Check your emotions

A purchase offer, even a very low one, means someone wants to purchase your home. Unless the offer is laughably low, it deserves a cordial response, whether that’s a counteroffer or an outright rejection. Remain calm and discuss with your real estate agent the many ways you can respond to a lowball purchase offer.

Counter the purchase offer

Unless you’ve received multiple purchase offers, the best response is to counter the low offer with a price and terms you’re willing to accept. Some buyers make a low offer because they think that’s customary, they’re afraid they’ll overpay, or they want to test your limits.

A counteroffer signals that you’re willing to negotiate. One strategy for your counteroffer is to lower your price, but remove any concessions such as seller assistance with closing costs, or features such as kitchen appliances that you’d like to take with you.

Consider the terms

Price is paramount for most buyers and sellers, but it’s not the only deal point. A low purchase offer might make sense if the contingencies are reasonable, the closing date meets your needs, and the buyer is preapproved for a mortgage. Consider what terms you might change in a counteroffer to make the deal work.

Review your comps

Ask your REALTOR® whether any homes that are comparable to yours (known as “comps”) have been sold or put on the market since your home was listed for sale. If those new comps are at lower prices, you might have to lower your price to match them if you want to sell.

Consider the buyer’s comps

Buyers sometimes attach comps to a low offer to try to convince the seller to accept a lower purchase offer. Take a look at those comps. Are the homes similar to yours? If so, your asking price might be unrealistic. If not, you might want to include in your counteroffer information about those homes and your own comps that justify your asking price.

If the buyers don’t include comps to justify their low purchase offer, have your real estate agent ask the buyers’ agent for those comps.

Get the agents together

If the purchase offer is too low to counter, but you don’t have a better option, ask your real estate agent to call the buyer’s agent and try to narrow the price gap so that a counteroffer would make sense. Also, ask your real estate agent whether the buyer (or buyer’s agent) has a reputation for lowball purchase offers. If that’s the case, you might feel freer to reject the offer.

Don’t signal desperation

Buyers are sensitive to signs that a seller may be receptive to a low purchase offer. If your home is vacant or your home’s listing describes you as a “motivated” seller, you’re signaling you’re open to a low offer.

If you can remedy the situation, maybe by renting furniture or asking your agent not to mention in your home listing that you’re motivated, the next purchase offer you get might be more to your liking.

By: Marcie Geffner. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2010. All rights reserved.

Owning your home not only allows you to build wealth through appreciation, but it can also reduce the amount of income tax you pay every year.

Here are seven tax benefits for homeowners.

1. Homebuyer tax credits

If you purchase your first home before April 30, 2010, you’re entitled to a tax credit of up to $8,000. If you currently own a home, but sell it to purchase another home before April 30, 2010, you’re eligible for a federal tax credit of up to $6,500.

2. Deductions for loan fees

Typically, you can deduct the “prepaid interest” you paid when you got your mortgage loan. That includes points, loan origination fees, and loan discount fees listed on your settlement statement, even if the seller paid those fees for you. Each time you refinance your home, you can deduct prepaid interest fees.

However, you must meet certain requirements to take the prepaid interest deductions when you purchase or refinance your home. Check with your accountant to be sure you’re following the rules.

3. Property tax deductions

In the year you purchase your home, you’re entitled to deduct the real estate taxes you paid at the closing table. You can continue to deduct the property taxes you pay each year.

4. The mortgage interest deduction

Every year, you can deduct the amount of interest and late charges you pay on your mortgage and home equity loans, though there are limitations. If you’re required to purchase private mortgage insurance (PMI) because you made a downpayment of less than 20% on your home, you can also deduct those premiums as mortgage interest expenses.

5. Home office expenses

If you have a home office you use only for business, you may be eligible to deduct the prorated costs of your mortgage, insurance, and other expenses related to that space. The government scrutinizes home-office deductions closely. Be sure you’re entitled to the deductions before claiming them.

6. The costs of selling your home

In the year you sell your home, you can deduct the costs of selling it, including real estate commissions, title insurance, legal fees, advertising, administrative costs, and inspection fees. You can also deduct decorating or repair costs you incur in the 90 days before you sell your home.

7. The gain on your home

If you lived in your home for at least two of the previous five years before you sell it, the government lets you to take up to $250,000 of profit on the sale of your home tax free. That amount is doubled for married couples. This deduction isn’t available on rental or second homes.

The government also allows you to subtract from your home sale profit any amounts you spend on improvements, such as window replacement, siding, or a kitchen remodel. Those deductions are in addition to the tax credits you can receive in 2010 for making energy-saving upgrades. Money invested for routine maintenance and repairs doesn’t count.

This article includes general information about tax laws and consequences, but is not intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws vary by jurisdiction.

 More from HouseLogic

More on the mortgage interest deduction
 (http://www.houselogic.com/articles/mortgage-interest-deduction-vital-housing-market/)
Claiming your homebuyer tax credit (http://www.houselogic.com/articles/claim-your-homebuyer-tax-credits/)

Tips to use when preparing your return (http://www.houselogic.com/articles/tax-tips-homeowners-preparing-2009-returns/)

 Other web resources

More information on homeownership deductions (http://www.nolo.com/legal-encyclopedia/article-29693.html)

IRS information on the mortgage interest deduction (http://www.irs.gov/pub/irs-pdf/p936.pdf)

G.M. Filisko. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2010. All rights reserved.

1. Low Interest Rates. It’s true! Interest rates are currently at historical lows.  This means over th ecourse of your loan, you’ll pay less interest.  And it also means monthly payments will be a smaller, more manageable amount.

2.  Mortgage Interest Deduction: Allows taxpayers who own a home to reduce their taxable income by the amount of interest paid on the loan each year.

3. Stability: Studies have shown that homeownership not only increases community involvement, it also leads to safer neighborhoods and higher graduation rates.

4. Affordability: Coupled with low interest rates, affordability is the highest it’s been in years.  Prices fell in many areass and median incomes rose, meaning you can get more bang for your buck.

5. Paying Towards Ownership.  Instead of paying a landlord, you are making an investment in your future.  Every month your payment goes towards something you’ll eventually own and that will have worth and value.  Renting only makes the landlord richer!

6. Appreciation. Average appreciation rates vary widely depending on the condition of the local market and demand, but anywhere from 4 to 6 percent annually is considered average.  This means the longer you stay in your home, the more your home will be worth.

7. Home Equity. This building of worth over time (see number 6) means that if you need to make improvements to your home, you will be able to tap into its equity to finance repairs and additions.

8. Gardening. Many households are embracing the organic movement and families have begun again to raise their own food.  Even the White House has its own victory garden. Owning your own home (in most cases) means you will have your own land to cultivate. 

9. Roots. Young and old alike seek out places where they belong.  Owning a property and taking your first steps towards putting down roots, can mean the difference between a house and a home.

10. Monthly Payments. Once your home is paid off, you won’t have monthly payments anymore.  Apart from insurance, property taxes and repairs, monthly expenses are minimal.  In today’s market, may buyers are finding, as well, that their monthly house payments are less than what they’d pay in rent! 

Carla Hill. Reprinted from Realty Times Copyright 2010. All rights reserved.

Rates at Historic Lows

Interest rates have been dancing around the all-time-low mark for some time. But did you know that the rates hit the lowest ever in October? This season, rates are about 0.5 percent lower than this time last year- which translates to a payment savings of approximately $60 per month on a $200,000 mortgage. Today’s lower rates give you an increase in buying power.

Home Prices at All-Time-Lows

Once school begins, the real estate market tends to slow down and gets slower by the holidays. The lack of buyer demand ios reflected in home prices as sellers become anxious. Homes are more affordable now than at any other point in time since 1970 according to the National Association of Realtors’ housing affordability index.

Sellers Are Motivated

With the current economic slowdown many sellers are willing to negotiate- not just on price, but also may be more open to entertain requests for other concessions such as appliances, or paying closing costs.

Plenty to Choose From

While real estate is local, most markets remain saturated with inventory. Being in the buyers’ shoes right now is like being a kid at Christmas. If you are serious about buying a home, the first step is to define what you are looking for in a home and at what price… and then get qualified! Once you find a house you love, be willing to negotiate a fair deal and grab it. Waiting around for things to improve from here could cause you to lose the opportunity on that “perfect home.” It’s important to remember you are not looking soley for the best deal… but for the best home.

Tax Advantages

Buying a home can give you a tax break. Here’s how: Mortgage interest (including points) and real estate taxes are deductible and it adds up. Since most of what you pay for your mortgage in the first year is interest, on a $200,000 mortgage at 4,25%, you get to deduct about $700 a month in interest. That reduces your taxable income about $8,400 a year.

There may not ever be a better time than now to buy a home. If you are thinking of purchasing a home this holiday season, get started now and discuss your options with your Realtor and loan professional. While interest rates, home prices and inventory remain at historic levels, keep in mind: They won’t stay this way forever!

It’s easier to settle happily into your new home if you’re confident you can afford it. That requires that you understand your mortgage financing options and choose the loan that best suits your income and ability to tolerate risk.

<strong>The basics of mortgage financing</strong>

The most important features of your mortgage loan are its term and interest rate. Mortgages typically come in 15-, 20-, 30- or 40-year lengths. The longer the term, the lower your monthly payment. However, the tradeoff for a lower payment is that the longer the life of your loan, the more interest you’ll pay.

Mortgage interest rates generally come in two flavors: fixed and adjustable. A fixed rate allows you to lock in your interest rate for the entire mortgage term. That’s attractive if you’re risk-averse, on a fixed income, or when interest rates are low.

The risks and rewards of ARMs

An adjustable-rate mortgage does just what its name implies: Its interest rate adjusts at a future date listed in the loan documents. It moves up and down according to a particular financial market index, such as Treasury bills. A 3/1 ARM will have the same interest rate for three years and then adjust every year after that; likewise a 5/1 ARM remains unchanged until the five-year mark. Typically, ARMs include a cap on how much the interest rate can increase, such as 3% at each adjustment, or 5% over the life of the loan.

Why agree to such uncertainty? ARMs can be a good choice if you expect your income to grow significantly in the coming years. The interest rate on some-but not all-ARMs can even drop if the benchmark to which they’re tied also dips. ARMs also often offer a lower interest rate than fixed-rate mortgages during the first few years of the mortgage, which means big savings for you-even if there’s only a half-point difference.

But if rates go up, your ARM payment will jump dramatically, so before you choose an ARM, answer these questions:

•How much can my monthly payments increase at each adjustment?

•How soon and how often can increases occur?

•Can I afford the maximum increase permitted?

•Do I expect my income to increase or decrease?

•Am I paying down my loan balance each month, or is it staying the same or even increasing?

•Do I plan to own the home for longer than the initial low-interest-rate period, or do I plan to sell before the rate adjusts?

•Will I have to pay a penalty if I refinance into a lower-rate mortgage or sell my house?

•What’s my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?

Consider a government-backed mortgage loan

If you’ve saved less than the ideal downpayment of 20%, or your credit score isn’t high enough for you to qualify for a fixed-rate or ARM with a conventional lender, consider a government-backed loan from the Federal Housing Administration (http://www.hud.gov/fha/choosefha.cfm) or Department of Veterans Affairs (http://www.homeloans.va.gov/vap26-91-1.htm/).

FHA offers adjustable and fixed-rate loans at reduced interest rates and with as little as 3.5% down and VA offers no-money-down loans. FHA and VA also let you use cash gifts from family members.

Before you decide on any mortgage, remember that slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. To determine how much your monthly payment will be with various terms and loan amounts, try REALTOR.com’s online mortgage calculators (http://www.realtor.com/home-finance/financial-calculators/mortgage-payment-calculator.aspx).

GM Filisko. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2010.  All rights reserved.

Mistake #1: Ignore contingencies

If your contract requires you to do something before the sale, do it. If the buyers make the sale contingent on certain repairs, don’t do cheap patch-jobs and expect the buyers not to notice the fixes weren’t done properly.

Mistake #2: Don’t bother to fix things that break

The last thing any seller needs is for the buyers to notice on the pre-closing walk-through that the home isn’t in the same condition as when they made their offer. When things fall apart in a home about to be purchased, sellers must make the repairs. If the furnace fails, get a professional to fix it, and inform the buyers that the work was done. When you fail to maintain the home, the buyers may lose confidence in your integrity and the condition of the home and back out of the sale.

Mistake #3: Get lax about deadlines

Treat deadlines as sacrosanct. If you have three days to accept or reject the home inspection, make your decision within three days. If you’re selling, move out a few days early, so you can turn over the keys at closing.

Mistake #4: Refuse to negotiate any further

Once you’ve negotiated a price, it’s natural to calculate how much you’ll walk away with from the closing table. However, problems uncovered during inspections will have to be fixed. The appraisal may come in at a price below what the buyers offered to pay. Be prepared to negotiate with the buyers over these bottom-line-influencing issues.

Mistake #5: Hide liens from buyers

Did you neglect to mention that Uncle Sam has placed a tax lien on your home or you owe six months of homeowners association fees? The title search is going to turn up any liens filed on your house. To sell your house, you have to pay off the lien (or get the borrower to agree to pay it off). If you can do that with the sales proceeds, great. If not, the sale isn’t going to close.

G.M. Filisko. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2010. All rights reserved.

What makes a good comparable sale?

Your best comparable sale is the same model as your house in the same subdivision-and it closed escrow last week. If you can’t find that, here are other factors that count:

Location: The closer to your house the better, but don’t just use any comparable sale within a mile radius. A good comparable sale is a house in your neighborhood, your subdivision, on the same type of street as your house, and in your school district.

Home type: Try to find comparable sales that are like your home in style, construction material, square footage, number of bedrooms and baths, basement (having one and whether it’s finished), finishes, and yard size.

Amenities and upgrades: Is the kitchen new? Does the comparable sale house have full A/C? Is there crown molding, a deck, or a pool? Does your community have the same amenities (pool, workout room, walking trails, etc.) and homeowners association fees?

Date of sale: You may want to use a comparable sale from two years ago when the market was high, but that won’t fly. Most buyers use government-guaranteed mortgages, and those lending programs say comparable sales can be no older than 90 days.

Sales sweeteners: Did the comparable-sale sellers give the buyers downpayment assistance, closing costs, or a free television? You have to reduce the value of any comparable sale to account for any deal sweeteners.

Agents can help adjust price based on insider insights

Even if you live in a subdivision, your home will always be different from your neighbors’. Evaluating those differences-like the fact that your home has one more bedroom than the comparables or a basement office-is one of the ways real estate agents add value.

An active agent has been inside a lot of homes in your neighborhood and knows all sorts of details about comparable sales. She has read the comments the selling agent put into the MLS, seen the ugly wallpaper, and heard what other REALTORS&reg;, lenders, closing agents, and appraisers said about the comparable sale.

More ways to pick a home listing price

If you’re still having trouble picking out a listing price for your home, look at the current competition. Ask your real estate agent to be honest about your home and the other homes on the market (and then listen to her without taking the criticism personally).

Next, put your comparable sales into two piles: more expensive and less expensive. What makes your home more valuable than the cheaper comparable sales and less valuable than the pricier comparable sales?

Are foreclosures and short sales comparables?

If one or more of your comparable sales was a foreclosed home or a short sale (a home that sold for less money than the owners owed on the mortgage), ask your real estate agent how to treat those comps.

A foreclosed home is usually in poor condition because owners who can’t pay their mortgage can’t afford to pay for upkeep. Your home is in great shape, so the foreclosure should be priced lower than your home.

Short sales are typically in good condition, although they are still distressed sales. The owners usually have to sell because they’re divorcing, or their employer is moving them to Kansas.

How much short sales are discounted from their market value varies among local markets. The average short-sale home in Omaha in recent years was discounted by 8.5%, according to a University of Nebraska at Omaha study. In suburban Washington, D.C., sellers typically discount short-sale homes by 3% to 5% to get them quickly sold, real estate agents report. In other markets, sellers price short sales the same as other homes in the neighborhood.

So you have to rely on your REALTOR’s knowledge of the local market to use a short sale as a comparable sale.

 August 5, 2010 By: Carl Vogel. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2010.  All rights reserved.

Some common myths associated with credit scores are that bouncing a check or checking your own credit will lower your score.  These typically do not have any impact on your score (unless bounced checks cause late payment or no payment).  In fact, it is important that you monitor your credit for fraud and check your score periodically.  AnnualCreditReport.com allows you to check your credit score for free once a year from each of the nationwide consumer reporting companies (Transunion, Experian and Equifax).  If you see fraudulent information, contact the organization providing the information as well as the credit bureau reporting it.

There are several things you can do to raise your credit score and build your credit.  For example:

1.  Pay Your Bills On Time- Even if you can only afford your minimum payment required, it is important that you ALWAYS pay your bill on time.  Making a late payment has a much bigger impact on higher credit scores.

2. Pay Down Credit Card Balances and Use Them Lightly- Having your balance close to your limit or maxed out negatively impacts your credit score.  Pay down the cards closest to their limit.  Your credit score will increase by limiting charges and balances to 30% or less of the cards limit.  Make sure to check your limits on your credit report to make sure they are accurate.  There are many instances where they are reported lower than they actually are.

3.  Don’t Let Items Go to Collections- Any negative reports by collections will stay on your credit report for 7 years.

4. Don’t Consolidate Your Debt- Applying for a new account can hurt your score and so can concentrating all your balances on one single card.  In general, it is better to have smaller balances on a few cards than a big balance on one card.

It is worth the effort to correct errors on your credit report if they are late payments, charge offs or collections that aren’t yours.  Please try to check your credit score at least once a year to make sure that everything appears correct.  If you would like more information about credit scores and pre-qualifying for a home loan, please contact me at 859-621-8517 and I will assist you in contacting a mortgage professional.

2. Wash your windows and screens. This will help get more light into the interior of the home.

3. Keep everything extra clean. A clean house will make a strong first impression and send a message to buyers that the home has been well-cared for. Wash fingerprints from light switch plates, mop and wax floors, and clean the stove and refrigerator. Polish your doorknobs and address numbers. It’s worth hiring a cleaning service if you can afford it.

4. Get rid of smells. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Open the windows to air out the house. Potpourri or scented candles will help.

5. Brighten your rooms. Put higher wattage bulbs in light fixtures to brighten up rooms and basements. Replace any burned-out bulbs in closets. Clean the walls, or better yet, brush on a fresh coat of neutral color paint.

6. Don’t disregard minor repairs. Small problems such as sticky doors, torn screens, cracked caulking, or a dripping faucet may seem trivial, but they’ll give buyers the impression that the house isn’t well-maintained.

7. Tidy your yard. Cut the grass, rake the leaves, add new mulch, trim the bushes, edge the walkways, and clean the gutters. For added curb appeal, place a pot of bright flowers near the entryway.

8. Patch holes. Repair any holes in your driveway and reapply sealant, if applicable.

9. Add a touch of color in the living room. A colored afghan or throw on the couch will jazz up a dull room. Buy new accent pillows for the sofa.

10. Buy a flowering plant and put it near a window you pass by frequently.

11. Make centerpieces for your tables. Use brightly colored fruit or flowers.

12. Set the scene. Set the table with fancy dishes and candles, and create other vignettes throughout the home to help buyers picture living there. For example, in the basement you might display a chess game in progress.

13. Replace heavy curtains with sheer ones that let in more light. Show off the view if you have one.

14. Accentuate the fireplace. Lay fresh logs in the fireplace or put a basket of flowers there if it’s not in use.

15. Make the bathrooms feel luxurious. Put away those old towels and toothbrushes. When buyers enter your bathroom, they should feel pampered. Add a new shower curtain, new towels, and fancy guest soaps. Make sure your personal toiletry items are out of sight.

16. Send your pets to a neighbor or take them outside. If that’s not possible, crate them or confine them to one room (ideally in the basement), and let the real estate practitioner know where they’ll be to eliminate surprises.

17. Lock up valuables, jewelry, and money. While a real estate salesperson will be on site during the showing or open house, it’s impossible to watch everyone all the time.

18. Leave the home. It’s usually best if the sellers are not at home. It’s awkward for prospective buyers to look in your closets and express their opinions of your home with you there.

To qualify for the New Home Tax Credit, the home must be a principal residence for a minimum of two years and a single family dwelling purchased after July 25, 2009 and before January 1, 2011.

Homebuyers can not claim the credit if their application is not received within seven days of the purchase date, the residence has been previously occupied, the application is received after the New Home Credit Cap ($15,000,000) has been reached, they are eligible for the Federal Tax Credits, they are building on their own land, and the home is still under construction or doesn’t close before January 1, 2011.

If you’ve ever wanted to build your dream home, now is the time to get started.  Interest rates are now at historic lows and a tax credit is still available.  Please contact me with any questions.