For Sale by Owner: Off MLS Listing is Risky Business

Since 2013, there has been an increase in sellers pre-selling properties and listing them off the Multiple Listing Services(MLS). Core Logic reported that in 2013, 53% of real estate transactions conducted in the U.S. were not listed on the MLS. Most sellers do not hold a real estate license, and are not permitted to use the MLS - the standard listing portal for a licensed real estate agent. Although buyer’s agents are willing to work with For Sale by Owner (FSBO) listings, they are not permitted to give the seller any advice or access to marketing. 

Sellers who want to list a FSBO may be losing out on tens of thousands of dollars in real market value on a property, especially if they list properties without an up-to-date appraisal or current market research. Often a seller will list a FSBO based on the sale price of a neighbor’s home, which may or may not be the best choice for a comparable property. A local real estate agent lists properties continuously in their regional sales area and is best suited to offer a market comparison in the neighborhoods he or she covers. Remember, tax assessments, though readily available, are not the best tool for gauging a property’s true market value at any give point in time.

One nuance about FSBO sales that should give sellers pause is the fact that an experienced buyer’s agent may hold the upper hand in a FSBO real estate transaction. Why? The seller may not be familiar with state laws and fiduciary codes and/or ramifications of contract issues that crop up during negotiations. Even with a lawyer creating a real estate contract on a property, the final outcome of a For Sale By Owner (FSBO) real estate sale may be held up over a variety of issues. Experienced REALTORS know how to circumvent these roadblocks quickly and keep a property transaction on track.

FSBO is Not Equal to a REALTOR’s Advertising Potential
Working with a professional REALTOR is worth the commission under these circumstances. A FSBO has a limited opportunity for marketing, becoming more heavily reliant upon web real estate portal sites such as Zillow.com. With a seasoned agent, advertising penetration for a property is far greater. For example, I list my properties for sale in Williamsburg, Virginia on four MLS websites. This gives my sellers and extensive area of coverage so that other agents can see the listing and buyers on the MLS can also see it. My MLS listings are also republished on Realtor.com, which is owned by the National Association of Realtors and is also a reputable website in the industry. My broker, Coldwell Banker Traditions, also has a listing mechanism on its locally based website, where my client properties receive excellent visibility. Not all REALTORS list properties this widely on the Web, so check with individual real estate agents and ask them for specific information about advertising provided for client listings through MLS and other venues on the Web.

There are other disadvantages to listing properties without an agent. If the owner happens to miss a showing with a potential buyer, he or she may miss the opportunity to sell a property altogether. For real estate sales in my territory, Southeastern Virginia, an owner is not permitted to use legal forms created by the Virginia Association for Realtors (VAR), unless they are licensed.   Real estate forms are formally copyrighted by the VAR and sanctioned for use only by membership. This puts the seller at another distinct disadvantage in the transaction. Having to create legal forms anew is not only time consuming, it may increase costs for an attorney.

            Besides some of the more obvious advantages to listing with a licensed real estate agent, there is also a common misconception that the use of a real estate lawyer will save money versus paying agents’ commissions. The seller still has to pay the buyers agent fees (which is variable by state and type of real estate transaction). All FSBO sales contracts must be created and finalized with a lawyer. The sales process involves having the buyer read the contract and make changes. The lawyer revises the contract appropriately and it is presented at closing. Lawyers in Virginia charge far more to create an original contract (in my experience) than the commission on the seller’s side - in most instances. Sellers who want to go it alone should seriously consider the lawyer’s fees may be more expensive, and are largely unpredictable, depending upon the number of legal forms needed, length of negotiations and additional contract requirements.
          
            Sellers need to forgo the FSBO and get smart in a real estate market that is definitely on the move in many regions of the U.S. Pricing is trending higher in the 2014 market and inventories are low in many markets. So sellers need to have expert advice on pricing real estate at current market value now - more than ever. In addition to potential loss of profits from home sale, the seller may easily run up against legal and contract issues that may not be quickly resolved. Worse yet, these matters may be settled too late to adhere to the time limits on certain loans such as FHA and USDA. If the seller does not know what they’re doing and timeframes are not heeded, this can cause the buyer to forfeit a loan. In turn, the property loses a good buyer and valuable time on the market.

Be wise and don’t engage in risky business – listing a property off the MLS or without a licensed agent. It is best to have the representation of a licensed agent for a variety of reasons. The main reasons are: the seller will have expert advice, will most likely sell the property sooner and the property will command a fair market price. Say no to FSBO. Instead, seek out a capable real estate professional in your region for piece of mind.     

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Single Female Homebuyers Numbers Increase in Today's Real Estate Market

Recent statistics show single women homebuyers outpace male homebuyers. They are currently capturing nearly 20% of the home buying market compared to approximately 10% for single men (National Association of Realtors). Single women make up 20% of this real estate market- a remarkable increase compared to the mid 1980s, when they were only 10% of the buying market.

Why have so many women decided to enter the home market? There has always been a home market for widowed and divorced women. This type of female homeowner has increased by the numbers of professional women who are making strides in careers and are perfectly capable of purchasing a home. Some may want to make an investment that eventually pays off as a resale or rental unit, while others want a comfortable, secure place to live that suits their lifestyle choice.

Yet when women purchase homes, the process they go through is much different from men. Many men are focused on the amount of space a home has, or the extra features. Men are inclined to want something immediately, and begin the process of paying for it. Women tend to conduct more research and deliberate on different choices. For women, making an emotional connection to the real estate agent and the home are important considerations in the whole process. Women and men definitely have differing approaches to home purchases.

Who is the Female Homebuyer?

What are the characteristics of a female homebuyer shopping for a home? There are actually many different groups of female homebuyers. These include: divorced, widowed, single mother, never married and more. For many professional women, an investment in a home purchase is simply a matter of getting tired of renting and wanting to modify their own space and/or to make a solid investment for the future.

There are also more female real estate investors in the current market then in the mid 1980s. They want to purchase homes that need renovations because the investment will pay off after the rehab is complete in a resale (also known as flipping). Or, the property will be renovated, then placed on the open rental market to produce a monthly income.

Single mothers are looking for properties with enough indoor/outdoor space so their children can play - as well as safe playgrounds nearby. Single mothers want secure neighborhoods with other families as neighbors, so their children can socialize and play with their age groups.

Divorced and widowed women and women who have never married without children may be searching for the complete opposite in a home and a neighborhood. Their ideal dwelling may be a quiet, secure place in a neighborhood without many children.

There are, of course, other types of women homebuyers - some who defy categories. All have the same interests at heart: owning a sanctuary for themselves and their loved ones and having a piece of the American dream.

What Do Women Want in a Home?

When it comes to being very specific about a property, the desires of the women homebuyer are paramount. Often women will not settle for anything less than what they want. Some of these particular aspects of homes include: large closet spaces, jetted bathtubs, a secure neighborhood, a separate laundry room, a spacious kitchen and more. Homes that are move in ready, requiring very little renovation, are often preferable to women homebuyers.

What Types of Properties Do Women Tend to Purchase?

Female homebuyers with careers often purchase townhouses and condominiums, because they have limited time outside of work and these types of property investments require low maintenance. Some women will opt for a single-family home in a secure place with a manageable amount of space.

Many single females on the market today are first time homebuyers. So, real estate agents will need to step them through the initial process of home financing and home purchase.

One thing is for certain. As women continue to make achievements in the professional world, the number of homebuyers will increase in numbers, too. And, women's preferences in housing will begin to shape the features of the actual properties that are sold. For now, one in five purchases are made by single women. This should be plenty of impetus for builders and renovation specialists to cater to women's taste.

Renovation loans: FHA 203(k), Fannie's Homestyle Renovation Mortgage & Conventional Rehab Loans

By Elaine VonCannon, ABR, SRES, Associate Broker, Notary, Team Leader, Property Manager, Award Winning Agent

With a plethora of homes still sold as short sales and foreclosures, renovation loans are increasingly popular with homebuyers. Many family dwellings are being redesigned for additional family members these days. As rental housing costs rise, families decide to live together and save money. There are multiple situations that could apply: boomerang children, aging parents, or divorced with grandchildren - the family home is in need of expansion or renovation to ensure everyone fits comfortably.

Rehab loans such as the FHA 203(k) program or the Fannie Mae HomeStyle Renovation Mortgage are the perfect answer for some first time homebuyers, too. If the borrower qualifies for the 203(k) program, the buyer can borrow based on what the house is expected to be worth after the home rehab is completed.

I will summarize some common home renovation loans available to consumers and some of the requirements for each. Interest rates are subject to vary for each loan detailed, so be sure to check with a qualified loan officer first, before embarking on a home purchase or refinance.

Renovation loans are effective for consumers and banks and mortgage companies because they offer the necessary resources to remove foreclosures from the market and redo them. Plus, these loans provide first time homebuyers, (who have historically been 30-40% of a healthy real estate market), the opportunity to renovate before moving in.

FHA 203(k) Rehab Loan

FHA insured home renovation loans are more popular now then ever before, because resources for renovations are greatly needed. A streamline 203(k) loan includes less than $35,000 in renovations. For homebuyers needing over $35,000 in rehab work, a full 203(k) is necessary.

To qualify for the FHA 203(k) loan, the borrower must agree to hire a real estate consultant to assess the construction plan and sign off on each phase. The project must be completed in six months, with five draws (or payments to contractors) allowed. A list of approved property renovations is included with the loan. Many borrowers feel this loan is too complicated – or the list of renovations too restricted for their projects. But the interest rate on FHA loans is low enough to make it worthwhile.

If interested in a FHA 203 (k) loan, find a mortgage broker with experience in this type of rehab loan to complete the transaction. "FHA loans are typically available for owner occupied residences. These loans are government insured and have a more expensive mortgage insurance rate (PMI), with a 1.75% up front payment and a monthly payment of 1.35%, compared to other loan products," says Jeff Hurd, Mortgage Banker with Fidelity Bank Mortgage in Newport News, Virginia. "With conventional rehab loans, the consumer has the option to pay all of the PMI up front, monthly or have the lender pay it (LPMI)," added Hurd.

Fannie Mae's HomeStyle Renovation Mortgage

When comparing the Fannie Mae HomeStyle loan to the 203 (k), Hurd says the HomeStyle loan product offers more flexibility with repairs and renovations and in the types of homes purchased. "The Fannie Mae HomeStyle Loan offers a wider scope of renovation projects, and can be utilized on a second home and an investment property as well as a primary residence," noted Hurd.

Other advantages of the Fannie Mae HomeStyle Renovation Mortgage include less money down then conventional rehab loans (a minimum of 5%) and less cost for the mortgage insurance. "Monthly mortgage insurance payments are reduced with higher down payments and/or a good credit score above 680. The conventional Homestyle will typically present a PMI pricing advantage over FHA," says Jeff Hurd. With Fannie Mae's HomeStyle Renovation Mortgage, home purchases and improvements can be combined into one loan for virtually any property - and it doesn't have to be Fannie Mae owned. The repairs or renovations must be permanently affixed to the structure and add value to the property. Lenders have to be pre-approved to sell this product, so make certain to ask the loan officer if he or she is participating in this home finance program.

Rehab Loans – the Time is Now

Hurd says now is a great time to purchase a home with a rehab loan. "There are so many houses that may be in distress. Whether the house is bank owned, or it's a foreclosure or short sale, or a homeowner is upside down and doesn't want to put the money into a property to fix it up - there are homes to choose from. Right now homebuyers have a good opportunity to buy a house for a great price and renovate it with the financing. These rehab loan products make it easier to buy a house and complete home rehab projects at the same time, before the move in date." Chances are excellent that a consumer can purchase a property, make the necessary renovations and walk out of the transaction with equity in the home. Hurd says, "There is a market of savvy consumers ready to acquire these houses now."

The housing market has changed tremendously over the last five to seven years. Because there are still vacant properties available in this real estate market, rehab loans are a means of obtaining these properties in need of repair. Homebuyers now can expand their choices of homes to live in because they can remodel to suit their needs. Real estate investors can purchase, rehab and rent or resell the property.

Rehab loans are an excellent stimulus for the real estate market and a great way for homebuyers to purchase what they want without having to worry about liquidating cash investments or having tens of thousands of dollars in addition to a mortgage to fund home renovations.