A seller’s worst nightmare is to find out as the moving van pulls away that the sale transaction has fallen apart. Though most home sales do go through, a certain percentage don’t.

To avoid an unpleasant scenario, it helps to consider the reasons why a home sale might fail. Then you can take steps to ensure against failure.

It’s a real showstopper if the buyer can’t obtain the financing to close the deal. This sort of deal-breaker is perhaps the easiest to avoid. Here’s how to protect yourself.

Make sure your buyers are pre-approved

First, before you accept an offer, no matter how good the price, make sure that the buyers are financially qualified. Ideally, you want to sell to buyers who have been pre-approved. This means that a lender has approved them for the mortgage they need to close the sale.

It’s a good idea to find out if there are any conditions attached to the buyers’ pre-approval. If the mortgage pre-approval is subject to the lender verifying the buyers’ income or their cash down payment, then it’s not a solid approval. A phone call to the buyers’ loan agent or mortgage broker will give you a better picture of the risk factors involved. You should let the buyers know that you intend to make the call so that they can inform their loan agent to provide you with the information you need.

If the buyers aren’t completely pre-approved at the time they make you an offer, but you’re inclined to proceed, include a provision in the contract for the buyers to provide you with proof that they have loan approval within a specified time period. That way you will know before the last minute whether or not to anticipate a problem.

Double-check the accuracy of your appraisal and title record

Even a pre-approved buyer can have trouble obtaining financing if it turns out the house doesn’t appraise for the purchase price, or if there’s a defect in the title record. The more cash the buyer has to put down, the less of an issue there should be with the appraisal-from the lender’s standpoint. However, a buyer might not feel comfortable buying your home if it doesn’t appraise. If the purchase contract includes an appraisal contingency, and your home doesn’t appraise for the purchase price, the buyers may be able to withdraw from the contract without penalty.

Before you even list your home for sale, your agent should provide you with a comparative market evaluation that will give you information about recent sale prices for similar homes in your neighborhood. If you’re priced inline with recent sales, the appraisal should not be an issue. The appraisers will be looking at the same information you are. Keep this in mind when you’re tempted to accept a very high offer from a buyer with a very low cash down payment. If the deal has little chance of closing, why accept it in the first place?

Title matters can cause problems, although these sorts of problems occur with less frequency. However, it is fairly common to have loans show up on a title review that were actually paid off years ago. Your closing agent can usually clear this up fairly easily. Stickier problems include such things as easements that weren’t recorded properly, bankruptcy proceedings, or disputes over ownership.

The closing: Before you enter into contract to sell your home, it might make sense to pay a title company or attorney to check the title record on your home if you have any reason to believe that there might be issues that could derail your home sale. This way, you have time to remedy any problems before you sell.

Are you less than perfect about paying your bills on time? Or maybe you pay your rent, utilities and other bills with cash or money orders so you have no credit record.

If that’s your problem, you may still be able to buy a house or condo. Thanks to innovative outreach home mortgage programs from Fannie Mae and other major home loan lenders, if you have a reliable source of income you can probably buy a home.

For example, I talked with a hard-working immigrant Hispanic gardener whose steady income comes from about 30 homeowners. A few of his customers pay him in cash. But most pay by check. Although he has no checking account, he told me how he recently got a mortgage from a major nationwide lender, with the help of a very patient mortgage broker, to buy the three-bedroom house he was previously renting. “I really need a four-bedroom house for my wife and our three kids, but it’s a start,” he told me.

Do you have a steady income?

If you are “credit challenged,” probably because you have no credit or bad credit, you may still be able to buy or refinance a home providing you have a steady income. That’s because mortgage lenders are now under extreme pressure to keep up their home loan origination volume, especially to borrowers without traditional verifiable income sources. Virtually every mortgage lender has a special home loan program for borrowers with credit problems. The interest rate might not be the lowest available, but mortgage money is abundantly available.

To illustrate, I once received a phone call from a long-time media acquaintance whom I had never met except by telephone. He briefly told me his home loan situation, admitting he “messed up” and had some serious credit problems. I was able to put him in touch with a savvy mortgage broker who arranged a mortgage at “only” 8 percent interest. My media friend was thrilled.

Know your credit report and score

If you’re not sure what is in your credit report, or you don’t know your FICO (Fair, Isaac and Co.) credit score, which most mortgage lenders use to rate your credit, the easiest source to learn this information is at www.myfico.com. For a small charge, you can obtain your credit report, FICO score and suggestions on how to improve your FICO score. At www.equifax.com, you can check your credit reports at all three major credit bureaus for an additional fee.

How do lenders use your score?

Fannie Mae and Freddie Mac, the nation’s largest home loan lenders in the secondary mortgage market, use computerized credit scoring programs to instantly approve mortgage borrowers for home loans.

When these non-human mortgage approval programs were implemented about 10 years ago, I was very critical. But the amazing result has been more, not less, home loan applicants approved when computerized credit scores are used. Furthermore, when a home loan applicant is rejected, a human mortgage underwriter takes a second look to see if an exception can be made for the loan to be approved.

FICO scores range between 450 and 850. The higher your FICO score, the better. A FICO score above 700 is almost always a “slam dunk” approval at the lowest mortgage interest rate. Nationwide, the average FICO score is 678.

Above 620 you will probably be approved for a home mortgage, but maybe not at the lowest interest rate. Below 620, you might get approved but you will surely have to pay a higher than normal interest rate.

Make sure your credit report is error-free

Thanks to a new federal law, all U.S. residents are entitled to one free credit report annually from each of the three national credit bureaus. After you obtain your credit report and FICO score, read it. If you discover any errors, contact the credit bureau immediately. When writing, phoning or sending e-mail to one of the three national credit bureaus, you will be informed if there is any cost for the services you are requesting. The latest credit bureau addresses and phones are:

Equifax, PO Box 740241, Atlanta, GA 30374; phone 1-800-685-1111; www.equifax.com.
Experian (formerly TRW), PO Box 949, Allen, TX 75013-0949; phone 1-800-422-4879; www.experian.com.
Trans Union, PO Box 290, Springfield, PA 19064-0390; phone 1-800-888-4213; www.tuc.com.

Each credit report contains different information because some of your creditors report to all the national credit bureaus, but other creditors report to only one or two. Each credit bureau must include a dispute form so you can correct any errors for correction.

Credit bureaus have 30 days from the date of dispute receipt to verify your complaint. If the credit bureau is unable to verify the information you dispute, that information must be removed from your credit report. When the credit bureau doesn’t receive a response from the creditor, the disputed item must be removed from your credit report. Be sure to follow up and insist on receiving a revised or corrected credit report.

Get pre-approved in writing

After checking your credit report and FICO score, even before shopping for a house or condo, it’s time to apply for a home loan.

Whether you apply with a direct mortgage lender or a mortgage broker who can “shop” your loan application among many lenders to find you the best terms, the first step to buying a home is to get a written mortgage pre-approval letter or certificate from an actual lender.

Don’t accept a mortgage “pre-qualification letter.” That means nothing because the issuer isn’t the actual lender. Instead, insist upon a full credit investigation and a pre-approval letter or certificate from a lender willing to make your loan, subject to reasonable terms such as appraisal of the house or condo you decide to buy.

Conclusion

Even if you have less than perfect credit, one way or another, you can probably buy a house or condo. Your first “starter home” probably won’t be your “dream home.” But it will start you on the road to building home equity rather than constructing a pile of worthless rent receipts.

Encompass Realty, www.encompassrealty.com, Arizona Real Estate, Encompass Mortgage LLC, www.encompassmortgage.net, www.encompassmortgage.org, Arizona Mortgage

When we moved into our present home 15 years ago, we picked the smallest of the three bedrooms for our master bedroom. It had a corner fireplace and a small bathroom, and it was a few steps from our three-year-old son’s room.

But now that little guy has become a big guy. And though we love to hear his rock group practicing in the evenings, we’re beginning to yearn for a private retreat—a quiet master suite where we can relax, read, or luxuriate in a hot bath away from the household hustle and bustle.

And we’re not alone: Nearly every new house built in our community features an elegant master suite. Clearly, builders know that a beautiful master suite ranks high on buyers’ lists.

But here’s our dilemma: If we add on a new master suite, will we get a return on our investment if we sell the house someday? It’s a question worth asking before launching into any remodel, particularly if the work is being done with a higher selling price in mind.

Real estate professionals and trade publishers offer up statistics each year that help in sorting out answers. One of my favorites is a “Cost vs. Value” study published each year by Remodeling magazine, a trade publication targeted primarily toward professional remodeling contractors. This study compiles and analyzes data gathered from real estate agents throughout the country to determine both national and regional average returns on investment for various home improvements.

In looking at the results each year, I’m surprised to see that, on a national average, most improvements will not recoup your full investment if you sell the house within a year. Of course, exceptions abound, depending upon the region, the vibrancy of the real estate market, and the type and cost of improvements.

In hot real estate markets filled with aging houses, returns on investment are higher than returns in slower areas, and the returns generally exceed the costs of improvements. Hot markets include Honolulu, San Francisco, San Diego, Seattle, Minneapolis, Boston, Philadelphia, Birmingham, and Garden City.

Certain kinds of additions do much better in particular places. Building a deck in San Diego or Hawaii is a solid bet. Adding a family room in San Francisco or Garden City will typically return upwards of 140 percent of the cost. Almost any major improvement in Garden City returns more than 125 percent of the cost.

Which improvements return more than others? Minor kitchen remodels are always a standout, but the national average for cost recouped is only 88 percent. In other words, in higher-end real estate areas, if you revamp cabinets, change appliances, and recover your floors, you’re likely to get your money back—and then some. But in slow-moving areas, you won’t. Bath remodels and major kitchen remodels are a close second.

Improvements such as adding a home office or replacing windows or siding are chancier. Your results will depend heavily upon where you live. The average cost recouped in Cleveland for replacing windows is under 30 percent, whereas it’s closer to 110 percent in New Haven.

Of course, certain improvements give a house more curb appeal or help it to sell more quickly. Replacing shoddy siding on a house in Boston or Chicago, for example, will not only boost the price by more than 120 percent of the job’s cost but also make the house look more appealing to more buyers.

Then again, if you intend to live in your home for years, short-term return-on-investment figures don’t really matter. The longer you stay in your home, the longer you enjoy a higher quality of life because of the improvements you make. And you can’t put a price on that.

I think I’ve just convinced myself that it’s time to start drawing up plans for a new master bedroom suite

Imagine this. You list your home for sale. Buyers are lining up to take a look. The inventory is so skimpy that buyers are having your home inspected even before making an offer. In so doing, they hope to out-fox the competition by making an offer that doesn’t include an inspection contingency.

Pre-inspections can serve a positive end, but sellers are wise to retain control over the process. To illustrate, let’s say you arrive home late one afternoon to find water flooding your basement from a pipe that burst during a home inspection. Your agent tries to determine who’s at fault. But, since three or four inspectors were inspecting your home at the same time, no one is sure who is to blame. As outlandish as this may sound, it actually happened to a Berkeley, CA, home seller recently.

Benefits of pre-sale inspections

Some sellers wonder why they should conduct pre-sale inspections. Won’t the buyers want to hire their own inspectors? What if an inspection uncovers defects that you have to disclose? Wouldn’t it be better to wait to have inspections done until after the buyers have committed to buying the property?

The main reason home-sale transactions fall apart is because of defects discovered during the buyer’s inspections. Buyers often try to renegotiate the price after they receive their inspection reports. Their argument is that they weren’t aware of the problems when they made their offer. By ordering inspections before you market your home, you decrease the odds that you’ll have a failed transaction due to inspection-related issues. Buyers can evaluate pre-sale reports, and take the information into account, before they make an offer.

Another reason to have your home pre-inspected is that it gives you a better understanding of the issues that could effect the sale. You can then decide if you want to make repairs before marketing your home. Even if you decide not to make repairs, you will have a much better idea of how much you’ll net from the sale.

Disadvantages of pre-sale inspections

Whether or not to let buyers pre-inspect your property is another issue. The benefit to allowing buyer pre-inspections is that you might receive offers that don’t have an inspection contingency.

However, other buyers might be put off if they preview your home while it’s being pre-inspected for another buyer. It could discourage other buyers from proceeding. At the least, it will be distracting, which can impede the sale process.

Additionally, there’s the issue of timing. Let’s say you’re waiting a week or so before you hear offers. Meanwhile, interested buyers are pre-inspecting your home. Just before you’re to listen to offers, a buyer shows up who falls in love with the property. He becomes aware that there are multiple offers from buyers who have already done pre-inspections. He decides not to make an offer because he figures that he can’t compete without having had the home inspected. In this case, you’d never know if this buyer might have made the best offer.

It’s usually in the seller’s best interest to level the playing field. If you discourage pre-inspections by buyers, then all buyers have an equal advantage insofar as inspections are concerned. And, if you provide your own pre-sale inspection report, done by a reputable local home inspector, buyers will be aware of any significant defects before they make an offer.

The closing: The point of providing pre-sale inspection reports is to educate buyers about the condition of the property. It is not to deny them the opportunity to inspect the property themselves after an offer is accepted. Buyers should then be encouraged to complete any inspections they deem necessary. A well-inspected home protects both the buyers and sellers. Dian Hymer

Encompass Realty & Investments LLC, www.encompassrealty.com, Arizona real estate, www.encompassmortgage.net, Encompass Mortgage LLC, Arizona mortgage, Arizona

The list of college costs can seem countless–ever-increasing tuition, textbooks so pricey they might as well be encrusted with gems and endless incidentals of food, clothing and activity fees.

There’s not much you can do to make those expenses less painful. But there is one area where you can soften the hit to your wallet–and if you’re lucky, even turn a profit. Invest wisely in housing, and instead of paying for pricey dorm rooms or ratty apartments, you can write a monthly check that boosts your equity.

The cost of housing a college kid keeps going up–according to The College Board, which puts out an annual report on college pricing trends, the average room-and-board expenses for undergraduates at private schools in the 2004 to 2005 school year totaled $7,434, up 4.6% from the year before. Meanwhile, the median existing home price in the U.S. went up a similar amount from July of last year to July of this year. Where would you rather feel the increase?

College-area real estate can be less vulnerable to price declines than other areas, says Eric Tyson, former financial counselor and co-author of Home Buying for Dummies and Real Estate Investing for Dummies.

“It’s not like being in the Rust Belt, where if a big company shuts down the factory, it can really throw a monkey wrench into the real estate market,” he says. The University of Michigan, for example, isn’t going to fold anytime soon. Plus, a campus means more cultural activities, a decent selection of restaurants and often less crime–all attractive in a neighborhood.

But investors may not see huge gains in prices over short periods of time.

“The down side, if there is a down side, is that people who work in the public sector, in universities and colleges, aren’t going to get a $500,000 bonus and trade up to a more expensive home,” Tyson says.

Still, there are the occasional exceptions.

“If you go back several decades, part of the reason the San Francisco Bay area, Silicon Valley and the Peninsula area took off as much as they did was because of the developments that were coming out of the universities,” Tyson points out, referring to the high-tech boom. “That can change the dynamics of a local real estate market.”

An area to keep an eye on, he suggests, is New Haven, Conn., home to Yale University. The seeds of a biotech industry have long been planted there, and they may yet flourish.

Jeff Groper, president of Bretton Realty in Brookline, Mass., near Boston University, says his office has seen a lot more families buying instead of renting apartments for their children, since interest rates have been so low.

“The kids are coming in with their parents and saying we want to spend $1,000 per kid to rent,” he says. If the parents are able to make the upfront commitment, he suggests they buy a two-bedroom apartment and bring in a roommate.

Recently, a father and his son, a freshman at Boston University, came into the office because the child wasn’t happy with his dorm, which cost about $800 per month, Groper says. The family spent $240,000 on a one-bedroom that could be split into a two-bedroom. With a roommate, the parents will end up paying less each month on housing costs.

“Through the course of the next four years, the property will appreciate, because it’s within walking distance of B.U.,” he says. “They will have saved $50,000. Even if they break even, they walk away having had free rent for four years.”

With thousands of students descending on Boston each fall, Groper says he gets calls from around the country from investors who would like to own in the area.

But it’s not just a matter of slapping down a few dollars–buyers need to consider several factors in their purchase.

Anyone looking to buy a rental property should look at the cost of renting versus buying the way they would look at a price-earnings ratio on a stock, Tyson advises.

“Look at what your monthly costs are going to be after tax benefits, and see how that compares to the rental income,” he says. “If you can’t come close to covering expenses or exceeding expenses with rent, the property may be inflated.”

Areas near Stanford and Palo Alto, Calif., he suggests, are examples of overpriced locations.

Think about who you’re going to be renting to. If you’re going to get anxious about a scratch on the wall, you shouldn’t buy a property that would most likely rent to college freshmen, Tyson says. Instead, try something that would appeal to professors or researchers.

Location is key–the closer to the university, the more likely students will want it. But if you hope to one day use the property as a pied-a-terre, or want to sell to professionals, you may not want to be in the very thick of things.

“The regular buyers that have done the college bit wouldn’t purchase there, because they’re too close to campus,” says Liz Roberts, sales associate at Coldwell Banker Previews in Washington, D.C. “I wouldn’t want to live in that campus-feely environment.”

As always, make sure that the building is sound, and you have good resale potential, Roberts advises.

If you do rent to students, be sure to get a substantial deposit to cover damage and cleaning costs, or in case your tenants decide to stop paying rent and go backpacking in Europe for the summer. And remember the bright side–you don’t have to put as much upkeep into a student rental as you would if you were targeting professionals. You can also charge more money for students, because they are willing to pack more people in and share bedrooms, as they would have in a dorm.

“Your returns on college students as an investor can be very profitable,” Groper says.

To help potential buyers, we looked at more than 300 metro areas and ranked them by their abundance of colleges, and by how much home prices have appreciated over the past five years. Metro areas are not necessarily the same thing as cities. For Boston and Washington, D.C., for example, the metro areas include neighborhoods outside the city boundaries. And, in a few cases, the areas may be defined slightly differently for education and housing data.

According to the National Association of Realtors, with inventory of homes available for sale across the country so tight anyway, rebuilding the Gulf Coast will place additional pressure on all home prices.

“New home prices will be immediately impacted because of increased construction costs,” says NAR economist Lawrence Yun, “and that will filter down to existing home prices as well.” That’s because as new house prices rise, more homebuyers will consider existing homes, increasing the demand (and prices) for them.

Home sales have already spiked, as has rental demand, in regions surrounding the disaster zone in the Gulf Coast, according to NAR.

Michael Carliner, economist with the National Association of Home Builders, points to increased housing demand in Baton Rouge and Houston, which pre-Katrina, had a large inventory of vacant rental housing. Much of that has now been snapped up, he said.

In Baton Rouge, evacuees have bid up property values by up to 30 percent in just the last week or two. (See that story here.)

But it isn’t just a Katrina effect. With home prices having gained so much in the past few years, skeptics have been waiting for what they consider to be an inevitable slowdown, and were quick to point to sluggish activity over the summer.

Those skeptics are still worried, but for the time being, there already are signs that the rally is picking up where it left off.

Florida remains strong
Katrina has had little effect on neighboring Florida markets, except for a trickle of hurricane evacuees in the panhandle area. Some businesses have also temporarily relocated to Tampa and other Florida towns, putting a little more pressure on markets.

Overall though, Sunshine State markets have continued strong and high prices are transforming landscapes. As single-family home costs have exceeded affordability for many Floridians, condo sales have boomed.

That has, in turn, affected the rental market – investors are snapping up apartment buildings for condo conversion and sending their prices climbing.

Said Matthew Martinez, who owns rental properties in Boston and Florida: “I’ve looked at 22 apartment buildings in Miami in the past two weeks and bought none. The economics just don’t make sense anymore.”

Just north of Miami, the situation is much the same. Elena Felipa, vice president of the Corcoron Group in West Palm, said “Lots of apartments are being converted to condos,” she says. “There are few rentals around anymore.”

Felipa says many recently constructed rental buildings – some just a year or two old – are already undergoing condo conversion.

Area prices have hit $350 a square foot – off the water – and $1,000 a square foot or more for waterfront property, according to Felipa.

That has driven bargain seekers three hours north to the Daytona area, where condos on the Intercoastal Waterway can still be had for $400,000 or $500,000. “You can’t touch that in south Florida,” said Felipa.

Northern perspective
Manhattan is about as far removed from the disaster in the Delta as one can get in the United States. But the market revitalized during late summer as well, after it paused to catch its breath in July, according to Corcoron’s CEO Pam Liebman.

“What we’re seeing is that fall is off to a running start, a sprint really,” said Liebman. She credits talk of interest rates stabilizing (a possible Katrina effect) for triggering the new “burst of buying, especially in entry level apartments,” which in Gotham often means million-dollar, one-bedroom co-ops.

Manhattan’s other consistently strong suit this year has been high-end properties. “We have seen very strong buys from the superwealthy, especially hedge fund operators. This year we had more transactions above $10 million than ever,” said Liebman.

The wealthy are also out in force on Long Island beach communities, according to Liebman. “In the Hamptons,” she says, “the biggest problem is a lack of inventory. Everything available is getting snapped up.”

The most expensive homes there, of course, are on the oceanfront. “Near or on the ocean, you’re practically setting your own price,” she says

The median price paid for a home in the nine-county region, which includes San Francisco and the Silicon Valley high-technology hub, rose to $619,000 in August, an increase of 2.1 percent from July and a 19-percent jump from a year earlier, according to the report by DataQuick Information Systems.

Home prices in the San Francisco Bay Area, which boasts one of the strongest housing markets in the United States despite the economic shock to the region from a prolonged high-tech slump, have posted double-digit percentage increases each month for 21 consecutive months, the La Jolla-based real estate information service noted.

According to DataQuick, 12,154 new and resale houses and condominiums sold in the Bay Area last month, marking an increase of 6 percent from the previous month and a decrease of 4.1 percent from a year earlier.

Year-earlier sales were the strongest of any August in the Bay Area, according to DataQuick’s records, which date from 1988.

According to DataQuick, the region’s housing market is not signaling the slowdown many analysts expected. They have predicted the market will cool because increases in the area’s home prices in recent years have outstripped personal income gains of potential home buyers.

“We’re a bit surprised at how stable the market is in all categories. Usually one segment of the market will be outperforming the others. Right now, though, the same trends apply to all parts of the market, from entry level on up to the prestige market,” said Marshall Prentice, president of DataQuick.

“This stability means that the market will probably stay strong at least through the end of the year,” Prentice said.

In its quarterly survey, NAR found that U.S. home prices rose at an annual rate of 13.6 percent, to a median price of $208,300.

Of the 149 metro areas surveyed, 67 showed gains of more than 10 percent.

The Phoenix market, up 47 percent since the second quarter of 2004, led all metro areas. The median home price there is $243,400.

Seven metro areas posted price declines; the most severe was in the Kalamazoo/Portage area of Michigan, where home prices have declined 3.7 percent, to $122,600.

The lowest priced market was Danville, Illinois. There, the average home is $73,400. Though that’s up 16.9 percent from the second quarter a year ago.

The table below is based on data for the second quarter from the NAR released on Aug. 15. Third-quarter data are due Nov. 15.

Metropolitan Area State Growth Median Price

Phoenix-Mesa-Scottsdale AZ 47.0% $243,40

Los Angeles-Long Beach-Santa Ana CA 8.3% $474,800

Encompass Realty, Arizona real estate, Phoenix real estate, Tucson Real Estate, www.encompassrealty.com, Encompass Mortgage LLC, www.encompassmortgage.net, Arizona Mortgage, refiance

A few days ago on a flight to San Francisco, I was seated next to well-known neurosurgeon Dr. Richard Parkinson from Sydney, Australia. He had been involved in a symposium at Northwestern University Medical Center in Chicago and was returning home.

After I told him my two neurosurgery stories, including how a University of Minnesota medical center neurosurgeon saved my father’s life, Dr. Parkinson wisely changed the topic by asking, “And what do you do?”

“I write about and invest in real estate” was my quick “elevator speech” reply. That gave us plenty of conversation for several hundred miles after I discovered he is very interested in real estate.

My seatmate told me he and his wife live in a Sydney “duplex.” Then I learned a duplex in Australia is a two-story house, not a two-family residence as it means in the U.S.

Dr. Parkinson then asked me about “by owner” home sales, which he said are very popular in Australia.

Thinking fast, I presumed that meant “for sale by owner,” or FSBO “fizzbo,” home sales. I explained in the United States only about 20 percent of home sales don’t involve real estate agents. Many of those home sales are between friends and relatives who really don’t need a realty agent to market the home.

Of course, I couldn’t fail to then share the pros and cons of such transactions that don’t involve a professional real estate agent. Then I shared the possible FSBO pitfalls.

1. CORRECTLY SET THE ASKING PRICE FOR YOUR HOME. The first FSBO challenge, I explained, is the difficultly a do-it-yourself home seller has correctly setting the asking price. Without consulting professional realty agents, a “home alone” seller doesn’t know the local market home sales prices.

For this reason, do-it-yourself home sellers should interview at least three successful realty agents who sell homes in your vicinity. The agents interviewed won’t mind if you tell them you are considering selling your home without an agent.

The reason is they know most “for sale by owner” sellers fail and list their home with a professional agent within 30 to 60 days. The agent most likely to get the listing is one of the agents who was previously interviewed.

Each agent interviewed should provide the home seller with a written CMA (comparative market analysis) showing the recent sales prices of comparable nearly homes and the asking prices of similar nearby homes now listed for sale (the competition).

The CMA “mini-appraisal” form also includes the asking prices of comparable neighborhood homes that didn’t sell, usually because their asking prices were too high. Each agent interviewed should then recommend an asking price for the residence.

The prime reason at least three agents should be interviewed is the home seller then has three expert opinions of market value. If one estimate is very high, that’s called “buying the listing.” When a market-value estimate is very low compared to the others, that agent could be hoping for a quick sale.

2. SUCCESSFULLY SELL YOUR HOME ALONE. As I explained to Dr. Parkinson, in a local “hot market” where there are more qualified home buyers than homes available for sale (called a “seller’s market"), it’s very easy to sell a home by placing a newspaper ad and waiting for the purchase offers from buyers. But when there are more homes for sale than qualified buyers, that is a “buyer’s market.”

However, most local home sales markets are currently “neutral” with an adequate supply of homes available for sale and many qualified buyers eager to purchase.

Although there are several “for sale by owner” Web sites with a small inventory of homes for sale in most communities, the majority of today’s prospective home buyers start their search on the Internet at www.realtor.com. Statistics show more than 70 percent of home buyers begin their quest here.

For a home to be shown for sale at this Web site, it must be listed for sale with a realty agent who belongs to the local multiple listing service (MLS). That entitles the listing to be shown at www.realtor.com and on other major Web sites.

Unless your home is listed with a member of the local MLS, who then markets the listing at this major Web site, your residence won’t be exposed to the largest number of prospective home buyers in your community. FSBO sellers lack this big advantage.

3. PREPARE A LEGALLY BINDING PURCHASE OFFER. A major problem for most “fizzbo” home sellers is how to create a legally binding purchase contract without a listing agent being involved. Lacking a listing agent, this task can be a major challenge because the home sale forms sold at stationery stores usually are worthless.

In addition, home sellers must comply with local disclosure ordinances, such as providing written defect disclosures (to prevent after-sale lawsuits), building code compliance, energy reports, radon reports, natural hazard disclosures, lead-based-paint disclosure and booklet, and other applicable disclosures.

FSBO home sellers who don’t have a listing agent should arrange with a local real estate attorney to be ready to prepare the necessary legal paperwork. Unfortunately, most real estate attorneys are not available on weekends when most home sales take place. Without a signed purchase contract, it is easy for a prospective buyer to withdraw a non-binding oral promise to buy and the sale is lost.

4. WATCH OUT FOR CONTRACT CONTINGENCY CLAUSES. Virtually every home buyer needs to include, for the buyer’s protection, at least two or three contingency clauses in their purchase offers.

The first customary contingency is for a satisfactory appraisal of the home by the lender’s professional appraiser. If the appraisal doesn’t reflect the sales price agreed upon in writing by the buyer and seller, the buyer probably won’t be able to arrange satisfactory financing.

The second contingency clause requires the buyer’s approval of their professional home inspector’s report. Because most home sales today involve such an inspection, smart home sellers have their own professional inspections made before putting the home on the market for sale so the seller knows about its defects and can repair any significant defects.

The third contingency clause that most home buyers insist upon is a professional termite or pest control inspection clearance. Again, smart home sellers have such a report completed before listing so they can take care of any discovered problems prior to the home being put on the market for sale.

5. HELP THE BUYER OBTAIN MORTGAGE FINANCING. Although today’s smartest home buyers obtain written pre-approval letters or certificates from mortgage lenders before beginning their home purchase quest, shockingly many buyers don’t start shopping for mortgage money until after they sign a home purchase contract.

Many of these “unapproved” home buyers have difficulty obtaining a mortgage due to low FICO (Fair, Isaac and Co.) credit scores, insufficient income, or other problems. Savvy realty agents know which local lenders can help these buyers, but do-it-yourself home sellers usually waste time waiting for these buyers to locate mortgage financing.

6. ARRANGE THE HOME SALE CLOSING DETAILS. Another task FSBO home sellers have is to arrange for the closing settlement for the transaction. Depending on local custom, the location might be in a real estate attorney’s office, a bank, a real estate office, a title insurance company, or an escrow firm. Do-it-yourself sellers should make advance arrangements for this all-important final step in the home sales process.

7. PREPARE TO NEGOTIATE A PRICE REDUCTION BECAUSE THERE IS NO SALES COMMISSION OR BE READY TO PAY A BUYER’S AGENT HALF OF A CUSTOMARY COMMISSION. Closely related to preparing a binding sales contract and obtaining a significant earnest money or good faith deposit, FSBO home sellers should be prepared to negotiate a price reduction most buyers expect if there is no sales commission paid to a listing agent involved.

Closely related is the for-sale-by-owner issue of how to handle buyer’s agents who represent prospective buyers. Successful “fizzbo” home sellers quickly learn these agents expect to receive about 3 percent (half of the customary sales commission) or the buyer’s agent won’t even show the home to the prospects.

IS IT WORTH THE HASSLE TO SELL YOUR HOME ALONE? After considering these pros and cons of selling a home alone without a professional real estate agent, home sellers should ask themselves “Is it worth the hassle to sell my home alone in the hope of perhaps saving about 3 percent of the sales price?”

Because most FSBO sellers eventually realize they aren’t capable of selling without a professional agent, within 30 to 60 days after trying to sell alone, most for-sale-by-owners list with a realty agent, usually one of the agents previously interviewed. Since selling homes is a complicated business, according to the National Association of Realtors over 80 percent of U.S. resale homes are sold with the help of a professional realty agent.

Encompass Realty, Arizona Real Estate, Encompass Mortgage, Encompass Mortgage LLC, Arizona mortgage loans, real estate mortgages, www.encompassrealty.com, www.encompassmtg.com, www.encompassmortgage.net

Tired of being priced out of the market? Perhaps you should consider buying an income-producing property that you can live in, such as a duplex or triplex. The additional income could help pay your mortgage and enable you to qualify to buy a more expensive property.

Ideally, your wealth-building strategy might go something like this. You move into the property and own it long enough to accumulate equity through appreciation. Then you sell. You use the proceeds earned from the portion of the building that you occupied as a down payment on a single-family home.

You exchange the proceeds from the rental portion of the property into a larger rental property that will have more upside potential, thereby avoiding capital gains tax. Or, if you’re tired of being a landlord or need more cash for a down payment, you can pay capital gains tax on the rental portion of your proceeds and plunk what’s left into a new home.

Be aware that the tax consequences of owning a single-family residence are different than they are for rental properties. For example, an owner of a single-family residence is entitled to a capital gain tax exemption at the time of sale, under certain conditions.

This exemption doesn’t apply to owners of rental property. In order to avoid paying capital gains tax when you sell a rental property, you have to sell subject to a 1031 exchange. So, if you buy an income property to live in, you’ll be subject to two different sets of tax laws. Consult with a tax advisor who knows the ins and outs of owning real estate before embarking on a project like this.

Taxes aren’t the only issues to investigate before buying a property where you’ll simultaneously be an owner and a landlord. A primary consideration is the price you pay. In areas where single-family home prices are high, you may also have a hard time finding a small income property that makes sense financially.

Preferably, the rents on an income property should cover the costs of ownership (mortgage payment, property taxes and expenses). Otherwise, you will pay extra each month to make ends meet. There are tax benefits for income-property owners, such as depreciation, that can help offset negative cash flow.

Since you’ll be living in the property, you can afford to pay a higher price than someone who wants the property strictly as an investment. However, keep in mind that you will be reselling it someday. If you overpay today, you may be disappointed at your returns when you sell.

HOUSE HUNTING TIP: Make sure to check on the local landlord-tenant laws. Some communities in California, such as Oakland, Berkeley and Santa Monica, have rent-control ordinances. Where rents are controlled, you may not be able to raise rents to market rates. Small income properties are notorious for having low rents. Base your projections on actual and allowable, not overinflated, rents.

Find out the strength of the local rental market. The rental market, like the housing market, fluctuates over time. The most successful rental properties are often located near shopping, transportation and good schools.

Financing is usually less expensive and easier to obtain for properties with four units or less, so you may want to restrict your search to properties of this size. Also be aware that the lender may factor in a vacancy allowance in calculating how much income the property will generate. You should do the same. There will be times when you’ll be without a tenant.

THE CLOSING: Finally, carefully consider if you can handle being a landlord, with all the responsibilities that entails, and one who will live in very close proximity to the tenants. Dian Hymer

Encompass Realty, Encompass Mortgage, Arizona mortgage, Arizona homes, Arizona real estate, www.encompassmortgage.net, www.encompassmtg.com, www.encompasslending.com

Ever wake up in early September and notice that the air smells different? School begins, days get shorter, and a sense of responsibility begins to creep up on most of us. We’ve always wondered why “fall cleaning” isn’t as popular as “spring cleaning.” The air on brisk September mornings inspires us to dutifully button up the home in preparation for cooler days and longer nights.

Add weather stripping to doors and windows
Weather stripping can be plastic, foam, felt or metal; its job is to seal small gaps, keeping moisture and cold air outside where it belongs. Look around your doors and windows: Is the weather stripping torn or missing? This can become expensive if ignored. On doors, make sure the bottom seal is working properly—there are many sweeps, gaskets and thresholds designed to seal this gap. Doors generally need weather stripping in their jambs as well. Adhesive-backed foam pads are easy to install for this purpose. Newer, energy-efficient windows generally don’t require added weather stripping, but if your windows are older, weather stripping can keep drafts at bay and energy costs down.

Check storm windows
If you have storm windows that are cracked or dirty, repair and clean them now—prior to autumn installation.

Fight winter with plywood
Find a couple of scrap sheets of plywood and set them aside. When the weatherman predicts a cold snap, set the boards against the exterior basement vents on whichever side of your house bears the brunt of your prevailing weather patterns. This bit of scrappiness could help prevent frozen pipes. Be sure to remove the boards once the weather warms up—those vents are there for a reason!

Insulation speculation
This is a good time to check the condition of insulation and see if you need more, especially if you live in an older home. You can purchase un-backed or loose-fill insulation if you are just beefing up what is already there. If you are adding batted insulation to a spot that has none, remember that the foil-backed side is the vapor barrier, and it must face the heated area. For example, if you are laying fiberglass insulation in an unfinished attic floor to keep heat in the living room below, you should see pink when you’re done—not foil! If your walls lack insulation, consider having a professional install blown-in insulation foam. The energy savings will probably offset the cost of the procedure in a couple of years.

Check gutters
Do a quick visual check to make sure gutters are clear—they’ll be performing double duty soon with rain storms and falling leaves.

Keep mice out
September inspires nesting in mice as well as humans. Mice are looking for a winter home now, and that newly insulated attic would be just the spot. Mice can squeeze through 1/4-inch openings; rats need a 1/2-inch. Make sure all exterior vents are screened, and that there are no gaps underneath garage doors. If you are careless about leaving doors and windows open this time of year, you’ll be setting mousetraps later. Pet doors are another favorite access point for rodents.

Caulk exterior
Think of caulk as weather stripping in a tube. Any gap on the outside of your home can be a candidate for caulking. Look at transition spots: corners, windows, doors, areas where masonry joins siding, or places where vents and other objects protrude from walls. Carefully read manufacturer’s directions to make sure the caulk you buy will work where you plan to use it, and don’t forget to purchase a caulking gun. Early fall is a good time for this task because caulk becomes difficult to apply when the temperature falls.

Got wood?
If you have a woodstove, it’s not too early to lay in a supply of firewood. Though most of us buy whatever’s local, bear in mind that soft woods like fir and cedar burn faster and create hazardous creosote in the chimney, thus requiring more system maintenance and more wood. Hard woods like oak, hickory and maple are slow, hot, clean burners. Wood piles attract insect and animal pests, so stack wood away from the house. Wood dries best when it’s protected from rain and has air circulating around it, so under the roof of a wall-less carport would be an ideal wood storage spot.

Clean dryer vent
This is another one of those tasks that should be on your to-do list every six months. Scoot your clothes dryer away from the wall, unplug it, and vacuum behind it. (If it’s a gas dryer, turn off the gas supply to the dryer at the appliance shutoff valve.) Unhook the tube that leads to the vent and clear as much lint from the tube as you can. Grab a shop vacuum, go outside, and tackle the outside dryer vent as well.

Inspect your roof and chimney
If your roof isn’t too steep, and isn’t covered with slate or tile, you may be able to carefully walk it on a dry day. Look for broken or missing shingles, missing or damaged flashing and seals around vent pipes and chimneys, and damage to boards along the eaves. Also peer down your chimney with a flashlight to make sure no animals have set up house in it. If you can’t get on your roof, perform this inspection with a ladder around the perimeter. Pay close attention to valleys and flashings—many leaks originate in these spots. Some patches and roofing cement now can prevent thousands of dollars of water damage later in the winter.Anne Erickson

Encompass Realty, Arizona Real Estate, Encompass Mortgage, Encompass Mortgage LLC, Arizona mortgage loans, real estate mortgages, www.encompassrealty.com, www.encompassmtg.com, www.encompassmortgage.net

Ever wake up in early September and notice that the air smells different? School begins, days get shorter, and a sense of responsibility begins to creep up on most of us. We’ve always wondered why “fall cleaning” isn’t as popular as “spring cleaning.” The air on brisk September mornings inspires us to dutifully button up the home in preparation for cooler days and longer nights.

Add weather stripping to doors and windows
Weather stripping can be plastic, foam, felt or metal; its job is to seal small gaps, keeping moisture and cold air outside where it belongs. Look around your doors and windows: Is the weather stripping torn or missing? This can become expensive if ignored. On doors, make sure the bottom seal is working properly—there are many sweeps, gaskets and thresholds designed to seal this gap. Doors generally need weather stripping in their jambs as well. Adhesive-backed foam pads are easy to install for this purpose. Newer, energy-efficient windows generally don’t require added weather stripping, but if your windows are older, weather stripping can keep drafts at bay and energy costs down.

Check storm windows
If you have storm windows that are cracked or dirty, repair and clean them now—prior to autumn installation.

Fight winter with plywood
Find a couple of scrap sheets of plywood and set them aside. When the weatherman predicts a cold snap, set the boards against the exterior basement vents on whichever side of your house bears the brunt of your prevailing weather patterns. This bit of scrappiness could help prevent frozen pipes. Be sure to remove the boards once the weather warms up—those vents are there for a reason!

Insulation speculation
This is a good time to check the condition of insulation and see if you need more, especially if you live in an older home. You can purchase un-backed or loose-fill insulation if you are just beefing up what is already there. If you are adding batted insulation to a spot that has none, remember that the foil-backed side is the vapor barrier, and it must face the heated area. For example, if you are laying fiberglass insulation in an unfinished attic floor to keep heat in the living room below, you should see pink when you’re done—not foil! If your walls lack insulation, consider having a professional install blown-in insulation foam. The energy savings will probably offset the cost of the procedure in a couple of years.

Check gutters
Do a quick visual check to make sure gutters are clear—they’ll be performing double duty soon with rain storms and falling leaves.

Keep mice out
September inspires nesting in mice as well as humans. Mice are looking for a winter home now, and that newly insulated attic would be just the spot. Mice can squeeze through 1/4-inch openings; rats need a 1/2-inch. Make sure all exterior vents are screened, and that there are no gaps underneath garage doors. If you are careless about leaving doors and windows open this time of year, you’ll be setting mousetraps later. Pet doors are another favorite access point for rodents.

Caulk exterior
Think of caulk as weather stripping in a tube. Any gap on the outside of your home can be a candidate for caulking. Look at transition spots: corners, windows, doors, areas where masonry joins siding, or places where vents and other objects protrude from walls. Carefully read manufacturer’s directions to make sure the caulk you buy will work where you plan to use it, and don’t forget to purchase a caulking gun. Early fall is a good time for this task because caulk becomes difficult to apply when the temperature falls.

Got wood?
If you have a woodstove, it’s not too early to lay in a supply of firewood. Though most of us buy whatever’s local, bear in mind that soft woods like fir and cedar burn faster and create hazardous creosote in the chimney, thus requiring more system maintenance and more wood. Hard woods like oak, hickory and maple are slow, hot, clean burners. Wood piles attract insect and animal pests, so stack wood away from the house. Wood dries best when it’s protected from rain and has air circulating around it, so under the roof of a wall-less carport would be an ideal wood storage spot.

Clean dryer vent
This is another one of those tasks that should be on your to-do list every six months. Scoot your clothes dryer away from the wall, unplug it, and vacuum behind it. (If it’s a gas dryer, turn off the gas supply to the dryer at the appliance shutoff valve.) Unhook the tube that leads to the vent and clear as much lint from the tube as you can. Grab a shop vacuum, go outside, and tackle the outside dryer vent as well.

Inspect your roof and chimney
If your roof isn’t too steep, and isn’t covered with slate or tile, you may be able to carefully walk it on a dry day. Look for broken or missing shingles, missing or damaged flashing and seals around vent pipes and chimneys, and damage to boards along the eaves. Also peer down your chimney with a flashlight to make sure no animals have set up house in it. If you can’t get on your roof, perform this inspection with a ladder around the perimeter. Pay close attention to valleys and flashings—many leaks originate in these spots. Some patches and roofing cement now can prevent thousands of dollars of water damage later in the winter.Anne Erickson

Encompass Realty, Arizona Real Estate, Encompass Mortgage, Encompass Mortgage LLC, Arizona mortgage loans, real estate mortgages, www.encompassrealty.com, www.encompassmtg.com, www.encompassmortgage.net