FSBO Jane

Coming from a blog about FSBO (For Sale by Owner) real estate, this post about a listing agreement could seem strange.

The Purpose behind This Post:

Yes, it’s no secret that I support selling and buying real estate on your own, without an agent, and that’s what I’m always telling you here. And if you know anything about listing agreements, it’s also no secret that these are made between home owners and real estate agents (the very people I’m saying you don’t require a partnership with, no offense to the hard-working ones).

So why am I dedicating a post to an explanation of this term? Simply put, understanding how listing agreements work can only benefit you on your path to real estate knowledge. (Disclaimer: This is my advice, based in the state I have currently work in. For more information, consult the real estate laws of your given state.)

(1) As a FSBO buyer: You may come across a home listed with an agent, one that you want to buy. If you are unrepresented, do you know what will happen?

(2) As a FSBO seller: You may change your mind and want to use an agent, or you may just want to sit on the fence a little, not officially making a decision one way or the other. Do you know if that’s possible? Do you know if you can go FSBO while also having an agent in your back pocket just in case?

What is a Listing Agreement?
A contract between a real estate broker and a property owner/seller that gives that broker the right to represent the seller, in offering the property for sale, for a set amount of time and for a set price—in exchange, the seller will pay the broker a commission of the sale, based upon the amount stipulated in the contract

How Does This Affect Me, As an Unrepresented Buyer?
Real estate commissions are paid from the sale price of a home. When the buyer and the seller both have agents, the commission percentage is split between them (Example: a 6% commission split into 3% for each agent). When the buyer does not have an agent, the entire commission goes to the seller’s agent. This is not bad, and sometimes it can give you greater negotiating power from the seller with an agent, as the agent may be willing to knock down part of the full commission for a sale.

As a Seller, Can I Have a Listing Agreement and Go FSBO?
Sometimes. Thing is, there are different types of listing agreements. Here are three:

If you have an “open listing,” this means your agreement gives an agent the opportunity to find you a buyer, bring buyers to your house, etc., and he or she will only receive commission if he or she brings you the buyer.

You could also have a “one-time show” from an agent who has a buyer interested in your home and is bringing them by to see it. In this case, you might sign an agreement that says the agent would receive X amount of commission if the sale went through with this particular buyer only.

Most commonly, though, listing agreements are what we call “exclusive-right-to-sell agreements.” It gives the broker/agent the exclusive right to sell your home and earn a commission. In typical agreements like these, no matter where the buyer comes from, the agent is the one who earns the commission. (However, note that you can also make stipulations in the original contract, if you’d like.)

Title companies are another one of those aspects of real estate that a lot of home owners (or potential home owners) don’t understand. The truth is, though, it’s not that difficult.

To explain, I have to start with a title:

What is a title?
You know how when you buy a car, you have to go to the D.M.V. to get it registered in your name? Even if you already paid the seller, drove away and have been using it for a week, you don’t officially own it without the title. Well, with real estate, titles are basically the same thing, except instead of a car you’re owning, it’s a property. Every property has a title. So when you buy a home, you get the title (rights of ownership) for the property put in your name. You’ll get a deed (the actual piece of paper) that transfers the title to you.

Why do you need a title company to do that?
The obvious question now is: if it’s so simple, why can’t you just get the property put into your name on your own? Why do you need a title company? Here’s why: Properties aren’t just more expensive than cars (well, usually); they’re also more complicated. For any given property, there can be liens taken out from the sellers—something as simple as the seller didn’t pay the water bill, so now the water company has a lien on the property. Or there could be disputes about who owns part of the property. In situations with these kinds of disputes, it’s usually the case that word-of-mouth said the seller owned it, but legal documentation said differently. Title companies help you sort through this stuff.

What is title insurance?
One of the primary roles of a title company is to set you up with title insurance. Yes, you need this. Just like you buy car insurance for financial protection in case of an accident or home insurance in case of a fire or flooding, etc., title insurance is there to protect you, in this case from any defects in the title agreement.

In other words, let’s say you were sued by someone who comes and claims he has a right to your property after you’ve purchased it, and he says your title isn’t valid. This is where your title insurance comes into play. It will cover costs of legal defense or might even reimburse you for financial losses, up to the dollar amount you set forth in the policy.

How do you find a title company when you’re going FSBO?
Because I used Buy Owner for my property marketing, I went ahead and used their title company, as well, which was great. They walked me through what I needed to do and I could stay updated about the status online. However you sell, though, you can easily locate a title company to suit your needs.

For more information about title companies, check out these resources:

• List of Web Definitions
• Benchmark Title
• About.com on Title Insurance

Basically, a mortgage is a loan. More specifically, it’s a loan to buy a house.

Seems pretty simple, right?

Well, yes and no. For one thing, there are interest rates, which fluctuate based on the economy and the current temperature of the market. Then there are points (charges for obtaining a mortgage).

Not to mention, there are different types of mortgages:

Fixed-rate mortgages (unchanging interest rate, over the life of the loan)

Adjustable-rate mortgages (interest rate changes at predetermined intervals, based upon whatever the current market dictates)

Balloon mortgages (small payments for a chunk of time like 5 to 7 years, then a large lump payment like a balloon to cover the difference)

And also, there’s the issue of the down payment. It’s become very popular in recent years to encourage home buyers to purchase homes with no money down. I discourage this, personally. In my opinion, you are more vested in something when your own money goes into it, right up front. Also, you’re far more likely to buy something you can’t afford when you’re putting nothing down. But mostly, you’ll be paying interest on a larger sum of money if you put none down, and, therefore, the house is costing you more long-term.

Here are some other related terms to know:

Principle: This is the term used for the amount of your loan – the purchase price of your home, minus your down payment.

Closing Costs: I found an article online that sums this up pretty clearly. Costs will vary for each transaction, but there will be costs.

Taxes: Anytime you purchase real estate, you have to pay property taxes. It’s the law. Break this law, and you could have the home taken away from you, and you don’t want that. So pay your taxes.

Insurance: Back to the issue of down payment – did you know that if you put less than 20% down, you’ll probably have to buy something called Private Mortgage Insurance (PMI)? It makes sense because you’re a bigger risk to the lender when you’ve put little into the deal. Even if you do put 20% or more down, you will likely need to purchase mortgage insurance, just to protect you in case of disasters like fire or theft.

One more thing: From a purely practical standpoint, I should add that for my last three real estate transactions, I used Guaranteed Rate, and I was really happy with their service. I was actually referred to them by Buy Owner, whom I was also using at the time, and I would recommend the experience to anyone. If you want more information about that at any point, just shoot me an e-mail at fsbojane [at] gmail [dot] com.

Welcome to a new series here at FSBOJane! I am always looking for ways to give you access to more information - one way I did this was through my series on using a FSBO help company (Buy Owner) at the end of last year.

Now I’m venturing into a new set of posts, this time about real estate terms.

Starting on Wednesday, I’m going to present articles that help explain terms that commonly come up when buying and/or selling homes.

Why a series on real estate terms? Basically, the most common complaint/excuse I hear from friends who don’t want to go FSBO is that they don’t know enough. Either they feel like they don’t know how to go about selling or they feel like there’s a hidden vault of information out there, which they don’t have access to.

So, to those of you who fall into that camp, this is for you.

Real estate doesn’t not have to feel like a secret code or a foreign language.  All you need is a little research or, in this case, a little time to stay updated at this site!

Stay tuned!

Image taken from Stewart

Ever heard of the Small House Society? It makes its mission to use smaller living spaces. The idea was derived from the need to refine the amount of natural resources we use, but what better time to spread the idea than during this economic downturn? I’m taking it upon myself to spread this incredibly intelligent idea.

The Smart Spending blog from MSN Money discusses the idea in a positive light, too. They come up with numerous perks to living in a small home rather than an oversized home. These include:

• A greener lifestyle is created from living in a home that takes up less space and uses less energy and resources than a large home.
• With less space, homeowners enjoy less cleaning and less stress altogether.
• The real kicker: less cost! It provides less to clean, less space to fill and therefore less unnecessary purchases, less space to energize and a smaller purchase price!

With this said, why do so many giant, oversized homes exist? According to the Smart Spending blog, oversized homes were created during the housing bubble at the beginning of the decade. People built big with the expectation of gaining significant revenue back in the future. Instead of making a functional investment, they made a financial investment. Now, with the housing market in an economic turmoil, no one is buying these houses.

Stay small. Consider what you can afford and how much space you need. Always keep the word need in mind instead of want. Do you need a bathroom as large as your bedroom? Do you need a huge yard? Think about what changes might occur in your future (a growing family size, a retirement) and make the best choice as you see fit.

It’s never easy to downsize or to make sacrifices. But, truthfully, I can’t think of a time more suitable for doing just that. You may come out of this hard time more successful, less stressed and much more appreciative of what you have!

For more information on the Smaller House Society click here.

To read the Smart Spending blog’s perspective on the idea, click here.

Simply put, when you’re selling a home, pricing matters. A lot.

This is no secret; I’ve talked about it here, here, here and here before.

But what is a secret, or at least what seems to be to a lot of people, is how to price it right. I get asked one question a lot - How do you know how to price your home? Particularly if you’re not using an agent? And I always respond with the same advice: do your research.

There are lots of ways to find out about the competition: ask around, visit open houses, talk to the neighbors, etc. You can also search online at places like Craigslist or Yahoo Real Estate and see what similar homes in similar areas are asking.

I usually tell my friends/clients to go to BuyOwner.com and Realtor.com. There, they’ll be able to search by city and price range, as well as get info on what’s available. It won’t be as detailed as a print-out from an agent’s office, but you can do it totally on your own.

Maybe you’ve heard? The real estate world has been a buzz lately, discussing a CNN Money article entitled, “Farewell to ‘for sale by owner’?”

The specific article, four short paragraphs in length, tells the story of the entrepeneur behind FSBOWebsite.com. He’s sold about 50 sites, the article says, but now his volume seems to be dwindling. Where he’d get one call a day before, he gets one call a week now.

I’m no mathmetician, but do those numbers seem to indicate something about FSBO real estate or about the real estate world at large? I mean, the guy has sold 50 sites. 50. As in, half of 100. This is hardly a major player in the FSBO marketing realm.

And where were the figures from sites like BuyOwner.com or FSBO.com or Fizber.com? Why were those sites lumped in to the realm of companies that may have to bid farewell, based on one small, struggling little company of 50 sites?

To be fair, the article also sites Sean Murray, of Real Trends, a market research firm in Colorado, who predicts percentage of FSBO sales may slip to a smaller slice of the greater market. But you know, he also says the market will bounce back, which doesn’t sound like a farewell to me.

CNN Money: Disappointing, to say the least.

Interested in the investment opportunity of vacation rentals but not sure what type of house to purchase? Here is information on how to turn any property into a vacation property.

Depending on the location, any house or condo could very well work as a perfect setting for travelers! Here are some thoughts to consider:

First, you need to check the rules for short-term rentals in the area. Check with your local government and know that you need to pass safety and health code regulations and acquire insurance policies and tax information. This step will take some time.

Research pricing structures for other vacation rentals in the area and plan your personal pricing structure. Know exactly what you hope to obtain before advertising or opening your doors to renters.

Clean everything. Clean the insides of your appliances and empty the refrigerator. Dust, polish, and disinfect everything indoors. Stain and repaint everything outdoors. Mow, trim and water all landscaping. The entire exterior and interior needs to appear new, clean and move-in ready!

Decide whether to do the cleaning yourself or to hire a cleaning service in the area. If this property becomes popular, you may have very little time between renters to clean, and each renter will leave the house in a different state of disorder. Plan ahead!

Strip the house of any personal attributes and replace them with neutral décor. If this is a beach house in a warm climate, hang pictures of beaches, oceans, sunsets and fishers. If this home is nestled in the mountains, include pictures of skiers, hiking trails, lodges and lakes. Remind the travelers why they chose this home in this area.

Install a keypad entry to the garage and/or make a duplicate key for easy access for your renters. A security system might be required in your area, but either way, adding one will be a selling point for strangers to the area.

Create instructional guidelines so that renters don’t become frustrated if they can’t figure out the garbage disposal or if they run out of linen towels. Also, create a list of local attractions and easy directions.

ADVERTISE! Promote the home with clear photographs, ample information on local attractions and exceptional detail to featured amenities, such as a Jacuzzi, a pool or a lakeview.

I found this list and think it sums up what you need to concentrate on pretty well: Here. Vacation rentals are a big investment opportunity right now! With so many houses for sale right now at exceptional bargains, why not do a little research on how to make an extra buck?

If you wish to purchase a vacation home for personal traveling purposes, read these perks! If you’re considering purchasing a vacation home as an investment opportunity, read these perks! Surprisingly, in this economic slump, now might be the perfect time to make the purchase, and for a lot of reasons!

The fall season is the most popular time for buying vacation homes. Now that winter is dwindling down, sellers will be desperate to sell vacation homes and will take drastic measures in order to find a buyer. Hence, you walk away with a deal!

In this economy, prices are cheap. If you have good credit, you can score a sweet deal now and then be reward later when the economy soars back!

Less people are buying. You can take your time to find the ideal home in the ideal location with the ideal amenities and activities nearby.

The dwindling dollar is causing more Americans to travel within the country rather than traveling overseas. As an investment opportunity, you should have no problem finding American or foreign renters!

If you sum up traveling costs, vacation homes can come out cheaper than hotel stays. Rent is usually lower than nightly hotel rates and you can cook in the house and better control your spending costs.

Some owners need to sell right now. You want to buy. You can work together to create the perfect situation for both of you.

For more information, read this article.

If you are a currently trying to sell your vacation home, read this article from my archives.

CNNMoney.com recently posted an article about the Top 10 Worst Real Estate Markets in 2009. The site has listed 10 markets with the worst forecasts concerning the price of housing. Sound doom and gloom? Well, remember, a seller’s loss is a buyer’s gain. Now is the time to buy your first condominium or single family home. And here is a list of the places where you should look, according to the article!

1. Los Angeles: “The median home price in the L.A.-Long Beach-Glendale metro area is projected to fall nearly 25% in 2009 - the biggest drop in the country.”

2. Stockton, California: “One in every 94 homes received a foreclosure filing this November in this northern California market near Sacramento, according to RealtyTrac. Eight of the ten worst housing markets projected for 2009 are in California.”

3. Riverside, California: “A popular boom earlier this decade fueled runaway prices for single-family homes in this market, which includes San Bernardino and Ontario, outside Los Angeles. Median prices are expected to fall to $197,000 in 2009, down nearly $60,000 from 2008.”

4. Miami/Miami Beach, Florida: “Miami will be nursing the hangover from its epic building boom for years to come. After falling 22% in 2008, prices are predicted to plunge another 23% next year.”

5. Sacramento, California: “High jobless rates and low population growth are helping burst the capital city’s inflated housing market. Prices are expected to fall another 22% in 2009, after tumbling 34% in 2008.”

6. Santa Ana/Anaheim, California: “Of the 100 biggest markets, this Orange County area, which includes Anaheim and Irvine, was the fifth most expensive place to live this year. But in 2009, prices are forecast to decline by $121,000.”

7. Fresno, California: “Fresno is located between Los Angeles and Sacramento, but it shared their housing woes. Prices in 2009 are expected to fall 44% from just two years ago.”

8. San Diego, California: “As the luxury condo boom continues to fizzles, median home prices in this southern California market are forecast to fall $87,000 to $326,000 in 2009.”

9. Bakersfield, California: “This city north of Los Angeles had the ninth highest foreclosure rate in November, as one of the country’s largest real estate bubbles continues to burst. Including Bakersfield, six of the ten worst foreclosure markets were in California.”

10. Washington D.C.: “This market, which includes bordering Virginia towns Arlington and Alexandria, is cooling off from record highs. Forecasts call for median prices to slide 20% to $275,000 in 2009.”

With many of these soon-to-be affordable homes on the market in cities with warmer climates, it might be a great time to invest in a vacation home! You can travel there during the summer, and you may even be able to rent it out for an extra yearly income.