Discover North Seattle: June 2008

If you wanted to sell your home and trade up to a more expensive one, but wanted to wait for a "better market" you might want to take a look at this PDF to see what you might be missing out on...

Opportunity in Todays Market

- Jay Silver

Real Estate Dictionary

Acceptance:  the date when both parties, seller and buyer, have agreed to and completed signing and/or initialing the contract.

Adjustable Rate Mortgage:  a mortgage that permits the lender to adjust the mortgage's interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change.

Amortized Loan:  a loan that is paid in equal installments during its term.

Appraisal:  an estimate of real estate value, usually issued to standards of FHA, VA and FHMA.  Recent comparable sales in the neighborhood is the most important factor in determining value

Appreciation:  an increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

Assumable Mortgage:  purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage.

Bill of Sale:  document used to transfer title (ownership) of PERSONAL property.

Cloud on Title:  any condition that affects the clear title to real property.

Consideration:  anything of value to induce another to enter into a contract, i.e., money, services, a promise.

Deed:  a written instrument, which when properly executed and delivered, conveys title to real property.

Discount Points:  a loan fee charged by a lender of FHA, VA or conventional loans to increase the yield on the investment.  One point = 1% of the loan amount.

Easement:  the right to use the land of another.

Encumbrance:  anything that burdens (limits) the title to property, such as a lien, easement, or restriction of any kind.

Equity:  the value of real estate over and above the liens against it.  It is obtained by subtracting the total liens from the value.

Escrow Payment:  that portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, hazard insurance and other items as they become due.

Fannie Mae:  nickname for Federal National Mortgage Corporation (FNMA), a tax-paying corporation created by congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional loans.

Federal Housing Administration (FHA):  an agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

FHA Insured Mortgage:  a mortgage under which the Federal Housing Administration insures loans made, according to its regulations.

Fixed Rate Mortgage:  a loan that fixes the interest rate at a prescribed rate for the duration of the loan.

Foreclosure:  procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.

Freddie Mac:  nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market.  It purchases and sells residential conventional home mortgages.

Graduated Payment Mortgage:  any loan where the borrower pays a portion of the interest due each month during the first few years of the loan.  The payment increases gradually during the first few years to the amount necessary to fully amortize the loan during its life.

Lease Purchase Agreement:  buyer makes a deposit for future purchases of a property with the right to lease property in the interim.

Lease with Option:  a contract, which gives one the right to lease property at a certain sum with the option to purchase at a future date.

Loan to Value Ratio (LTV):  the ratio of the mortgage loan principal (amount borrowed) to the property's appraised value (selling price).  Example - on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.

Mortgage:  a legal document that pledges a property to the lender as security for payment of a debt.

Mortgage Insurance Premium (MIP):  the amount paid by a mortgagor for mortgage insurance.  This insurance protects the investor from possible loss in the event of a borrower's default on a loan.

Note:  a written promise to pay a certain amount of money.

Origination Fee:  a fee paid to a lender for services provided when granting a loan, usually a percentage of the face amount of the loan.

Private Mortgage Insurance (PMI):  see Mortgage Insurance Premium.

Second Mortgage / Second Deed of Trust / Junior Mortgage / Junior Lien:  an additional loan imposed on a property with a first mortgage.  Generally, a higher interest rate and shorter term than a "first" mortgage.

Settlement Statement (HUD-1):  a financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.

Severalty Ownership:  ownership by one person only.  Sole ownership.

Tenancy In Common:  ownership by two or more persons who hold an undivided interest without right of survivorship.  (In event of the death of one owner, his/her share will pass to his/her heirs.

Title Insurance:  an insurance policy that protects the insured (buyer or lender) against loss arising from defects in the title.

- Jay Silver

1.      The kids have all graduated from college.  You and your husband finally have time to yourselves...then they move back home!

2.      You have three spare rooms in a four bedroom house.

3.      You have to shuffle your cars each morning to leave for work.

4.      You spend more time driving to work than you do with your family.

5.      You spend more money each month for storage than you do for your mortgage.

6.      Your neighbor found a loophole in the homeowner's association rules and is raising donkeys.

7.      You keep hearing faint voices telling you to "get out" and they're getting louder.

8.      Grandpa Jed just struck oil while hunting in your back yard.

9.      The dog's house doubles as a guest room.

10.     You have to take a number to use the bathroom.

- Jay Silver

Myth #1:  You should always price your home high and negotiate down.

Truth:  Pricing too high can be as bad as pricing too low.   If you list too high, you'll miss out on buyers looking in the price range where your home should be.  Offers may not even come in, because buyers who are interested in your home are scared off by the price and won't even take the time to look at it.  By the time you correct the price and list your home at its fair market value, you will have lost that window of opportunity when your home draws the most attention from the public and real estate agents; i.e. the first 30 days that it is on the market.  A well-trained real estate agent who looks out for your best interests will consult with you on your home's fair market value and different pricing strategies for the current market.

Myth #2:  Minor repairs can wait until later. There are more important things to be done.

Truth:  Minor repairs make your house more marketable, allowing you to maximize your return (or minimize loss) on the sale.   Most buyers are looking for homes that are ready for them to move into.  If your home happens to attract a buyer who is willing to make repairs, he/she will begin asking for repair allowances that come out of your asking price.  The amount of an allowance that you have to offer a buyer is usually more than what it would cost for you to make the repair (or hire someone to make the repair).  Remember, buyers are comparing your home to other homes that are currently on the market.  Your home should be inviting so that everyone who looks at it can see themselves living there. 

Myth #3:  Once a potential buyer sees the inside of your home, curb appeal won't matter.

Truth:  Buyers probably won't make it to the inside of the home if the outside of your home does not appeal to them.   Buyers and their agents often do drive-bys before deciding whether a home is worth their time to look inside.  Your home's exterior must make a good first impression so that buyers are compelled to stop and come inside.  All it takes is keeping the lawn mowed, shrubs and trees trimmed, gardens weeded and edged, and clutter put away.

Myth #4:  Your home must be every home buyer's dream home.

Truth:  If you get carried away with repairs and replacements to your home, you may end up over-improving the house.   There is a point where improving your home doesn't pay off.  The key is to consider what competing properties feature and look like.  A highly-motivated real estate agent will consult with you on what competing properties have to offer - he/she can even show you competing properties so that you can make sound home improvement decisions.

Myth #5:  You are better off selling your home on your own and saving money on the commission you would have paid to a real estate agent.

Truth:  Statistically, many sellers who attempt to sell their homes on their own cannot consummate the sale without the service of a real estate agent.   Homeowners who succeed in selling their home by themselves usually net less than if they had a real estate agent working for them.  The National Association of REALTORS_â surveys consumers every year, including homeowners who succeeded in selling their home without a real estate agent.  Over 70% of these homeowners say that they would never do it again.

Myth #6:  When you receive an offer, you should make the buyer wait. This gives you a better negotiating position.

Truth:  You should reply immediately to an offer!  When a buyer makes an offer, that buyer is, at that moment in time, ready to buy your home.  Moods can change, and you don't want to lose the sale because you have stalled in replying.

- Jay Silver