"What IF..............?" Scenarios to Think About When Selling Your Home

In working with Sellers today it’s very important to give them options and go through the various choices they have. After many listing presentations and conversations with other agents about their presentations, I’ve jotted down a few questions that every seller should seriously consider.

Most sellers tell us today the same thing… “If I can’t get $_________ for my house, I’ll just wait.” Folks, this is an emotional response to the price in most cases. Selling a home isn’t ONLY about the price we can get for it. Generally a decision to sell a home is to satisfy some kind of need (job transfer, bigger family, downsizing, etc.) How many sellers wake up one day and say “Honey, I think the house is worth $_________ so it’s time to sell!” It’s important to keep our minds OPEN to the big picture and needs of the family so we don’t get stuck on just the price.

Now, if you don’t really NEED or really WANT to sell your house, don’t list it! One more overpriced listing is not going to help the market recover. In fact it does the opposite by keeping larger inventory than we need. Let’s take a look at some questions that may help you in making your decision:

1. “What If” we got a cash offer, close in 2 weeks for your house for the price of $25,000 less than the figure in your mind. Would you take it? “What If” we got a cash offer for $50,000 less, $75,000 less? What is your TRUE threshold? Knowing this helps you be more realistic if you receive an offer that’s less than what you’re asking.

2. “What If” we just cannot get the price you want for the home? What will you and your family do?

3. “What If” you decide to wait out the market? How long could you wait?

4. “What If” it took 7, 8, 9, 10 years to get back to the price you suggest you want for the home? Let’s face it…even if we do hit the bottom at the end of 2011, most markets only appreciate at a rate of 2 to 5% per year. Do the math, at 2% a year, how long will it take to get back up to the price you want? How long at 5%? It’s going to be longer than you think.

a. What will it cost you to keep the home for that time frame?

b. What plans will you have to change in order to stay?

c. What sacrifices will you have to make?

5. “What If” we went ahead and got the property SOLD now at a price that makes sense for today’s market value?

a. What will it cost to make the sale happen?

b. What plans could you then move forward with?

c. What sacrifices would you have to make, if any?

Having an agent who will take you through this process to identify your true options is essential to keeping the logic in place and the emotion under control. We know it’s a tough decision…try not to kill the messenger :)!

7 Things You Need To Know About Investing in Outer Banks Property

So you want to be a real estate investor on the Outer Banks?

As if buying a primary residence isn’t challenging enough, what should you expect when buying your first investment property or second home at the beach? Without proper guidance or experience, you really can find yourself in a frustrating situation. Buying investment property is a phenomenal idea right now as prices, rates and rental income create a perfect combination for purchasing a beach home that will practically pay for itself. So what do you need to know? Check out the list below.

1. Be prepared for 20% to 30% down payment. It’s unheard of in the Outer Banks to buy rental property with less than 20% down. Some lenders may even require as much as 30% down. Now don’t let that figure scare you. Keep in mind prices are down about 35% overall, so 30% of today’s prices is often times less that 20% of 2005’s prices were.

2. Most lenders will allow you to use up to 75% of the projected or established rental income as to qualify for the loan. With that income you may qualify for more than you expected.

3. Use the 17 week rule. If you are nervous about the affordability of a second or investment home, follow the advice of some smart investors. If the home has a history of generating more than 17 weeks of rental a year, calculate all of your expenses for the year and if they can be paid with the 17 weeks of income then it’s a good investment. Most homes with a pool and hot tub will generate at least 18 weeks and some up to 24 weeks, depending on location. If the expenses can be paid with 17 weeks, the rest is money that can be set aside for annual maintenance. This is a very safe rule of thumb.

4. Be sure to find out the flood zone of the property. The entire Outer Banks is actually in a flood zone. However, some areas based on elevation are in flood zone X. No flood insurance is required in flood zone X. You can still purchase the insurance if you choose. As long as the home is not in a COBRA zone, you should be able to qualify for the Federal Flood Insurance which is extremely affordable.

5. You might have to pay a due diligence fee. The new North Carolina Offer To Purchase & Contract now provides the buyer the right to cancel the contract for any reason or no reason during the specified “due diligence period.” This new simplified contract allows the buyer and seller the ability to negotiate a time frame for the buyer to do all inspections and research needed to make a firm decision of buying. For the right to do this, the buyer pays a due diligence fee. The seller assumes the risk of taking the home off the market for this time frame which could easily be 30 to 45 days, so a fee for this time seems appropriate. This fee is always 100% negotiable between buyer and seller and is NOT refundable for any reason other than seller’s breach.

6. Be prepared to pay a slightly higher interest rate. Investment properties and Jumbo loans do run a higher risk, so lenders charge anywhere from .5% to 1% higher for these loans. There are still 30 year fixed loans available for beach properties.

7. If you push off your buying decision until the summer months, you’ll need to be prepared to do all showings on either Saturday or Sunday whichever is turnover day for the properties you’re viewing. You’ll also be fighting the incoming and outgoing traffic! Unless you’re looking at foreclosures only, which are vacant, the weekly tenancies won’t be disturbed for your showing. Spring and Fall are the easiest times to access the properties as they are vacant and not winterized.

If you have questions about buying an investment home on the Outer Banks or would like a cashflow analysis of any available home, contact me!

Now is a Good time to Buy Investment Properties in the Outer Banks!