The federal government spent years designing a tool to help consumers shop intelligently for mortgages -- comparing lenders' rates, terms and total settlement costs -- but mostly consumers ignore it or don't use it.
A new survey of 1,000 American consumers suggests that the "Good-Faith Estimate" (GFE) disclosures that all homebuyers and refinancers receive at loan application to facilitate comparison are not getting the job done.
Federally mandated GFEs spell out the lender's charges, all anticipated fees for title insurance, escrow and settlement services, plus other key costs. The most recent version of the GFE, released at the beginning of last year, contains space for consumers to take one lender's estimates and get competing quotes from as many as three others. It also requires lenders to stand behind their estimates within a nominal tolerance.
But the survey found that the GFE may not be improving shopping as intended. After receiving the disclosure, 56 percent of buyers say they did no comparison shopping among other lenders. 12 percent used the form to contact just one additional lender, and 10 percent weren't sure whether they actually used the GFE at all.
Forty-nine percent of buyers said the GFE disclosure was too omplicated,
"a waste of time," or they weren't sure. Just 37 percent rated it "useful." The survey had a statistical margin of error of plus or minus 3.2 percent.
Between 2003 and 2008, the Department of Housing and Urban Development proposed modifications to the GFE, but critics said the revised disclosure was too lengthy -- three pages -- and predicted that it would become just another part of the paper blitz that cascades over buyers and mortgage applicants. As it turned out, not only has it failed to simplify consumer shopping, it's actually confusing shoppers.
Meanwhile, Congress has shifted responsibility for GFEs and other consumer mortgage disclosure issues to the new Consumer Financial Protection Bureau, which is scheduled to spring to life in July. The bureau has announced that streamlining the GFE and combining it with federal truth-in-lending disclosures will be one of its high-priority projects.
But given the glacial pace of federal rulemaking, the three-page GFE is likely to remain in use for many months -- maybe a year or more -- before any new streamlined version takes its place. So if you seriously want to shop intelligently for a home loan, read your GFE. And use it to compare costs -- line item by line item -- among multiple lenders.
Friday, May 6, 2011
How to Sell Your Home in Tough Times
If you're in the market to sell your home, you probably feel you can't catch a break. Nearly five years into the housing bust, when many experts thought the real estate market would at least have stabilized, sales and prices are still dropping in most of the country.
In February existing-home sales tumbled 9.6% from the previous month, and the median price of a single-family home dropped to $157,000 from $163,900 the previous year, according to the National Association of Realtors.
You can't count on things turning around soon, either. At the current sales pace, it would take 8.6 months to clear out the 3.5 million existing homes listed today.
With the boost from the recent homebuyer tax credit gone, anyone who decides or is forced to put a house up for sale enters a market where houses often linger a full six months -- even a year -- without any bites.
Put part of the blame on stiff competition: Foreclosures and Short Sales, which accounted for 39% of sales in February, sell for about 15% less than conventional homes.
Fortunately, there is one glimmer of good news. Bargain hunters, too, know that home prices are down some 32% from their peak. In a recent survey, three-quarters said that it was a good time to buy a home. But translating that interest into an actual sale can require some extreme measures.
It's not enough to show buyers your house is a deal: You have to convince them it's a total steal. That means slashing your price, bringing in a pro to pretty it up, and creating a killer website for your home. Here's how to do it right.
Slash Your Price -- Bigtime,
Sellers are still loath to accept the extent of the toll the bust took on their homes' value. Many also give in to the temptation to list the property above fair market value to see what happens. Big mistake. About a quarter of sellers in the past year initially listed too high and were forced to knock the price lower. Even in cities that have held up well, 25% of sellers resort to at least one price cut, and often two.
Think you can always drop the price if your home doesn't sell? Bigger mistake. The first 30 days on the market are the most important. That's when your place attracts the most attention and gets the most showings. So You often end up with less than you would have if you priced it right to begin with,. So get aggressive right out of the gate.
Undercut your competition. Today there's a big gap between what sellers want and what buyers are willing to pay. Ask your realtor to show you what houses similar to yours have sold for in the past three to six months. If more than a couple of the comparable properties were foreclosures or short sales, look closely at the photos and descriptions of those former listings. Distressed homes should be included in your comps if they are in move-in condition.
Once you have a handle on your likely sale price, list your home a bit beneath that. You don't have to undercut by much to attract attention, because that price will probably still be about 10% or 15% below what other homes are listed for. Even if you're competing with lots of foreclosures and short sales, your price should generate enough interest to attract more than one bidder, pushing up the final price to where it should be.
No bites within 30 days, take out the ax, and make a big move. Make a giant cut -- as much as 10% of the asking price, and even more in an area where prices are still falling. That should be enough to warrant a second look from buyers who passed the first time, and to bring in a new pool of potentials who are hunting in the lower price range.
Play hardball. It's okay to reject low-ball offers if a buyer won't budge. But if a buyer is willing to negotiate, stay cool and counter-offer.
Hire a Stager
Staging, increasingly popular with homeowners trying to sell mid-range houses, can extend from simply rearranging existing furniture to repainting, replacing fixtures, and bringing in new furnishings. The goal: to highlight the house's best features while making it as easy as possible for buyers to imagine themselves living there. Find the right stager. The ASP designation is a plus -- it indicates the stager has gone through some basic training -- but it isn't essential. Establish a budget and ask the stager to work within it. Stagers typically charge $150 to $400 to walk through your home and give recommendations for each room. You can then execute the plan yourself or hire the stager to do it for an hourly fee, usually $100 or so, plus the cost of any new paint or furnishings.
Find the Right Hook -
These days it's going to take far more than a FOR SALE sign in the front yard and a spot on the multiple-listing service to get potential buyers in the door. That means getting the word out in a creative fashion -- and finding a realtor who is willing to do the same.
Create a great website. You also want to get your listing on alternative sites like Craigslist or even Facebook. About 90% of buyers begin their search on the Internet, according to the National Association of Realtors. Make sure your home's online presence has a dozen or two photos.
Throw money at buyers. Incentives can perk buyers' interest just as much as price cuts. Many buyers will agree to a higher price if their upfront costs are lowered, since they often run short on cash. If you can afford it, offer to cover the buyer's closing costs or pay the first year's property taxes or condo or homeowner association dues. Or, you might be able to bring buyers to the door by tossing in an unusual bonus, such as a $1,000 gift card (throw in one for the buyer's agent as well); a belonging they mentioned loving, such as the pool table or plasma TV; or a $5,000 credit to use in the home as they wish. (You can even pay upfront points so that they can get a lower mortgage rate, if you can swing it.)
In 2009, when Karen Mauro put her small, historic two-bedroom Orange County, Calif., home on the market she thought it would be a tough sale. Realtor Lisa Blanc listed the property at $467,500 and spread the word not only through the MLS listing but also with an update on her Facebook page. A Facebook friend of Blanc's passed the info to someone she knew was looking for that kind of house. Within a week, Mauro had an offer for $460,000.
Stay away -- far away. Disappear (along with your dog, if possible) for all showings and open houses so that prospects can imagine themselves in your house -- an impossible task when your family is vegging on the couch.
In February existing-home sales tumbled 9.6% from the previous month, and the median price of a single-family home dropped to $157,000 from $163,900 the previous year, according to the National Association of Realtors.
You can't count on things turning around soon, either. At the current sales pace, it would take 8.6 months to clear out the 3.5 million existing homes listed today.
With the boost from the recent homebuyer tax credit gone, anyone who decides or is forced to put a house up for sale enters a market where houses often linger a full six months -- even a year -- without any bites.
Put part of the blame on stiff competition: Foreclosures and Short Sales, which accounted for 39% of sales in February, sell for about 15% less than conventional homes.
Fortunately, there is one glimmer of good news. Bargain hunters, too, know that home prices are down some 32% from their peak. In a recent survey, three-quarters said that it was a good time to buy a home. But translating that interest into an actual sale can require some extreme measures.
It's not enough to show buyers your house is a deal: You have to convince them it's a total steal. That means slashing your price, bringing in a pro to pretty it up, and creating a killer website for your home. Here's how to do it right.
Slash Your Price -- Bigtime,
Sellers are still loath to accept the extent of the toll the bust took on their homes' value. Many also give in to the temptation to list the property above fair market value to see what happens. Big mistake. About a quarter of sellers in the past year initially listed too high and were forced to knock the price lower. Even in cities that have held up well, 25% of sellers resort to at least one price cut, and often two.
Think you can always drop the price if your home doesn't sell? Bigger mistake. The first 30 days on the market are the most important. That's when your place attracts the most attention and gets the most showings. So You often end up with less than you would have if you priced it right to begin with,. So get aggressive right out of the gate.
Undercut your competition. Today there's a big gap between what sellers want and what buyers are willing to pay. Ask your realtor to show you what houses similar to yours have sold for in the past three to six months. If more than a couple of the comparable properties were foreclosures or short sales, look closely at the photos and descriptions of those former listings. Distressed homes should be included in your comps if they are in move-in condition.
Once you have a handle on your likely sale price, list your home a bit beneath that. You don't have to undercut by much to attract attention, because that price will probably still be about 10% or 15% below what other homes are listed for. Even if you're competing with lots of foreclosures and short sales, your price should generate enough interest to attract more than one bidder, pushing up the final price to where it should be.
No bites within 30 days, take out the ax, and make a big move. Make a giant cut -- as much as 10% of the asking price, and even more in an area where prices are still falling. That should be enough to warrant a second look from buyers who passed the first time, and to bring in a new pool of potentials who are hunting in the lower price range.
Play hardball. It's okay to reject low-ball offers if a buyer won't budge. But if a buyer is willing to negotiate, stay cool and counter-offer.
Hire a Stager
Staging, increasingly popular with homeowners trying to sell mid-range houses, can extend from simply rearranging existing furniture to repainting, replacing fixtures, and bringing in new furnishings. The goal: to highlight the house's best features while making it as easy as possible for buyers to imagine themselves living there. Find the right stager. The ASP designation is a plus -- it indicates the stager has gone through some basic training -- but it isn't essential. Establish a budget and ask the stager to work within it. Stagers typically charge $150 to $400 to walk through your home and give recommendations for each room. You can then execute the plan yourself or hire the stager to do it for an hourly fee, usually $100 or so, plus the cost of any new paint or furnishings.
Find the Right Hook -
These days it's going to take far more than a FOR SALE sign in the front yard and a spot on the multiple-listing service to get potential buyers in the door. That means getting the word out in a creative fashion -- and finding a realtor who is willing to do the same.
Create a great website. You also want to get your listing on alternative sites like Craigslist or even Facebook. About 90% of buyers begin their search on the Internet, according to the National Association of Realtors. Make sure your home's online presence has a dozen or two photos.
Throw money at buyers. Incentives can perk buyers' interest just as much as price cuts. Many buyers will agree to a higher price if their upfront costs are lowered, since they often run short on cash. If you can afford it, offer to cover the buyer's closing costs or pay the first year's property taxes or condo or homeowner association dues. Or, you might be able to bring buyers to the door by tossing in an unusual bonus, such as a $1,000 gift card (throw in one for the buyer's agent as well); a belonging they mentioned loving, such as the pool table or plasma TV; or a $5,000 credit to use in the home as they wish. (You can even pay upfront points so that they can get a lower mortgage rate, if you can swing it.)
In 2009, when Karen Mauro put her small, historic two-bedroom Orange County, Calif., home on the market she thought it would be a tough sale. Realtor Lisa Blanc listed the property at $467,500 and spread the word not only through the MLS listing but also with an update on her Facebook page. A Facebook friend of Blanc's passed the info to someone she knew was looking for that kind of house. Within a week, Mauro had an offer for $460,000.
Stay away -- far away. Disappear (along with your dog, if possible) for all showings and open houses so that prospects can imagine themselves in your house -- an impossible task when your family is vegging on the couch.
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