the federal and state taxes, closing fees, title insurance, mortgage fees and the cost of moving it can add up to more than 10% of the cost of the house. That really eats into your profits.

The commissions are by far the largest expense. You can avoid those high commissions if you sell your home yourself.

The taxes are unavoidable. It’s the government. The title company that provides title insurance and in some states handles the closing has to be paid. A necessary cost. Depending on how much stuff you have determines how much it will cost you to move. That leaves the commissions. Are they necessary? Sellers are becoming more and more fed up.

Those commissions can strip away your profits. Many home sellers are realizing they can save commission costs by selling their homes themselves. The real estate industry will change from this fact alone.

The Disrupters Changing The industry

Technology has moved in on the taxi industry, run video stores out of business, changed the way we trade the stock market and done away with travel agencies.

We still do real estate the old fashion way. The middleman, or broker, brings buyers and sellers together and takes a significant part of the sellers’ proceeds. It’s not that there haven’t been attempts to overthrow the traditional real estate agent, it’s just that nothing has stuck nationwide.

The main “threat” and most likely to succeed are the iBuyers.

iBuyers

One reason the real estate industry will change are iBuyers. iBuyers are companies, mostly investor funded startups, that buy a home directly from the homeowner. The attraction to iBuyers is no listing time, no real estate broker fees, no staging or marketing and no waiting.

They make money by buying a house and reselling it. The ibuyer uses local data and their own algorithms to determine a home’s value. Then the iBuyer will make a cash offer. If accepted the house can close whenever the seller wants to.

But…as good as all that sounds the iBuyer still needs to turn a profit. They do that by offering less than market value so they can make money on the sale. Or charging a commission. It still cost the seller money, sometimes even more. The attraction is the process is convenient and fast for the seller with none of the usual anxiety associated with selling a house the traditional way using a broker.

Some of the more popular iBuyers are:

Opendoor

Opendoor has its own automated valuation model (AVM) system so it can make offers quickly. The allure to Opendoor as mentioned is speed and convenience. The downside is the 7% commission. Yes, the 7% commission which is even more than a traditional broker charges. Opendoor is starting to gain traction in several cities and has plans for expanding to more.

Knock

Knock helps people that are selling and buying. People that want to move. They do this by buying the new home for them so the client can move and then selling their old home for them once they’re settled in to the new place. Knock also charges a commission of 6%.

Offerpad

Offerpad represents the true ibuyer philosophy. They literally buy your home from you outright then sell it at a profit. You’ll be getting less than full value for your property because that’s how they make money. Buy low and sell high.

Redfin Now

Redfin is a real estate company that in the beginning was hostile to the real estate business. They bragged that they were going to change the way people did real estate by upending the traditional model. The ambitious plan didn’t work out quite as dramatically as they prophesized and in the end they were just another discount brokerage. Redfin Now is an extension of the original company that will make offers and buy homes outright for resell.

Zillow

Zillow is the original real estate disrupter. In the beginning Zillow sold advertising and leads to real estate agents to make money and that’s still the brunt of their business. What Zillow did was insert itself in between the real estate agent and the consumer. They offered a simple way for buyers to browse real estate listings without the need of an agent and then “sold” those buyer leads to agents when they needed help. Zillow made real estate agents nervous because they attracted a lot of attention, but swore up and down that agents had nothing to worry about. Zillow was agent friendly and needed real estate agents to be profitable.

Recently Zillow has ventured into the ibuyer space, positioning itself for whatever happens in the future. Zillow is playing both sides of the fence, a very good move. Again Zillow swears they are only testing the iBuyer path and agents have nothing to worry about but whichever way the business shifts Zillow will be ready. Zillow is truly the 800-pound gorilla in the new real estate paradigm.

Discount Brokerages

Discount brokers are just what they sound like. Some discount brokerages use a flat fee model. They presumably offer real estate services cheaper than mainstream brokerages. They’ve been around forever but recently have been trying to differentiate themselves into something unique and new with complicated pricing structures.

Purple Bricks

Purple bricks makes money by charging a flat upfront fee and then the remainder being paid after the house sells. If the house doesn’t sell the upfront fee is non refundable. It still costs between $8,000 and $10,000 to sell a home through purple bricks but can be less expensive than using a traditional brokerage. The problem with this model is the nonrefundable upfront fee. Purple Bricks is a UK company that tried and failed in the US and Australia.

Simple Showing

Simple Showing is yet another investor funded startup that offers low commission fees, 1% listing fee and 3% buyer agency fee with an up to $5000 buyer rebate. The seller pays a 4% fee in total.

Redfin

Redfin offers a 1% listing fee when you sell and buy through them. That 1% listing fee doesn’t include the buyer’s agent commission, which is generally 3%. Your overall cost will be closer to 4%.

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This is certainly not an exhaustive list of iBuyers or discount brokerages, but enough to give you an idea of what’s coming for the traditional real estate business.

The success of these types of brokerages rests on lower commissions and flat fees, which means less money for the agents doing the work. What makes a career in real estate attractive is the amount of money that can be made. If that money is reduced substantially the field of experienced agents will dwindle. This in turn runs the risk of reducing an agent’s true fiduciary towards the client which is somewhat of a problem in real estate now.

After the investor money runs out time will tell if these types of new real estate brokerages will last and be profitable. We must wait and see if these companies are what will make the real estate industry change.

The Law Is After Real Estate

Courts and government are taking a hard look at what some think are anti-competitive practices. The real estate industry will change drastically if the Government wants change despite the millions spent on lobbying efforts to keep the status quo.

The Trump administration DOJ is investigating the real estate industry. If that course of action is pursued the real estate industry will change, but no one can really predict how just yet.

Some sellers question why they have to pay a buyer’s realtor. Sellers are forced to pay for both their own agent and the buyer agent. A commission is charged to the seller and that commission is split between the sellers’ agent and the buyers’ agent. There have actually been class action lawsuits by sellers against their agents claiming anti-competitive behavior.

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No one knows and no one can be sure what will take hold and what will not but change is inevitable. Antiquated real estate practices are being challenged from all sides. The problem with iBuyers is cost. They offer convenience but don’t address the expense of selling a house. The discount brokerages are offering savings but so are many real estate agents due to competition among themselves. Even so, it’s still a lot of money to sell your house. Money that should be profits for you, the home seller.

What I think will come to pass is more people will realize that with a little education it’s really not that difficult to sell a house. Many thousands of brand new untrained agents do it every day. 10 years ago when I sold my first house I hadn’t a clue what I was doing and just sort of stumbled through it. Since then I have sold hundreds of homes and figured it all out. I know how to sell a house fast and for the most money. And people still pay me a lot of money to do that.

Whatever happens in the long run for the real estate industry happens but what needs to happen for home sellers is profit. They say real estate is the best investment you can make…and it can be.

Sell your house yourself.

Let me show you how you can save thousands of dollars of your own money. Click here!

Joel

Why Your Buyers Financing Matters

by Joel Weihe

Financing matters. There are many ways and means to purchase a home including paying cash. We’re going to deal only with the ways that matter to the home seller and explain why your buyers financing matters to you.

You may be wondering what financing has to do with you? You’re the one selling the home, aren’t you? Not borrowing money to buy it. The financing has quite a bit to do with the sale actually.

The type of financing your buyer is using can directly affect the time it takes and the probability of making it to the closing table. When you go into contract your house is pulled off the market. If for whatever reason the deal falls through the time off the market could affect your selling price. How? Because it gives your house the appearance that the house has been on the market longer than it actually has.

Say for example your house goes up for sale and 6 weeks later you have a contract. At this point your house has been on the market for 6 weeks. The deal is now 3 weeks in, maybe 4, and the bank says your buyer can’t get financing. Could be a number of reasons like job loss, lied on the loan application or just a bad lender. So now the house goes back up for sale and spends more time on the market. To potential buyers your house looks like it has been on the market for 10 weeks rather than just 6.

Now you may be getting into that stage where people start wondering what’s wrong with the house. Why hasn’t it sold?

There’s a saying in the real estate world, “the longer it sits the less it gets.”

Types Of Financing

Conventional Loan

A conventional loan is a loan between a person or organization and a lender. With conventional financing the loan is not backed or guaranteed by the government. Money is borrowed from a lender and paid back to a lender. If the borrower defaults on the loan the lender gets the hose back and is stuck with it.

Conventional loans generally require more down. The banks like 20% but often will take less and charge the borrower PMI or private mortgage insurance. The theory is the more the borrower has in the deal the less likely they are to default. If they do stop paying back the commitment the mortgage insurance company will take care of it. Why is this important to you? Conventional bowers are usually the strongest buyers, and the easiest loans to get through to closing.

Most conventional borrowers have more skin in the game or money down. Conventional loans usually require higher and better credit scores. Then the idea becomes maybe this borrower is more responsible and less likely to have something “come up” during the loan verification process. You don’t want anything “coming up” during the verification process. That can shut a deal down.

Financing matters and conventional loans are the next best thing to cash.

Government Insured Loans

Government-insured loans are just that. Home loans, or mortgages, that are backed by the government so if a buyer defaults the government insures against losses the lender may incur. There are three types of government-insured financing.

FHA Financing

The Federal Housing Administration is the branch of the federal government that manages the (FHA) mortgage insurance program.

FHA loans are available to just about anyone that qualifies with credit and income guidelines. These loans are very popular because they require a relatively small down payment and are easier to get approved for. Borrowers can get into a house with as little as 3.5 percent of the contract price down. Potential buyers can get by with lower credit scores and even in some cases recent bankruptcies or foreclosures on their record.

FHA loans can come in many forms. Often lenders and FHA offer special programs to help people become homeowners. There are first time home buyer programs, bond programs and others. These are all usually FHA.

USDA/RURAL

USDA loans are a 0 down loan that is designed for low-income borrowers. There are a lot of rules as to qualifying income and type and price of the home. Those rules vary from state to state. USDA loans are the most difficult to get and the get to closing. There’s a lot involved including a very difficult appraisal process. (More on that later)

The VA Home Loan Benefit

The US Government created the VA home loan benefit in 1944 to assist service members returning from the war to be able to purchase homes. Since it’s inception the VA home loan has helped over 20 million veterans and their families obtain affordable financing to buy a house.

The veteran can get into a house with $0 down and no PMI.

VA loans are great for qualifying veterans but a little more work for you. It’s great if you want to help a vet by considering his/her offer from the multitude that you’ll get. Keep in mind the VA loan is a lot like FHA with an even a more stringent appraisal process.

The appraiser requirements are mostly like the FHA requirements, but my experience has shown the VA appraisers are a little stricter. More likely to call you out on what they consider defects.

There are some fees that the veteran is not allowed to pay and if they come up are the responsibility of the seller, bank or escrow company. Some of these fees are a processing fee (not to be confused with origination fee), closing fee or the cost of termite inspection.

Remember Veterans have given their time and more serving our country and fighting for the benefits we enjoy living here. Just something to keep in mind when considering a veterans offer.

The Government Appraisal process

What concerns you as the seller for Government-backed loans like FHA and VA is the appraisal process. The government has a Stricter appraisal process that may require repairs to be done to the home.

The home must be in a certain good condition. According to HUD handbook 4150.2 the structure “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants”.

What Appraisers Look For

Some the things Government trained appraisers look for and how it relates to why your buyers’ financing matters.

All bedrooms must have egress (a way out) for safety concerns such as fire. A window is OK if it’s large enough for someone to get out.
In homes built prior to 1978 when lead based paint was banned in the US the appraiser will check for any chipped or peeling paint. Painters must have a specific license to deal with lead-based paint and it is expensive to hire them.
All steps and stairways should have a handrail. Sometimes if steps are uneven the appraiser will call it out.
The heating system must work and be sufficient to create comfortable and healthy living conditions.
The roof must be in good condition and, obviously, keep moisture out of the house. It should have a future too.
The foundation must be in good repair and able to carry and normal loads imposed on it.
The lot should be graded to promote positive water flow away from the house to prevent damage.

I have found USDA and Rural loans to be the most difficult to get through. The house must be in really good condition and where I live in Kansas that can be a challenge because the maximum allowable home price is so low. When considering an offer using USDA financing be sure your home is in good shape or negotiate the contract with required repairs in mind.

The three key things to remember what will be watched for any of these Government backed loans are:

Safety
Sanitary
Structurally sound

The following is what I mean by open to interpretation. In the defective conditions section of the FHA handbook it shows how the process leaves you at the appraisers’ mercy. It reads as follows; “Other readily observable conditions that impair the safety, sanitation or structural soundness of the dwelling.”

Defective Conditions

A property with defective conditions is unacceptable until the defects or conditions have been remedied and the probability of further damage eliminated. That’s a quote from the handbook. Some defective conditions include

Poor workmanship
Defective Construction
Evidence of continuing settlement
Excessive dampness
Leakage
Decay
Termites
Handrails where needed

This is by no means an exhaustive list but will give you a good idea of what to be ready for.

Financing matters

It’s not just about price when deciding on which offer to accept, and you will get many if you follow my training. The type of financing your potential buyer is using could be the difference between a successful closing or more time on the market.

Now, consider this; You have 3 identical offers except one is conventional, one is FHA and one is VA. Which do you accept? Keeping in mind that service members deserve a break.

How To Sell Your House Yourself

by Joel Weihe

Do you know how to sell your house yourself? Have you ever considered it?

for sale by owner real estate sign and beautiful house.

When you think of selling your home what’s the first thing that comes to mind? For most it’s where to find a realtor. How do I find the right Realtor? Many will go to their friends for referrals. Some will google and end up with a service that promises to find them the “best” Realtor.

The truth of the matter is the first thought should be can I do this myself? If you don’t think so then by all means you should hire a Realtor, but think about that commission. It might be worth learning how to do it yourself.

It’s really not that difficult. With some instruction it’s very possible. I’ve taught many new agents the art of listing and selling a home. Brand new agents with no more experience than you have. So why not pay yourself instead of an agent.

Take the money you save and put it down on your next house to lower the mortgage payments. Maybe you can finally afford that vacation you’ve been dreaming about. Or buy a new car. It’s your money. You should keep it.

The Basics

Here’s basically what you need to know to sell your house yourself and save thousands of dollars:

Price your house right!

Many for sale by owners (FSBO) fail and realtors love to point that fact out. The only reason a house doesn’t sell is because of price and everything is relative to price. Homes in the neighborhood may be selling in a certain price range and you think that’s what your’s should sell for. That may be the case but a few things to consider;

Is your home the same size? If the neighbors house is 2400 sq ft and yours is 1900 sq ft the neighbors house will be more.
Is your house in similar or better condition? The condition of a house factors into price.
Does your house need updating? If a home is stuck in the 80’s it will have an effect on price.

You can use the online real estate portals such as Zillow to find comparables when pricing your house.

Realtors that stalk FSBO’s that have been on the market awhile know that the price is to high and they have a strategy. When meeting with the seller they’ll brag about their record, go over marketing plans and convince you they can sell it knowing full well in a couple weeks they’ll be asking you for a price reduction. And you’ll agree. I’ve seen it happen time and again. Now you’re selling the house for what it should have been to begin with but you’re stuck paying those expensive real estate commissions.

Get Your House In Order.

Yes, clean your house. Upside down and inside out. Clean is a big deal when getting your house ready to sell.

Do an inventory of what needs to be repaired, improved upon or replaced. Consider;

Painting inside and out where needed.
Clean windows inside and out.
Insure the roof is in good condition.
Test all electrical, plumbing and appliances. repair or replace as needed.
Declutter by renting a POD or storage unit.
Powerwash the front porch area. Entire house if it needs it.
Mow often and maintain landscaping.
Clean or replace carpeting if needed.

It has been my experience that home buyers are always on the lookout for what’s wrong with a house, looking for negotiating points. If the carpet needs cleaning to a buyer that’s $5000 for new carpet. In reality it may cost $300 to have it cleaned. A dripping faucet means the plumbing needs to be replaced when the faucet just needs a new washer. You get the picture.

Remember, buyers want to move in and start living. They’ll look for a house that will let them do that.

Marketing Your Home

In this day of the internet, marketing your home is really quite simple. That’s the big difference between pre internet real estate and real estate now. Before the internet, and sites like Zillow, the real estate industry held all the information. You needed a real estate agent to market your home. A real estate agent was also needed to research and visit homes.

Not anymore. Now consumers have all that information at their fingertips.

To effectively market your FSBO;

Put a for sale sign in your yard. You want all your neighbors to know there is a house for sale in the area.

2. Advertise your house online everywhere you can. This can mostly be done for free. Sites like Zillow posts FSBO’s. Craigslist is another popular place that home buyers search.

3. Host an open house. It’s best to hold your house open on the weekend. Find out when realtors do it your area. Start advertising in the online real estate portals where you listed at least a full week before the event.

Sell It

So now that you have priced your home right and prepared it for market your ready to start showing. Potential buyers will call you and ask to see it. If you’ve done everything right someone, or several someones, will make an offer.

A full price cash offer with no concessions is the best. If you don’t get that perfect offer right away but a lesser one you can counter offer. This will go on until you come to an agreement and then you put it in writing.

Ask your potential buyer for a pre approval letter from his/her lender. You’ll want to make sure it is a reputable bank or mortgage company. If you have any doubts research the firm and it’s OK to call.

Every state has a different contract and different rules and disclosures. There are also federal disclosures. You can find paperwork for your real estate transaction online. Search for it. Many title companies have contracts you can use. Make sure you do your research and have all the paperwork in order. Make sure everything is included in the contract. Any concessions or contingencies, such as inspections or paid closing costs, must be included.

It may be that you get get a low offer. What we call a lowball. If that happens do not get emotional. Keep your cool and either say no thank you or give a counter. Some buyers will test the water by making a low offer. They may very well be willing to pay what you want but you’ll never know if you you don’t give them a chance.

Closing

Arrange who will be handling the closing ahead of time be it an attorney or a tile company. This can also be a valuable source of information throughout the process. Keep the closing agent in the loop while you’re in contract.

Once you have a contract most of the hard work is done. The buyers lender and the title agent do most of the work from here on. Just be ready to answer any questions or provide any requested documents.

That’s It

It’s not always easy and sometimes there are complications but that happens with or without a real estate agent. The money you’ll save is well worth the effort.

High Fees and Costs Are Hurting The Housing Market

by Joel Weihe

The housing market is very low on inventory all across the country. While there are still plenty of buyers looking for homes the housing market itself is slowing. More people, especially millennial’s, are forgoing home ownership for now. Part of that is because of high fees and costs that are hurting the housing market. Some of that decline is simply because of the inventory. There are not enough homes to go around. Some of that decline is due to the high cost of buying a home.

According to I nvestopedia Millennial’s aren’t buying homes at the rate of previous generations. Millennial’s compose the largest segment of the U.S. population, nearly one forth, and if they’re not buying homes that could create a problem for the housing market.

Affordability is a big issue. There has been a considerable rise in housing prices the last few years. That increase has put home ownership out of reach for many when you include the high cost of buying and selling a house.

Transaction Fees When Selling A House

The Cost of Selling a House with a real Estate agent can be expensive. If a brokerage charges 6% of the contract price when listing a home that is a substantial cut into profits for the home seller. For example for a $250,000 price tag the home seller loses a full $15000.

Think of what you could do with $15000.

Some potential home sellers simply can’t afford to sell their house. People are staying put for longer periods of time which means less people selling and moving. Many homeowners would like to move up, or downsize or move to a different area. High transaction fees often prevent that from happening.

Closing Costs When Buying A House

High Fees and Costs Are Hurting The Housing Market through the buyer too. Closing costs and prepaid are expensive and the responsibility of the buyer to pay. These costs cannot be rolled into the financing and have to be paid out of pocket.

After saving for a down-payment a buyer also needs to have thousands more on top of that to cover closing costs and prepaids.

What are closing costs? Closing costs are all of the banks and government fees and taxes. Closing costs can include, but not limited to:

Loan origination fee
credit report
Appraisal fee
Title insurance
Closing fee paid to closer company. Could be a title company or a bank.
Recording fees
Underwriting fee
Food certification

Prepaids are taxes and insurance. A mortgage payment consist of principle & interest (the money you borrow and what you pay the bank to do so) taxes and insurance. When a real estate transaction closes there is a certain amount of money that needs to be escrowed for those taxes and insurance. That comes out of the buyers pocket.

All Together

All together the radical increase in housing prices the last few years, the shortage of inventory and the high fees and costs are hurting the housing market. The American Dream of home-ownership seems to be slipping from the grasp of a lot of Americans.

You as a home seller have the power to help fix that. One solution to this national problem is for home sellers to forego the huge transaction costs, real estate commissions, and sell their homes themselves.