Digging Deep For A Down Payment

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Issues Arose, and Now We Don’t Want to Sell. Will There Be Penalties for Backing Out? Q: We recently decided to sell our home. We accepted an offer that included a $10,000 deposit from the buyer. We’re set to close in about six weeks. Since we accepted the buyer’s offer, circumstances have changed, and we no longer want to sell our home. Can we back out at this point? If so, will there be a penalty?

A: You have a contract with the buyer to sell your home.The idea of a contract is to assure that both parties perform as promised in the agreement. For you as the seller, that means delivering title to the property as of closing. Imagine if you do not close.The buyers may have ended a lease or sold their current residence.Where are they supposed to live? What about their costs for inspections, closing services and other expenses? If you do not go through with the agreement, you may be forced to pay damages.You also may be forced to sell the property under the concept of “specific performance.” There are several steps you can take. First, show the sale agreement to an attorney and see if it provides any grounds for you to terminate the contract without penalty. Second, ask the buyers if they would like to end the transaction. It may be that they too have changed their minds. Third, if the buyers still want to go ahead with the purchase, ask if they would accept a cash payment from you to end the agreement. Be aware that even if the purchasers agree to end the transaction, you still may owe a fee to the brokers.They, after all, did their job, a job usually defined as finding a “ready, willing and able” buyer who wants to purchase the property on terms satisfactory to you. Speak with your attorney for specifics.

If you do not sell, you may be forced to pay damages

Q: Within the last 10 years, my neighbor and his wife bought more than 15 acres adjoining their lot. They split up last year and subdivided the acres between them. The ex-wife is looking to sell her acres, and I’m interested in buying. Who’s responsible for surveying the property? See ASK OUR BROKER, Page 2

Maximum exposure: Open houses may be a chance for neighbors to get a peek inside your home, but in competitive markets they can turn into a battlefield for bidding wars between homebuyers looking to grab the best property possible.

Open the door to selling Giving homebuyers a quick stroll through your home may be all it takes BY BARBARA BALLINGER CTW Features

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t used to be an open house was the first step to expose a new listing – and give nosey neighbors a peak into someone else’s home. But as houses stay on the market longer, open houses are getting a different glance. Lisa Tibbet felt it was important for buyers to see her large one-bedroom Mount Vernon, N.Y., co-op because of the amenities, landscaping and the gated community’s proximity to a nearby train station. However, she felt her showing was more of a voyeuristic venture for her visitors. “All my neighbors came to be nosey, and

some who didn’t live here also came by,” she says.When no bids materialized,Tibbet lowered the price and eventually switched to a salesperson from a larger organization that reaches a broader audience. Her new salesperson also holds open houses less frequently. Her unit hasn’t sold, says Tibbet, but she’s heartened that more traffic has materialized. Practitioner Aric Shlifka, with @properties in Chicago, also has seen found that open houses attract nonbuyers.“A lot of time it’s tire-kickers seeing what’s in the neighborhood,” he says. Yet agents, brokers and Realtors still hold them for a variety of reasons. For Shlifka, it’s banking on the chance a seller might come through. He’s more inclined to hold one if the

property is located in a busy area with a lot of street traffic, and he also says an open house can be a way to gain new buyers who haven’t yet selected a real estate practitioner.“It gets you in front of people. I’ve gotten multiple clients that way. If they can see and talk to you, they begin to trust you and might want to work with you,” he says. Still other practitioners hold them because their clients insist on doing so. But then there are the great believers. Michael Shapot, a broker and vice president with Coldwell Banker Hunt Kennedy, New York, says open houses provide a regular stable of buyers.“They should be called Mad

Digging deep for a down payment Scraping up the deposit for a new home is no easy task. Here’s how to not go in over your head

BY CHARLES SCUTT CTW Features WHEN YOU WANT SOMETHING badly enough, usually the proper discipline and determination can help you find a way to make it happen – whether that means

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draining out the last drop of laundry detergent to finish a load or fishing around the center console for the extra change needed to get through the toll. But when it comes to finding the scratch to make the down payment on your dream home, it often requires a lit-

See SELLING Page 2 tle more ingenuity and a whole lot more homework on your part. Most lenders require anywhere from 10 percent to as little as 3 percent down on the purchase of a new or existing home, says Carl Agard, a broker and author of “Getting the Real Out of Real Estate”(Adelphi Publishing and Media Group, 2006).“This

See DOWN PAYMENT Page 2

DOWN PAYMENT Find a way to pay CONTINUED FROM PAGE 1 depends on the type of loan program the buyer is getting. Credit scores are a big factor in determining the required down payment for the lender.The lower your credit score, the more the down payment can be.” “The traditional method of coming up with a down payment – save, save, save – is tougher today as prices of homes rise,” says Alison Rogers, a licensed saleswoman with DG Neary Realty, Manhattan.“But young buyers are finding a way. Now, buyers tend to do a combination of saving and borrowing.They dig into their own resources, get a second loan from a bank and often ask for gifts from their families.” Indeed, if you’re on a tight budget, a popular way to come up with a down payment is to accept a monetary gift from a friend or relative, says Agard. Gifts must be disclosed to lenders, who also require a signed gift letter from the donor that states there is no expectation of repayment. Scott Yonehiro, senior board member of First Security Lending, Burbank, Calif., says that borrow-

SELLING Showcase your home CONTINUED FROM PAGE 1 Houses – you’d think owners were giving away their apartments for free,” he says.“Sundayafternoon open houses for properly priced properties are jammed with buyers eager to outbid each other.And they do just that.A majority of listings that sell generate multiple bids and often sell after bidding wars that resemble auctions, at prices way above.” Because of security, many buildings restrict the hours that they can be held, how many people go through the unit at a given time and require attendees to be escorted from the front door to the unit. Price often can factor into whether an open house is worthwhile, others say. Some real estate pros won’t hold them for upperbracket properties because they believe they’ll get more casual sightseers than serious lookers. In his Washington, D.C., market, the cutoff generally is at $2 million,

ers with limited finances also can try to qualify for a silent homepurchase loan provided by most U.S. cities and counties.This type of financing assistance from a local government agency is offered to ensure growth within local communities. Silent loans can be for as much as 15 percent of the value of the purchased property, with no repayments form the borrower ever required, as long as they do not sell or refinance the property to pull out equity for a set amount of years. “However, the time frame for this restriction can be as long as 20 years, and if broken, interest is due back to the governing agency and with a pretty stiff penalty,” says Yonehiro, who adds that down-payment assistance also is commonly provided by nonprofit 501(c)(3) charitable organizations, like PreferredProgram (www.preferredprogram.org). Other government programs and resources can be found at www.hud.gov/buying/localbuying.cfm. Consumer banks and mortgage lenders aren’t the only sources borrowers turn to for extra greenbacks.“Some buyers also take a loan out against their whole life insurance policy if it has a large face value to borrow against,” says Agard. If you’re getting married and

planning to buy a home together, one creative down payment fundraising tactic is to establish a down-payment registry with your bank, which essentially is a savings account into which friends and family members can deposit monetary gifts. Strategies to avoid when hunting for down-payment funds include maxing out your credit cards to obtain the necessary cash, says Agard.“The 18 to 22 percent finance charges will kill you.” He also cautions against borrowing from relatives or loved ones who will make you repay with interest.“If you aren’t able to repay, you run the chances of ruining your relationships with these people,” he says. Yonehiro adds that it may not be wise to liquidate any type of retirement accounts, including IRAs or 401(k) accounts, which may incur steep penalties and defeat the purpose of saving money – and earning compounded interest – for your future needs. “Generally, it is not advisable,” he says.“However, some 401(k) accounts allow funds to be removed without penalty as long as they are applied to a down payment towards a home to be lived in.” Agard recommends checking with your accountant to see if any excess fees or taxes are involved

with dipping into a retirement account. Lastly, be careful you don’t misrepresent your ability to have the down payment, says Macon McDavid, Realtor/broker with Realty Executives Parrish Realty, Knightdale, N.C.“You must have these funds in an account, stock or something which you can convert to cash. If someone lends you the money and you just put it into your bank or savings account, the bank can trace it and find out where you got it.You need a paper trail and you must be honest.” Ultimately,“buying a house is a huge commitment, and there will be more financial obligations that come up within the first couple of months once you close,”Agard says. If you do not have enough money for the down payment, you may have a lot of problems trying to make ends meet once you have to pay a mortgage, and soon enough you may find your house up for foreclosure, he says.“At least be prepared to save up to 3 percent of the sales price of the house you want to buy, as well as three months worth of mortgage payments, just in case of any emergencies.”

says Michael Rankin, a broker with Tutt,Taylor & Rankin, Sotheby’s International Realty. Whether an open house will be the magic bullet to produce a contract is never for sure, but if you’re selling and want to try it, the following guidelines are more apt to help beat the odds, experts say. • Announce it to the world.To attract the largest number of visitors, be sure you get out the word through advertisements in local newspapers and Web sites, post flyers, and then post signs and hang balloons as the day nears. Be sure to have the open house right after the listing agreement has been signed to gain the greatest exposure, says Jack Strama, a Realtor with Jenny Pruitt & Associates in Atlanta.You also can then use professional photos to showcase the house. Rankin often takes a more personalized approach and mails invitations to everyone in the neighborhood, just in case they want to change homes or know someone who wants to live in the area. • Choose the right day and time. Most real estate pros suggest

a weekend day and a two-tothree-hour window in the afternoon. Rankin, however, often prefers a Wednesday or Thursday night after work, from 6 p.m. to 8 p.m., when people are less busy and not preoccupied with weekend events, he says.Also, be careful not to plan the open house for when there’s a major local sporting activity because it may pare attendance, says Linda Feinstein, broker/owner, ERA Jensen & Feinstein Realtors in Hinsdale, Ill. • Food or no food? Some say nibbles and beverages are critical to lure – and keep – lookers; others say it creates a mess with crumbs. Rankin doesn’t serve food, but for certain more expensive listings offers sparkling water and white wine. Shlifka brings in coffee and snacks according to listing price.“It can help to open up conversations,” he says. Jason McInerney, an agent with RE/MAX Realty Plus of South Boston, definitely believes, however, in the power of food and drink. He’s even become known as “Chef Jay” in his area.A former chef, he started preparing food for open houses when the Boston

market slowed.“The average number of days on the market has grown from 70 to 150.We need a way to keep sellers happy and interest buyers,” he says.Among his favorite offerings: baked brie in puff pastry with strawberrychampagne sauce and Sicilian won tons stuffed with plum tomatoes, basil, sour cream and Chablis. He prepares most of the recipes at home, then finishes them at the house so pleasant smells waft through. His listing sheets provide recipes. • Encores. Depending on availability, Strama says he likes to hold an open house every month and sometimes twice a month. “The goal is to increase awareness of homes that are available. Somebody may say to someone in their office, Hey, there’s an open house in the neighborhood, which spreads the word,” he says. But the key, he adds, is to hold them consistently rather than just once.“Some people need to come back two or three times and at different times before they’re ready to buy.”

© CTW Features

© CTW Features

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Ask Our Broker CONTINUED FROM PAGE 1

A: It used to be that land sales could be fairly informal, but those days are gone. In this case, the couple subdivided their property, which means there should be a site plan done by a licensed surveyor. If yes, perhaps the surveyor can update the report at a discount. If the sale is being financed, you can be certain that a lender will want a survey – and so should you.Why? To establish the location of the property, to define its borders and to determine whether it has any easements or encroachments. As to who pays, that’s often negotiable and really depends on local customs and who wants the deal more. If land is tough to sell in your area, you could offer to buy the property subject to a survey provided by the seller, which must be satisfactory to you. If land is easy to sell, you pay. Or, you might suggest dividing the cost.A local real estate broker can provide specifics. Q: My wife and I took out a 15-year fixed-rate loan for 6.5 percent. The loan amount was roughly $650,000. We refinanced after six months with our original bank to get a 5.75-percent interest rate. The cost to refinance was about $700, however, our monthly payment has been reduced by about $750 a month. We’re making double the monthly payments to knock down the principal as fast as we can. We plan on refinancing after our loan balance drops below $417,000, to get the lower rate associated with a conventional loan. Would you recommend going with a bigger lender with higher rates – a lender with more stability who is less likely to sell their loans? Should we refinance if we can get a .5-percent rate reduction? Should we switch to a 5-year adjustable-rate mortgage? A: None of the above.You now have a 15-year loan at 5.75 percent being paid at an accelerated pace.As this is written, rates for conventional 15-year loans are higher, so stick with what you’ve got. As to lenders selling loans, don’t worry about it.The new loan owner cannot change your fixed rate or create new terms. Lastly, you have no reason to convert to an adjustable-rate mortgage. Not only are ARM start rates not much lower than your current interest level at this writing,ARM rates always can rise higher.Why take the risk when you already have a terrific loan, a great lender and a smart repayment plan? © CTW Features Need real estate advice? Peter G. Miller, author of “The Common-Sense Mortgage,” would love to hear from you. Send your questions to [email protected]