Sellers May Want to Offer Assumable Mortgage

One of the good way (especially now) to market you property is to offer assumabble mortgage

Sellers who can’t find a buyer should look at the terms of their mortgage and, if it is permitted in their area, offer to let a buyer assume their loan.

Utah Housing Loan is assumable loan.

Assumable mortgages made in recent years generally carry interests rates below current market rates. Plus, a buyer who can qualify with the lender can step into a mortgage without having to come up with a down payment or pay hefty closing costs.

It is definitely win-win for sellers and buyers.

The Website HomeAssume.com matches buyers and sellers. FHA and VA mortgages are assumable, as are many conventional adjustable-rate mortgages

Inspection Deadline should be 20 days before Settlement

Why?- If Buyer provides written objections to Seller, Buyer and Seller shall have seven calendar days after Seller's receipt of Buyer's Objections (the "Response Period") in which to agree in writting upon the manner of resolving Buyer's objections.

Except as provided in Section 10.2, Seller may, but shall not be required to, resole Buyer's objections. If Buyer and Seller have not agreed in writting upon the manner of resolving Buyer's objections, Buyer may cancel this Contract by proving written notice to Seller no later than three calendar days after expiration of the Response Period.

A mejore problem arises when the agents alloq a contract to be written where these dates actually extend beyound the settlement deadline. That is why it is better to have Inspection Dealine at least 20 days before Settlement.

Agency Disclosure

Going back to Real Estate Purchase Contract. Today I will cover Agency.

Agency Disclosure is mandatory, and this item often gets agents in trouble.

1. Agent should not write any offers prior to written agreement with his/her client. It avoids any confusion who Agent can or cannot represent and how much he/she will be paid. As a seller, you can choose if you are fine with Agent potentially representing both you-Seller and Buyer (limited representation/limited agency). Even though some may consider this limited representation is a conflict of interests, it is legal in Utah.

a. Here is why agents cannot list the property without an agreement, and cannot write an offer without one.

2. Limited Agency is prohibited if

a. If Agent is or one of the owner of the house Buyers are interested to buy (In other words, agents can sell their own houses as listing agents, but cannot represent both themselves and buyers)

b. Same applies if agent is officer, director, partner, member, employee or stockholder in the property buyer is interested in.

So let's make it clear:

Q and A:

A. Can Agents sell a property they have some or all ownership in? Yes
B. Can that same Agent also act as a Buyer's Agent? No
C. Can Agent represent buyer even though he/she represent seller/has a listing? Yes, only if seller and buyer authorized him/her to do so.
D. Can a listing agent purchase a property that they have listed or are trying to obtain listing? Most likely not.

Even though limited agency is legal in Utah. In some situations the law recognizes that it is not impossible, but difficult to fulfill fiduciary duties to both seller and buyers.

Agency is the possibly the most important aspect of what agents do. And, Agent has following duties to his/her client:

Loyaalty
Obedience
Full Disclosure
Confidentiality
Reasonable care and diligence
Holding Safe and accounting for all money or property entrusted to the Agent

The question which has never been aswered yet is does Agent have some type of ongoing agency relationship? In other words, let's say agent had a listing, but now he/she doesn't; however, now agent has a buyer for his/her previous listing... Potentially, even though it is not clearly asnwered by law situation, it is risky situation because as a Agent, you have knowledge of very private information such as previous offers, for instance...

Mortgage Financing Contingency

If the buyer applies for mortgage, he will be contingent upon his/her financing. If you are a seller, it helps to check pre-approval and/or pre-qualification letter from the lender before offer accpetance, but buyer will still reserve the right to be contigent upon financing. (finacing clause)

First of all, what is the difference between Pre-Approval vs. Pre-Qualification?

Usually, pre-approval simply means interview with a lender, and lender's confirmation how much you can afford depends on information you provide to the bank.

Pre-qualification is based not only on interview, but also your credit check and few more paperwork you were required to bring: W2s, employment history, etc.

In other words, pre-aulification is more than pre-approval.

Second of all, while above mentioned financing clause is good at taking care of the most situations, if I represent buyer and if the byer is shopping around for loan, I suggest to add disclosure something like this " This ofer is subject to the Buyer's approval of the terms and conditions of any mortgage financing that the Buyer may apply for".

As a seller, you should clearify this statement and establis some time of boundaries. Not to have it as a deal breaker, it is better to buyers to know exactly what loan they are qualifing for before writting an offer.

Tomorrow, I will discuss what does it mean to apply for the loan, and what is procedure if the loan is denied?

Closing Costs

Especially, as a first time buyer or seller, people do make mistake budgeting for the house they can afford, forgetting about closing costs. Today I would like to touch base what closing costs are and what usually seller and buyer responsible for.

Depending on how strong the market is for sellers and buyers and how well your negotiation goes on, you can ask pther party to pay for your closing costs. Keep in mind though, it may no be always beneficial, so please call me if you consider doing that...

Please keep in mind that numbers below are only estimates, and they may depend on your agent and Title Company. I recommend my clients no matter if it is Buyer or Seller to call around and choose the best Title Company out there.

What Closing Costs Seller usually responsible for and why?

As a seller, you final paperwork should look something like this:

Contract sales price: let's say $275,000
minus closing costs-------about ??
minus paying off the mortgage(s) you have
minus (adjusting items you have not paid for)....let say you are closing on June 04, county taxes are due once a year in Utah, so final amount will get adjusted, in other words you would be responsible for county taxes from January 01-June 04 (assuming June 04 is recording date)

All of this is pretty easy except what is closing costs?

1. Seller is responsible for commissions, seller would pay for Buyer's and Seller's Agent. This number should not be a mistary because if you are a seller, you should already have agent agreement which discussed how much it is...
2. That Title company would charge settlement or closing fee, usually about $75-100
3. Title Company would also charge document preparation free: about $25-35
4. Seller is responsible for Owner's Coverage. In other words, Title company at seller's expense buys insurance which covers Lender and Buyer/Future Owner covers from any undiscovered liens, claims, house upgrades with no city permit, etc. It is not an option item for seller, it is a requirement for seller to purchase. If you house costs $275,000, you are looking at about $900
5. and, lastly recording fee- to make sure you would be removed as a owner of this property-$20.00

What Closing Costs Buyer usually responsible for and why?

As a buyer, you final paperwork should look something like this:

Let's say you contract price is the same: $275,000
minus closing costs-------about ?? about $8,000
__________+
so the gross amount due from Borrower/Buyer is now $283,000

Then amounts paid by or in behalf of the buyer will be deducted:

such items as Deposit or Earnest Money (so here, you would see that your deposit did not get lost it simply became your downpayment)
principle amount of your loan
2nd loan if you have one
again, because county taxes are paid only once a year, and you did not live in the house from January 1 to June 4-you will receive this prorated amount as a discount

This is how Title Company calculates how much many you would need to bring...

Again, All of this is pretty easy except what is closing costs, what is $8,000 in this case:

1.Loan Origination Fee, this amount is traditionally 1% of you loan amount and is payable to your Mortgage Company. It should not be a mistary, and you should know up front how much moeny your mortgage person is planning to charge.
2. Whoever is providing you mortgage may also charge such items as tax fee, processing fee, underwritting fee, flood certification fee, appraisal review fee, assignment fee, courier fee...please get a good understand what and why these fees are charged...Appraisal and Inspection Fees, if you did no pay them yet, will be charged here
3. Now, let's sy again you are closing/recording on 6/04. Your first payment will not be due most likely until 7/01. So, your interest rate proration will be added to you, in othr words, based on your interest rate, it is calculated that it is about $37 a day, so you will be charge about $980, from 6/05-7/01
4. Harzardous Home Insurance: I recommend you shop around or ask your existing car insurance for discount if you do both car and huse with them. Your Home Insurance will be added here, about $650, let's say
5. Then the lender may request some reserve to have money at all times for such things as 2 months of hazard insurance at all times, some months of county property taxes, mortgage insurance, etc.
6. Now, title charges: Settlement/Closing fee $125, document preparation $35
7. If you are a cash buyer, you would not be resposible for the next, highest number: Lender's Coverage. If you borrow money, you are required to buy this Title insurance which is described above.
8. Wire and Courier Fee to Title Company
9. Recording fee- to make sure you are certified as a new owner of the property

As a side note to remember, most of thi fees are the same if you refinance the house, so please remember to do the refinancing only if it is beneficial.

Next article of "A to Z" section: "C"-Commissions...

Commissions - How Much Should You Pay?


Fact - Real Estate Broker's commission rates are not regulated in any state and are ALWAYS 100% negotiable. When you decide to sell your house, if you are like most people, you will want to hire -or at least consider hiring- a real estate agent to handle the process.

Surprisingly, many people think that real estate brokerage commission rates are "set" in their area and they have to pay 5% or 6% (or, the area's going rate) of the sales price to the agent in order to get their services. This is absolutely not the case, and in fact, you can pay whatever you and the agent agree to.

What is a fair amount?
"Fair" is whatever you and the agent decide is fair, and just as you are not under any obligation to pay any more than you want to, the agent is not under any obligation to do business with you if they are not going to earn what they want. You will probably find that most agents will want to get a commission rate somewhere between 4%-7%, depending on your particular area. While you may think that this is too much, keep in mind the following:

The agent is not getting the entire amount. In fact, they get about 37.5% of the total on average (this varies also by geographic area), because the buyer's agent's company usually gets half of the entire amount (say 3%), and of the remaining half (3% in this example), the listing agent's company gets about 25% of that or more.
If the sale goes smoothly (real estate transactions rarely do), the agent may not put in a huge amount of time and effort into the process, but if complications arise (there usually are some, if not many), the agent may put in a great deal of time and energy, including many evenings and weekends.
The agent has no guarantee they will get paid and if you change your mind halfway through and decide not to sell, the agent may have invested a lot of time and energy for nothing.
The agent is most likely on straight commission and has to pay for everything (i.e., gas, cell phone, signs, insurance, etc.) out of their own pocket.
While it is understood the listing side pays for marketing the home and facilitating the showings and feedback process, the listing agent also plays an important role in keeping the buyer and seller at the negotiation table. Example: A buyer offered an initial price of 15K less than the list price. The seller countered at 4K under list and the buyer responded that they had offered their top amount and there would be no counter. The seller was offended and the talks were off. Two weeks later, the listing agent convinced the seller to counter again and invite the buyer to the table to see if the buyer would be willing to come up from his initial offer. He did and eventually, the deal was closed and everyone was happy. Ultimately the listing agent recognized that some amount in between the two was reasonable and was successful in coaching the seller to see the benefit of dealing with this particular buyer.
You might consider an incentive-based compensation for the agent.
So, if your house is not going to sell for very much and/or is probably not going to be an "easy" sale for whatever reason (perhaps there are a lot of homes on the market and not selling quickly, or you are in the middle of a divorce and you know the agent is going to have to deal with a lot of tension and communication with multiple parties), when you do the calculations, you may find that the agent is actually doing a lot of work for very little compensation. However, if your house is worth half a million dollars or more, and houses are flying off the market, then asking for a 1% or 2% reduction of the agent's requested rate might be very fair for both of you.

Understand how the commission is divided between the listing agent's company and buyer's agent's company:
Let's say that you agree to pay 6% to the agent you are going to hire. The assumption is that 3% of this right off the bat is designated for the buyer's agent's company that brings the successful buyer to the table. The question you should ask is why do you have to pay 3% to the buyer's agent's company? Can't the buyer pay that themselves? Then, you could just pay 3% or thereabouts to the listing agent and you would save yourself a lot of money, right? Well, here's how it works: Most buyer's use a buyer's agent to help them in the home buying process. Now they could pay their agent themselves, but then they would probably expect about the same amount they are paying to be discounted from the price of your home. In other words, consumers understand that real estate commissions are put into the price of the home and have been done so for decades, so even though you as the seller are paying the entire commission, you are still probably going to net about the same as you would had you only paid the listing agent.

The problem in most states is that the contracts used are written by lawyers paid for by the realtor associations, therefore making it difficult to benefit from not having a licensed agent during a purchase.

Could you offer less than half of the total commission to the buyer's agent?
How about this: why not offer less than half (3% in our example) to the buyer's agent... say 2%, instead of the 3%? You absolutely could. But, some people will tell you that if you offer less than the "going rate" to buyer's agents, they won't show your home. In my experience, this is absolutely false. I have been involved in the sale of dozens of homes and have found that what buyer's agents want more than anything is to find their buyer a home that they will like, get the sale done, make a reasonable commission, and move on to the next client. I have found that lowering or raising the amount offered to the buyer's agent had no impact on how often the home was shown, as long as it was some substantial amount for their time. What mattered most was whether or not the price of the home and its condition were favorable to buyers.

"Discount" and flat fee MLS companies.
You could use a "discount" or flat fee MLS company instead of a "traditional" company (actually, since commissions are not regulated, there really is no such thing as a discount company). Even if you do this however, you are still going to want to offer something reasonable to buyer's agents so they don't get too turned off too much and not bring a good buyer. And, unless you are willing to do a lot of work yourself (being present at showings, inspections and/or other appointments), the extra that you pay the listing agent over the flat fee company may actually be worth it and you may even net more money by having a dedicated agent to negotiate for you at all times. Selling via flat fee MLS is growing rapidly in slowing markets. Many resort to this alternative selling method as it is the most economical and flexible way to sell.

Recommendations for dealing with the real estate commission:
If your home is not worth very much and/or it is not a great market for sellers, pay the "going rate" after shopping a few prominent Realtors. You will need all the help you can get, and the agents are not actually going to be making a ton of money for the time they put in.
If your home is worth a lot and/or it's a hot seller's market, tell the agent that you think it is fair to pay them slightly less of THEIR side as well as slightly less of the BUYER"S agent's side (for example, instead of 3% to each side - 6% total, pay 2.5% to each side - 5% total).
Make sure the agent will do the following: Put your home in the local MLS; add as many high-quality photos as possible (make sure they choose the best looking photo for the "primary" MLS photo); put an attractive "For Sale" sign out front; put a continuous supply of flyers in a flyer box; put a Realtor lockbox on the door; offer whatever amount that you had authorized them to offer to buyer's agents in the MLS, and make sure they guide you well in preparing and staging your home. Although about 80% of buyers first use the Internet to preview homes, a significant number of buyers still call from well-placed newspaper and magazine advertisements.
Getting Prequalified
Remember!
In anything you get what you pay for. A true real estate professional is worth there weight in GOLD, the trick is finding a Professional, A Full Time Realtor.
Articles