July 2009 Vol. 4 No.7
• For Sale by Owner - Is it Ever a Good Idea? • July's Home Value Improver • About Us

For Sale by Owner - Is it Ever a Good Idea?

As a mortgage broker, I have helped clients finance many types of real estate deals - small first- time homes, luxury vacation homes, condos and multi- families. Many have been successful, while some have been less so. When real estate sales were particularly robust and housing values very high, some people ventured to sell their houses on their own (known as a For Sale by Owner or FSBO, pronounced "fizbo").

While people realize that FSBOs come with risks - a potential longer time on the market, a lower selling price, working with unreasonable buyers - they may not anticipate other potential complications. One client of mine recently experienced something unexpected, but not surprising - an appraiser who valued the home he was selling too low. With the permission and encouragement of this client, I decided to share his family's story with you so that you will understand the pitfalls of doing something such as a real estate sale without the best professionals.

Married Dad and Business Owner Takes His Chances

Giuseppe Taibi is the married father of two daughters and the owner of an olive oil import business . He and his wife owned a condo in a desirable section of Cambridge, on a street that Boston Magazine once named the best street on which to live in Cambridge. This fact, Giuseppe assumed, would make it easy to sell. Other members of his condo association also encouraged him to sell the house as a FSBO, suggesting that other members may know potential buyers.

Giuseppe was happy to find buyers quickly. After an inspection and some negotiations on price, both parties were fairly happy with the situation and signed a Purchase and Sale agreement.

Everything seemed to be going well until the entrance of the real estate appraiser. Giuseppe could tell right away that the appraiser was not very professional. His knowledge seemed shallow and sure enough, the appraisal came in well under the agreed upon price, so the bank would not loan the buyers the money.

Appraising is about more than square footage and number of bathrooms, and that fact can be difficult to convince a bank. How does an appraiser account for a sunny unit, desirable section of a street, or any other feature that does not fit into an appraiser's equation?

Appraisers today are very powerful, and banks are being conservative. That combination can torpedo even the smoothest real estate transaction. I was working with Giuseppe on the purchase of a single- family home, and he showed my independent appraiser the appraisal on his condo. The independent appraiser agreed to also appraise the condo, and the price came in higher. Both parties agreed to the higher price, since it was obviously more accurate.

He and the buyers ended up splitting the difference of what would have been a real estate agent's commission fees. Giuseppe was happy that everything worked out in the end, but he suffered a lot of unnecessary stress. He emphasizes the importance of working with professionals - real estate agents and mortgage brokers. While clients often think that they know what those professionals are doing, there is a lot of work behind the scenes (such as finding the right appraiser) that is vitally important to a good sale.

July's Home Value Improver

7 Tips for Keeping Your House Cool and Your Electric Bill Low

We are spared heating costs in the summer, but electricity to run air conditioners can get pricey. Here are several ways you can keep your house cool without running air conditioners all day.

  1. Follow some basic rules of nature. Keep the heat of the day out by keeping windows and doors closed, and let the cool evening air in.

  2. Employ ceiling fans. Ceiling fans can significantly cool the air, especially at night. Get one with remote control, and you can sleep comfortably on low, medium, or high.

  3. Replace your compressor if you have central a/c. Today's a/c compressors are much more energy efficient than older ones. Even a 10-year-old a/c compressor can cost up to 40% more to run than a newer, more efficient one.

  4. When shopping for room air conditioners, be sure to get one that has an energy efficiency rating (EER) higher than 10. Also get one that is not too big for the area it is cooling.

  5. Don't run the a/c and the dehumidifier at the same time. The dehumidifier will force the air conditioner to work harder.

  6. Protect the windows. On windows that face south or east, keep the shades or window blinds drawn in the heat of the day. If you want to take more permanent steps, you can install window awnings on the outside of those windows.

  7. Keep your air conditioner working efficiently by changing the filters regularly. If possible, keep the a/c in the shade, too.

I've always been interested in the psychology of money - how we spend, why we spend and what we feel about money - so two recent studies got my attention.

The first, from The Boston Consulting Group conducted by Harris Interactive, reports on how much we Americans love a bargain. Three-quarters of Americans surveyed say "it makes me happy" when they buy something that's a good value. And 90% report telling others about a "good deal" they've received.

The second poll, conducted by Associated Press-GfK, reports that Americans are feeling less stressed about their debt than they were just a year ago - even though the economy has gotten worse in many areas. Researchers attribute the results to the fact that people are working to remain positive while they take actions to control their spending and lower their debt. The key here is the combination of attitude and action. A positive attitude alone will do nothing for your finances.

The influence of your brain and your emotions on your financial situation cannot be underestimated. How you feel will affect how you spend and how you save. When making financial decisions about your biggest asset - your home - make sure to check in with yourself before taking action. Are you looking at a house just because it seems like a great deal? Are you putting on a happy face about your finances while avoiding the tough decisions that could help you improve it? Questions to ponder on the beach this summer!

As always, I am happy to discuss your specific situation or answer any questions you may have!

Best regards,
Debbie Siegel
Westchester Mortgage

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