How To Use Comparable Sales To Price Your Home.

Before you put your home up for sale, use the right comparable sales to find the perfect price.

How much can you sell your home for? Probably about as much as the neighbors got, as long as the neighbors sold their house in recent memory and their home was just like your home.

Knowing how much homes similar to yours, called comparable sales (or in real estate lingo, comps), sold for gives you the best idea of the current estimated value of your home. The trick is finding sales that closely match yours.

What makes a good comparable sale?

Your best comparable sale is the same model as your house in the same subdivision-and it closed escrow last week. If you can't find that, here are other factors that count:


Location: The closer to your house the better, but don't just use any comparable sale within a mile radius. A good comparable sale is a house in your neighborhood, your subdivision, on the same type of street as your house, and in your school district.


Home type: Try to find comparable sales that are like your home in style, construction material, square footage, number of bedrooms and baths, basement (having one and whether it's finished), finishes, and yard size.


Amenities and Upgrades: Is the kitchen new? Does the comparable sale house have full A/C? Is there crown molding, a deck, or a pool? Does your community have the same amenities (pool, workout room, walking trails, etc.) and homeowners association fees?


Date of Sale: You may want to use a comparable sale from two years ago when the market was high, but that won't fly. Most buyers use government-guaranteed mortgages, and those lending programs say comparable sales can be no older than 90 days.


Sales Sweeteners: Did the comparable-sale sellers give the buyers downpayment assistance, closing costs, or a free television? You have to reduce the value of any comparable sale to account for any deal sweeteners.

Agents can help adjust price based on insider insights

Even if you live in a subdivision, your home will always be different from your neighbors'. Evaluating those differences-like the fact that your home has one more bedroom than the comparables or a basement office-is one of the ways real estate agents add value.

An active agent has been inside a lot of homes in your neighborhood and knows all sorts of details about comparable sales. She has read the comments the selling agent put into the MLS, seen the ugly wallpaper, and heard what other REALTORS, lenders, closing agents, and appraisers said about the comparable sale.

More ways to pick a home listing price

If you're still having trouble picking out a listing price for your home, look at the current competition. Ask your real estate agent to be honest about your home and the other homes on the market (and then listen to her without taking the criticism personally).

Next, put your comparable sales into two piles: more expensive and less expensive. What makes your home more valuable than the cheaper comparable sales and less valuable than the pricier comparable sales?

Are foreclosures and short sales comparables?

If one or more of your comparable sales was a foreclosed home or a short sale (a home that sold for less money than the owners owed on the mortgage), ask your real estate agent how to treat those comps.


A foreclosed home is usually in poor condition because owners who can't pay their mortgage can't afford to pay for upkeep. Your home is in great shape, so the foreclosure should be priced lower than your home.


Short sales are typically in good condition, although they are still distressed sales. The owners usually have to sell because they're divorcing, or their employer is moving them to Kansas.

How much short sales are discounted from their market value varies among local markets. The average short-sale home in Omaha in recent years was discounted by 8.5%, according to a University of Nebraska at Omaha study. In suburban Washington, D.C., sellers typically discount short-sale homes by 3% to 5% to get them quickly sold, real estate agents report. In other markets, sellers price short sales the same as other homes in the neighborhood.

So you have to rely on your REALTOR'S knowledge of the local market to use a short sale as a comparable sale.

Chip Plumley can be reached at (610) 444-9090 or (610) 357-8635. Prudential Fox & Roach is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.

ChipPlumley.com

7 Homeowner Tax Advantages

When you're evaluating how much home you can afford, make sure you factor in the tax advantages of homeownership.

Owning your home not only allows you to build wealth through appreciation, but it can also reduce the amount of income tax you pay every year.

Here are seven tax benefits for homeowners.

1. Homebuyer tax credits

If you purchased your first home before April 30, 2010, you're entitled to a tax credit of up to $8,000. If you owned a home, but sold it to purchase another home before April 30, 2010, you're eligible for a federal tax credit of up to $6,500.

2. Deductions for loan fees

Typically, you can deduct the "prepaid interest" you paid when you got your mortgage loan. That includes points, loan origination fees, and loan discount fees listed on your settlement statement, even if the seller paid those fees for you. Each time you refinance your home, you can deduct prepaid interest fees.

However, you must meet certain requirements to take the prepaid interest deductions when you purchase or refinance your home. Check with your accountant to be sure you're following the rules.

3. Property tax deductions

In the year you purchase your home, you're entitled to deduct the real estate taxes you paid at the closing table. You can continue to deduct the property taxes you pay each year.

4. The mortgage interest deduction

Every year, you can deduct the amount of interest and late charges you pay on your mortgage and home equity loans, though there are limitations. If you're required to purchase private mortgage insurance (PMI) because you made a downpayment of less than 20% on your home, you can also deduct those premiums as mortgage interest expenses.

5. Home office expenses

If you have a home office you use only for business, you may be eligible to deduct the prorated costs of your mortgage, insurance, and other expenses related to that space. The government scrutinizes home-office deductions closely. Be sure you're entitled to the deductions before claiming them.

6. The costs of selling your home

In the year you sell your home, you can deduct the costs of selling it, including real estate commissions, title insurance, legal fees, advertising, administrative costs, and inspection fees. You can also deduct decorating or repair costs you incur in the 90 days before you sell your home.

7. The gain on your home

If you lived in your home for at least two of the previous five years before you sell it, the government lets you to take up to $250,000 of profit on the sale of your home tax free. That amount is doubled for married couples. This deduction isn't available on rental or second homes.

The government also allows you to subtract from your home sale profit any amounts you spend on improvements, such as window replacement, siding, or a kitchen remodel. Those deductions are in addition to the tax credits you can receive in 2010 for making energy-saving upgrades. Money invested for routine maintenance and repairs doesn't count.

Chip Plumley can be reached at (610) 444-9090 or (610) 357-8635. Prudential Fox & Roach is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.

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5 Tips for Deciphering Your Home Loan's Good Faith Estimate.

Knowing how to read your good-faith estimate can help you save money on your home loan.

When you're shopping for a mortgage loan, it's sometimes hard to understand the jargon lenders use in the good-faith estimate explaining the costs and fees you'll pay when taking out a mortgage.

When you apply for a mortgage, the lender has three days to give you a good-faith estimate of the fees and interest rate you'll pay, as well as other loan terms. Here are five tips for using the new three-page form to your advantage.

When you apply for a mortgage, the lender has three days to give you a good-faith estimate of the fees and interest rate you'll pay, as well as other loan terms. Here are five tips for using the new three-page form to your advantage.

1. Know which fees can increase and by how much

In the past, lenders provided an estimate of the costs involved in getting your home loan, and if those costs rose by the time you closed on your home, tough luck. The good-faith estimate shows some fees the lender can't change, like the loan origination fee that you pay to get a certain interest rate (commonly called points) and transfer costs.

The form also lists the charges that can increase by up to 10%, like some title company fees and local government recording fees. The lender must cover any increase over that amount.

Finally, the good-faith estimate lists the fees that can change without any limit, such as daily interest charges.

2. Look for answers to basic loan questions

In the summary section, lenders explain your loan's terms in simple language. Can your interest rate rise? If so, a lender must spell out how much the rate can jump and what your new payment would be if it does. Can the amount you owe the lender increase, even if you make your payments on time? If it can, a lender must show you the potential increase.

3. Evaluate the "tradeoffs" on a loan

In the new "tradeoff table," you can ask lenders to provide details on the tradeoffs you can make in choosing among home loans. If you'd like the same loan with lower settlement charges, how will the interest rate change? If you'd like a lower interest rate, how much will your settlement charges increase?

4. Compare apples to apples with the shopping chart

Included on the good-faith estimate is space for you to list all the terms and fees for four different loans, so you can make side-by-side comparisons.

5. Know what's missing from the good-faith estimate

The new form lacks some key information, such as how much you'll reimburse the sellers for property taxes they've already paid on the home. It also doesn't tell you the amount of money you'll have to bring to the closing table. Some lenders have created supplemental forms providing that information. If yours hasn't, ask for it.

Chip Plumley can be reached at (610) 444-9090 or (610) 357-8635. Prudential Fox & Roach is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.

ChipPlumley.com

Find The Home Loan That Fits Your Needs

Understand which mortgage loan is best for you so your budget is not stretched too thin.

It’s easier to settle happily into your new home if you’re confident you can afford it. That requires that you understand your mortgage financing options and choose the loan that best suits your income and ability to tolerate risk.

The basics of mortgage financing

The most important features of your mortgage loan are its term and interest rate. Mortgages typically come in 15-, 20-, 30- or 40-year lengths. The longer the term, the lower your monthly payment. However, the tradeoff for a lower payment is that the longer the life of your loan, the more interest you’ll pay.

Mortgage interest rates generally come in two flavors: fixed and adjustable. A fixed rate allows you to lock in your interest rate for the entire mortgage term. That’s attractive if you’re risk-averse, on a fixed income, or when interest rates are low.

The risks and rewards of ARMs

An adjustable-rate mortgage does just what its name implies: Its interest rate adjusts at a future date listed in the loan documents. It moves up and down according to a particular financial market index, such as Treasury bills. A 3/1 ARM will have the same interest rate for three years and then adjust every year after that; likewise a 5/1 ARM remains unchanged until the five-year mark. Typically, ARMs include a cap on how much the interest rate can increase, such as 3% at each adjustment, or 5% over the life of the loan.

Why agree to such uncertainty? ARMs can be a good choice if you expect your income to grow significantly in the coming years. The interest rate on some-but not all-ARMs can even drop if the benchmark to which they’re tied also dips. ARMs also often offer a lower interest rate than fixed-rate mortgages during the first few years of the mortgage, which means big savings for you-even if there’s only a half-point difference.

But if rates go up, your ARM payment will jump dramatically, so before you choose an ARM, answer these questions:

•How much can my monthly payments increase at each adjustment?

•How soon and how often can increases occur?

•Can I afford the maximum increase permitted?

•Do I expect my income to increase or decrease?

•Am I paying down my loan balance each month, or is it staying the same or even increasing?

•Do I plan to own the home for longer than the initial low-interest-rate period, or do I plan to sell before the rate adjusts?

•Will I have to pay a penalty if I refinance into a lower-rate mortgage or sell my house?

•What’s my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?

Consider a government-backed mortgage loan

If you’ve saved less than the ideal downpayment of 20%, or your credit score isn’t high enough for you to qualify for a fixed-rate or ARM with a conventional lender, consider a government-backed loan from the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA).

FHA offers adjustable and fixed-rate loans at reduced interest rates and with as little as 3.5% down and VA offers no-money-down loans. FHA and VA also let you use cash gifts from family members.

Before you decide on any mortgage, remember that slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. To determine how much your monthly payment will be with various terms and loan amounts, try REALTOR.com’s online mortgage calculators.

Chip Plumley can be reached at (610) 444-9090 or (610) 357-8635. Prudential Fox & Roach is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.

ChipPlumley.com

7 Tips For Improving Your Credit

Here's how to clean up your credit so you get the least-expensive home loan possible.

Getting the loan that suits your situation at the best possible price and terms makes homebuying easier and more affordable. Here are seven ways to boost your credit score so you can do just that.

1. Know your credit score

Credit scores range from 300 to 850, and the higher, the better. They're based on whether you've paid personal loans, car loans, credit cards, and other debt in full and on time in the past. You'll need a score of at least 580 to qualify for a home loan and 740 to get the best interest rates and terms.

You're entitled to a free copy of your credit report annually from each of the major credit-reporting bureaus, Equifax, Experian, and TransUnion. Access all three versions of your credit report at http://www.annualcreditreport.com/. Review them to ensure the information is accurate.

2. Correct errors on your credit report

If you find mistakes on your credit report, write a letter to the credit-reporting agency explaining why you believe there's an error. Send certified documents that support your case, and ask that the error be corrected or removed. Also write to the company, or debt collector, that reported the incorrect information to dispute the information, and ask to be copied on any materials sent to credit-reporting agencies.

3. Pay every bill on time

You may be surprised at the damage even a few late payments will have on your credit score. The easiest way to make a big difference in your credit score without altering your spending habits is to diligently pay all your bills on time. You'll also save money because you'll keep the money you've been spending on late fees. Credit card or mortgage companies probably won't report minor late payments, those less than 30 days overdue, but you'll still have to pay late fees.

4. Use credit carefully

Another good way to boost your credit score is to pay your credit card bills in full every month. If you can't do that, pay as much over your required minimum payment as possible to begin whittling away the debt. Stop using your credit cards to keep your balances from increasing, and transfer balances from high-interest credit cards to lower-interest cards.

5. Take care with the length of your credit

Credit rating agencies also consider the length of your credit history. If you've had a credit card for a long time and managed it responsibly, that works in your favor. However, opening several new credit cards at once can lower the average age of your accounts, which pushes down your score. Likewise, closing credit card accounts lowers your available credit, so keep credit cards open even if you're not using them.

6. Don't use all the credit you're offered

Credit scores are also based on how much credit you use compared with how much you're offered. Using $1,000 of available credit will give you a lower score than having $1,000 of available credit and using $100 of it. Occasionally opening new lines of credit can boost your available credit, which also affects your score positively.

7. Be patient

It can take time for your credit score to climb once you've begun working to improve it. Keep at it because the more distance you put between your spotty payment history and your current good payment record, the less damage you'll do to your credit score.

Chip Plumley can be reached at (610) 444-9090 or (610) 357-8635. Prudential Fox & Roach is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.

ChipPlumley.com