John Beckett's Real Estate Blog

The proliferation of services that help homebuyers and sellers complete their own real-estate transactions is relatively recent, and it may have you wondering whether using a real-estate agent is becoming a relic of a bygone era. While doing the work yourself can save you the significant commissions that many real-estate agents command, for many, flying solo may not be the way to go — and could end up being more costly than a commission in the long run. Buying or selling a home is a major financial and emotional undertaking. Find out why you shouldn’t discard the notion of hiring an agent just yet.

1. Better access/more convenience

A real-estate agent’s full-time job is to act as a liaison between buyers and sellers. This means that he or she will have easy access to all other properties listed by other agents and will know what needs to be done to get a deal together. For example, if you are looking to buy a home, a real-estate agent will track down homes that meet your criteria, get in touch with sellers’ agents and make appointments for you to view the homes. If you are buying on your own, you will have to play this telephone tag yourself. This may be especially difficult if you’re shopping for homes that are for sale by owner. Similarly, if you are looking to sell your home yourself, you will have to solicit calls from interested parties, answer questions and make appointments. Keep in mind that potential buyers are likely to move on if you tend to be busy or don’t respond quickly enough. Alternatively, you may find yourself making an appointment and rushing home, only to find that no one shows up.

2. Negotiating is tricky business

Many people don’t like the idea of doing a real-estate deal through an agent and think that direct negotiation between buyers and sellers is more transparent and allows the parties to look after their own interests better. This is probably true — assuming that both the buyer and seller are reasonable people who are able to get along. Unfortunately, this isn’t always an easy relationship. What if you, as a buyer, like a home but despise its wood-paneled walls, shag carpet and lurid orange kitchen? If you are working with an agent, you can express your contempt for the current owner’s decorating skills and rant about how much it’ll cost you to upgrade the home without insulting the owner. For all you know, the owner’s late mother may have lovingly chosen the décor. Your real-estate agent can convey your concerns to the seller’s agent. Acting as a messenger, the agent may be in a better position to negotiate a discount without ruffling the homeowner’s feathers. A real-estate agent can also play the “bad guy” in a transaction, preventing the bad blood between a buyer and seller that can kill a deal. Keep in mind that sellers can reject a potential buyer’s offer for any reason — including just because they hate his or her guts. An agent can help by speaking for you in tough transactions and smoothing things over to keep them from getting too personal. This can put you in a better position to get the house you want. The same is true for the seller, who can benefit from a hard-nosed real-estate agent who will represent his or her interests without turning off potential buyers who want to niggle about the price.

3. Contracts can be hard to handle

If you decide to buy or sell a home, the offer-to-purchase contract is there to protect you and ensure that you are able to back out of the deal if certain conditions aren’t met. For example, if you plan to buy a home with a mortgage but you fail to make financing one of the conditions of the sale — and you aren’t approved for the mortgage — you can lose your deposit on the home and could even be sued by the seller for failing to fulfill your end of the contract. (Keep in mind that the details of any contract may vary based on state law.) An experienced real-estate agent deals with the same contracts and conditions on a regular basis and is familiar with which conditions should be used, when they can be removed safely and how to use the contract to protect you, whether you’re buying or selling your home.

4. Real-estate agents can’t lie

Well, OK, actually they can. But because they are licensed professionals, there are more repercussions if they do than for a private buyer or seller. If you are working with a licensed real-estate agent under an agency agreement, such as a conventional, full-service commission agreement in which the agent agrees to represent you, your agent will be bound by law to a fiduciary relationship. In other words, the agent is bound by law to act in his clients’ best interest, not his own. In addition, most real-estate agents rely on referrals and repeat business to build the kind of client base they’ll need to survive in the business. This means that doing what’s best for their clients should be as important to them as any individual sale. Finally, if you do find that your agent has gotten away with lying to you, you will have more avenues for recourse, such as through your agent’s broker or professional association or possibly even in court if you can prove that your agent has failed to uphold his fiduciary duties. When a buyer and seller work together directly, they can — and should — seek legal counsel, but because each is expected to act in his or her best interest, there isn’t much you can do if you find out later that you’ve been duped about multiple offers or the home’s condition. And having a lawyer on retainer any time you want to talk about potentially buying or selling a house could cost far more than an agent’s commissions by the time the transaction is complete.

5.  Not everyone can save money

Many people eschew using a real-estate agent in order to save money, but keep in mind that it is unlikely that both the buyer and seller will reap the benefits of not having to pay commissions. For example, if you are selling your home on your own, you will price it based on the sale prices of other comparable properties in your area. Many of these properties will be sold with the help of an agent. This means that the seller gets to keep the percentage of the home’s sale price that might otherwise be paid to the real-estate agent. However, buyers who are looking to purchase a home sold by owners may also believe they can save some money on the home by not having an agent involved. They might even expect it and make an offer accordingly. However, unless buyer and seller agree to split the savings, they can’t both save the commission.

The bottom line
While there are certainly people who are qualified to sell their own homes, taking a quick look at the long list of frequently asked questions on most “for sale by owner” websites suggests the process isn’t as simple as many people assume. And when you get into a difficult situation, it can really pay to have a professional on your side.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=25368603

You’re finally wrapping up your home purchase. Congratulations. Before it’s officially yours, though, you have one last hurdle: the mysterious process known as “closing” or “settlement.” Open your wallet and hold onto your hat. “Closing costs” — the catch-all term for a host of fees, taxes and charges — can total 2% to 6% or more of your purchase price — $4,000 to $12,000 on a $200,000 mortgage. That means you’ll need to budget a chunk of money besides your down payment. Costs vary by region and by what you negotiate. Buyers usually pay most fees, but sellers may pay some, too. Buyers often get lenders to contribute, too. Be aware, however, that lenders offering a “zero-closing-cost” loan. Closing starts when you sign a purchase contract. It ends about four to eight weeks later, at a closing meeting (or conference) where you sign papers on your loan; pay fees, taxes and services to finalize the sale; and receive the keys and deed to your new home.

Who’s in charge?

A professional settlement agent orchestrates a closing. The agent files documents, pays taxes on your behalf, ensures every task is done and recorded in the time specified by law, and also may hire an appraiser, pest inspector and other professional services. The agent represents the buyer, the seller and the lender equally. In some states, the agent must be an attorney. In others, it’s an independent settlement or escrow company. (An escrow company is one licensed by the state to hold money and documents.) In many states, title companies — whose primary jobs are to make sure there are no claims on the property and to sell insurance guaranteeing that the title is clear — may be the settlement agent.

States’ requirements vary:

• In New York, only an attorney — usually a specialized “closing attorney” — oversees a closing.
• In Nevada, as in most states, title companies act as the settlement agent.
• In California and Wyoming, escrow companies are used.

The federal forms and rules used to disclose your loan costs and closing fees, however, are identical in every state:

• Your lender must give you a binding good-faith estimate, or GFE, within three business days after you apply for a loan. It shows loan costs and estimates your other closing costs. Your final origination charges and transfer taxes can’t vary from this estimate. Quotes for other services may vary by up to 10%. Bigger variations are a “tolerance violation” and the lender must credit you the difference within 30 days of your closing, says Cathy Blaszyk, vice president for lender services at Closing.com.
• At your closing, the settlement agent will give you a HUD-1 form showing your final costs.

How to shop

Closing costs vary greatly. In its 2009 survey of average total closing costs in 52 cities and states, Bankrate.com found a $1,579 difference between the highest-cost state, Texas, at $3,855, and Nevada, with the lowest average cost, $2,276. Most of these fees are negotiable, and you can shop separately for many of them. The consumer has to open their eyes, because they can save a lot of money. People spend more time shopping for a big-screen TV. Closing.com’s closing costs calculator lets you plug in home-purchase information to get numerous estimates and quotes on closing services from providers near you. By shopping aggressively, you might:

• Qualify for a better interest rate than you’d expected.
• Find that a loan offer with a higher interest rate is really the best deal when all closing costs are considered.
• Spot “junk” fees.
• Find lower rates on services such as title insurance, settlement services or inspections.
• Use these lower bids to negotiate better prices with your lender.

Start shopping for settlement services and for additional loan offers once you’ve made one mortgage-loan application. A lender must stick to its good-faith estimate for 10 days. The bank or broker can’t go back and make changes, which gives the borrower a chance to make comparisons. Don’t worry about hurting your credit score by making numerous loan applications. In “4 credit-scoring myths,” personal finance guru and MSN Money contributor Liz Pulliam Weston says that your FICO score will register multiple inquiries in a 45-day period as just one inquiry. Applying is free, except maybe for the cost of pulling your credit report — about $15, tops. Lenders can’t collect application or appraisal fees while you’re comparison shopping. Although recent changes in federal law make it harder for lenders to pad fees, you should still get expert help in reviewing offers and closing documents. The key is getting somebody who is trained and who can comprehensively look at it for you.

In advance, line up either of these:

• A real-estate attorney through the American Bar Association lawyer locator  or find referrals from a state or local bar association.
• A free, housing counselor certified by the Department of Housing and Urban Development (call 800-569-4287.

Read more at: http://realestate.msn.com/article.aspx?cp-documentid=25322086&page=2

The Social Security program turns 75 this month. Since President Franklin D. Roosevelt signed the Social Security Act on Aug. 14, 1935, few workers have not been impacted by the program. Almost all working Americans pay into Social Security, and it’s the largest source of income for U.S. citizens age 65 and older. Yet this huge entitlement has many facets, some of which are not widely known.

The system is larger than the economy of most countries. For the past 20 years, the Social Security program has been the biggest single item in the federal government’s budget. The amount of money flowing through the Social Security system each year is larger than the total economies of all but the 16 richest nations in the world. Between the collection of the first Social Security taxes in 1937 and 2007, the retirement system took in $13 trillion and made payments of $10.6 trillion. That’s an amount that Social Security’s first beneficiary, Ida May Fuller of Ludlow, Vt. — who received benefits averaging about $650 a year over 35 years — probably never dreamed of.

It’s not just a retirement program. The original Social Security program paid benefits only to retired workers. Later, disability benefits and payments to a beneficiary’s spouse and children were added to the program. If you graduated from college four years ago, you are already protected against disability,If you are married and have children, your dependents are protected. Annual Social Security Administration mailings to all workers age 25 and older include an estimate of the amount you would be paid if you became disabled, as well as how much your spouse and children would receive should you pass away.

You pay 6.2% of your income into the system. Almost all (94%) American workers pay 6.2% of their taxable income, up to $106,800 annually, into the Social Security trust fund. Employers pay a matching 6.2% for each worker. Self-employed workers must contribute 12.4% of their income annually.

There haven’t always been cost-of-living increases. Annual cost-of-living adjustments didn’t become a part of Social Security until 1975 (as a result of amendments passed in 1972). Prior to 1975, an act of Congress was required to increase benefits to keep up with consumer prices. Before then, benefits were protected from inflation only when Congress chose to notice it. Now increases in payments are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers. Annual increases have ranged from 1.3% in 1996 and 1998 to 14.3% in 1980. This year, for the first time since 1975, there was no cost-of-living boost, because the index did not increase between the third quarter of 2008 and 2009.

Retirees can increase annual payments by waiting to claim benefits. You can begin receiving Social Security checks as early as age 62. But payouts increase 7% to 8% for each year you delay your start date, up to age 70. Workers who sign up early receive smaller monthly checks, but potentially for more years, than those who delay claiming but receive bigger payouts for the rest of their lives. Baby boomers who know they are going to have a long life are much better off waiting. Epstein, who is spending down her Roth individual retirement account in order to delay claiming Social Security, says her benefits will increase by about $500 a month by waiting until age 70 to sign up.

Couples have additional options. A retiree is entitled to Social Security benefits of up to 50% of a higher-earning spouse’s payout if that amount is greater than benefits based on his or her own working record. Widows and widowers are entitled to the higher earner’s full retirement payout. Dual-earner couples who have reached their full retirement ages can even claim twice if each first signs up for a spousal payment, then claims again later based on his or her own work record (which will then be higher due to delayed claiming). Ex-spouses are also eligible for benefits if the marriage lasted at least 10 years.

Existing beneficiaries can get do-overs — at least for now. If you’ve already signed up for Social Security and are receiving a reduced payout, it’s not too late to boost your check. If you pay back the entire amount you have already received from Social Security (without interest), you can then re-enroll and qualify for higher payments for the rest of your life. That could change, however. This week Kiplinger reported that the payback option may soon be eliminated.

Social Security numbers have significance. The first three digits of your Social Security number are assigned based on geographical region, with the lowest numbers being assigned in the Northeast. The middle two digits, called the group number, are allocated in a precise but nonconsecutive order from 01 to 99. The last four digits are issued in a sequential order. More than 420 million unique numbers have been assigned, and they are not reused after a person’s death. Since 1989, Social Security numbers have been issued to Americans shortly after they’re born, which makes younger people’s Social Security numbers somewhat predictable, if you know a person’s date of birth and hometown. And that’s information people commonly list on social-networking websites, according to research by Alessandro Acquisti, an associate professor of information technology and public policy at Carnegie Mellon University. Do not offer personal information such as date of birth and hometown publicly.

Paper Social Security checks will soon be retired. New recipients will be required to collect payments by direct deposit into a bank account or a government Direct Express Debit MasterCard beginning March 1, 2011. Existing beneficiaries must switch to electronic payments by March 1, 2013. Paperless payments are expected to save $300 million over five years, according to Treasury Department estimates.

The trust fund has a projected deficit. The Social Security trust fund is currently projected to be sufficient to provide payments through 2037. Unless changes are made to the program, after that year, resources will be sufficient to pay out only about 78% of scheduled benefits. Congress is considering a variety of potential changes to address the projected shortfall, including tax increases, benefit cuts and a rise in the retirement age. A Senate Special Committee on Aging report released in May found that relatively minor tweaks could put the trust fund back on sound financial ground for at least 75 more years. It’s a shame that the tone of the 75th celebration is sort of nostalgic. I would hope that the 75th anniversary is not only about how good things used to be but also about how good things could still be in the future.

Read at: http://articles.moneycentral.msn.com/RetirementandWills/CreateaPlan/10-things-you-should-know-about-social-security.aspx?slide-number=12

This weeks quotes come from Star Jones, one of my favorite Attorneys and talk show celebrity:

I guess the President says the majority of the people didn’t elect him, he doesn’t have to listen to ‘em anyway.

I want people to make the same choice I made to get healthy.

I want the big drama. I always said I don’t want a wedding I want a parade.

No, you’re not allowed to be bossy when you’re married. You have to learn compromise, and compassion and patience.

This is the time that I really miss being in my courtroom because I believe that that’s the last place in this country where there’s supposed to be fairness.

Read more at: http://www.brainyquote.com/quotes/authors/s/star_jones_2.html

1. Is your house in a high-traffic area? While many are advertised in the newspaper, on the Internet and in fliers, it’s still drive-by and foot traffic that brings most open-house visitors. Amanda Staines, a sales director from Atlanta and a former agent, says she plans to hold an open house every weekend until her newly renovated two-bedroom townhome sells. The reason? “Location, location, location. My house is off a major road, so the signage can really pull” people in, she says.

2. Does it have special features or was it recently renovated? An especially beautiful house can make buyers out of the most casual visitors.

3. What’s your home’s sale price? Many real estate agents say they no longer hold open houses for high-end homes, because they consider them a draw for thieves and gawkers. They prefer to schedule private tours.

4. How much time and money am I willing to invest in an open house? In some markets, much of the competition is using stagers and investing in costly upgrades such as painting and landscaping. If you aren’t wiling to spruce things up, an open house might not be worth it.

5. Is my real estate agent behind the idea? If they don’t think it’s a good idea for your home, or are unenthusiastic about it, it might not do much for you.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=13108453