What is a CMA (Comparable Market Analysis)?

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Before putting a home on the market or listing with a local real estate agent, home sellers obtain a comparative market analysis, also referred to in the industry as a CMA. Sellers use a CMA to figure out the value of their home and what to price their home for sale.

What is a Comparative Market Analysis?

Although reports can vary, from a two-page list of comparable home sales to a 50-page comprehensive guide, the length and complexity of the report depend on the agent’s business practice.

However, standard comparative market analysis reports contain the following data:

  • Active Listings

Active listings are homes currently for sale. These listings matter only to the extent that they are your competition for buyers. They are not indicative of market value because sellers can ask whatever they want for their home. It doesn’t mean any of the prices are realistic. The offered sales prices do not reflect market value until they sell, and in buyers market, for example, most sell for a lot less.

  • Pending Listings

Pending sale homes are formerly active listings that are under contract. They have not yet closed, so they are not yet a comparable sale. Unless the listing agent is willing to share information about the pending sale – and many are not – you will not know the actual sold price until the transaction closes. However, pending sales do indicate the direction the market is moving. If your home is priced above the list price of these pending sales, you could face longer DOM (Day On Market).

  • Sold Listings

Homes that have closed within the past six months are your comparable sales. These are the sales an appraiser will use when appraising your home for the buyer, along with the pending sales (which will likely have closed by the time your home is sold). Look long and hard at the comparable sales because those are your market value.

  • Off-Market / Withdrawn / Canceled

These are properties that were taken off the market for a variety of reasons. Usually, the reason homes are removed from the market is because the prices were too high. The median prices of this group will almost always be higher than the median prices of comparable sales. However,listings cancel, also for the following reasons:

1. Seller’s remorse. The sellers decided they cannot part with their home and no longer want to sell.

2. Priced too high. Nobody made an offer or the only offers received were low-ball offers, which were rejected.

3. The DOM were too long. Agents sometimes withdraw listings so they can put them back as a new listing and fool buyers.

4. Repair requests. The homes were once under contract and after the home inspection, the buyer requested repairs which the seller refused.

5. Seller fired the agent. It’s not uncommon for unhappy sellers to fire an agent and hire a newagent.

  • Expired Listings

This group will reflect the highest median sales price because they did not sell and were probably unreasonably priced. Some of the expired listings could also show up as an active listing, listed by a new agent at a new price. Listings also expire because they were not aggressively marketed or because the home was in need of repairs.

Examining Comparable Sales

Comparable sales are those that most closely resemble your home. It is difficult to compare a tri-level home to a single-story home. Select the homes from this list that are mostly identical to your home in size, shape and condition, such as:

  • Similar Square Footage

Appraisers compare homes based on square footage. Larger square-foot homes are worth less per square foot than smaller square-foot homes. The variance among a group of median-priced homes ideally should not exceed more than 200 to 400 square feet, plus or minus.

  • Similar Age of Construction

Ideally, the age of the home – the year it was built – should be within a few years of other comparable sold homes. Mixed-age subdivisions are common. For example, in one area of Sacramento, a subdivision consists of homes built in the 1950s, and then they jump a couple decades to the 1970s. Although the homes are located next door to each other, the homes loaded with character from the 1950s sell for more than their newer Brady Bunch counterparts. If your home was built in 1980, say, and brand new homes up the street are selling for more, you cannot command the same price as a new home.

  • Similar Amenities, Upgrades, and Condition

Appraisers will deduct value from your home if other homes have upgrades and yours does not. A home with a swimming pool will have a different value than a home without a pool. A completely remodeled home is worth more than a fixer. Homes with one bath are worth less than homes with two or more baths. Deferred maintenance will count against you.

  • Location

Everybody knows that real estate is valued on “location, location, location,” but have you considered what that means? A home with a view of the city, for example, is worth more than a home facing a cement wall. Homes located on busy thoroughfares are worth considerably less than homes on quiet streets. Compare your home to those in similar locations. If your home sits across the street from a power plant, look for other homes with power plant exposure or those located along railroad tracks, among other undesirable locations.

For a FREE CMA of your property visit: www.ModernoRealtyHomeValue.com

Source: The Balance

 

How to lower your mortgage rate when buying a home

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Mortgage rates took a big leap after the presidential election and are continuing to move higher. Demand for homes is strong, but home prices are hitting new highs and affordability is weakening.

For the average buyer who was thinking about getting into a new home last summer, but didn’t, the monthly payment on that same home is now considerably higher. There is, however, a way to lower it by buying down the rate.

“Buying your rate down, or ‘paying points,’ means you’re paying an extra fee on top of standard loan fees like appraisal, underwriting and a credit report to get a lower rate.

Of course that means you have to have more cash upfront. The math isn’t as complicated as it seems. First, a “point” is 1 percent of the amount of your loan, so if you are taking out a $200,000 mortgage, 1 point would be $2,000. Lenders will lower your rate if you pay that point at closing, or, at the start of the loan.

“If you were getting a 30-year fixed loan of $325,000, you might get two options with and without points. Today the option with zero points might show the rate as 4.25 percent, and the option with 1 percent in points – equal to $3,250 – might show the rate as 4 percent,” said Hebron. “Paying $3,250 at closing to lower your rate by .25 percent lowers your payment $42 per month, and lowers your interest cost $68 per month.”

How do you know if you should buy down the mortgage? It’s all about time – how long you expect to be in the home and have that same mortgage. What is the savings? Here comes more math – this time from Matt Weaver, vice president of sales at Finance of America Mortgage.

“We can calculate this figure by taking the dollar value of the buy down and dividing it by the monthly savings from the lower interest rate, then dividing that figure by 12 months. So as an example, let’s say a homebuyer will need to pay $2,000 in buy down to generate $30.00/month in savings. If we divide $2,000.00/$30.00, we would conclude it would take 66.7 months, or 5.5 years, to recoup the cost of the buy down – now you can ask yourself, ‘Do I reasonably foresee myself staying in this home for at least 5.5 years?’ in order to truly capture the return on your investment,” explained Weaver.

Sounds simple, if you have the cash and the time, but buying down a mortgage, as with everything else in housing, carries some risk.

“As they say, ‘A dollar in the present is worth more than a dollar in the future.’ The risk with the uncertainty in length of ownership coupled with the possible need of that same cash for any unforeseen expenses poses a risk for homebuyers considering a buy down,” said Weaver. “The buy-down strategy can be worthwhile with a longer-term view in mind, longer term being defined as seven years or greater.”

The benefits can also vary lender to lender. Shopping for the best rate is always a good plan but even more important when you’re looking to buy down.

“The break-even time on buying down varies from lender to lender and from rate to rate, generally in a range of five-10 years. Look at different combinations of rates and upfront costs side-by-side and see which makes the most sense for you,” suggested Matthew Graham, chief operating officer of Mortgage News Daily. “Heads-up: Some lenders with stricter interpretations of recent regulatory changes no longer allow this flexibility.”

If you really don’t see yourself in the home for more than seven years, or even 10, you might want to consider an adjustable-rate mortgage (ARM). These carry much lower interest rates and can be fixed for five, seven, 10, even 15 years. They were vilified during the housing crash because so many people took them out and then couldn’t afford the payments when they adjusted, but the ARMs of today are not those of years past.

One more thing to consider is the rate itself. Mortgage rates are rising, but they are still near historic lows. If you are really on the edge of homeownership, perhaps you’re a young first-time buyer, then buying down the rate is probably not for you. The odds are you’re going to want to be more mobile, and staying in the home for seven years is longer than it sounds. Bailing out of the home before you expected is a real risk.

“The other risk of buying down your rate is that rates drop after you do so,” cautioned Hebron. “For now that risk is low. The Mortgage Bankers Association is predicting that rates will rise about .375 percent from current levels during 2017.”

While rates are expected to rise, the experts have been wrong before. Rates could just as easily come down and credit availability could loosen up, depending on how the new administration tackles mortgage reform. Rates are also sensitive to global financial markets, which are always a wild card, and especially so now.

Source: Dian Olick-CNBC Real Estate Reporter

http://www.cnbc.com/2016/12/29/rising-mortgage-rates-making-you-nervous-heres-how-to-lower-yours.html

 

Five interview questions you need to ask your realtor!

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If you’re a first-time homebuyer, you may be wondering how to start the process. After browsing homes online, the next step for homebuyers is often choosing a Realtor.

But how do you find the best ones out of all the available choices?

Here are the five questions to ask your real estate agent:

1. What is your experience working with first-time homebuyers?

Oftentimes, first-time homebuyers will rely on a personal referral from a family member or friend when they start the buying process. While this is a great way to be introduced to a real estate agent, you need to make sure the agent has the skill set and patience to work with a first-time buyer. A real estate agent should take the time to walk through the entire purchase process from loan pre-qualification, a needs analysis (what are you looking for, the area you want to live, commute times, price point, etc), how to look at homes objectively, reviewing the contract with you prior to writing an offer, how a contract will be written to your benefit, funds needed to close, funds needed AFTER closing, closing time lines, etc.

2. How long have you been in the real estate business?

While there are many excellent agents that are new to the business, making sure you have experience working on your side is a key to your success in finding and negotiating a great deal. Working with a new agent or even an agent who has had his/her license for years, but has not closed a lot of transaction may not be in your best interest. Don’t get me wrong, there are some exceptional agents who have not closed a ton of transactions, but you should consider experience over someone you “like.” You want to make sure your agent is knowledgeable about writing offers with the terms working in your favor.

3. Are you working for me and in my best interest throughout this transaction?

Buyers often call on a home for sale from a sign in the yard, and the listing agent wants to show you the home. The listing agent has signed a contract with the seller to work on their behalf. They cannot work for you and the seller at the same time while trying to get both sides the best deal. If you do hire a real estate agent that also works with sellers, ask them up front how this will work if you are to view a home they are selling. Buying at a discount or at terms that work in your favor are extremely important when buying a home for the first time. I like to say that you earn your equity in the purchase of the property, not necessarily when you go to sell the home, but when you buy. Equity is wealth. You will need someone working FOR you and in your best interest.

4. How will you communicate with me?

The right amount of communication from an agent should reassure you that the agent is working hard to find you the home of your dreams. Buyers should hear from their agents without prompting. Agents should communicate often about open houses, new listings, setting up showing times, and changes within the market.

With prices high and inventory low in the current market, there’s likely to be multiple offers on the home you want, and a breakdown in communication could be the difference between an accepted and a denied offer. Ask how often the agent will communicate and what’s his/her preferred method. Will he/she primarily use email or phone, and how does that lines up with what you’re looking for?

5. Are there any fees I need to pay you?

A buyer’s agent is paid by the seller in almost all transactions. However, asking this question is going to be important so you know of any fees you may be responsible for at closing. Some agencies charge a “transaction fee” which may or may not be negotiable.

Source: Kelsey Ramirez, Housing Wire

 

http://www.modernorealty.com/2016/11/16/five-interview-questions-you-need-to-ask-your-realtor/

 

 

 

Who pays for closing costs?

Who pays for what

One very common question of real estate transactions is, “Who pays for what on a real estate transaction?” Below is a list to give you an idea of some of the common expectations, but this list will vary from region to region. Also, if it’s a buyer’s or seller’s market it could possibly change the common fee responsibility.

The SELLER could generally be expected to pay for the following:

  • Real Estate Commission
  • Document preparation fee for Deed
  • Documentary transfer tax
  • Any city Transfer/Conveyance Tax (according to contract)
  • Any loan fees required by buyer’s lender
  • Payoff of all loans in seller’s name (or existing loan balance if being assumed by buyer)
  • Interest accrued to lender being paid off, Statement Fees, Reconveyance Fees and any Prepayment Penalties
  • Termite Inspection (according to contract)
  • Termite Work (according to contract)
  • Home Warranty (according to contract)
  • Any judgments, tax liens, etc., against the seller
  • Tax proration (for any taxes unpaid at time of transfer of title)
  • Any unpaid Homeowner’s dues
  • Title Insurance Premium
  • Recording charges to clear all documents of record against seller
  • Any bonds or assessments (according to contract)
  • Any and all delinquent taxes
  • Notary Fees
  • Escrow Fee

The BUYER could generally be expected to pay for the following:

  • Title Insurance Premium
  • Escrow Fee
  • Notary Fee
  • Document preparation (if applicable)
  • Recording charges for all documents in buyer’s name
  • Termite Inspection (according to contract)
  • Tax proration (from date of acquisition)
  • Homeowner’s transfer fee
  • All new loan charges (except those require by the lender for seller to pay)
  • Interest on new loan from date of funding to 30 days prior to first payment date
  • Assumption/Change of Records fees for takeover of existing loan
  • Beneficiary Statement Fee for assumption of existing loan
  • Inspection Fees (roofing, property inspection, geological, etc.)
  • Home warranty (according to contract)
  • City transfer/Conveyance Tax (according to contract)
  • Fire insurance Premium for first year

 

The information listed above is an example of the costs each party may have in a transaction. Not all transaction are the same and may have different costs.​