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Short Sale Documentation

October 21, 2015 by Gabrielle

Perhaps the most significant part of handling short sale listings is gathering the appropriate documention from the Seller. While each lender / loan type tends to have slightly different requirements, overall the list is similar and must be presented to the Lender at the time short sale negotiations are begun.

Short sale documentation almost always includes at least:

  1. Authorization from the Seller(s) allowing the negotiator to contact lender(s) on their behalf.
  2. Hardship letter. This letter, written by the Seller, describes exactly why the Seller is in need of a short sale and why the lender should consider their request. Not a time for sugar coating, the letter should be heartfelt (I actually like handwritten letters the best).
  3. Financial Documents (duration varies by lender)
  • Pay Stubs (two months)
  • Bank Statements (last three months)
  • Tax Returns (last two years)
  • Financial worksheets (income and expense report for the past three months, and projecting forward for the next three months, or if self-employed, a profit & loss statement will be needed)

As a short sale listing agent, I like to have this documentation in my file at the time a listing is begun. Waiting to gather this all-important short sale document until an offer is received typically delays submission to the bank and the beginning of negotiation services.

For help listing your home and a more comprehensive list of the short sale documentation needed, be sure to consult with your lender, your attorney, and, of course, your trust real estate brokers.

 

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Filed Under: Selling, Short Sale or Foreclosure? Tagged With: Selling Advice, Short Sale or Foreclosure?, Short Sales

Should You Refinance Your Home?

September 30, 2015 by Gabrielle

If you feel you have sufficient income to continue making payments on your home, but need to lower the payments, one of the best choices — providing current interest rates are justifiably less than your existing rate —  is to refinance the home.

By refinancing, you may be able to remain with your existing lender, or perhaps take advantage of better terms offered by another.

In addition to examining the current interest rates, the next question a homeowner must face when pursuing a refinancing option surround the property itself: Is the value of the property sufficient to support a new, replacement loan? Remember that an appraisal for the property will be done by your lender and must reflect that the loan amount sought is no more than the current guideline for lending. In a conventional loan, that generally means that the loan can be for no more than about 95% of the appraisal amount, based on your particular loan. At the moment, FHA will loan up to 96.5% of the home’s value.

Finally, you must determine whether your current credit position will support a new, replacement, loan. If you’ve fallen behind in your payments on your mortgage or perhaps on other debts, it may be difficult to qualify for a refinance mortgage.

 

 

The information presented on this Site should not be construed as legal or financial advice. You are advised to seek consultation with a qualified Attorney and Accountant. ©Gabrielle Nemes, 2010

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Filed Under: Buying, Selling Tagged With: Selling Advice, Short Sale or Foreclosure?, Short Sales

Staging Without Spending — One Key to Home Selling Success!

September 30, 2015 by Gabrielle

Staging Without Spending — One Key to Home Selling Success!

Rearranged furniture for impactEffective staging is a tremendous benefit when needing or wanting to sell a home. But professional staging can be expensive. Don’t get me wrong — professional stagers do absolutely amazing jobs! But sometimes the money’s just not there to hire a stager, buy a bunch of staging materials or rent snazzy furniture.

Although the real estate market seems to be recovering slightly, most sellers still need to capture every penny possible from the sale of their existing home — perhaps to gain maximum sufficient funds to purchase a new place or perhaps to attract a sufficient price will keep their sale from falling into the short sale category.

Simple clean-up and rearranging of furniture can do wonders without spending much more than the cost of soap and water, a few boxes to store extra clutter and possessions, and maybe the short-term rental of a storage unit. 

Removing worn throw rugs, dingy pillows and bedspreads is a tremendously effective tool. Sometimes merely washing and ironing (yes … that word) is sufficient. A bottle of bleach and a can of my favorite “Barkeepers Friend” can make kitchens and bathrooms really shine. Remove all of those refrigerator magnets, canisters, coffee pots, grinders, toasters, etc. as they just look like clutter when photographed. (And a good listing agent should take lots of photos of your house to show off its best features.)

A seller and I often spend less than $250 when preparing a home for sale. For less than about $50, I always buy a few brand new thick fluffy towels, color-appropriate shower curtains, and candles to work wonders in bathrooms. Add a couple of ribbons around the towels for a model-home look.

A visit to the local thrift store can provide a couple of big toys (scrubbed sparkling clean, of course) to add personality to an empty bedroom. A gallon or two of mis-mixed neutral-toned paint and a couple of hours can freshen up a stale entry. Don’t forget the discount stores such as Big Lots!, TJ Maxx, Marshalls, HomeGoods when shopping for linens and impact art pieces. Check out the clearance aisles at Home Depot or Lowe’s if you need to replace or update light fixtures or cabinet pulls. I’ve picked up small tables and then spray painted them for entry accents.

And don’t forget the front door. My favorite is to paint the door a deep charcoal or black. Then put a couple of pots of live flowers near the front door. Not just greenery (of course it depends on the time of year), but some nice yellows, reds, or purples sitting on the clean front porch near that freshly painted front door — just does wonders.

I wish I’d have taken more “before” pictures from some of the homes I’ve sold, but did scrounge up a few before and after photos. Maybe these few photos will give you a few ideas.

Staging Without SpendingBefore (nice kitchen & well kept, but look at the clutter’y fridge and the stuff above the cupboards.)

 

 

 

 

Staging Without Spending -- AfterHere’s the same kitchen after decluttering. Still a few necessary things on the counter … but look at the difference! Could we have removed the wallpaper border? Yes … but the owner really pushed back and I wanted to pick my battles.

 

 
Staging Without Spending - BeforeAnother before and after kitchen. Of course it helped tremendously to remove the spent roses from the room …but even removing the extra microwave cart and adding a little breakfast table to the end made a huge difference!  Staging with Addition of Table -- $100  
Here’s another before and after. One of those difficult young teen’s rooms where stuff gets thrown everywhere. Tied up the curtains, removed the extra dresser and held the threat of extra chores and homework over the young owner’s head should the place get cluttered again during the selling process. You can’t see the posters on that were on the wall beside the bed and taped to the closet doors. Those were taken down, with the tape residue also scrubbed off.

Preparing for Sale - Teen Bedroom - BeforePreparing for Sale -Teen Bedroom - After 

 
Staging Without Spending -- Deck beforeEven outside small Staging Without Spending -- One Key to Successorganizational efforts can be amazing. Check out these before and after deck photos.

It was raining during the “before” photo and sunny during the “after” photo. We trimmed up the overgrown bush in the corner, rearranged the BBQ area,  swept the roof overhang and rearranged the deck furniture so it looked tidy. 

 
Total cost for new bedspread & pictures? -- $75I wish I had a couple of the “before” photos of this bedroom and bathroom. Owned by a single guy (what fun it was to work with him, actually! He was SO appreciative of everything I did to help him get his little condo ready for sale!)

Take it on good faith … with all of the sports posters and “stuff” that he’d carefully collected over the years, the place needed a bit of effort to get it market ready. This “blue” bedroom was a bit of a challenge, but adding a new bedspread and pictures cooled it down a bit without repainting. (By the way … we also removed the artsy “nudes” in the bathrooms. I could just envision a youngster’s pointed questions!)

The place sold for list price .. and very quickly once it was ready and during a time in the down market when it was VERY difficult to sell a condo!

 

Bath -- bought a $9.95 shower curtain & $10's in towels. Homeowner had everything elseIn almost every house, rearranging furniture and gathering all of the collectibles into a single “themed” room also goes a long ways. Prior to listing, walk through the house and notice how many things you’ve gathered that are similar — little ceramic boats, boat pictures, metal sailboats. We all tend to have things we love, but then we spread them out all over. Gather them together into a boat-themed bathroom or bedroom.

Sometimes you can Stage Without Spending — One Key to Home Selling Success!

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Filed Under: Selling Tagged With: Selling Advice

Think Housing Prices Are Too High?

September 30, 2015 by Gabrielle

I have a client that loves to send me little jokes and ditties every now and then. He’s just slightly older than I am and loves to pontificate about how prices are outrageous and how he can’t imagine how people can afford to live any more.

In some respects, of course, he’s absolutely right. But in others, it’s amazing how little prices have gone up.

Today he sent me a list of a few things and their prices in 1955. Of note, of course, are prices like gasoline – 23 cents a gallon; milk – 85 cents a gallon; eggs – 61 cents a dozen.

A bit of checking around and I see this list, thanks to www.fiftiesweb.com: 

House: $22,000
Average income: $4,137
Ford car: $1606-$2944
Milk: $.92
Gas: $.23
Bread $.18
Postage stamp: $.03
Sirloin chops: $ .69 lb.
Pot Roast: $.43 lb.
Eggs, doz.: $.61
Coffee: $.93 lb.
Milk, ½ gal. $.43
Potatoes, 10 lb. bag: $.53
Starkist Tuna, 6 ½ oz. can: $.25 lb.
Oreo cookies, 11¾ .oz pkg: $.39
Potato Salad, pint: $.29
Cracker Jack, 24 pac: $1.49
Apple cider,½ gal.: $.49
Gum Drops, 1½ lb. pkg: $.29
Ivory Soap, 2 bars: $.29
Mickey Mouse lunchbox: $.88
Slinky: $.88
Nylons, pair: $1.00
Home permanent: $1.50
Baseball Glove: $9.95

 

As I reviewed this list, I’m thinking … wow, some of these haven’t gone up much at all. I mean, last week’s ad for potatoes was something like $1.48 for a ten pound bag (about 3 times more than 1955); milk – $2.59 a gallon (oof, that’s a big price increase: about 6 times, although I’m pretty sure I see milk for $1.99 a gallon now and then) eggs were something like $1.50 a dozen or so (can’t find an ad anywhere) – up about 2.5 times.

gas prices

 

Gas in my area (just south of Seattle) is right around $3.30 a gallon – up 14.3 times (that’s a gotcha!)

 

Anyway, then I decided to look at the price of housing. According to this chart, the price of a home in 1955 was about 5.3 times the average income.

Hmmmmmmmmmmm

key with dollar signLooking at local statistics, Washington state reports that the 2011 median income for King County (basically the greater Seattle area) is projected to be $66,294. Median house price for sold homes in King County right now? The Northwest Multiple Listing Service (NWMLS) says: $343,700 as of end of November. 5.18 times the median income. Pretty close to 1955.

Now, 1955 is just slightly before my memory (I was two in 1955) … I have memories of some of these though! I wonder what my grandchildren born in 2010 will think when looking back at prices when they’re 55.

Enough analysis this time of the morning!

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Filed Under: Random Thoughts Tagged With: Affordable Homes, Buying Advice, Just for Fun, Selling Advice

Preparing Your House For Sale in Auburn, WA … or Anywhere!

September 30, 2015 by Gabrielle

PrintPreparing Your House For Sale in Auburn, WA … or Anywhere!

As with so many of the good things we want in life, selling a house is just plain hard work. Your house will be examined through a looking glass, so it’s critically important that it be well prepared, well priced, and well represented. Here are just a few of the steps necessary before hanging that For Sale sign:

House Prep

While this sometimes feels like an almost insurmountable task, carefully preparing your house is definitely the first step in successfully selling a home in today’s market. If you’ve ever taken the time to tour carefully staged model homes, you are likely aware that your home must compete on a very high level to quickly sell and pull the numbers you know your house is worth.

Basics

Start with these basic steps:

  • Declutter
  • Clean the closets
  • Depersonalize
  • Clean, clean, clean

Your house must sparkle, both inside and out. Remember that you’ll be packing up to move anyway … so start by going through the closets, the cupboards, removing the chatskies that have gathered in the bookcases, shelves and tables, and so on.

And don’t spare the furniture polish and glass cleaner. Dirty windows are definitely deal killers for so many people. They want to see bright clear views of the yard and garden.

Finally, don’t forget the outside! From the front door to the driveway to the fences. Be sure everything is neat and tidy. Bring in fresh bark if needed; mow the lawn; trim the hedges … get it?

Staging

It isn’t always necessary to hire a professional staging company to make your home look like a model home, but it is critical that your home display itself with an eye for design and presentation. If you can’t do this by yourself, at least start by bringing in your real estate broker (that’d be me!) and we’ll go through some use what you have tips to get started. And talk about professional staging, too!

What’s Selling?

Take a look at what’s actually selling in your area. Is your neighborhood still surrounded by foreclosures? How about new construction? Big houses? Smaller houses? Remodels? Each of these factors point to the type of marketing approacPrinth your home may require.

Pricing

One of the most common comments I hear when sitting with “wannabe” Sellers for the very first time is “The neighbor just sold their house for $$!” In fact, this comment is often the reason we’re sitting together at all. So how did that happen? In part because they knew the numbers.

When pricing your house, remember that your house is being weighed against every other house on the market. Therefore, your house needs to be the best value (in addition to looking the best, of course). You’ll be confident in your house price if you know these numbers:

  • Feature & Presentation Comparisons
  • $ per Square Foot Comparisons
  • Neighborhood Comparisons
  • Assessment to Sale Price Comparisons
  • Historical Data: Appreciation/Depreciation
  • Local Economic Factors

While not all of this data is easy to find, each number plays a role in determining what the optimum sale price of your home should be.

Timing

Yes, timing truly is important, but it’s not the end-all. While you need to know the timing trends for your area, remember that not every house sells only in the Spring and Summer. People have to move all times of the year. Your home may sell faster during the hot moments, but don’t panic if you’re not quite ready when the experts tell you to get going.

Marketing

Presenting your home to potential buyers requires knowledge of how buyers find houses and what they see when they do find it. It’s not just about hanging the sign, it’s about courting the right folks in the right way, and that includes both potential buyers and potential real estate brokers:

  • Photos
  • Online Presence
  • MLS Listing
  • Video Tours
  • Flyers

When you’re ready to think about selling your home, give me a call. We’ll go through all of the steps and information necessary when preparing your house for sale in Auburn, WA … or Anywhere!

 

 

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Filed Under: Selling Tagged With: Auburn, Selling Advice

16 Tips to Prepare Your Home for Sale

September 1, 2015 by Gabrielle

While buyers must shop within their financial qualifications, their decision to make an offer on a home is first, and foremost, an emotional response to the appearance of your home and property. The money and negotiation side to the actual purchase comes later.

In order to maximize the appearance of your property — thus eliciting more excited Buyers about your home, follow these 16 simple preparation tips.

1. Tidy up the grounds, porches and garage.

2. Keep the lawn trimmed and edged.

3. Make sure that your yard is clean.

4. Your front door adds to that first impression—be sure it is scrubbed or repainted if necessary.

5. Wash windows, window ledges and corners, and clean/dust window coverings. Grime is your enemy!

6. If any decorating or painting is needed (especially in the kitchen), do it now! Twenty dollars worth of paint will make a much larger difference in the sales price.

7. Bathrooms help sell homes. Make this room sparkle.

8. Illumination is like a welcome sign. Replace bulbs and turn on the lights.

9. Declutter the closets — pack away the clothes that are out of season during your sale period. Donate those that haven’t been used in a year or two. And don’t forget to also weed out the shoes and purses that are out of style and sitting on shelves or floors!

10. Declutter the kitchen cabinets and pantry areas. If your cereal boxes and chips are crammed into the cupboards, the buyer may think your kitchen is too small, requiring immediate remodeling on their part.

11. Clean up areas where your pets reside — that means making sure their kennels sparkle, the litter box area is neat and tidy (and smells good!).

12. If you have exotic pets like reptiles or even gerbils, mice, or hamsters, consider boarding them with friends during your sale period. Many people are allergic or even fearful! Remember that the idea is for people to concentrate on your house, not concerned about your pets (for whatever reason).

13. Walk around the outside of your house with a critical eye for signs of neglect or decay — this could be dry rot in deck boards, trim boards that should be powerwashed and repainted, roof shingles that are loose, and so on. Once a buyer spots something that strikes them as neglect, they’ll start looking for other signs. You want them to concentrate on the good features, not looking for things to pick apart at the time of the offer.

14. Walk through the inside of your home with that same critical eye. A running toilet, dripping faucet, carpet snags or just stained spots, all lead a buyer to question your upkeep. While homes are priced very low right now for a number of reasons, buyers still want to move into a home that won’t require tedious maintenance issues.

15. Pack away valuables, store extra furniture, knick-knacks, medicines, firearms, and personal information.

16. Pretend you are seeing your home for the first time through a buyer’s eyes. Call me for recommendations on how to stage the property for presentation to prospective buyers.

Finally, although the next two points don’t directly affect the appearance of your home and property, following them will greatly increase your chances of receiving a favorable offer:

  • Leave the showing to the agents. A buyer’s agent knows their client’s requirements and wants and can best emphasize the features of your home.
  • Don’t discuss anything about the sale with a potential customer. Let your agent discuss price, terms, possession and other items concerning the sale.

Remember that spending a little extra time getting your home ready for sale will result in a much higher selling price. Sometimes dramatically so!!

Added 9/5/10: This morning my Lowe’s newsletter arrived with a similar article, with even more specifics. To read that article, click HERE.

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Filed Under: Selling Tagged With: Selling Advice

May 1st = Garden Time in the Pacific NW!

May 1, 2015 by Gabrielle

Hard to believe as I look out the window that today more or less marks the unofficial beginning of garden season here in the Pacific Northwest. It’s a heavy grey day outside and has been raining and blowing like nuts since yesterday afternoon. Oh wait. The sun’s out. Give it a few minutes. Now it’s hailing. Actually, that’s about right for our Spring weather.

imageIn our yard, May 1st has always been the earliest that baby vegetables go into the garden, flower pots get hung and planters dressed up for the summer. We’re fortunate to have a huge garden plot, which also means that lots of weeding, soil turning, and fertilizing also takes place about this time of the year.

Gardening is a huge part of our PNW lifestyle, especially here in the suburbs where I work to assist Buyers in their home purchases so that they have a little of their own garden heaven. As I tour homes with them, it’s interesting to hear comments about the garden areas of the houses they like.

Some Buyers are so excited about green lawns and summer barbeques, some look forward to having a few fragrant roses to bring indoors during the summer months, and some have grandiose plans (like me) for full-blown vegetable plots hoping to grow enough produce to can and freeze for the year.

imageBecause of Buyer fascination with gardens, Sellers should also strive hard, especially at this time of year, to be sure that yards and gardens are well trimmed and productive. Have a vegetable garden area as part of the yard? Go ahead and plant it even though the hope is to have your home sale completed well before harvest time. Buyers love the idea of picking fresh tomatoes!

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Filed Under: Buying, Selling Tagged With: Buyers, Gardens, Selling Advice, Street Appeal

The rumor continues — 3.8% real estate tax

July 17, 2012 by Gabrielle

Income Tax

Way back in September of 2010, I wrote a blog post about an email message that was circulating regarding an 3.8% real estate tax that was included as part of President Obama’s healthcare plan. At that time, the messages were aimed at overturning the Healthcare plan itself. Now that the Supreme Court has upheld the plan, it seems that the goal is to advise the general public that real estate agents won’t be voting for President Obama.

Just another political message designed as a scare tactic.

Because this message is so pervasive, I decided to address this subject again.  I’ve received a similarly worded message no less than eight times in the past three days. At the bottom of this post I’ve attached the message thread I received yesterday from a very savvy client.

Sigh … this is just another not true email circulation that’s gaining ground again because of the upcoming election.

The facts? — There is not a 3.8% real estate tax for ALL real estate transactions starting in 2013. But there IS a 3.8% investment tax on profits for people who meet a high capital gains threshold.

In a nutshell, the 3.8% tax (called the Medicare tax — it has nothing to do with real estate), will be imposed on investment income only for individuals with a net income above $200,000 or couples with a joint net income of more than $250,000. Further, it’s then imposed only for transactions with a taxable gain above $250,000 per individual or $500,000 per couple. And then there are yet further conditions that control the taxable amount.
 
Realistically, there are VERY few people that will be impacted by this amount because capital gains on real estate sales don’t take effect until after aprofit from sale of $500,000 is reached (for couples) or $250,000 (for single filers) on a their net real estate investment income.
 
For example, if a high income couple making $260,000 TAXABLE INCOME on their tax return should sell a property with a net capital gain of $600,000, then they would pay a 3.8% tax on the lesser of:
 
  • The amount of taxable income generated by the sale = $100,000. 3.8% of $100,000 is $3,800

or

  • The amount by which their taxable income exceeds the $250,000 taxable income level= $10,000. 3.8% of $10,000 is $380
 
It’s important to realize that the tax isn’t on real estate — it’s on investment income. And, frankly, although we all hope that our home is a fantastic investment and that we’re going to make oodles of money on it, if that does come true and we’re also a high income wage earner, then perhaps it’s only right that we share a small portion of our wealth in the form of taxes.
 
Refer anyone that sends this message to you back to Snopes.com at http://www.snopes.com/politics/taxes/realestate.asp
 
So … back to the subject of the message: “You should read this regardless of political leaning so that you are aware of it.” … Yep … they should read THIS message regardless of political leaning.

—– Original Message —–
Sent: 7/16/2012 2:27:00 PM
Subject: FW: Home Sales Tax-effective Jan. 1, 2013 You should read this regardless of political leaning so that you are aware of it.

This came from a friend in CA;  is this a true story?   I trust you and believe you will know.

Marilyn

 

____________________________________________

I’ve talked to realtor friends and this is true!  I’m not trying to bad mouth anyone, but it is something that will affect every single one of us who owns property.

 


Subject: Home Sales Tax-effective Jan. 1, 2013

Very important!!!!

———————————————————— When does your home become part of your health care? After 2012!
Your vote counts big time in 2012, make sure you and all your friends and family know about this !
HOME SALES TAX
I thought you might find this interesting, — maybe even SICKENING!
The National Association of Realtors is all over this and working to get it repealed, — before it takes effect. But, I am very pleased we aren’t the only ones who know about this ploy to steal billions from unsuspecting homeowners. How many realtors do you think will vote Democratic in 2012?
Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That’s $3,800 on a $100,000 home, etc. When did this happen? It’s in the health care bill, — and it goes into effect in 2013. Why 2013? Could it be so that it doesn’t come to light until after the 2012 elections? So, this is ‘change you can believe in’?
Under the new health care bill all real estate transactions will be subject to a 3.8% sales tax.
If you sell a $400,000 home, there will be a $15,200 tax. This bill is set to screw the retiring generation, — who often downsize their homes. Does this make your November, 2012 vote more important?
Oh, you weren’t aware that this was in the ObamaCare bill? Guess what; you aren’t alone! There are more than a few members of Congress that weren’t aware of it either.
You can check this out for yourself at:
http://www.gop.gov/blog/10/04/08/obamacare-flatlines-obamacare-taxes-home
I hope you forward this to every single person in your address book.
VOTERS NEED TO KNOW.

Subject Home Sales Tax-effective Jan. 1, 2013

 

 

 

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Filed Under: Selling Tagged With: Home Ownership, Just for Fun, Real Estate Tax, Selling Advice, Tax Credit

Another Maple Valley Closed Sale!

May 11, 2012 by Gabrielle

With great thanks to everyone involved, I’m pleased to announce the closed sale of this absolutely wonderful home in Valley Meadows. With multiple offers, we were able to come to contract within about a week of listing.

SOLD-Front

 The honor roll includes:

  • Brandon – the Buyer
  • Dean & Debbie – the Sellers
  • Andy – the relocation rep
  • Sara and Rob from Stewart Title – the title and escrow folks
  • Josh Hall – the Buyer’s broker
  • Dave Jagosh of Pacific NW Home Inspections – the Seller’s inspector
  • and me of course – the Seller’s broker

So … how was it done?

My clients (the Sellers) were fantastic. They prepped the house exactly as suggested, including having the home pre-inspected, then completed everything on the inspection list. It helped that we used one of the very best inspectors in the area – in fact the seller’s inspector also turned out to be the preferred inspector for the Buyer.

We did some careful marketing, targeting the home in the MLS with a full-fledged suite of photos, along with adding another 30 or so photos on my Web site, along with being sure the listing appeared on several hundred other sites.

Did we have careful talks about price? You betcha! The right price brought the expected offers with fully preapproved Buyers. With a bit of negotiation, everyone was thrilled! 

image

image

 

 So a HUGE thank you and Congratulations to everyone involved!

 

Whooo hooo!

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Filed Under: Sold! Tagged With: Maple Valley, Selling Advice, Sold!

Okay, Should You Sell … and Buy in 2012?

December 27, 2011 by Gabrielle

sitting on fence-flicker by michaelkuhn_picsLike many, you may have been sitting impatiently on the fence for the last three years hoping for a miracle that would allow you to sell your existing home without sacrificing too much more equity … and buy at today’s price and interest rate.

At least once a week I get a call from a previous client or someone “just checking out the market,” wanting to do exactly that. And, who absolutely wouldn’t want to buy a house with the bargains out there??!!

Let me try to help you make a bit of sense out of this type of scenario.

The latest statistics from the Office of Federal Housing Economic Oversight (OFHEO) and Federal Housing Finance Agency (FHFA) indicate that home prices in Washington State, overall, lost approximately 8.67% from the end of 3rd quarter 2010 through 3rd quarter 2011, but gained 111.07% for the 20 year period ending 3rd quarter 2011. Okay .. math … 111.07% divided by 20 years = 5.55% a year appreciation!

Now, assuming that housing prices are getting to the bottom end of their free-fall, let’s also assume that housing prices will continue to appreciate overall at a safe rate of about 5% a year for the next 20 years. There’s still going to be some skidding when reviewed on the short term, but remember that real estate is a long term investment — 10-20 years.

Continuing with assumptions, let’s presume that housing prices in Washington State might fall another 7-8% over 2012 (I think that sounds like a bit much, but my crystal ball is a bit cloudy, so who knows? Note, that The Housing Predictor anticipates an approximate drop in the Seattle area of about 5.1%.)

So … your current house valued today at, say $250,000, might be worth approximately $230,000 or maybe $235,000 by year end. Yikes … another nosebleed of $15,000-$20,000. Perhaps you owe approximately $150,000-$200,000 … and you’re paying around 6% in interest on your mortgage. (Quick math … $200k at 6% = principal & interest payment is approximately $1,200 a month – but you’re paying more than that because you haven’t refinanced since 2008 and your house was worth more and your loan was bigger. I’m guessing you’re probably paying around $1,600 a month principal and interest.)

You want a bigger house, different neighborhood, lower interest rates. And you can buy that for, say, $275,000-$300,000 at today’s prices. At the end of the year (assuming you wait until next December), those houses might be priced at $255,000-$280,000.

Let’s look at what that means to your pocketbook by comparing interest rates.

Right now, rates are sitting right around 4%. They move around a bit … but let’s say 4% just for talking sake.

Analysts have been surprised that rates have stayed as low as they are, so let’s presume they go back up to 5%. If you buy in January rather than waiting until next December, your purchase might look like this:

 

   

Today’s Price

 

Price at End of 2012

Purchase Price

 

$275,000

-7%

$255,000

Down Payment

20%

($55,000)

20%

($51,000)

Amount Financed

 

$220,000

 

$204,000

Principal & Interest Payment

4%

$1,050.30

5%

$1,095.12

Interesting … buying now at a higher price still saves about $45 a month over waiting until year end and paying a bit more in interest.

Now, let’s look back at that historical trend for appreciation. Conservatively, let’s say that  house gains in value 5% a year overall for 20 years.

Therefore, if you buy a house today at $275,000, twenty years from now at 5% a year (hmmmm, 100% increase), historically, that house could be worth approximately $550,000. Plan to keep the house 10 years? How about approximately $412,500?

Should you sell … and buy new in 2012?  “I” think so; personally I expect prices to start to rise in 2013. But, of course it has to make sense to you. If you plan to buy a home and believe you’ll be able to stay in it for 10 years or more, then absolutely.

If your overall payment on a replacement home is within your budget, you have the funds to close the sale of your old home and a new one, then let’s get going while rates are amazing and prices are too!

*man on fence graphic thanks to Flickr, Michael Kuhn

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Filed Under: Buying, First Time Buyer, Selling Tagged With: Buying Advice, Repeat Home Buyers, Selling Advice

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The information contained and the opinions expressed on this Web site are not intended as real estate advice. Gabrielle Nemes does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. You should always conduct your own research and due diligence and obtain professional advice before making any real estate or investment decisions. Gabrielle Nemes will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

 

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