John Beckett's Real Estate Blog

If a new house is listed for only slightly more than older ones you’re looking at, is it worth jumping on? Here’s a look at the pros and cons.

Some homebuyers will take nothing less than a new home with an untouched bathtub. Others want a home with character in an established neighborhood.

Personal preferences aside, there are pros and cons to buying a newly built home over a resale, as well as financial implications for each option.

New-home advantages
Rochelle Fitzgerald, a sales associate with Coldwell Banker Residential Brokerage’s Rockwall office near Dallas, says, “There’s no question that some people prefer that ‘new-home smell’ and the idea that no one else’s feet have been on the carpet. On top of that, many people like to personalize their home by picking out everything from the beginning.”

Some buyers focus on the more practical aspect of buying a new home because it typically will require less maintenance than an older house.

“It’s very important to some buyers to have everything new, plus they have the peace of mind that comes along with the builder’s warranty,” says Dan Kruse, broker/owner of Century 21 Affiliated in Madison, Wis.

On the financial side, builders, particularly in a slow real-estate market, offer plenty of incentives to buyers.

“In a sellers market, new homebuyers will often spend as much as 10% or more above the purchase price for optional features,” says Jeff Ristine, broker/owner of Weichert, Realtors: Kingsland Properties near Chicago. “Now many builders are offering free options as an incentive to buyers, such as a finished basement and an upgraded kitchen. Builders are tailoring their incentives to specific buyers, so some will throw in things like initiation fees for a country-club membership.”

New-home disadvantages
In spite of the added builder incentives, real-estate experts say new homes are typically more expensive than existing homes.

“Traditionally, new homes are more expensive because they are being built from the ground up,” Kruse says. “In recent years, some new homes have come down somewhat in cost because the builders have been hurt so badly by the downturn in the housing market. For the most part, though, builders try to keep price integrity and will offer closing-cost assistance or upgrades rather than lower the base price.”

Upgrades and closing costs are typically tied to the buyer using a builder-designated lender and title company.

“I would caution buyers, at least in our market in the Chicago area, to be careful buying a new home because builders are competing against foreclosures and it could be long time before a new home will increase in value,” Ristine says. “Even with builder incentives, you are usually paying a premium for buying a new home, so you need to hold onto it for five years or more to build any equity.”

Fitzgerald says buyers of new homes should expect to own for longer than buyers of existing homes because of differences in price appreciation.

“In a new-home community, if you need to sell within a year or two, you are competing against the other homes that are still being built and can be customized,” Fitzgerald says. “Buyers will choose a brand-new home rather than a 1-year-old home, especially if the builder can offer incentives that a regular seller cannot.”

One other downside is the potential for living amid a construction site for several years, particularly if the builder has slowed development because of the recession.

When to buy a new home
Real-estate agents agree that the best values for a new home come when the development is nearly complete.

“In years past, buyers wanted to get in early to take advantage of pre-construction pricing and a better location within the community,” Kruse says. “But now, buyers want to get in late, so if you have to sell you won’t be competing with newer homes in the development.”

Ristine says buyers should be cautious about buying before a community is nearly complete, because some builders are so financially strapped that they cannot complete their developments.

Existing-home advantages
“The biggest advantage of existing homes is the maturity of the community,” Kruse says. Buyers can look at how well the homes have held their value historically. Plus, buyers willing to purchase a fixer-upper can more easily increase the value of their property than someone with a new home.

Fitzgerald says that buying in an established community allows homeowners to know more about the schools and neighbors before they buy.

Long-term value in new and existing homes
For most homebuyers today, the biggest concern is whether the property will hold its value.

“In 10 years, a new home purchased today is likely to have more value simply because you own a newer home designed to meet today’s standards,” Fitzgerald says. “A new community will have newer amenities, too, including schools and shopping areas.”

Kruse and Ristine believe long-term value depends more on location than the age of the property.

“Value depends on where a home is located and how well the home has been maintained,” Ristine says. “People do like new things, but if a home has been upgraded with a new kitchen and bath, it can compete very well with a new home.”

Ultimately, the decision to buy a new or existing home comes down to what a buyer values more: a maintenance-free, new home or a mature neighborhood.

Read at:  http://realestate.msn.com/should-you-buy-a-newly-built-home

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

So you’re thinking about selling your house. But how much do you really know about negotiating a home’s sale? Jump into this unprepared and you could leave thousands of dollars — maybe tens of thousands — on the table. You need to go back to school briefly and become a student of the fine art of negotiation. But how does a home seller get smart fast? You need the crib sheet, with negotiation tips you can use throughout the home-selling process, as taught by some of the savviest and most experienced real-estate teachers. And don’t worry — no one’s going to call you to the principal’s office for keeping this cheat sheet close at hand.

As you’re getting started
Smart negotiating starts early — even before you’ve gotten an offer from a buyer, the experts say. In fact, it starts when you choose a real-estate agent.

Beware the “Mr. Nice Guy” agent. When deciding upon a real-estate agent, you want an agent who represents you to be hard-nosed, irritating and determined; to have learned his or her business in the backrooms; and to tell it like it is and get what he or she goes after. You want the other guy to have the ‘nice’ agent. The lesson: Don’t choose just on personality, but effectiveness.

Understand “forward pricing.” When pricing your home — the first step in the negotiation process — “don’t simply take what the last home in the neighborhood sold for and make that your price. Instead, use forward pricing: If homes in your area are appreciating by, say, 10% annually, and the last comparable home sold six months ago for $300,000, then yours should be priced at $315,000 (half of 10% of $300,000 equals $15,000, which is the amount that should be added to “forward price” for this home).  That’s pricing it forward to the current market.

Once the offers start coming in
Stay out of it. Though the occasional homeowner will feel expert enough at negotiations to handle the sale of the home himself, experts generally say it’s wiser if homeowners stay out of sight during the negotiation process and let their agent do all the talking. That doesn’t mean you don’t play an active role — but you stay behind the scenes. You definitely need to not be seen. It needs to be the agents battling it out.

Get the conversation started. Let’s say you put your home up for sale at $300,000, and a would-be buyer offers $200,000. It’s tempting to just dismiss the offer out-of-hand. Don’t do it. If someone comes in at $200,000 on a $300,000 home, You come back at $290,000. Make some movement. Get the conversation started. By moving — a little bit — you send a signal that you’re willing to negotiate, but you’re not desperate. And that frequently will get the would-be buyer to play ball and counter with a more serious offer.

Remember, it isn’t personal. Lots of times the first offer from a buyer will be a lowball offer — just testing the waters. Let’s say it was offered at $300,000 and they offer $210,000 — some ridiculous amount. Well, the seller gets insulted. The worst thing that can happen in a negotiation is that you take things personal. Remember: It’s just business.

Keep it moving. Time is a key element of negotiation. The longer you can keep someone at the negotiating table, the more likely you’re going to come to a conclusion that’s satisfactory to you. Why? Because the more time and effort people invest, the more they feel invested in getting the deal done and buying your property. So what to do? No matter how bad the offer is, always make a counteroffer – and always give a concession — maybe it can’t always be on price, but maybe it can be on financing. Or, maybe there’s something in the property the buyer wants (that can be thrown in as a concession). … Just the act of keeping it going, keeping the deal alive, actually helps make the deal. One psychological tip: If you’re going to counter (offer), it’s usually a good idea to make the counter on the same document as the original offer. When the counter is on the same document, even though the other party knows that his or her original offer was rejected, it makes it seem like the same deal is still being negotiated.

As the negotiation continues (or drags on). Don’t split the difference. It might be tempting to make a deal happen by just saying, ‘Let’s split the difference between offer and counter offer.” Don’t do it. Why not? Because you’re being too generous, and you’re leaving money on the table.

A small concession can be big at the end. As you’re getting close to closing a deal, but you’re still not there, consider giving a small concession near the final moment. The concession could be moving back the closing date a week, or leaving a piece of patio furniture that the buyer admired. Why? The other side’s need to think they’ve “won” the negotiation, this may be what’s holding up the deal … so throwing them a small win can seal the larger victory. Because timing (of the concession) is more important than the size of the concession, the concession can be ridiculously small and still be effective.

And there you have it — a crib sheet that ensures the only thing that won’t be cheated the next time you sell a home is you.

Read entire story at: http://realestate.msn.com/article.aspx?cp-documentid=23599546