Second Mortgage

This week we answer a listener email.

Q: I received a decent offer on my property but the buyer asked me to hold a second mortgage. What should I do?"

A: Seller Financing is becoming more common in today’s market. Traditional qualifying criteria for mortgages have tightened significantly and in general, our ailing economy has made it more difficult for potential buyers to save money.

You may stand to benefit from ‘holding paper’ on the sale of your property. Firstly, you may negotiate the interest rate and terms, and in most cases the rate is higher than traditional financing. You will be earning interest on your equity in the property, and in the end, you will make more money in the transaction. Also, you may qualify for the tax benefits of an installment sale where you can defer a portion of your gain until the loan is satisfied. But of course, check with your accountant.

There are risks to providing seller financing. Most often, your loan is subordinate to the primary financing, and in the case of default or foreclosure, your equity may be surrendered.

There are steps you can take to protect yourself, however, and you should seek the assistance of your attorney and/or accountant. Make sure you verify the credit worthiness of the buyer. Require the buyer to carry hazard insurance on the property and include a due-on-sale clause. Also, in some instances, you can require the buyer to carry PMI to insure your loan against default.

In summary, you should not be scared off by an offer that asks you to hold financing. With professional advice and the proper protections in place, agreeing to participate in the financing can result in a win-win situation.

Online Accuracy: Property Values

This week we answer a listener question.

Q: "I am addicted to looking at property values on Zillow.com. I watch my home’s value fluctuate. Exactly, how accurate are the estimates from these sites?"

A: There are many websites that estimate property value and each one needs to be taken with a grain of salt. Zestimates from Zillow.com appear to be random and are not consistent. These online estimates range from 5% of the sales price to over 20%. 

Websites that assess the value of your home, rely upon data from your town’s tax assessor’s database and also upon recent sales data. There are a few problems with this means of evaluating a property’s worth. 

First, it is not possible for an entity located off the Cape to accurately assess the condition of a property. A physical inspection is valuable.

Second, location attributes are crucial line items in any physical appraisal. An external obsolescence may not be noted that can significantly impact value. 
Third, when you look up a property, the list of comparable recent sales that are used to determine value, almost always includes homes or condominiums that have nothing in common with the subject. 

A perfect example of this flaw is when you research a waterfront property in Provincetown, Truro, Wellfleet or Eastham. You will see comparable sales listed that may only be a half mile from the subject but are not on the water. The value is tremendously different, however, this is not figured into the equation.
The best way to determine the value of your property is to hire a Certified Appraiser. An appraisal will provide the definitive value of your home. Or, ask your Real Estate Broker to prepare an opinion of value backed up by a Comparative Market Analysis. 

Take those online websites and do yourself a favor…hit escape.

Happy Birthday!

This week The Closing Table turns 2 years old. In those two years, we covered topics that addressed the real estate market on the outer cape and answered questions from you.

You’ve emailed, stopped me on the street and approached me at social functions in order to ask about your home, condominium and market conditions. Most importantly, you provided feedback regarding this program. Weekly shows have moved many of you to send in a response. I strongly encourage you to do this. No question is silly, no concern unwarranted.

It seems that The Closing Table has established a solid listener base, who tunes in to pick up a tip and check out the real estate activity in Provincetown, Truro, Wellfleet and Eastham. At the end of each calendar quarter, I recap the activity in these four towns, a particular listener favorite. 

Every weekday at 1PM, whether at work, in a car or at home you listen. It is to you that I extend a grateful thanks. It makes this seem worth while, knowing that the information broadcast, helps you, whether a homeowner, renter, buyer or seller with your real estate needs in some way.

I ask that you keep listening, keep emailing and feel free to stop me wherever you see me to ask a question or provide feedback. Thanks. 

A special thank you is extended to the underwriters who have continued supporting The Closing Table on WOMR for two years. The law office of David Hallet, Pride Mortgage and The Home Inspector. 

So in closing, Happy Birthday to The Closing Table… I’ll be back next week.

A Rise in the Cost of Living ... Home

The cost of home insurance has been on the rise. In some cases premiums increased close to 10% in 2007.

Looking at ways to save money on home insurance can be tricky, especially when your property is on Cape Cod.

One way to save is by combining your home and auto insurance policies together. Using the same company for both may save you up to 20% on the home insurance policy. Be a diligent consumer and as with any other service, get three estimates from three different companies. Use a different agency to get the quotes. 

Also, Home insurance policies are tiered as needed. There are minimal coverage policies that only cover certain items if damaged, mid level packages that most homeowners have and extensive packages to include possessions, finishes and replacement. Living in a coastal area, you may want to have a policy that sits between the mid level and extensive.

Check with your insurance agent in regards to what is actually covered. In some policies, high end finishes are not covered and if a home needs rebuilding, the insurance company will pay for basic finishes only.

Review your deductible as well. In most case there is no need for a low deductible and most of us are paying for one. Paying a higher deductible can save you hundreds per year.

These are some basic measures to take when looking to save money on your homeowners insurance. There could be more. Call your insurance agent and you may be surprised at where you are overpaying and could save money.

A Reliable Realtor

When choosing a realtor in this market to list your home for sale, you may want to be careful with whom you sign.

The Boston Globe reported the following interesting account of a buyer’s agent recent woes. The agent was hired to help an aging couple downsize to condo living.

The couple had identified a particular large association that housed multiple units for sale. They decided to look at three. The properties were listed with different agencies and the buyer agent called each and left messages to set up showings. Only one called back the same day to confirm an appointment and added that there has been a lot of activity in the 26 days the condo has been for sale.

The two other agents never called back. The buyer agent called both again. One of the listing agents, in an irate tone, yelled at the buyer agent an accused the agent of not being an MLS registered realtor. The listing agent then said the property was dark and needed work. The condo has been for sale for over one year. 

The other listing agent, who called back a few days later, told the buyer agent that he worked a half hour from the listing and showing it is difficult. There is no lockbox, so any appointment will have to meet his schedule requirements, not the buyers’. This condo has been for sale for almost 2 years.

Needless to say, the couple moved forward with the one they could see.

Seller beware, do your homework before listing your home. In this market the last thing you want to do is hire a listing agent who alienates the buyer agent and makes it a challenge to show your property.

Unless you want to own that listing that never sells, seek out an agent that is creative, aggressive and does not have attitude. The buyer agent is an important piece of the equation in today’s delicate market and scaring them away is not a wise strategy for selling your home.