The Ins and Outs of the Mortgage Business
By Ron Cahalan EWI Protege and Mortgage Professional
Have you ever been surprised by a letter you receive in the mail instructing you that you are now to make your house payment to another lender and/or loan servicer? It happens often and, if it hasn’t happened to you already, chances are it will. If the lender you originally obtained your mortgage loan from has any knowledge that they may sell your loan and ‘hand-you-off’ to someone else anytime in the future, they are required by law to notify at closing. Those who may purchase your mortgage could be any type of financial institution; a bank, credit union, another mortgage banker or an investor. There are companies that specifically go out in search of mortgages to buy in order to make money off of the ownership of your mortgage. Many homeowners have found that their mortgage passed through the hands of a number of investors or mortgage servicers over the life of their loan. How does a mortgage servicer make money and why or how are mortgages bought and sold? There is an interest-rate spread between the ‘actual net-rate” charged or paid for a mortgage and the rate you pay each month. That “spread” has a value over the term of the loan and, for simplicity purposes, let’s say the spread on your loan is .375% (3/8ths of one percent… which is typical, by the way). If you have a $200,000 loan and the spread is .375%, then for one month this would amount to $62.50 of income to the servicer or an annual income of $750. Lets say that servicer is servicing only 500 loans. The income to that 500 loans ($100 million dollars at an average of $200,000 per loan) would be $375,000 in income. Now you see the value. And, most servicers are managing thousands of mortgages, not just 500. The contract to service all those loans is worth a real measurable value over the assumed life of a loan (say 7 to 10 years). It is the contract or agreement to service your loan that is bought and sold between these servicers. That value can be between 1% and say 2.5% of the loan amount. (Again, we are giving you a simplistic view; it is quite a complex calculation when it comes to Wall Street and bond traders, etc.) That said, let’s say you are a servicer and you have a portfolio you want to sell that equals $100 million dollars in mortgages. The market is fairly aggressive for those contracts and it is willing to pay 1.5% for your portfolio. If you sell that $100 million of mortgages for 1.5% it could bring you an immediate windfall of approximately $1,500,000! But, if that investor kept the contract for an estimated 7 years and earned the $375,000 per year, the realized income would have been over $2.6 million dollars. See the value? Now, the mortgage servicer is going to do a few things for you. They collect your payments every month and process the payments. Then, they send those payments on to the mortgage holder/owner, which is typically a mutual fund or mortgage bond holder. They keep their 3/8ths of a percent income for performing these services. The service they are performing is for the lender, not actually for you as the homeowner. It is also the service of the loan servicer to pay your property taxes and hazard or homeowners insurance for you during the year (most mortgages have the taxes and insurance as a part of the mortgage payment). They also typically send you a statement or coupons to track your payments to the mortgage, the county for taxes and insurance companies paid. They also make the adjustments to your payments and notify you of this should there be a change in your insurance or property taxes or an adjustment in your interest should you have an adjustable rate mortgage. It is also the responsibility of the servicer to counsel you in how to manage your mortgage, help you work through problems and financial crisis and work with you if you have missed payments. They may offer you forbearance or a deferral of principal and interest payments as a temporary remedy to difficulties you may have in your finances. If your problems can’t be worked through and foreclosure ends up being the only option, then the servicer will be the party to carry out that order. Mortgage servicers have to follow the same rules, guidelines and regulations that the bank, credit union and mortgage banker does. If your mortgage is sold to another servicer, it is the responsibility of BOTH servicers to notify you of the transaction. The new servicing company cannot change the terms of your mortgage either. There will be times when your loan is sold and you may have a few glitches with the new servicer. Carry out all of your communications in writing. Never stop paying your payment due to any hassles you may be having between the servicers. The servicer(s) must solve any issues within 60 days. So, should you be concerned when your mortgage is sold? No. Just watch your statements for any mistakes. Track that all the payments are being applied correctly and that your taxes and insurance are being paid per the terms of your mortgage loan documents. Keep all documents you receive from the servicers, including all checks and letters of correspondence. Otherwise, your mortgage activities should be fairly uneventful. E-mail me at RealtorChris@msn.com
Tuesday, August 28, 2007
Thursday, July 26, 2007
How to defuse a ticking home loan
Interest rates on about $1 trillion in adjustable-rate mortgages are headed up by the year's end. If your loan is among them, this five-step game plan might save you a lot of grief.
Latest Market Update
July 26, 2007 -- 09:40 ET
By Liz Pulliam Weston
The young woman just wasn't getting it.
She called Consumer Credit Counseling Service of Nevada and Utah for help managing her family's mortgage payments. A year ago, a mortgage broker had persuaded her to refinance the family home, pull out all of the equity and invest the cash in a rental property. Now both mortgage payments had reset to much higher levels, with the interest rate on the rental jumping from 1% to more than 8%.
She couldn't afford either payment. Michele Johnson, the CEO of the counseling service, remembers the woman pressing for a way to keep her home, but there wasn't one. The problems were that:
Both properties had lost value as Las Vegas' real-estate bubble popped. The woman owed more on the homes than they were worth, so lenders wouldn't refinance the loans.
So-called rescue funds, set up by some states and some lenders to help victims of predatory lending, had far more applicants than funds, and they weren't available in her case anyway.
A bankruptcy filing, touted by attorneys in television ads as a way to "fight foreclosure," would just put off the inevitable.
The woman's only option for avoiding foreclosure was a short sale, in which she might persuade a lender to accept the sale proceeds from both properties and forgive the rest of her debt. But, Johnson said, the woman didn't want to hear that.
"People have this unrealistic viewpoint that 'this is my home; I'm not going to lose it.' It all becomes very emotional," Johnson said. "Listening to facts and figures is not what they want to hear. They want a rescue."
Don't delay If your loan is among the $1 trillion in mortgages scheduled for payment increases by the end of the year, ignorance and denial are not your friends. You need to take action, and the sooner the better:
If you've still got some equity in your home and the ability to handle a larger payment, you may be able to switch to a smarter loan.
If your situation isn't as rosy, quick action can contain the damage to your personal finances.
Here's your game plan.
Know where you stand. Dust off your mortgage documents, advises LendingTree.com chief economist Jim Svinth, and scour them for important information, such as:
When your payment is scheduled to adjust.
What benchmark the payment will be based upon (such as the LIBOR rate or the one-year Treasury).
What your margin is (this is what is added to the benchmark to determine your new rate).
What your caps are (many adjustable loans typically can increase no more than 2 percentage points in a year and 6 percentage points over the life of the loan, but check your documents to be sure).
You can find the most recent benchmark rates at HSH Associates' ARM index page. Once you know what your new interest rate is likely to be, you can use HSH's amortization calculator to determine what your new payment would be.
Math-challenged? You may be able to simply call and ask your lender or loan servicer, if they're not too busy handling all the folks who have already defaulted.
You also need to find out whether you would face a prepayment penalty for refinancing your loan. Prepayment penalties are unfortunately common on loans extended to people with troubled credit, and until they expire, they can make a refinance harder to justify financially.
Your future is tied to your past Get your credit reports and FICO credit scores. Your options will be dictated in large part by those scores, said credit and mortgage expert Gerri Detweiler of FreeRateSearch.com, particularly if you don't have much equity in your home or can't document your income with tax returns or other proof. You generally need a score of 700 or better to get the best rates and terms. If your scores are 660 or below, LendingTree.com's Svinth said, you'll face more scrutiny from lenders and have a tougher time getting a loan.
This is a big turnaround from a year ago, Svinth said, when lenders were falling over themselves to give no-down-payment and no-equity loans to borrowers with credit scores below 620 and income they couldn't or wouldn't prove.
"We've gotten back to basics," Svinth said. "Credit and collateral matter now."
Someone with credit scores in the 700s who is able to document his or her income and who wants a loan for 95% or less of the home's value "has plenty of options," Svinth said. "It's the ones with poor credit who want a 100% stated-income loan. . . . I'm not saying there are no options, but they're going to be expensive."
You can get your credit reports once a year for free from AnnualCreditReport.com, but scores are not free. To get FICO scores, which are the same scores mortgage lenders use, you'll need to pay about $50 at MyFico.com, the only site that sells FICOs for all three bureaus. Mortgage lenders typically base their decisions on the middle of the three scores, or the lower of the two middle scores when lending to a couple. You also can get an approximation of your scores with MSN Money's credit-score estimator.
You may be able to boost your scores by successfully disputing serious errors on your report, such as accounts that aren't yours or late payments that actually were made on time. Another tactic for quick score improvement: pay down credit card balances and use your cards lightly. The less of your credit limits you use at any given time the better. Using 30% or less of your credit limits is good; less than 10% is even better. Because balances are reported monthly, improvements in your scores should show up quickly. Read "7 fast fixes for your credit score" for more tips.
Get real about your equity. Refinancing to a different loan will be tough, if not impossible, without at least some positive gap between what your home is worth and what you owe. Home-value estimators such as Zillow, RealtyTrac and Domania can get you started, but you may get a more accurate figure by talking with several real-estate agents who are familiar with your neighborhood. If home prices are dropping in your area, understand that lender appraisals may be getting more conservative as well.
Start shopping. If you can refinance, your next step is deciding whether you should. You can research your options at FreeRateSearch.com, LendingTree.com and other sites.
What you should do next depends on the specifics of your situation.
If your current, fully indexed rate is significantly higher than the rate you could get with a no-cost refinance, mortgage expert Jack Guttentag recommends jumping to a new loan, assuming there's no prepayment penalty. (Guttentag's site, the Mortgage Professor, includes an article about whether to refinance an adjustable rate into a fixed-rate loan, as well as other information about refinancing.)
If the new rate isn't much better, though, and you can handle the bigger payment, you might just stick with the loan you have, Guttentag said.
"Ninety-nine percent of ARM borrowers approaching a rate reset face a rate increase," said Guttentag, "but it could be small, and if there is a prepayment penalty, it might not pay to refinance."
Detweiler, of FreeRateSearch.com, votes for fixing your rate if you can. She notes that rates, though higher, still are near generational lows, and she thinks the gap between fixed and adjustable rates isn't great enough to justify going with an adjustable loan's greater risk. That's true for folks with good credit as well as for those with troubled credit.
Here's an example. Someone who in September 2005 opted for a two-year hybrid mortgage for $250,000 and who had a credit score of 615 could have qualified for a loan with a payment of about $1,579 a month. In September 2007, the payment on his loan would be scheduled to rise to $1,906, a 21% increase.
Because rates have risen overall, jumping to another two-year loan wouldn't save much: less than $100 a month. Switching to a 30-year fixed rate would, by contrast, result in a payment of about $1,881 a month, just $60 more than the two-year hybrid.
Can't cope? Talk to a housing counselor. If you think you can't swallow a bigger payment and you have no equity in your home, Detweiler said, it's time to call for help. A HUD-approved housing counselor can discuss your options and offer budgeting assistance to see whether there's a way to handle the new payments.
If not, your last best hope may be selling the home before foreclosure. Read "Facing foreclosure? 9 options" and "Your lender doesn't want your house" to better understand your alternatives when you're facing default.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published July 26, 2007
E-mail me at RealtorChris@msn.com
Latest Market Update
July 26, 2007 -- 09:40 ET
By Liz Pulliam Weston
The young woman just wasn't getting it.
She called Consumer Credit Counseling Service of Nevada and Utah for help managing her family's mortgage payments. A year ago, a mortgage broker had persuaded her to refinance the family home, pull out all of the equity and invest the cash in a rental property. Now both mortgage payments had reset to much higher levels, with the interest rate on the rental jumping from 1% to more than 8%.
She couldn't afford either payment. Michele Johnson, the CEO of the counseling service, remembers the woman pressing for a way to keep her home, but there wasn't one. The problems were that:
Both properties had lost value as Las Vegas' real-estate bubble popped. The woman owed more on the homes than they were worth, so lenders wouldn't refinance the loans.
So-called rescue funds, set up by some states and some lenders to help victims of predatory lending, had far more applicants than funds, and they weren't available in her case anyway.
A bankruptcy filing, touted by attorneys in television ads as a way to "fight foreclosure," would just put off the inevitable.
The woman's only option for avoiding foreclosure was a short sale, in which she might persuade a lender to accept the sale proceeds from both properties and forgive the rest of her debt. But, Johnson said, the woman didn't want to hear that.
"People have this unrealistic viewpoint that 'this is my home; I'm not going to lose it.' It all becomes very emotional," Johnson said. "Listening to facts and figures is not what they want to hear. They want a rescue."
Don't delay If your loan is among the $1 trillion in mortgages scheduled for payment increases by the end of the year, ignorance and denial are not your friends. You need to take action, and the sooner the better:
If you've still got some equity in your home and the ability to handle a larger payment, you may be able to switch to a smarter loan.
If your situation isn't as rosy, quick action can contain the damage to your personal finances.
Here's your game plan.
Know where you stand. Dust off your mortgage documents, advises LendingTree.com chief economist Jim Svinth, and scour them for important information, such as:
When your payment is scheduled to adjust.
What benchmark the payment will be based upon (such as the LIBOR rate or the one-year Treasury).
What your margin is (this is what is added to the benchmark to determine your new rate).
What your caps are (many adjustable loans typically can increase no more than 2 percentage points in a year and 6 percentage points over the life of the loan, but check your documents to be sure).
You can find the most recent benchmark rates at HSH Associates' ARM index page. Once you know what your new interest rate is likely to be, you can use HSH's amortization calculator to determine what your new payment would be.
Math-challenged? You may be able to simply call and ask your lender or loan servicer, if they're not too busy handling all the folks who have already defaulted.
You also need to find out whether you would face a prepayment penalty for refinancing your loan. Prepayment penalties are unfortunately common on loans extended to people with troubled credit, and until they expire, they can make a refinance harder to justify financially.
Your future is tied to your past Get your credit reports and FICO credit scores. Your options will be dictated in large part by those scores, said credit and mortgage expert Gerri Detweiler of FreeRateSearch.com, particularly if you don't have much equity in your home or can't document your income with tax returns or other proof. You generally need a score of 700 or better to get the best rates and terms. If your scores are 660 or below, LendingTree.com's Svinth said, you'll face more scrutiny from lenders and have a tougher time getting a loan.
This is a big turnaround from a year ago, Svinth said, when lenders were falling over themselves to give no-down-payment and no-equity loans to borrowers with credit scores below 620 and income they couldn't or wouldn't prove.
"We've gotten back to basics," Svinth said. "Credit and collateral matter now."
Someone with credit scores in the 700s who is able to document his or her income and who wants a loan for 95% or less of the home's value "has plenty of options," Svinth said. "It's the ones with poor credit who want a 100% stated-income loan. . . . I'm not saying there are no options, but they're going to be expensive."
You can get your credit reports once a year for free from AnnualCreditReport.com, but scores are not free. To get FICO scores, which are the same scores mortgage lenders use, you'll need to pay about $50 at MyFico.com, the only site that sells FICOs for all three bureaus. Mortgage lenders typically base their decisions on the middle of the three scores, or the lower of the two middle scores when lending to a couple. You also can get an approximation of your scores with MSN Money's credit-score estimator.
You may be able to boost your scores by successfully disputing serious errors on your report, such as accounts that aren't yours or late payments that actually were made on time. Another tactic for quick score improvement: pay down credit card balances and use your cards lightly. The less of your credit limits you use at any given time the better. Using 30% or less of your credit limits is good; less than 10% is even better. Because balances are reported monthly, improvements in your scores should show up quickly. Read "7 fast fixes for your credit score" for more tips.
Get real about your equity. Refinancing to a different loan will be tough, if not impossible, without at least some positive gap between what your home is worth and what you owe. Home-value estimators such as Zillow, RealtyTrac and Domania can get you started, but you may get a more accurate figure by talking with several real-estate agents who are familiar with your neighborhood. If home prices are dropping in your area, understand that lender appraisals may be getting more conservative as well.
Start shopping. If you can refinance, your next step is deciding whether you should. You can research your options at FreeRateSearch.com, LendingTree.com and other sites.
What you should do next depends on the specifics of your situation.
If your current, fully indexed rate is significantly higher than the rate you could get with a no-cost refinance, mortgage expert Jack Guttentag recommends jumping to a new loan, assuming there's no prepayment penalty. (Guttentag's site, the Mortgage Professor, includes an article about whether to refinance an adjustable rate into a fixed-rate loan, as well as other information about refinancing.)
If the new rate isn't much better, though, and you can handle the bigger payment, you might just stick with the loan you have, Guttentag said.
"Ninety-nine percent of ARM borrowers approaching a rate reset face a rate increase," said Guttentag, "but it could be small, and if there is a prepayment penalty, it might not pay to refinance."
Detweiler, of FreeRateSearch.com, votes for fixing your rate if you can. She notes that rates, though higher, still are near generational lows, and she thinks the gap between fixed and adjustable rates isn't great enough to justify going with an adjustable loan's greater risk. That's true for folks with good credit as well as for those with troubled credit.
Here's an example. Someone who in September 2005 opted for a two-year hybrid mortgage for $250,000 and who had a credit score of 615 could have qualified for a loan with a payment of about $1,579 a month. In September 2007, the payment on his loan would be scheduled to rise to $1,906, a 21% increase.
Because rates have risen overall, jumping to another two-year loan wouldn't save much: less than $100 a month. Switching to a 30-year fixed rate would, by contrast, result in a payment of about $1,881 a month, just $60 more than the two-year hybrid.
Can't cope? Talk to a housing counselor. If you think you can't swallow a bigger payment and you have no equity in your home, Detweiler said, it's time to call for help. A HUD-approved housing counselor can discuss your options and offer budgeting assistance to see whether there's a way to handle the new payments.
If not, your last best hope may be selling the home before foreclosure. Read "Facing foreclosure? 9 options" and "Your lender doesn't want your house" to better understand your alternatives when you're facing default.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published July 26, 2007
E-mail me at RealtorChris@msn.com
Thursday, June 28, 2007
16 favorite money rules of thumb
Here they are, plain and simple. Follow these guidelines and your finances -- and nerves -- will be in pretty good shape.
By Liz Pulliam Weston
Sometimes, you just want an answer.
"Can I afford a new car?" "How much should I be saving for retirement?" "What's the best way to pay off debt?" "What's the right credit card for me?"
If you're a patient, detail-oriented type, you may be willing to sit still for an exhaustive lecture on any of the above subjects. If you're like most of us -- overworked, sleep deprived and in a hurry -- you'd rather skip the whole dreary "on the one hand this, on the other that" analysis.
So I've cut to the chase and compiled a list of my 16 favorite money rules of thumb.
These are, of course, just guidelines. By definition, rules of thumb aren't meant to be immutable laws or applicable in every situation. But hopefully these broad, easy-to-understand principals will at least give you a starting point for assessing what to do in your own financial situation.
Retirement, Part I: "Save 10% for basics, 15% for comfort, 20% to escape." This rule of thumb works pretty well if you start to save for retirement by your early 30s. Saving at least 10% of your income ensures you won't be eating pet food. Fifteen percent should get you a more comfortable living, while 20% gives you a shot at an early retirement (and yes, you get to count employer contributions as part of your percentage). Wait just a decade to start, though, and you'll need 15% for basics and 20% for comfort; an early retirement may not be in the cards. For a more customized estimate of how much you need to save, check out MSN Money's Retirement Planner.
Retirement, Part II: "Retirement money is for retirement; until then, keep your mitts off it." There's rarely a good reason to borrow against your retirement accounts, and almost never a reasonable excuse for cashing them out. Look elsewhere to find money to pay your debts or buy a home. Let your retirement money keep working for you undisturbed. Someday, you'll be glad you did.
Student loans: "Your total borrowing shouldn't exceed what you expect to make your first year out of school." Many graduates have learned to their chagrin that student lenders will gladly loan you far more money than you can comfortably repay. Students and parents need to put their own limits on how deeply they go into debt, or they could face a literal lifetime of student-loan payments. Read "How much college debt is too much?" for more details.
College savings: "Saving for retirement is more important, but try to put at least $25 a month per kid in a college savings plan." Your child can get student loans, but no one will lend you money for retirement. That's why retirement comes first. But contributing even a small amount each month will help reduce the amount of debt your child eventually incurs. Thanks to recent tax law changes and reductions in fees, 529 college-savings plans have emerged as the best way for most parents to save. To learn more, read "How Uncle Sam wants you to save for college."
Cars, Part I: "Buy used and drive it for at least 10 years." This one rule of thumb easily could save you tens of thousands of dollars over your lifetime compared with what you would pay buying cars new and owning them just five years. Not only will you buy half as many cars, but you'll avoid the 20% or so loss to depreciation that happens as soon as you drive a new car off the lot. Today's cars are better built and will last longer than ever before, so buying used isn't the gamble it used to be.
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Budget your way to freedomThe "B" word isn't a straitjacket on fun. Here's how to start your budget and how to find the leaks in your wallet.
Cars, Part II: "If you must borrow to buy a car, follow the 20/4/10 rule." Which means: Make a 20% down payment, don't borrow for more than four years and don't agree to a monthly payment that's more than 10% of your income -- or 8% if you plan to buy a home in the next few years. A substantial down payment ensures you'll have equity in your car when you drive off the lot -- which is important, since owing more on your car than its worth can leave you financially vulnerable if the vehicle is totaled or stolen. (Read "The real reason you're broke" and "Close the gap in your car insurance" for more details.) Limiting the loan term and monthly payment will keep you from overspending.
Cars, Part III: "To compute and compare the real monthly cost to buy, insure and operate a car, double the price tag and divide by 60." You can get more precise figures about how much a car will cost over five years by using Edmunds.com's "True Cost to Own" calculator. But this rule of thumb will help you determine if that car you think is affordable actually will be once all costs are factored in.
Credit cards: "If you carry a balance, look for the lowest rate. If you don't, get rewards at least equal to 1.5% of what you spend." Your primary goal if you carry credit card balances should be paying them off as quickly as possible. That means avoiding reward cards, which tend to have higher interest rates, in favor of the lowest-rate card for which you qualify, given your credit history. But if you already pay off your balances in full every month, you should look for cards that give you cash back or reward equal to 1.5% or more of your spending (read "People who charge everything" for more details). Sites like CardRatings.com and Bankrate.com can help you sort through the offers.
Debt repayment: "Pay off maxed-out cards first." When paying down credit card debt, the argument used to be between those who advocated paying the highest-rate card first (to save the most money) and those who argued for paying the smallest balance first (for a faster feeling of accomplishment that can motivate you to keep going). These days, though, you should first tackle any card that's close to its limit, since maxing out cards hurts your credit scores and can trigger penalty rates and fees.
Financial flexibility: "You need to be able to get your hands on cash or credit equal to three months' worth of expenses." Ideally, everybody would have at least three months' worth of expenses saved up in cash to serve as a cushion against job loss or other disasters. But saving that much money can take a while, as I wrote in "The $0 emergency fund," and many families have more important priorities to address first. Space on your credit cards and an unused home equity line of credit can be used as stand-ins for a real emergency fund until you can get around to saving the cash.
Insurance: "Cover yourself for catastrophic expenses, not the stuff you can cover out of pocket." Insurance isn't meant to cover the normal expenses of daily living, as I wrote in "3 costly myths about insurance." It's designed to bail you out when you face expenses so big they might otherwise wipe you out financially. That's why you want high limits on your policies -- but high deductibles, too.
Life insurance: "Those who need it typically need five to 10 times their income." Most people need to answer only two questions about insurance: "Do I need it?" and, if the answer is yes, "How much do I need?" You probably need life insurance if other people are financially dependent on you. You probably don't if you're single or your kids are grown. If you do need life insurance, the most important thing is to buy enough. Term or "pure" insurance is usually the way to go, since insurance that includes an investment component can be as much as 10 times more costly -- busting most families' budgets. The five- to 10-times-income rule is a pretty broad guideline, so you'll want to use MSN Money's Life Insurance Needs Estimator for a more precise fix.
Mortgages, Part I. "If you can't afford to buy the house using a 30-year fixed-rate mortgage, you can't afford the house." There are good reasons for choosing less traditional loans, but buying a house you couldn't otherwise afford isn't one of them. Too many people today are facing foreclosure because they used an adjustable or interest-only loan to buy too much house for their means. Read "Who's at most risk for foreclosure?" for the grim details.
Mortgages, Part II. "Fix the rate for at least as long as you plan to be in the home." Lenders, brokers or real-estate agents may tout the low, low payments of adjustable-rate loans, but sooner or later those payments will jump -- sometimes substantially. Protect your family and your investment by opting for a loan with a fixed-rate period that matches how long you expect to live there. If you're sure you'll move in five years, for example, a five-year hybrid is a good option. If you think you'll stay put for 10 years or more, you might just go for the certainty of the 30-year fixed.
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Mortgages, Part III: "You almost certainly have better things to do with your money than prepay a low-rate, deductible mortgage." People get excited about how much interest they can save by making extra mortgage payments. What they don't realize is that they can get a much better return elsewhere. Don't consider prepaying your mortgage until you're taking full advantage of your retirement savings options and have paid off all your other debt. Read "Don't rush to pay off that mortgage" for more details.
Priorities: "Retirement, then credit cards, then emergency fund." Your highest priority, typically, should be saving for retirement, since every dollar you fail to save today could cost you $10 or more in lost retirement income. (The younger you are, the more you'll lose by not tucking money away now.) Also, opportunities to get a 401(k) match or to fund an IRA or Roth IRA are typically "use it or lose it" propositions. Dispatching credit card debt should be your next highest priority, since it's probably accumulating at double-digit interest rates and reducing your financial flexibility (see above). Finally, an emergency fund equal to three to six months' worth of expenses can be a bulwark against the inevitable setbacks life sends us -- job loss, disability, illness, accidents, natural disasters. Having a pile of cash in a high-rate savings account can also do wonders for reducing your money anxieties.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published June 28, 2007
E-mail me at RealtorChris@msn.com
By Liz Pulliam Weston
Sometimes, you just want an answer.
"Can I afford a new car?" "How much should I be saving for retirement?" "What's the best way to pay off debt?" "What's the right credit card for me?"
If you're a patient, detail-oriented type, you may be willing to sit still for an exhaustive lecture on any of the above subjects. If you're like most of us -- overworked, sleep deprived and in a hurry -- you'd rather skip the whole dreary "on the one hand this, on the other that" analysis.
So I've cut to the chase and compiled a list of my 16 favorite money rules of thumb.
These are, of course, just guidelines. By definition, rules of thumb aren't meant to be immutable laws or applicable in every situation. But hopefully these broad, easy-to-understand principals will at least give you a starting point for assessing what to do in your own financial situation.
Retirement, Part I: "Save 10% for basics, 15% for comfort, 20% to escape." This rule of thumb works pretty well if you start to save for retirement by your early 30s. Saving at least 10% of your income ensures you won't be eating pet food. Fifteen percent should get you a more comfortable living, while 20% gives you a shot at an early retirement (and yes, you get to count employer contributions as part of your percentage). Wait just a decade to start, though, and you'll need 15% for basics and 20% for comfort; an early retirement may not be in the cards. For a more customized estimate of how much you need to save, check out MSN Money's Retirement Planner.
Retirement, Part II: "Retirement money is for retirement; until then, keep your mitts off it." There's rarely a good reason to borrow against your retirement accounts, and almost never a reasonable excuse for cashing them out. Look elsewhere to find money to pay your debts or buy a home. Let your retirement money keep working for you undisturbed. Someday, you'll be glad you did.
Student loans: "Your total borrowing shouldn't exceed what you expect to make your first year out of school." Many graduates have learned to their chagrin that student lenders will gladly loan you far more money than you can comfortably repay. Students and parents need to put their own limits on how deeply they go into debt, or they could face a literal lifetime of student-loan payments. Read "How much college debt is too much?" for more details.
College savings: "Saving for retirement is more important, but try to put at least $25 a month per kid in a college savings plan." Your child can get student loans, but no one will lend you money for retirement. That's why retirement comes first. But contributing even a small amount each month will help reduce the amount of debt your child eventually incurs. Thanks to recent tax law changes and reductions in fees, 529 college-savings plans have emerged as the best way for most parents to save. To learn more, read "How Uncle Sam wants you to save for college."
Cars, Part I: "Buy used and drive it for at least 10 years." This one rule of thumb easily could save you tens of thousands of dollars over your lifetime compared with what you would pay buying cars new and owning them just five years. Not only will you buy half as many cars, but you'll avoid the 20% or so loss to depreciation that happens as soon as you drive a new car off the lot. Today's cars are better built and will last longer than ever before, so buying used isn't the gamble it used to be.
Video on MSN Money
Budget your way to freedomThe "B" word isn't a straitjacket on fun. Here's how to start your budget and how to find the leaks in your wallet.
Cars, Part II: "If you must borrow to buy a car, follow the 20/4/10 rule." Which means: Make a 20% down payment, don't borrow for more than four years and don't agree to a monthly payment that's more than 10% of your income -- or 8% if you plan to buy a home in the next few years. A substantial down payment ensures you'll have equity in your car when you drive off the lot -- which is important, since owing more on your car than its worth can leave you financially vulnerable if the vehicle is totaled or stolen. (Read "The real reason you're broke" and "Close the gap in your car insurance" for more details.) Limiting the loan term and monthly payment will keep you from overspending.
Cars, Part III: "To compute and compare the real monthly cost to buy, insure and operate a car, double the price tag and divide by 60." You can get more precise figures about how much a car will cost over five years by using Edmunds.com's "True Cost to Own" calculator. But this rule of thumb will help you determine if that car you think is affordable actually will be once all costs are factored in.
Credit cards: "If you carry a balance, look for the lowest rate. If you don't, get rewards at least equal to 1.5% of what you spend." Your primary goal if you carry credit card balances should be paying them off as quickly as possible. That means avoiding reward cards, which tend to have higher interest rates, in favor of the lowest-rate card for which you qualify, given your credit history. But if you already pay off your balances in full every month, you should look for cards that give you cash back or reward equal to 1.5% or more of your spending (read "People who charge everything" for more details). Sites like CardRatings.com and Bankrate.com can help you sort through the offers.
Debt repayment: "Pay off maxed-out cards first." When paying down credit card debt, the argument used to be between those who advocated paying the highest-rate card first (to save the most money) and those who argued for paying the smallest balance first (for a faster feeling of accomplishment that can motivate you to keep going). These days, though, you should first tackle any card that's close to its limit, since maxing out cards hurts your credit scores and can trigger penalty rates and fees.
Financial flexibility: "You need to be able to get your hands on cash or credit equal to three months' worth of expenses." Ideally, everybody would have at least three months' worth of expenses saved up in cash to serve as a cushion against job loss or other disasters. But saving that much money can take a while, as I wrote in "The $0 emergency fund," and many families have more important priorities to address first. Space on your credit cards and an unused home equity line of credit can be used as stand-ins for a real emergency fund until you can get around to saving the cash.
Insurance: "Cover yourself for catastrophic expenses, not the stuff you can cover out of pocket." Insurance isn't meant to cover the normal expenses of daily living, as I wrote in "3 costly myths about insurance." It's designed to bail you out when you face expenses so big they might otherwise wipe you out financially. That's why you want high limits on your policies -- but high deductibles, too.
Life insurance: "Those who need it typically need five to 10 times their income." Most people need to answer only two questions about insurance: "Do I need it?" and, if the answer is yes, "How much do I need?" You probably need life insurance if other people are financially dependent on you. You probably don't if you're single or your kids are grown. If you do need life insurance, the most important thing is to buy enough. Term or "pure" insurance is usually the way to go, since insurance that includes an investment component can be as much as 10 times more costly -- busting most families' budgets. The five- to 10-times-income rule is a pretty broad guideline, so you'll want to use MSN Money's Life Insurance Needs Estimator for a more precise fix.
Mortgages, Part I. "If you can't afford to buy the house using a 30-year fixed-rate mortgage, you can't afford the house." There are good reasons for choosing less traditional loans, but buying a house you couldn't otherwise afford isn't one of them. Too many people today are facing foreclosure because they used an adjustable or interest-only loan to buy too much house for their means. Read "Who's at most risk for foreclosure?" for the grim details.
Mortgages, Part II. "Fix the rate for at least as long as you plan to be in the home." Lenders, brokers or real-estate agents may tout the low, low payments of adjustable-rate loans, but sooner or later those payments will jump -- sometimes substantially. Protect your family and your investment by opting for a loan with a fixed-rate period that matches how long you expect to live there. If you're sure you'll move in five years, for example, a five-year hybrid is a good option. If you think you'll stay put for 10 years or more, you might just go for the certainty of the 30-year fixed.
Video on MSN Money
Budget your way to freedomThe "B" word isn't a straitjacket on fun. Here's how to start your budget and how to find the leaks in your wallet.
Mortgages, Part III: "You almost certainly have better things to do with your money than prepay a low-rate, deductible mortgage." People get excited about how much interest they can save by making extra mortgage payments. What they don't realize is that they can get a much better return elsewhere. Don't consider prepaying your mortgage until you're taking full advantage of your retirement savings options and have paid off all your other debt. Read "Don't rush to pay off that mortgage" for more details.
Priorities: "Retirement, then credit cards, then emergency fund." Your highest priority, typically, should be saving for retirement, since every dollar you fail to save today could cost you $10 or more in lost retirement income. (The younger you are, the more you'll lose by not tucking money away now.) Also, opportunities to get a 401(k) match or to fund an IRA or Roth IRA are typically "use it or lose it" propositions. Dispatching credit card debt should be your next highest priority, since it's probably accumulating at double-digit interest rates and reducing your financial flexibility (see above). Finally, an emergency fund equal to three to six months' worth of expenses can be a bulwark against the inevitable setbacks life sends us -- job loss, disability, illness, accidents, natural disasters. Having a pile of cash in a high-rate savings account can also do wonders for reducing your money anxieties.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published June 28, 2007
E-mail me at RealtorChris@msn.com
Wednesday, June 13, 2007
Thursday, May 10, 2007
3 bad reasons to buy a home
Yes, we've all heard the reasons that everyone will benefit from homeownership. Here's why that's not necessarily so.
By Liz Pulliam Weston
Fear stampeded a lot of people into buying a home during the recent real estate boom. Now we're seeing the even more fearsome fallout.
People who were terrified about being priced out of the real estate market are now horrified by their ever-rising mortgage payments. People who were afraid of missing out on the "easy money" of home-price appreciation are now anxiously realizing that what goes up can also come down.
Foreclosures are spiking. Sales and prices are stalling. Lenders are finally tightening up ridiculously loose lending standards, just at the point where many people are realizing they can't afford the mortgage they have and desperately need a new one.
Despite all of this, I still hear from people who are pressuring themselves into buying a house even when it's not something they necessarily want or need.
It's a fact that homeownership is a great way for most people to build wealth over time. But that doesn't mean everyone should be a homeowner. It's a bigger commitment and more expensive than most first-time buyers ever realize. You should have a clear idea of what you're getting into before you commit to 30 years of payments -- and you shouldn't let any of the following popular legends guide your decision.
'It's a good investment' Sometimes yes, sometimes no.
Nationally, home prices rose 50% between 2000 and 2005, and in more than 30 cities -- including San Diego, Los Angeles, Miami and Washington, D.C. -- prices doubled.
But that's not the norm. In the 30 prior years, from 1969 to 1999, the average appreciation for homes exceeded the inflation rate by a little more than 1 percentage point. Compare that to stocks, which bested inflation by 7 percentage points in the same period.
And appreciation isn't a given, as homeowners in Detroit, Santa Barbara, Calif., and Kokomo, Ind., are learning.
So far, the price declines have been pretty mild. Let's hope we don't see a repeat of the real estate recessions that gripped Boston, Dallas, Houston, Anchorage and Southern California in the 1980s and 1990s.
After dropping more than 20% in the 1990s, for example, Los Angeles home prices took almost 10 years to regain their peak, says real estate expert John Karevoll, an analyst with DataQuick Information Systems. Anyone who lived here during that time knows people who were upside down -- owing a bigger mortgage than the home could be sold for. Thousands of people simply walked away from houses they couldn't sell, trashing their credit ratings in the process. Lenders slashed the prices on foreclosed homes to get rid of their burgeoning inventories, which further drove down property values. It was an ugly cycle that, once started, was hard to stop.
Even when prices are perking along normally, though, your home may benefit your bottom line less than you think. Home-price appreciation figures don't take into account the considerable amounts homeowners shell out along the way. The Wall Street Journal once estimated a typical homeowner over 30 years would pay nearly four times the house's purchase price in maintenance, repairs and improvements.
A home is primarily a place to live. Its value as an investment is secondary and certainly is no replacement for a well-diversified portfolio of stocks and bonds.
'I'm tired of throwing away money on rent' Normally, renting is cheaper than owning. But in some cities, soaring real estate prices have made renting so much cheaper that it's getting really tough to make the case for becoming a homeowner.
For many people, the choice is between renting an affordable place in a good neighborhood and straining to buy either a less desirable place or one that requires a tortuous commute.
Video on MSN Money
Buy your first home in a year
If you're thinking of buying your first home, it helps to have a game plan. Liz Pulliam Weston gives us a practical, one-year plan to making your dream come true.
And as we're seeing, many people stretched themselves way too far to buy houses. They opted for adjustable mortgages or loans with exotic terms; what initially seemed like reasonable payments suddenly spiked, throwing financial lives into chaos and contributing to the current high delinquency rate.
You're not really throwing money away when you send a check to your landlord, anyway. You're exchanging it for a place to live. You're also getting flexibility and freedom -- things you sacrifice when you buy a home.
When you're a renter, it's the landlord, not you, who is generally responsible for maintenance, repairs and the toilet that blows up in the middle of the night. If the neighborhood should start to slide, or you get or lose a job, you can up and move, often with just a few weeks' notice.
It's true that you may have to deal with rising rents and recalcitrant landlords. Homeowners, however, are often stuck with rising taxes and maintenance costs, as well as recalcitrant neighbors.
Moving is never fun, but moving when you own a home is an expensive, time-consuming process. Finding a buyer can take months in all but the hottest markets, and you should figure selling costs will eat up about 10% of your home's value, once you add agent commissions and moving expenses. On a $250,000 home sale, that's like piling up $25,000 in cash and setting fire to it -- that much of your equity is gone for good.
In other words, homeownership is more like marriage; renting is more like living together. Make sure you're ready to be wedded to a house before you propose to leave behind life as a renter.
'I need the tax deduction' Buying a house just for the mortgage break would be like giving somebody a buck just to get 35 cents or less in return.
That's because your write-off is limited to your tax bracket. If you're in the top federal tax bracket, every dollar you pay in mortgage interest only saves you 35 cents in taxes. Most people get even less, since they're in the 25% or lower tax brackets.
Don't misunderstand -- the tax break is nice, and you need somewhere to live. But you should make sure you can really afford to own a home before you take the plunge.
Remember that many of the real costs of owning a home aren't deductible. Uncle Sam won't give you a break for insurance, repairs or maintenance, for example -- and those costs can really add up.
Most homeowners should plan to spend at least 1% of their home's purchase price each year on maintenance and repairs, says finance expert Eric Tyson -- and more if they plan to hire someone else to do all the work. Tyson, a co-author of "Home Buying for Dummies," recommends setting aside some money each month in an emergency fund. You may not spend the whole amount every year, but sooner or later a big expense will come along -- a new furnace or roof, for instance -- that will consume several years' worth of savings.
If you fail to maintain your home properly, you'll pay even more when it comes time to sell. Many buyers won't even bid on a property that shows significant neglect. Even in hot markets, buyers are likely to ask for expensive concessions to pay for the repairs you should have been doing all along.
The key tests The best advice on the issue of whether to buy remains the time-tested version: Do it when it's right for you. That means being able to agree to all the following statements:
I plan to stay put for at least three years. If the real estate market in your area is weak, you may need even longer for price appreciation to offset the costs of selling and moving.
Video on MSN Money
Buy your first home in a year
If you're thinking of buying your first home, it helps to have a game plan. Liz Pulliam Weston gives us a practical, one-year plan to making your dream come true.
I can swing all the costs involved. That requires, most importantly, having enough cash for a decent down payment (which in today's lending environment may mean at least 5% of the purchase price). I'm also a fan of using good, old-fashioned fixed-rate mortgages -- either the 30-year variety or hybrid loans that are fixed for as long as you plan to remain in the house.
If you can't swing the payments with one of those loans, you probably can't afford the place. (If you are contemplating a less traditional loan, make sure you find out how high the payments can go and determine whether you could afford to pay them.) Then make sure you can afford all the incidental costs, including taxes, insurance, homeownership association dues and assessments, repairs and maintenance. It's not a bad idea to limit your total housing outlay to 25% or 30% of your gross income, especially if you want to have money left over to save for retirement, fund your children's college educations and take the occasional vacation.
I want to be a homeowner. Houses are expensive and complicated to buy, finance and maintain. Appreciation is far from a given. If you don't have a strong desire to own your own walls, and do what it takes to keep them in good shape, you're probably better off remaining a renter -- at least for now.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published May 10, 2007
By Liz Pulliam Weston
Fear stampeded a lot of people into buying a home during the recent real estate boom. Now we're seeing the even more fearsome fallout.
People who were terrified about being priced out of the real estate market are now horrified by their ever-rising mortgage payments. People who were afraid of missing out on the "easy money" of home-price appreciation are now anxiously realizing that what goes up can also come down.
Foreclosures are spiking. Sales and prices are stalling. Lenders are finally tightening up ridiculously loose lending standards, just at the point where many people are realizing they can't afford the mortgage they have and desperately need a new one.
Despite all of this, I still hear from people who are pressuring themselves into buying a house even when it's not something they necessarily want or need.
It's a fact that homeownership is a great way for most people to build wealth over time. But that doesn't mean everyone should be a homeowner. It's a bigger commitment and more expensive than most first-time buyers ever realize. You should have a clear idea of what you're getting into before you commit to 30 years of payments -- and you shouldn't let any of the following popular legends guide your decision.
'It's a good investment' Sometimes yes, sometimes no.
Nationally, home prices rose 50% between 2000 and 2005, and in more than 30 cities -- including San Diego, Los Angeles, Miami and Washington, D.C. -- prices doubled.
But that's not the norm. In the 30 prior years, from 1969 to 1999, the average appreciation for homes exceeded the inflation rate by a little more than 1 percentage point. Compare that to stocks, which bested inflation by 7 percentage points in the same period.
And appreciation isn't a given, as homeowners in Detroit, Santa Barbara, Calif., and Kokomo, Ind., are learning.
So far, the price declines have been pretty mild. Let's hope we don't see a repeat of the real estate recessions that gripped Boston, Dallas, Houston, Anchorage and Southern California in the 1980s and 1990s.
After dropping more than 20% in the 1990s, for example, Los Angeles home prices took almost 10 years to regain their peak, says real estate expert John Karevoll, an analyst with DataQuick Information Systems. Anyone who lived here during that time knows people who were upside down -- owing a bigger mortgage than the home could be sold for. Thousands of people simply walked away from houses they couldn't sell, trashing their credit ratings in the process. Lenders slashed the prices on foreclosed homes to get rid of their burgeoning inventories, which further drove down property values. It was an ugly cycle that, once started, was hard to stop.
Even when prices are perking along normally, though, your home may benefit your bottom line less than you think. Home-price appreciation figures don't take into account the considerable amounts homeowners shell out along the way. The Wall Street Journal once estimated a typical homeowner over 30 years would pay nearly four times the house's purchase price in maintenance, repairs and improvements.
A home is primarily a place to live. Its value as an investment is secondary and certainly is no replacement for a well-diversified portfolio of stocks and bonds.
'I'm tired of throwing away money on rent' Normally, renting is cheaper than owning. But in some cities, soaring real estate prices have made renting so much cheaper that it's getting really tough to make the case for becoming a homeowner.
For many people, the choice is between renting an affordable place in a good neighborhood and straining to buy either a less desirable place or one that requires a tortuous commute.
Video on MSN Money
Buy your first home in a year
If you're thinking of buying your first home, it helps to have a game plan. Liz Pulliam Weston gives us a practical, one-year plan to making your dream come true.
And as we're seeing, many people stretched themselves way too far to buy houses. They opted for adjustable mortgages or loans with exotic terms; what initially seemed like reasonable payments suddenly spiked, throwing financial lives into chaos and contributing to the current high delinquency rate.
You're not really throwing money away when you send a check to your landlord, anyway. You're exchanging it for a place to live. You're also getting flexibility and freedom -- things you sacrifice when you buy a home.
When you're a renter, it's the landlord, not you, who is generally responsible for maintenance, repairs and the toilet that blows up in the middle of the night. If the neighborhood should start to slide, or you get or lose a job, you can up and move, often with just a few weeks' notice.
It's true that you may have to deal with rising rents and recalcitrant landlords. Homeowners, however, are often stuck with rising taxes and maintenance costs, as well as recalcitrant neighbors.
Moving is never fun, but moving when you own a home is an expensive, time-consuming process. Finding a buyer can take months in all but the hottest markets, and you should figure selling costs will eat up about 10% of your home's value, once you add agent commissions and moving expenses. On a $250,000 home sale, that's like piling up $25,000 in cash and setting fire to it -- that much of your equity is gone for good.
In other words, homeownership is more like marriage; renting is more like living together. Make sure you're ready to be wedded to a house before you propose to leave behind life as a renter.
'I need the tax deduction' Buying a house just for the mortgage break would be like giving somebody a buck just to get 35 cents or less in return.
That's because your write-off is limited to your tax bracket. If you're in the top federal tax bracket, every dollar you pay in mortgage interest only saves you 35 cents in taxes. Most people get even less, since they're in the 25% or lower tax brackets.
Don't misunderstand -- the tax break is nice, and you need somewhere to live. But you should make sure you can really afford to own a home before you take the plunge.
Remember that many of the real costs of owning a home aren't deductible. Uncle Sam won't give you a break for insurance, repairs or maintenance, for example -- and those costs can really add up.
Most homeowners should plan to spend at least 1% of their home's purchase price each year on maintenance and repairs, says finance expert Eric Tyson -- and more if they plan to hire someone else to do all the work. Tyson, a co-author of "Home Buying for Dummies," recommends setting aside some money each month in an emergency fund. You may not spend the whole amount every year, but sooner or later a big expense will come along -- a new furnace or roof, for instance -- that will consume several years' worth of savings.
If you fail to maintain your home properly, you'll pay even more when it comes time to sell. Many buyers won't even bid on a property that shows significant neglect. Even in hot markets, buyers are likely to ask for expensive concessions to pay for the repairs you should have been doing all along.
The key tests The best advice on the issue of whether to buy remains the time-tested version: Do it when it's right for you. That means being able to agree to all the following statements:
I plan to stay put for at least three years. If the real estate market in your area is weak, you may need even longer for price appreciation to offset the costs of selling and moving.
Video on MSN Money
Buy your first home in a year
If you're thinking of buying your first home, it helps to have a game plan. Liz Pulliam Weston gives us a practical, one-year plan to making your dream come true.
I can swing all the costs involved. That requires, most importantly, having enough cash for a decent down payment (which in today's lending environment may mean at least 5% of the purchase price). I'm also a fan of using good, old-fashioned fixed-rate mortgages -- either the 30-year variety or hybrid loans that are fixed for as long as you plan to remain in the house.
If you can't swing the payments with one of those loans, you probably can't afford the place. (If you are contemplating a less traditional loan, make sure you find out how high the payments can go and determine whether you could afford to pay them.) Then make sure you can afford all the incidental costs, including taxes, insurance, homeownership association dues and assessments, repairs and maintenance. It's not a bad idea to limit your total housing outlay to 25% or 30% of your gross income, especially if you want to have money left over to save for retirement, fund your children's college educations and take the occasional vacation.
I want to be a homeowner. Houses are expensive and complicated to buy, finance and maintain. Appreciation is far from a given. If you don't have a strong desire to own your own walls, and do what it takes to keep them in good shape, you're probably better off remaining a renter -- at least for now.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published May 10, 2007
Thursday, January 11, 2007
My Tulsa House
The Most Critical Questions to Ask Any Agent Before Listing:
How many homes have you sold in the last year, not your company or your office, but you personally? (Hint: If they have not sold at least 30 homes ever, their experience may not be at the level that would provide a superior advantage to you.)
How long have you been an active, working agent? Not just licensed or in the real estate business, but how long have you actually been selling in our market? ( Hint: If they have not been in our market for 15 years or more, they missed some of the cyclical ups and downs that have defined values. Not to mention the sheer transaction experience needed to benefit you.)
Do you have a 24 hour call system that provides information to buyers at any time, 24 hours a day? (Having a 24 hour call system is vital. Consider going no further if one is not part of the agent's marketing.
Do you know the difference between passive selling and aggressive marketing? (Hint: Don’t say a word. Wait and see if they truly have an explanation or even know that there is a difference. If not, consider choosing someone else.)
Do you have an aggressive market plan into which you invest your personal dollars? (Hint: Most real estate companies provide such generic marketing, that if the agent doesn't supplement it, your promotions remain limited.)
How does your marketing benefit your sellers directly? (Hint: The largest part of most marketing plans benefits you only indirectly. The same marketing efforts can provide a direct benefit to you if handled properly.)
What sort of guarantee do you offer? (Hint: Aren't warranties offered for nearly every service or product that you purchase? Why should real estate service be any different? Expect an iron clad guarantee of performance or else. The “or else” is the teeth of the guarantee.)
Do you test your marketing techniques for results? (Hint: If your agent does not know where his best results come from, how can you be sure the best marketing techniques are being used. Not just assumptions or company statistics, but real monitoring of your marketing to determine what is best for you, the seller!)
What Internet marketing is done for my home, for you as an agent and for your company? (Hint: Marketing on the Internet is vital in today’s environment. If the company and agent does not have a strong Web presence, you will be at a disadvantage.)
How do you have access to incoming transferees and new employees? (Hint: There are 4 companies in Tulsa that dominate the relocation business and they may not be who you think. Find out more!)
These are direct questions that you should ask your next potential agent, and he or she should be able to answer them. Don't just list your home because you like someone or a Realtor sent you something in the mail. Your home is your largest asset. List it with someone with a track record for sales; someone who sells homes and doesn't just list them!
PLEASE CALL ME TO COMPARE!
Chris Martin 918-645-2158
Coldwell Banker RaderGroup, Realtors
How many homes have you sold in the last year, not your company or your office, but you personally? (Hint: If they have not sold at least 30 homes ever, their experience may not be at the level that would provide a superior advantage to you.)
How long have you been an active, working agent? Not just licensed or in the real estate business, but how long have you actually been selling in our market? ( Hint: If they have not been in our market for 15 years or more, they missed some of the cyclical ups and downs that have defined values. Not to mention the sheer transaction experience needed to benefit you.)
Do you have a 24 hour call system that provides information to buyers at any time, 24 hours a day? (Having a 24 hour call system is vital. Consider going no further if one is not part of the agent's marketing.
Do you know the difference between passive selling and aggressive marketing? (Hint: Don’t say a word. Wait and see if they truly have an explanation or even know that there is a difference. If not, consider choosing someone else.)
Do you have an aggressive market plan into which you invest your personal dollars? (Hint: Most real estate companies provide such generic marketing, that if the agent doesn't supplement it, your promotions remain limited.)
How does your marketing benefit your sellers directly? (Hint: The largest part of most marketing plans benefits you only indirectly. The same marketing efforts can provide a direct benefit to you if handled properly.)
What sort of guarantee do you offer? (Hint: Aren't warranties offered for nearly every service or product that you purchase? Why should real estate service be any different? Expect an iron clad guarantee of performance or else. The “or else” is the teeth of the guarantee.)
Do you test your marketing techniques for results? (Hint: If your agent does not know where his best results come from, how can you be sure the best marketing techniques are being used. Not just assumptions or company statistics, but real monitoring of your marketing to determine what is best for you, the seller!)
What Internet marketing is done for my home, for you as an agent and for your company? (Hint: Marketing on the Internet is vital in today’s environment. If the company and agent does not have a strong Web presence, you will be at a disadvantage.)
How do you have access to incoming transferees and new employees? (Hint: There are 4 companies in Tulsa that dominate the relocation business and they may not be who you think. Find out more!)
These are direct questions that you should ask your next potential agent, and he or she should be able to answer them. Don't just list your home because you like someone or a Realtor sent you something in the mail. Your home is your largest asset. List it with someone with a track record for sales; someone who sells homes and doesn't just list them!
PLEASE CALL ME TO COMPARE!
Chris Martin 918-645-2158
Coldwell Banker RaderGroup, Realtors
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